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Industry and American Democracy

ISSUE:  Autumn 1939

The accent in my title belongs on “American.” Today the word “democracy” is used with scant discrimination. At one and the same time it is applied to our own form of government, to the parliamentary system of France, to the limited monarchy of Great Britain, and to the dictatorship of Soviet Russia. In fact, in current usage it may mean any nation outside the orbits of the so-called Axis Powers. It is well to know at the outset what we are talking about. Wherever the word “democracy” appears in this article, it refers to the Made-in-America product.

What is American democracy? Precise and scholarly definition is beyond me. But in my mind, and I believe in the popular mind also, it is a system of self-government in which the paramount consideration is the freedom and welfare of the citizen as an individual. Communal welfare is secondary, not because it is unimportant, but because it is believed that the highest aggregate good of all the people will result automatically from each individual’s having the widest latitude to do his best with his own private affairs. Under such a concept, all powers stem from the individual to the group as it is represented in government—not in the reverse direction. Government is the creation and servant of the individual. Officials of government are agents with authority that is limited and defined, hired to perform designated duties for the individual.

It is plain in our history that the American people generally recognized from the beginning that governmental power and individual freedom bear a relationship to each other about the same as the one between cat and mouse. Every precaution was taken by the American people to bell the cat and to clip its claws. Today it is fashionable for the so-called “bright young men” of Washington and their imitators to sneer at “rugged individualism” as a fetish cherished only by reactionaries. Yet there is abundant proof that Americans in the mass regard “individual freedom” not as a high-flown phrase suitable only for patriotic occasions but as a controlling influence in their personal everyday lives. It was not oratorical skill but popular support that enabled opponents of centralized power to secure a Constitution which withheld from the Federal government all powers not expressly given it. It was not by accident that the Bill of Rights was made part of our basic law, nor that power was so distributed among the three branches of government that each checked and balanced the others.

And there are other than documentary indications of this desire to prevent the aggrandizement of government as well as of its converse, the desire to safeguard the independence of the individual. Americans, alone and in groups, reveal this desire as a characteristic trait. In all our wars, the American civilian who has turned soldier for the time has been noted not only for great personal bravery and initiative under fire but also for deep-seated antagonism towards military regimentation. Until very recent years, organized labor consistently refrained from seeking or accepting governmental aid, because such aid, however useful at the moment, was recognized as a first step toward governmental control. Throughout the country and at all times, Americans have been extremely zealous to see that governmental powers which intimately affected citizens as individuals—powers over their persons, homes, local customs, means of livelihood —should be vested in the governmental units and officers nearest at hand and most immediately responsive to the citizens’ will.

Nowhere have the beneficial effects of individual freedom shown themselves more clearly in a practical way than in industry. In fact, individual freedom, in the political form of economic freedom or free private enterprise, has been the distinguishing element in American industry. I do not discount the fact that our country has had abundant land, plentiful and varied natural resources, geographical advantages, and a constantly growing population. But other countries (such as Russia and China) have had these same assets and during the same time as ourselves. These other countries have not had American democracy. Their peoples have not been privileged to conduct their economic lives free from restraints imposed for social or political reasons.

Land, natural resources, and other economic assets are inert things. They are worthless until something is done with them. Their human value depends on the use that is made of them. The best use will be made where the incentive is strongest. The strongest incentive the individual can have is freedom to do his best in his own way and for his own benefit. The American way of life has been so sound, its yield so bountiful, precisely because it is foursquare with human nature. Man works best when he works for himself, when he is free to select his own path, and when, although he must bear the consequences of his own mistakes, he is free to reap the full harvest of his good judgment and industry. In America the individual has known the greatest freedom in history. Under this system of individual freedom, the American people have reached the highest plane of general material well-being experienced by any people at any time.

Operation of free private enterprise produced an almost unbroken progress during the 150 years following the birth of our country. We had setbacks, of course. We had a number of serious depressions. But the constant trend was onward and upward. After each interval of marking time, we attained and held new high levels. Americans gave the world an astounding number of the inventions which have produced outstanding changes for the better in conditions of life. Many foreign inventions and discoveries found useful development only after they were brought here. Americans fashioned new methods in manufacture, agriculture, commerce, transportation, and every other branch of human activity. Other countries sought avidly for the key to the tremendous secret of American success. Expert observers came to our shores hoping to find this secret in our production lines or in our fields. Many of them returned disappointed. They did not realize that the real secret of Ameri-can progress was an intangible compounded of individual freedom and the inborn spirit resulting from the exercise of individual freedom by generations of men. It is significant that American methods and equipment transplanted to foreign soil have rarely reached performance standards normally exacted at home.

