Wednesday, November 7, 2012

Let's Make a Deal, IV: Society Becomes Non-Social

If the financial and economic problems facing the United States in 1910 we've been looking at in the last few postings weren't enough, there was also the degeneration of society itself. Society had, in fact, become less "social." Part of the problem was that the economic problems were obvious: concentrated ownership of capital, lack of access to capital credit, an inadequate money and credit system, an inelastic currency, and a shift from land to industrial and commercial capital as the predominant source of economic growth — a source to which most people lacked access.

The full effect of some of the problems with the social order had been staved off for a while by the relative success of the Homestead Act, but that was limited to land, not the rapidly expanding commercial and industrial capital. The increased production due to the Act and the consequent increase in demand, especially for rail service, brought the country out of the depression that followed the Panic of 1873. Similarly, the combination of crop failures in Europe and bumper crops in the U.S. brought the country out of the depression that followed the Panic of 1893.

There are two significant differences between the recovery from the depressions of the 19th century, however, and that of the 1930s and today. In the latter half of the 19th century, capital ownership was still relatively widespread in the United States. Increases in production had the double benefit of providing increased goods and services to purchase, as well as an increase in income with which to purchase.

In the 1930s and today, however, the remedy to an economic downturn is not to increase production and the capital ownership by means of which ordinary people can benefit from the increase, but to stimulate demand alone by artificially creating jobs. Ironically, it was the increased real demand for war material in the Second World War that brought the United States out of the depression of the 1930s, not the artificial demand created by increased government spending and debt.

Within the ruling Keynesian economic framework that became embedded as public policy with the New Deal, production is not a problem, while widespread capital ownership is characterized as irrelevant, a diversion, or even a positive evil. The rationale is that if ordinary people own capital, they will use the income for consumption, thereby drying up the supply of savings presumably essential to finance new capital that will provide the wage system jobs that provide people with income.

Both the increasingly individualistic (capitalism) and collectivistic (socialism) attitudes that had begun to characterize American society in the latter half of the 19th century can be traced to the concentration of capital ownership. Despite that (or because of that), the solution to this particular problem (as Pope Pius XI was to point out a generation later) is to become more social . . . not more social-ist.

The fact is that the United States, as described by Alexis de Tocqueville in Democracy in America (1835, 1840) had once been a fundamentally different type of society. As de Tocqueville compared social action in France, Great Britain and America, he claimed that in France, people expected the State to solve problems, in Great Britain they expected a "great man" to solve problems, but in America people tended to take matters into their own hands — the people were in charge. As he observed,

"In some countries a power exists which, though it is in a degree foreign to the social body, directs it, and forces it to pursue a certain track. In others the ruling force is divided, being partly within and partly without the ranks of the people. But nothing of the kind is to be seen in the United States; there society governs itself for itself. All power centers in its bosom; and scarcely an individual is to be meet with who would venture to conceive, or, still less, to express, the idea of seeking it elsewhere. The nation participates in the making of its laws by the choice of its legislators, and in the execution of them by the choice of the agents of the executive government; it may almost be said to govern itself, so feeble and so restricted is the share left to the administration, so little do the authorities forget their popular origin and the power from which they emanate." (Alexis de Tocqueville, "The Principle of Sovereignty of the People in America," Democracy in America, I.iv.)

This different orientation had its effect on every day life:

"The citizen of the United States is taught from his earliest infancy to rely upon his own exertions in order to resist the evils and the difficulties of life; he looks upon social authority with an eye of mistrust and anxiety, and he only claims its assistance when he is quite unable to shift without it. This habit may even be traced in the schools of the rising generation, where the children in their games are wont to submit to rules which they have themselves established, and to punish misdemeanors which they have themselves defined. The same spirit pervades every act of social life. If a stoppage occurs in a thoroughfare, and the circulation of the public is hindered, the neighbors immediately constitute a deliberative body; and this extemporaneous assembly gives rise to an executive power which remedies the inconvenience before anybody has thought of recurring to an authority superior to that of the persons immediately concerned. If the public pleasures are concerned, an association is formed to provide for the splendor and the regularity of the entertainment. Societies are formed to resist enemies which are exclusively of a moral nature, and to diminish the vice of intemperance: in the United States associations are established to promote public order, commerce, industry, morality, and religion; for there is no end which the human will, seconded by the collective exertions of individuals, despairs of attaining." ("Political Associations in the United States," ibid., I.xii)

In light of this, it is revealing that during the Great Depression of 1893-1898 there were, for the first time in American history, widespread calls for the government to take direct action. People felt that they had lost control over their own lives, and were looking to the most stable and most powerful entity around — the State — to make things right. The State had changed from being the people's servant, to being its master.

#30#

1 comment:

nail-in-the-wall said...

Michael D. Greaney (Intro): A "B.C." strip by the late, great Johnny Hart had two of the characters — I don't recall which ones — leaning on a stone (evidently the prehistoric equivalent of the old brass rail), with one of them saying, "It's a funny world." After a panel of silence, the other character says, "Everybody says that, but nobody laughs."

Yup. It's a funny world. Take (for instance) the fact that as society in the United States became less social following the Civil War, it became more socialist. This was not just in reaction against capitalism, although that was a big factor. It was also a reaction against the loss of property in capital, and thus the loss of power and control over one's life. Where previously people had tended to look to themselves for solutions to problems, get organized, roll up their sleeves, and get things done on their own ticket, those inclined to capitalism now tended to look to some "Great Man" for salvation, while those inclined to socialism tended to look to the State.

While none of this addresses the weird combination of capitalism and socialism known as Keynesianism, which tends to look to a "Great Man" called a dictator in charge of an all-powerful State for salvation, it does highlight the need for a return to an economic system characterized by widespread capital ownership if society is to survive in any form that resembles anything truly social — which (not surprisingly) turns out to be the topic of today's posting .