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Banned
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Uhhhh..... guys.... could it be that this 1940 description, by John Flynn is as strong an indictment of the flaws of the capitalist "system", as the root causes of today's "credit crisis", as it is about the flaws of our "one party" political system....that all of it is an intertwined "disease", rather than it is a "system"?
Capitalists who cap abundant output to hold up prices and concentrate wealth and prosperity, into a dramatically limited number of hands, instead of attempting to foster the utopia we in America could potentially have enjoyed. Ironically, the system in Alaska of distributing petroleum royalties to all residents is lauded by the same elite thugs who decry any discussion of alternatives to the capitalist model and our "one party" political system.....
Quote:
http://mises.org/books/countrysquire.pdf
THE NEW DEAL—SECOND EDITION 73
laws and rules and regulations governing the behavior of
individuals could be set up, with controls on prices, production,
the organization of industry. What they overlooked
was that the planning authority could not compel
individuals to invest their money, could not enforce investment
which is the dynamic function in the capitalist
system.
Into Washington on the wave of the crisis there swarmed
a large group of earnest men, apostles of this school of
the planned society. A few of them were men who had
thought about this seriously for a long time. Most of them
were new converts, half baked, many fresh from Wall
Street law and brokerage offices, thrust from their old
careers by the disaster, new and almost fanatical followers
of the planners.
The other movement was akin to this, yet wholly
different. As the planning movement stemmed from the
Left, this movement had its origin on the Right. For many
years businessmen were afflicted by what they called overproduction.
In almost every industry enterprisers were
producing more goods than they could sell. This has
always been true in our present economic system, but it
became more serious as our resources increased and the
physical machinery and financial credit for utilizing them
were perfected. As far back as 1870 in the oil regions of
Pennsylvania the producers found that they could pump
more oil than they could sell. This brought prices down.
They therefore decided that the remedy was to produce
less oil and keep prices up. It is entirely possible that this
conviction has been the most potent single principle of
action in American economic society during the last
seventy years. It is a very natural thing for a man in
business to feel that he would be more prosperous if there
were not so many in competition with him. It is easy to
74 COUNTRY SQUIRE IN THE WHITE HOUSE
understand that the average manufacturer will think that
he can get a better price and hence make a larger profit if
he can introduce a little scarcity into his production.
The first means of attaining this objective was through
trade associations. They were organized to bring together
producers in the same industry to reduce production and
to keep up prices and to make it more difficult for others
to come into the industry and hence to compete with
them. The idea spread to every trade—even to labor unions
that sought to limit apprenticeships so as to check the
flow of new recruits into their trades.
The next phase of this was through industrial combinations
and corporate monopolies. Rockefeller tried the trade
association but found that it did not work efficiently to
limit production. He then formed a combination between
himself and his competitors in a corporation, twelve or
fourteen competitors uniting in a single industrial unit.
Later the holding company was invented to facilitate this
same process. Always it was the effort of producers to control
production, to limit it in order to keep up prices, to
produce scarcity in the interest of higher prices and profits.
It is useless to quarrel with this. Apparently it is in the
very order of human nature that men moved by selfinterest
will act this way.
The Sherman anti-trust law was adopted in 1890 to
check this very thing. Later, under Woodrow Wilson, the
Clayton Act and the Federal Trade Commission law were
passed to strengthen the government in checking this
movement. Men like Woodrow Wilson—who, unlike
Roosevelt, was widely read in the history of civilization—
realized that this movement, however natural amongst
businessmen, was based upon the theory that scarcity in
production was essential to high prices and profits.
After the World War this movement, which up to then
THE NEW DEAL—SECOND EDITION 75
had been looked upon as lawless, began to put on the
vestments of respectability. The Chamber of Commerce
of the United States and various trade associations began
a movement for what they called "self-rule in industry."
The objective was to weaken the enforcement of the antitrust
laws, to change those laws, to modify them, to suspend
them in order to enable business groups to get together
to adopt codes of ethics, as they said, to outlaw
unfair trade practices. Unfair trade practices would include
many things that every decent businessman would
condemn, such as commercial bribery and false advertising.
But they were also made to include such things as the
enterpriser's right to produce and to price his goods as
he saw fit; to include, indeed, a man's right to expand his
business or go into a new business. In other words, under
the guise of regulating fairness in competition, powerful
business groups wished to get rid of the Sherman and
other anti-trust laws in order to confer upon their
organized groups the right to make laws for their industries.
