Our Way Out: populists David Coyle and Lyle Lanier understood today's fundamental problem in 1936
Dick Eastman
With musty smell and detached cover the book "Who Owns America?; A New
Declaration of Independence" sits in a crate of Harold Bell Wright novels
and Farmer's Digest magazines
at an estate sale. Edited by Herbert Agar and Allen Tate (New York:
Houghton Mifflin Company, 1936), the first two essays are "The Fallacy of
Mass Production," by David Cushman Coyle, and and "Big Business in the
Property State," by Lyle H. Lanier.
incendiary excerpts:
"When people of one area are in debt and going deeper year by year, and
the creditors, growing richer all the time, live in a different area, the
nation will be subjected to disruptive strains. The debtors sections want
moratoriums or inflation, the creditors want "sound money' and protection of
the sanctity of contracts. The conflict interferes with the overall
efficiency of the economic system. From the national standpoint, the main
virtue of small decentralized industry is that it will reduce the strain
between unbalanced sections of the nation. Regional self-sufficiency is a
means of avoiding sectional conflict, just as national self-sufficiency is a
means of keeping out of other people's wars. The efficiency of the nation
as a whole, and the peaceful relation of its parts, will be improved by
spreading as many industries as possible among agricultural areas.
"The theory that mass production, involving the concentration of each
industry in a specialized area, is a means of efficiency is therefore a
fallacy. The internal efficiency of the industry may be imporved by having
everything concentrated, or it may not; but the overall effect on the
nation is to set up major dislocations of trade and to overstrain the
adjusting powers of the Federal Government.
"The spectacular growth of certain great trusts and industrial mamoths
has produced the hopeless feeling that mass production is an inevitable
trend. The saying is that we cannot turn back the hands of the clock,
although there are few machines, even clocks, that cannot be turned backward
as well as forward. Actually most biological processes go always forward,
but almost never continuously upward. The dinosaur and the wooly mammoth
grew great, failed to develop the necessary brains to adapt themselves to a
changing environment, and passed off the stage. So may the mammoths of
industry.
"The spontaneous trends toward decentralization of ownership, and even of
location, are still quiet and unnoticed, just as were the weak and uncombed
ancestors of man in the Age of Monsters. There is the growing use of
electric power, freeing the machine from the steam power plant. Power is a
small item in the cost of most products, but the fact that it can be
delivered through a wire is important. Even the rates are of some
consequence, as is shown by the great increase of use that follows rate
reductions.
"With the increasing pressure toward lower electric rates, many functions
are going back into the home. With electric machines the housekeeper can do
many jobs that were for a while more efficiently done in the factory. The
home machine may be idle most of the time, but it produces the product
directly in the hands of the consumer without the costs and risks of the
market. This is technological decentralization in an extreme form, and the
extent to which it will occur with lower electric rates is only beginning to
be realized. The electric current and the electric machines themselves are
factory products, but they represent the use or factories to do away with
factories.
"The concrete road has already dealt a severe blow to the railroads.
Automobiles are an escape from the mass production of transportation.
Instead of traveling in groups of several hundred on a train, most of us now
travel in our own cars when and where we please. Here again, gasoline and
automobiles are factory products used for decentralized travel in place of
the centralized travel of the railroads.
"These tendencies toward small-scale production are as yet ineffective in
face of the pressure of finance toward centralization. Yet they may become
cumulative as they develop. Automobiles and home machinery take traffic
from the railroads, which with increasing technological efficiency are still
unable to lower their rates. National advertizing grows more expensive as
the people grow insensitive to louder and louder appeals. The overhead
costs of centralized production tend to grow and finally to outstrip the
economies of technology. Then only the use of racketeering power by the
central banks can prevent the success of small unhampered competitors.
"Finally, with the repeated failures of Big Business to provide security
and plenty, the time must come when the people will drastically limit the
power of the great rackets that have grown up about mass production.
Perhaps the New Deal will develop into the New Adjustment. Perhaps the
conservatives will win an election and smash the system more thoroughly than
they were able to do in 1929. Either way, the end has to come. Fromthere
on, there are only two roads toward a practical use of technology.