Good as the American system has been, no firm believer in it contends that this system is perfect. And if he is ordinarily conversant with human nature, he does not waste time hoping that it ever will be perfect. From the very fact that the system is founded on the principle of free action, it follows that opportunities are created for those who are chiselers and crooks as well as for honest men, and also that a wide disparity must exist between the return which the most ableand the least able will obtain from their efforts. But the believer in the American system maintains rightfully that it has demonstrated a continuous tendency to self-improvement and has unlimited capacity for future improvement. ” Whatever its defects, this system is still the foundation of a way of life which has produced the highest material welfare for the greatest number of humans at any time or place on this planet. Despite claims to the contrary by demagogues in and out of politics, comparison with the best of other countries shows that the average American citizen benefits—relatively of course—from the system of free enterprise as much as if not more than “Economic Royalists” or the imaginary “Sixty Families.” A convenient measure is the amount of goods and services a unit of labor will buy, Taking the steel industry as an illustration, we find that statistics show that the average American worker can buy a market basketful of staple foods for the wages from one and one-half hours of labor. The labor required of average workers in other countries to get the same amount and kinds of foods ranges from slightly less than four hours in England to more than twenty-three hours in Russia. Under the American system, the constant trend has been towards higher wages for fewer hours of work. To the average American, this has meant greater leisure together with a larger share of the necessities and comforts of life. With only six per cent of the world’s area and seven per cent of its population, the United States consumes many times more than its mathematical share of world production. Americans drive eighty per cent of the world’s automobiles, use sixty per cent of its telephones, and own fifty per cent of its radios. The buying power of the 130,000,000 Americans exceeds that of the half billion Europeans and the more than one billion Asiatics. These facts apply not only during periods of extreme prosperity; they apply now. They indicate that despite depression and unemployment, the American system provides a broad and deep sharing of its benefits which other systems cannot or do not provide. Unfortunately for our own good, we hear far too much about what is wrong, not nearly enough about what is right with America.

We have no fundamental problems that cannot be solved. There is no physical barrier to a higher and more widespread prosperity in the United States than has ever been known before. Above, I made the statement that America had enjoyed unbroken progress in the period from the birth of the country to the onset of the depression in 1929. Industrial production is one of the best indicators of general economic conditions. During those 150 years, new levels of industrial production were established on an average of every three to four years. The years following, from 1929 to the present, constitute the longest span in our history in which our country has failed to pass its previous high record of industrial production. According to previous experience, we should have done so not once but twice, and should now be well on our way to a third peak.

Yet comparison of the past ten years with the preceding 150 reveals few changes in basic resources. We have as much land and it is more productive. There is no scarcity of any important natural resource and no threat of scarcity in the near future. Our plant and equipment capacity is greater, if anything, now than before. Our man power is as well trained and as willing to work. Our banks bulge with an unprecedented national hoard of idle money. Our population is larger than before and, although the rate of increase is slower, it is still growing; and our population both wants and has available to it a wider variety and better quality of goods and services. Potential demand, capital, man power, plants and tools, natural resources, land—these are the “raw materials” with which six generations of Americans in the past fashioned ever improving standards for themselves and their country. With these same advantages, plus the additional advantages of greater knowledge and more advanced methods, why does our generation find itself in stalemate? Is not our real lack something of the incentive, the will, and the spirit of those Americans before us? By way of answer, let us consider the following parallel statements:

1.  During the past ten years our country has reversed its entire previous economic experience of continuous progress.

2.  During the past ten years there has occurred in our country, for the first time, a deliberately planned, continuing, government-conducted assault on the principle of free private enterprise in American industry.

It is my sincere belief that the simultaneous existence of these two circumstances is not mere coincidence. I believe there is a direct relationship between them, and I further believe that it is the relationship that exists between effect and cause.