The conviction had taken root that the economic
system must be governed, that the people to govern it
were the producers themselves, which meant the employers;
that they should govern it through trade associations,
that the laws of the United States should be changed
to permit this and that the government should authorize
it with a kind of general supervision by the government
itself.
The central thesis of these men was that we produced
too much and that this abundance ruined prices, and their
central objective was to keep production down.
To a mind unaccustomed to thinking about these things
it was easy to confuse the objectives of the planners with
the objectives of the self-rule-in-industry groups. And one
of the most amazing spectacles in our history is the manner
j6
in which, in those first days oŁ the New Deal, the apostles
of planning for abundance and the protagonists of planning
for scarcity united under Roosevelt to produce the
NRA. The NRA was called planning. The planners of all
sorts hailed it—the Chamber of Commerce and the Left
Wingers, the champions of abundance and the champions
of scarcity.
It was possible only because Franklin D. Roosevelt himself
had never thought about these things. It is almost
beyond belief that a man so completely oblivious of the
powerful and hostile forces at work in his administration
and so unaware of what he was doing in a field of
economic activity wholly new to him should be hailed by
the populace as one of the great leaders of our time.
2
The actual business of putting together the NRA began
in March 1933. As it emerged it appeared before the
people as a great liberal revolution, the dawn of a new
day, under the auspices of liberals, for the people and for
labor—and as part of the great forward surge toward
abundance. But one must look beyond the throb and
pother of those feverish days to understand the swift
succession of moves and the cast of characters behind
them.
In 1925 the Trade Relations Committee of the Chamber
of Commerce of the United States was formed to foster
trade practice conferences. Under its sponsorship trade
associations adopted codes of practice (President Roosevelt
imagined in 1933 that he had originated codes). Price
fixing and limiting production were banned in these codes.
When President Hoover was elected he promptly put an
end to these codes—there were over forty of them. Hoover
said that while the codes seemed innocent enough, the
THE NEW DEAL—SECOND EDITION 77
officers of the codes, under protection oŁ the codes, sanctioned
price and production agreements.
Then came the crash of 1929. In February 1931 the
Chamber named a Committee on Continuity of Business
and Employment with H. I. Harriman as chairman. That
committee reported that "A freedom of action which
might have been justified in the relatively simple life of
the last century cannot be tolerated today, . . . We have
left the period of extreme individualism." In other words,
the Chamber was all for introducing a little regimentation
into our diet. It proposed: (1) Control of production.
(2) Modification of the Sherman anti-trust law to permit
business units to enter production agreements under government
control. (3) A National Economic Council. (4)
Unemployment insurance, old-age pensions, government
unemployment exchanges. (5) Shorter hours in industry.
That was the Chamber of Commerce talking.
About the same time the Committee on Work Periods
in Industry, Mr W. P. Litchfield (Goodyear Rubber Company),
chairman, reported in the summer of 1932 on its
Share-the-Work movement. This committee reported that
employers ought to be permitted to unite to agree on
shorter hours and minimum wages.
Thus the movement to suspend the Sherman anti-trust
law to permit business to organize into units under codes
to control production, fix prices, limit competition, govern
wage and hour standards, originated with the Chamber
of Commerce and business itself. The public imagined
that this was a product of the Brain Trust. The Brain Trust
was supposed to be a group of young professors, equipped
with oversized brainpans—experts in economics, law and
government—symbolizing, above all, a break with the
Coolidgian and Hooverian past and its bookless, nescient
businessmen. But the idea was an idea of certain businessyS
COUNTRY SQUIRE IN THE WHITE HOUSE
men. And the thing they wanted to do was to cut down
production to keep up prices—to produce scarcity in the
interest of higher prices and profits.
Senator Wagner had a bill for RFC loans for selfliquidating
projects. Roosevelt suggested that he have a
conference of persons interested. The conference was held
in Wagner's office. It included an odd assortment—Meyer
Jacobstein; Virgil Jordan, then with the McGraw-Hill
business papers; Congressman Clyde Kelly; Harold Moulton
(Brookings Institute); Fred I. Kent, vice-president of
the Guaranty Trust Company; David Podell, New York
trade-association lawyer; Simon Rifkind, Wagner's secretary,
Colonel Rorty; Jett Lauck, of the railroad brotherhoods;
and James Rand (Remington-Rand Company)—a
motley group but not red. This group was full of plans.