"The road that is now being followed in Russia is that of State
capitalism, theoretically intended to lead ultimately to a communist system
in which there would be no political State. With centralized planning,
controlling a decentralized hiearchy similar to that of any great
corporation, the whole nation can be operated on a mass production basis.
The dislocations that attend mass production under free capitalism are
prevented by abolishing private enterprise with all of its faults and
virtues.
"The objections to communist State capitalism in America are several.
Americans do not like the idea, which is a real obstacle to making it work.
The possibility of successful planning of a plenty system in which most of
the products are necessarily luxuries is yet to be shown. Finally, the
advantage of free initiative in developming active minds may be crucial at
later stages of human progress. In any case, for good or bad reasons, the
American people will try the alternative if they can.
"The alternative adjustment, if it can be attained, will consist
essentially in freeing capitalism from high finance -- in freeing small
business from the domination of Big Business. Mass production in private
hands, we must recognize, is not workable in a capitalist system. Those
industries where mass production is no more efficient than high-technology
production on a small scale can be decentralized and made to operate in the
free market according to the standard theory of capitalism -- provided the
people are willing to use their political power to prevent financial
domination and racketeering. Other industries that cannot show a reasonable
efficiency except in large-scale operation can be tolerated only if they are
removed bodily from the capitalist system and run as public services. By
such a double adjustment, decentralization one way and public ownership the
other, a capitalist system can be made to work if we are prepared to take
the necessaryt measures.
"The principle fallacy of mass production, then, is the idea that it is
the same thing as high technology and that it must therefore be accepted,
whatever the consequences. Actually, in a capitalist system, mass
production is usually a mere camouflage for high-finance manipulation of
business, to the detriment of the commonwealth and the impoverishment of the
nation."
---
(next an excerpt from Lyle Lanier's chapter, "Big Business and the Property
State")
"In this land of rugged individualism two hundred corporations control
more than fifty percent of the nation's industrial assets. each
corporation, in the memorable words of Chief Justice Marshall, is an
'artificail being, invisible, intangible, and existing only in the
contemplation of the law.' These unique beings, incomparably more rugged
than their human compatriots, symbolize modern man's genius for organization
and collective economic action. Logically, they are the supermen of the
ideal communistic State, but in America one finds them operating largely at
varience with the requirements of this theoretical status. Conceived in
that constitutional Garden of Eden whose walls are the Fifth and Fourteenth
Amendments, and nurtured by the friendly decisions of a judiciary saturated
with ex-lawyers of corporations, these economic giants have become the
instruments of an economic fascism which threatens the essential democratic
institutions of America.
"The American people have long recognized the danger to democracy of
economic power concentrated in the hands of big corporations. When the
'trust' movement began more than fifty years ago, it was soon opposed by
anti-trust legislation designed to check monopolistic practices. The
Sherman Act, the Clayton Act, and the Federal Trade Commission Act, to
mention only thge major measures, represent attempts to 'democratize' the
corporation. But these laws have been impotent to stem the rising tide of
big business organization. In the words of Samuel Untermyer, 'The courts,
Congress and the executive departments of the Government have participated
with equal effectiveness in the blows that were ... struck at the anti-trust
laws until they have been reduced to their present pitiable plight....'
Through the decison of the Supreme COurt which permits one company to
acquire the assets of a competing company, through that peerless technique
of twentieth-century banker-capitalism, the holding company, through trade
association agreements, and through national advertizing of retail prices,
the American system of free competition has been systematically
exterminated. The recent investigations of the Brookings Institution show
that the effectiveness of industrial price control in recent years has been
much greater than in the heroic days of the early trusts and
'trust-busting.' Ironically enough, the most vociferous defenders of free
competitive enterprise are the big industrialists and their lawyers, whose
illicit appeal to the sentiments properly attaching to the institution of
private ownership of real property has served to camouflage the development
of an alien economic system.
"In these matters America is confronted with a condition, not a theory.
It is obvious that the peculiar dissociation of ownership from control of
property which characterizes the corporation, and the reduction of a
progressively increasing number of real property owners to the status of
wage earners, create conditions not contemplated by the founders of the
American Republic. These conditions are so complex that democracy
throughout the world is giving way to one or the other of those two poles of
political absolutism, communism or fascism. If we are to avoid some such
outcome in America, it is imperative that some formula be discovered whereby
the benefits of technology and organization can be utilized to promote,
rather than destroy, the fundamental aims of demcoracy.