At its beginning in 1933, the Roosevelt Administration pledged that its major efforts would be attacks on the tax and debt burden, on unemployment, and on depression in general. In the six and one-half years since then, taxes have increased enormously, the Federal debt has mushroomed from $22,538,000,000 to $40,440,000,000, there are still ten million unemployed, and we have never been out of depression. The real attack of the Roosevelt Administration has been against American industry. The word “industry” is used here in its broad, economic meaning to include all forms of human activity that create or increase value. Under this meaning, the farmer is engaged in industry. So is his hired man and so also are the merchant and his clerk, the banker, the crew of train and ship, the factory owner and his workmen, and every other employed person who is not directly engaged in the work of government.

It has been the traditional American idea that democratic principles apply to the activity of the individual in industry as they do to his activity in the social or political phases of his life. Yet under the Roosevelt Administration, Americans have had a contrary philosophy dinned into their ears. Exponents of this philosophy insist that it involves no fundamental change in the American system. In fact, they say that their objectives are essential to the fulfillment of the promise implied in the declaration that all men are created equal and endowed with inalienable rights. Let us see!

The arguments given to support each of the drastic changes in the American economy have followed a strikingly similar pattern. They point to the unhappy effects of depression, to inequalities and maladjustments in our economic system, to the complexity of modern life, to the apparent planlessness of the American economy. They state or imply that the basic cause of our economic troubles is too much power and too much opportunity for power in the hands of individuals. The advocated solutions are also marked by their uniformity. Invariably, the suggested cure is to cir-, cumscribe the power of the individual and, as this is done, to enlarge the power of the Federal government. At the same time it is proposed that in governmental units other than the Federal, vital powers be progressively restricted as they reach downward through the state to local units over which the individual citizen exercises most direct control. Within the Federal government, furthermore, it is advocated that decisive authority over this greatly augmented power be lodged entirely in one branch, the executive.

In other words, the formula is less power to the individual, more to government; less power to local units, more to the central government; and ultimately, less power to other branches of government, more to the executive.

Condensed and simplified, this is the reasoning behind the programs that have been presented so persuasively as the way to a new America. The application of this reasoning has virtually extinguished individual economic freedom in important sections of industry. By regulation, by establishment of controls, and by competition, the Federal government under the Roosevelt Administration has enlarged its power or created new power over many branches of our national economy. I am sure that no more than a listing is required to remind the reader of the new authority of the Federal government over agriculture, banking, the security markets and the issuance of new securities, communications, labor relations, wages and hours, pricing and production policies, conservation of natural resources, the utility industries, and other economic activities. It must be remembered that this authority is not limited to the making and enforcing of rules to govern; it puts government into the operation of our economic system.

The fact that this situation exists is a direct challenge to American principles. So also is the method by which it was brought into existence. No one can seriously affirm that this enlargement of Federal power was produced by normal American governmental processes. The original ideas for most of it were hatched, not by regular elective or otherwise responsible officials of government, but by a motley crew which has been given many names, and which, for convenience, will be identified here as the “White House Inner Group.” This group, or gang, has had a changing personnel, but always there has been such a group and almost always its individual members have totally lacked the stamp and color of any recognizably American political philosophy. The ideas of this gang, incorporated into gang-written bills, constituted the bulk of “must” legislation that was jammed j through those Congresses of unhappy memory which justly earned the name of “Rubber Stamp.”

Such procedures were hardly in accord with American practice. Neither were the gang-made provisions for the administration of this new Federal power over the American economy. Clearly shown in these provisions are impatience with democratic processes and preference for the alleged “efficiency” and “quick action” of the bureaucratic method. Vast powers over our economic system have been delivered into the hands of boards and administrators clothed with executive, legislative, and judicial authority. It is bad enough that the ability and impartiality of these top bureaucrats are not beyond question; it is worse that their authority has been delegated to hordes of underlings scattered throughout the country. The individual is practically powerless to protect such economic freedom as remains to him from the machinations of the bureaus. In many cases, appeal from their decisions is practically impossible, and in others successful appeal is possible only under financial burden and other punishing conditions.