Kent wanted guarantee of profits; Moulton and Jacobstein
were for credits to business; Wagner wanted public works;
Podell was for modification of the anti-trust laws. A committee,
however, was named to draw a tentative bill. It
did. I have seen that bill, and it contains the germ of
everything, save the licensing clause, that appeared in the
final NRA Act.
All this time another group was at work. Jerome Frank
and others were interested in national planning along the
George Soule idea—planning for abundance. John Dickinson,
Wall Street lawyer, then assistant secretary of commerce
and attorney for the Sugar Trust, had a series of
proposals closely paralleling the Chamber of Commerce
plans. Dickinson and Frank somehow got together, and
thereafter the preparation of an acceptable bill was carried
on by them along with Podell and Rifkind.
At the same time General Hugh Johnson was at work in
Moley's office on a plan to organize business. He wrote
a short bill containing an outright grant of power to the
THE NEW DEAL—SECOND EDITION 79
President to organize industry to give trade associations
authority to regulate competition, prices, production,
wages, hours. A day or two later he joined the Wagner
group. Donald Richberg came in a little later. After that,
little by little, Johnson and Richberg, supported by the
President, took over the final drafting of a bill.
What they produced was a plan for self-rule in industry
by trade associations under supervision of a government
bureau called the National Recovery Administration—the
NRA. It specifically suspended the anti-trust laws, thus
successfully completing a war that business had waged for
fifty years. It was the one thing that appealed most
strongly to Roosevelt's imagination. He imagined he had
been the instrument of creating a revolution in American
industry. This was his idea of a planned economy. It was
a plan for organizing each industry under a code. The
code was to be drawn by the industry and submitted to
the NRA, of which General Johnson became the head.
Labor and consumers had nothing to do with drawing the
codes. They could appear before the administrator and
object to any part of a code before it was approved, but
the codes were drawn by the employer associations.
Donald Richberg later said that the trade associations were
asked to Washington and told to write their own tickets.
They most certainly did.
For instance, the Steel Code was drawn by the representatives
of the American Iron and Steel Institute, and
it set up the Institute as the code authority. Thus it went
throughout the field of industry—some seven hundred
codes drawn up by the employers with a code authority
representing them, usually their trade association, making
thousands of rules and regulations with the force of law,
binding upon them and the people of the United States.
This was one of the most amazing spectacles of our
80 COUNTRY SQUIRE IN THE WHITE HOUSE
times, and represented probably the gravest attack upon
the whole principle of the democratic society in our
political history. The theory of our government is that
laws are to be enacted only by the representatives of the
people chosen by them. When a group of men, however
chosen, sit down to make rules fixing prices, controlling
production, setting out the conditions of competition,
defining the conditions upon which a man may enter a
business, fixing the amount of floor space or machinery
he will have, they are enacting laws, by whatever name
they are called, particularly when they are enforceable by
the public authorities and in many cases with jail sentences.
These laws were being enacted not by Congress or
a legislature or a board of aldermen or a public official of
any kind, but by a group of men called a code authority,
elected in most cases by the employers in their respective
industries. Under this plan a group of employers, elected
by other employers, could sit around a table—like a legislature—
and enact laws binding on the community. Anyone
who violated them could be put in jail. Not only did they
enact the laws, but they united in themselves the executive
power to enforce compliance, vested with police power.
Perhaps this is a good plan. Perhaps this is the way
society ought to be managed. But it is not the democratic
way. The country was divided into provinces—economic
provinces as distinguished from geographical provinces.
The geographical provinces—the states and counties—continued
to be run on the democratic plan by popularly
elected legislators and executives. The economic provinces
—the province of steel, of textiles, of millinery, etc.—were
run by legislators and police (compliance officers) elected
not by the people in the industries on the democratic
principle but by a handful of employers. And if this
system had continued in force and our development had
THE NEW DEAL—SECOND EDITION 8l
progressed along that line, we would have continued to
move further and further from the democratic plan and
in the direction of the corporate state of Mr Mussolini.
For this was the beginning of the corporate state, only
we called the corporatives codes.