"The decentralization of industrial enterprise -- financially as well as
geographically -- is an important method of conforming technology to the
democratic ideal. Many types of industry can be operated more economically
in small units. Futhermore, many strictly local enterprises have been
organized into large financial units, often for the sole purpose of
extracting a profit from the local consumer groups by virtue of the power
accruing to the large holding company. But even when decentralization,
facilitated by whatever legislative implementation seems appropriate, has
been developed to the limit, there will remain many vast industries which
cannot be reduced to samll scale units. One thinks, for example of
assembly-line types of manufacturing, of communication, transportation, and
certain phases of the electric power industry. These large-scale
enterprises perform valuable economic services and no one would deny the
many social benefits which have resulted from their development. But the
benefits have cost too much, and have been accompanied by a progressively
increasing concentration of economic power which is inimical to the welfare
of the people. The use of this power has been incompatible both with
democratic principles and with the theory by which Big Business usually
rationalizes its operations. This indictment is plainly substantiated by
the recent imnportant studies of economists of the Brookings Institution.
It will be profitable to view the operation of the 'American system' through
the unbiased eyes of these careful economic analysts, since specific
knowledge about fundamental defects of the system is essential to the
development of an intelligent program of readjustment.
"the economic philosophy of capitalistic industrialism, as developed in
the classical economic literature, involves two major propostions. The
first of these concerns merely the theoretical mechanaics of production and
distribution; the second justifies the operation of the system for profit by
those individuals who happen to secure control of the instruments of
production, or capital. with respect to the process of production, it was
held that by means of machinery and the systematic utilization of labor, it
would be possible to provide a volume of goods adequate to raise the
standard of living of the masses to a level of basic comfort and security.
the old economy of scarcity would be transformed into an economy of
abundance. It is evident that mass production implies mass consumption, and
that classical economists clearly recognized the need for a pattern of
distribution of income which would satisfy this fundamental requirement.
Otherwise, the productive mechanism could not be completely utilized, and
both the consumer and the capitalist would suffer to the extent of the
failure to achieve this desideratum.
The principle of the private ownership of industrial property was simply
accepted as one of those inalienable rights of man, and its economic
justification ran somewhat as follows: The desire for profits stimulates an
owner to an energetic and intelligent management of his business, with the
result that the maximum productivity will be secured with the least cost;
but the necessity for meeting competiton would force the manager to reduce
prices roughly in proportion to the reduction in operating costs, and
consequently the greatest possible distribution of goods would occur. Under
such a competitive system the poorly managed, inefficient firm would
disappear, thus protecting the consumer from the cost of such unecnomnical
operation. A necessary corollary to this economic rationale was the
assumption that competition would not be met through wage-cutting since this
course would naturally result in reduced purchasing power.
"Thus runs the traditional rationalization of capitalistic industrialism.
If one describe social progress solely in terms of such economic
abstractions as production and consumption, and conceive that the human
animal will conduct himself in accordance with reasonable engineering
formulae, then it must be admitted that such a system might actually achieve
its objectives. But the Brookings studies show that the theory and the
practice of the system are sadly at cross purposes. Our high-powered
capitalists have failed to follow the economic blue-print, if indeed the
majority of them ever knew it existed. On the side of efficient prodcution
they have given a creditable performance, although in recent years there has
been an increasing tendency in certain industries to suppress patents and
new technological developments. On the side of distribution, however, the
capitalists have violated the fundamental principle which requires that
prices be continuously reduced in proportion to reduction in costs of
production. The classical economists assumed that prices would be
controlled by competition, but the industrialists have found it simpler to
control prices by agreement. The Brookings study shows that whereas
industrial efficiency in terms of growth of production per gainfully
employed person increased eighteen per cent between 1922 and 1929 (the
increase was 29 per cent in manufacturing industries), nevertheless the
retail price level remanined practically stationary. Instead of expanding
consumption by the desirabel method of price reduction, business men
resorted to high-pressure salesmanship, installment credits, and loans to
foreign countries."
must stop here
Dick Eastman
Yakima, Washington
Every man is responsible to every other man.