Other exhibitions of Roosevelt Administration impatience with democratic processes have been more open to public view than the works of the bureaucrats. Most prominent was the attempt to “pack” the Supreme Court, and its aftermath, the vengeful campaign to “purge” opposing senators. Of more recent date have been the Administration fight to hold its grip on the “emergency” power to devalue gold; the Administration attempt to scuttle the Hatch bill, taking Federal employees out of politics; the die-hard Administration opposition to the Logan bill, providing for review of bureaucratic decisions, and the Administration reach for unprecedented peacetime powers in foreign relations in the neutrality bill. These are nothing but additional indications of the Administration’s unswerving determination to retain the power already in its hands and to grasp new powers.

The historic justification for strong central authority is that concentrated power can be used to better advantage n than diversified power for the best interests of a country and its people. America was founded in revolt against this theory, which is directly opposed to the political concept of individual freedom. Yet under the Roosevelt Administration, despite traditional American ideas, concentrated power has been largely substituted for individual freedom—particularly in the economic field. When one man in Washington has authority to decide for millions of farmers how many acres they shall plant to each crop, when he has power to reward those who comply and to punish those who prefer their own judgment, then the man in Washington runs the farms of the country, and not the men who do the planting. The same is true of the government controls affecting all branches of industry. What is the difference between this state of affairs and the dictator systems of Germany, Italy, and Russia? There is no essential difference. Ours is collectivism, too, even though it be an early stage of collectivism.

Those who sneer at the assertion that we are headed towards complete regimentation are able to do so because so far our regimenters have been fully occupied in the economic field. Germany and Russia have shown that before dictators can control a country, they must control its economy. Not until the individual’s economic freedom is destroyed is it safe or feasible to strip him entirely of personal and political freedom. Spokesmen for the Administration scoff at the idea that it has collectivist intentions. But there is more than passing significance in the not too well concealed friendliness of some of the Administration’s personnel toward one form of collectivism, Communism, and in the fact that the New Deal Administration is the only one that has ever received the favor and support of the Communist party.

It may be, as the Roosevelt Administration loudly proclaims, that the vast majority of American people want America to be “made over” into a controlled economy. If so, no one can deny their right to it. The Constitution which guarantees the people’s freedom also provides the method by which they can discard freedom if they so desire. Before doing so, however, the people have the right to know exactly what they are doing and they have the right to take the step by constitutional process. So far, both rights have been denied them. The program that has been carried out by the Roosevelt Administration was never submitted to the American people in the platform of any political party. It has never been presented as a program by the Roosevelt Administration. The only sanction for its actions which the Administration can claim is the alleged “mandate” that it received from the people. And this mandate is open to serious question. There is no doubt that an important section of the American people supports the Administration doctrine that governmental authority in the economic field is essential to prosperity. There is another important section that is opposed to this doctrine. The Roosevelt Administration has not utilized the democratic method of give-and-take debate to win majority support for its viewpoint. Instead, it has employed a technique that has been more effective politically, but considerably less aboveboard. Using its blank-check powers over the combined credit of 130,000,000 Americans, it has gone into the market place and bought the support of minority groups such as certain sections of farmers, certain factions of organized labor, the Negroes, and the unemployed. It has used its power to stifle opposition. It has resorted to demagogic, emotional appeals to engender mass hatred against its opponents. It has incited class warfare.

Fortunately, there are growing signs that this technique is wearing itself out. Many of the American people are no longer mystified by the New Deal machine and are now able to see what makes it tick. They are tired of “emergencies.” They want the substance rather than the fatuous promise of prosperity. The independence of the present Congress has been both a constructive thing in itself and a reflection of determination on the part of the people that government and the country shall no longer dance to the whimsical piping of the Roosevelt Administration.

Soon our country will be in the midst of a political campaign which for heat and acerbity promises to match anything in our history. Before they are plunged into the confusion of opposing personalities and issues, Americans who believe in American principles should fix one simple thought firmly in mind. American industry is an inseparable part of American democracy. Through the years, industry’s structure has grown on the foundation of American principles. Operating on these principles for 150 years, our industry made possible the greatest progress in world history. The perversion of those principles during recent years has abated neither unemployment nor depression, and has substituted uncertainty and despair for the initiative and courage that once characterized our people. The important question to be decided is whether we shall witness a return to American principles that support and stimulate industry or see a continuation of the collectivist ideology that smothers it. Americans who do their part to decide the issue in favor of American principles will have the double satisfaction of knowing they have helped restore the American brand of democracy, and also that they have paved the way for a sound progress and a general prosperity better than America has ever known before.


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