This whole plan was declared unconstitutional by the
Supreme Court of the United States—not by a five-to-four
decision, but unanimously. Men like Justice Cardozo,
Brandcis and Stone joined vigorously in the decision. The
reason given was that the NRA was an abdication by
Congress of its constitutional powers to mae laws governing
our economic society.
The strangest feature of this episode was that this
serious blow to our democracy was carried on to the
cheers of many of the so-called liberals who flocked to
Washington to support the New Deal. Around the country
generally many sincere liberals and progressives were completely
confused by the whole performance. Everything
that was done was done in an atmosphere of hectic excitement
and with speeches and declarations and proclamations
couched in the language of liberalisrk. The
planning for scarcity was carried on with the language of
the planning for abundance.
At the same time the whole project was given the
appearance of being a great charter of liberty for labor.
Labor had nothing to do with making the codes—had
merely the power of protest that any citizen had. But the
law recognized in labor the right of collective bargaining.
As a matter of fact, as it turned out this was a delusion
because it merely gave to labor what it already had,
namely, the right of collective bargaining provided it
could force it on the employers. And what actually happened
was that a few powerful unions under strong
leadership, like the coal, Ladies' Garment Workers,
82 COUNTRY SQUIRE IN THE WHITE HOUSE
Amalgamated Clothing Workers under Lewis, Hillman
and Dubinsky, did get a great deal because of their
numerical and financial strength and their vigorous leadership
and their militant tactics. The great victories of the
CIO in the steel, automobile and other industries were
won after the NRA had passed out of existence.
But while the NRA was formally killed by the Supreme
Court, it was riding swiftly to its doom through the sheer
confusion and folly of its organization. General Johnson,
the first administrator, had resigned, and after a brief
interval in which Donald Richberg headed it, the NRA
was led by Mr S. Clay Williams. Mr Williams was and is
the head of the Reynolds Tobacco Company. He went to
Washington when the NRA was formed to protect the
great tobacco companies, fought labor in the NRA, declared
vehemently that he would fight the NRA to the
Supreme Court if necessary on any effort to give labor
any rights, and ended by being appointed by President
Roosevelt the administrator of the NRA,
As for Mr Richberg, who became then a sort of assistant
president, he presently left the administration to
become one of the most excessively employed lawyers in
Washington—representing oil companies, motor companies,
Latin-American dictators, the Transamerica Corporation,
while at the same time maintaining the most
intimate relations with the White House.
Incidentally many of the administrators of the NRA,
the AAA, the SEC and other government bodies are now
busily engaged as attorneys for the big business interests
with which they were in contact while they served the
government.
The NRA as a chapter in political government becomes
plain only when you understand the man who made it
possible—President Roosevelt. The man who had deTHE
NEW DEAL—SECOND EDITION 83
nounced Hoover for regimentation, who attacked the
Republicans for not enforcing the anti-trust laws, who
had proclaimed his devotion to freedom of enterprise and
to the traditions of democracy, without retracting any of
these bold declarations or making any explanation
proceeded to put into effect a policy that was the negative
of all these things. While at the same time proclaiming
his devotion to democracy, he adopted a plan borrowed
from the corporative state of Italy and sold it to all the
liberals as a great liberal revolutionary triumph. And,
curiously, every American liberal who had fought
monopoly, who had demanded the enforcement of the
anti-trust laws, who had denied the right of organized
business groups, combinations and trade associations to
rule our economic life, was branded as a tory and a reactionary
if he continued to believe these things.
Indeed it is very difficult to explain the strange complacence
of the various liberal groups in the presence of
the President's surrender to some of the worst elements
in that so-called Big Business that they had so mercilessly
attacked. The Treasury Department was headed by a Wall
Street industrialist while his undersecretary was a member
of the most active Washington lobbyist law firm, his
assistant secretary a vice-president of the American
Bankers Association. The secretary of commerce was a
reactionary politician who had been practicing law in
Washington as an income-tax lawyer ever since he left
the Internal Revenue Bureau at the time of Woodrow
Wilson, while his assistant secretary was an ally of one
of the most powerful law firms in Wall Street and at the
time represented the Sugar Trust in an attack on the
Sherman anti-trust law. One of the first acts of the administration
was to organize in the Department of Commerce
what was called the Business Advisory Council. It
84 COUNTRY SQUIRE IN THE WHITE HOUSE
contained the names of some of the biggest businessmen
in America. Its objective was, as the secretary of commerce
stated publicly, to "weave the pattern for the future
economic life of the nation." At a later date when Mr
Roosevelt brought his friend, Mr Henry Morgenthau, Jr, a
shockingly inexperienced person, in as secretary of the
treasury, he named as the Treasury's fiscal adviser Earle
Bailie, dominating partner in the firm of J. & W. Seligman
& Company, whose then most recent claim to public notice
was Senator Hiram Johnson's merciless exposure of his
methods in South American financing.
The President was incessantly busy conferring appointments,
authority, honors on leading reactionary and conservative
figures one week and then passing out appointments,
orders and endorsing measures for the Left
Wingers the next week. If he approved an act to regulate
the stock exchanges (the SEC) to please the liberal and
progressive groups, he appointed a Wall Street speculator,
Mr Joseph Kennedy, as the head of the commission and
literally paralyzed its functions to please the conservative
groups. As it happened the conservative groups were more
sapient, more experienced apparently and more realistic
than the liberal groups. They were quick to see that the
President was kidding them a little. But whatever the
liberals and conservatives thought about it, the final result
was that the President literally got nothing important
done.....
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Quote:
Book Review -- Forgotten Lessons: Selected Essays of John T. Flynn
....But Franklin Roosevelt's New Deal was something on a scale and with a purpose far different than the minor and marginal regulations that Flynn viewed as useful or required to improve the "rules of the game" so that the private enterprise system could "do its job" of securing both liberty and prosperity.The National Recovery Act of 1933 threatened the very existence of free enterprise in America. Industry was to be straightjacketed into government-mandated cartels given the authority to set prices, determine production levels, and regulate the workplace. But rather than see this as an "antibusiness" policy, Flynn argued that the NRA was FDR's collaboration with segments of the "big business" community that wished to control and limit market competition for their own monopolistic purposes. Indeed, in 1937, Flynn wrote an article for The Yale Review entitled "Mr. Hopkins and Mr. Roosevelt" in which he argued that FDR's appointing of his confidant, Harry Hopkins, to the post of secretary of commerce was part of the policy of cementing a network of government-business relationships and partnerships; as a result, Roosevelt tried to have Flynn blacklisted from being published in a wide circle of popular magazines and journals.
Flynn argued that there were few things exceptionally "new" in Roosevelt's New Deal. Since the time of the ancient Greeks and Romans, government had attempted to win popular favor and prevent social unrest by running budget deficits, creating money, and producing the illusion of prosperity on the rising price curve of inflation. What was new with the New Deal was the grand scale with which FDR ran up the federal debt — tens upon tens of billions of dollars, figures unique in the entire fiscal history of the United States.
But even with massive deficit spending, by the late 1930s, unemployment in the U.S. economy was still in the double-digit range. So Roosevelt turned to that other great historical device to which governments have resorted to "create jobs": defense spending. The wars in Europe and Asia gave FDR the rationale for bipartisan support for even greater deficits in the name of military preparedness. But once nations begin down the path of big spending for war preparedness, actual wars often are not far behind. With war comes militarism and the grand expansion of state power, with the freedoms of the people taken away or suspended in the name of the national emergency. This is exactly the road down which FDR took America, a road that finally led to the Japanese attack on Pearl Harbor.
In the postwar period, John Flynn was a die-hard anticommunist. But he believed that America's Cold War strategy of big military spending and numerous military commitments around the world were mainly Keynesian-type pump-priming tools to keep government deficit spending going to maintain an inflationary prosperity. In a manuscript rejected by National Review in 1956, and now included in Forgotten Lessons , Flynn declared:
"The gaudiest of these job-making boondoggles is militarism. The American taxpayer perhaps doesn't realize that this evil institution was used in Germany, France, Italy, and other countries not primarily for purposes of defense, war or conquest, but to bolster the economic system with jobs for soldiers and jobs and profits in the munitions plants. When the war in Europe roared up out of the muck, disorder and bankruptcy of that unhappy continent, Roosevelt spotted the thing he loved best [big government spending]. He turned eagerly to it and showed what a boom could really be with the soldiers and military industry."
This "racket," for political power and control, Flynn argued, was what most of America's cold war military spending was all about. ...
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Last edited by host; 09-06-2008 at 04:13 PM..
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