A Reviewer’s Notebook – 1959/9

There never was anything wrong with American capitalism that a purer conception of freedom couldn’t cure, and Europeans—at least some Europeans—are at last catching on to the fact. Here we have Massimo Salvadori, a con­tinental European who teaches at Smith and Bennington, writing The Economics of Freedom: American Capitalism Today (Doubleday, 242 pp., $4.50). Sal­vadori likes what he sees in this country, and, as part of his cam­paign to mollify European critics, he calls it “people’s capitalism.” Father R. L. Bruckberger, a French Dominican priest who spent eight years in America, also likes our economic system and says so in his stimulating Image of America (Viking, 288 pp., $4.50). But he thinks capitalism has a bad name that will never be eradi­cated by any adjectival medication. His proposal is to speak of the American economic system as a “third choice.”

Salvadori’s book comes to us with an introductory commenda­tion by Adolf A. Berle, Jr. Father Bruckberger’s essay is vouched for in a foreword by Peter Drucker. Berle, who once thought that the big corporations would take us all captive, is a recent con­vert to the view that countervail­ing forces can be counted on to force a “corporate conscience” on Big Business. As for Drucker, he has always believed that the American Revolution was, in reality, a counterrevolution car­ried out in the name of ancient English freedoms against the growing despotism of eighteenth century European monarchs.

The intelligence brought to bear on these books by their sponsors is, then, quite in line with a burgeoning recognition in many quar­ters that social systems which do not honor the “primacy of the per­son” (Drucker’s phrase) in all realms, the economic included, must become intolerable. This shift in the intellectual weather is all to the good. It is, however, a question whether the new pro­ponents of economic freedom really understand the full impli­cations of what they are talking about. Let us see.

Does History Justify “New Deal”?

Salvadori is perfectly sound in most of his history and most of his generalizations. He knows that any comparative audit of systems must prove socialism to be inferior in all respects to capitalism. He commends Bradford Smith for saying, in 1957, that “all Marx’s dire predictions about capitalism have been reversed…. the level of living for workers has risen, their hours have been shortened, income has been more evenly dis­tributed, agriculture is being sub­sidized instead of exploited….” He realizes that capitalism in America has been more creative than its parent system in England. He speaks of profit as “the spark plug which keeps the motor run­ning”; he is ill in favor of the market mechanism; and he treats consumption as the main purpose of the economic process.

Surely, such thinking is on the side of the angels. One may read all of Salvadori’s book, however, without encountering any real at­tempt to understand the social forces of the past thirty years in America as they have affected the “economics of freedom.” “The Square Deal and the New Free­dom,” says Salvadori, “were fol­lowed by the New Deal which, moderated and reformed in the postwar period, has become the American Deal.” But is it a sound “deal” when a third of the people’s total income is taken by govern­ment to be handed back to favored groups in accordance with the pressure generated by the push­ and-pull of those who are most skilled at the game? Is it a sound deal when one segment of labor (that of the tightly organized mass industries) is granted the political power to raise its wages at the expense of other segments of the working classes? Is it a sound deal when a small business­man in, say, Utah is kept from expanding his factory because tax money is needed to provide foreign aid for a semi socialist government in India?

Salvadori is personally willing to accept a good deal of govern­ment intervention in the economy on the ground that it reduces the tensions of life. He does not see that for every tension that is lessened by government action, an­other one is created. (Satisfac­tion because of increased “secu­rity” is negated by dissatisfaction with a decrease in take-home pay.) Nor does Salvadori see that the cumulative effect of interven­tions is to create a general feeling that no one has rights that need be respected or duties and obliga­tions that one should be expected to fulfill.

Security Lost Through Inflation

A steadily augmenting social security program may, theoreti­cally, reduce the “tension” of fear­ing the onset of old age. But when social security is paid for out of inflation, it does not really allevi­ate any fear. Meanwhile, when government promises to take care of the elderly, children may drop the problem entirely. It is no longer incumbent upon them either to help their own parents or to save for themselves. By relieving them of “strain,” then, the gov­ernment has also relieved them of the necessity of decision. At some cumulative point, interventionism must serve to create a society that is incapable of the practice of any significant freedoms at all.

No doubt Salvadori’s answer to this would be that Americans still have plenty of scope for the prac­tice of freedom as long as two-thirds of the rich fruits of their energies are left in their own hands. In a world of steadily in­creasing productivity, he might say, the government’s percentage of a “take” can be expanded with­out hurting anybody. But if Colin Clark is right, an expanding tax take must have its adverse effect on the very nature of productivity itself. Salvadori seems not to rec­ognize the problem in its Ameri­can guise. Yet it is surely impor­tant to “the economics of free­dom.”

Father Bruckberger’s Image of America is like Salvadori’s book in that it begs the question of the New-Fair Deal. As an explanation of pre-1932 American develop­ment, set down for a European audience, Image of America is generally excellent. It explains how the consumer came to take command over the American pro­ductive system. It recognizes the role that innovation plays in keep­ing the American corporation trim and happy without reaching for cartel status. It appreciates the importance of the penny econ­omies that can result in high wages, large profits, and low prices once a “break-even” point has been passed.

Men and Ideas

Father Bruckberger has a neat trick of driving his meaning home by use of contrasting personalities. He dramatizes the difference between the American and the French Revolutions by setting off Thomas Jefferson, who urged La­fayette to accept a limited mon­archy, against Saint-Just, who tried to terrorize everybody into republican virtue. He juxtaposes Sam Gompers, whose program for American labor was “more,” and Lenin, who wanted “everything or nothing.” And he uses the half-forgotten American economist, Henry Carey, an optimist, as a battering ram against Ricardo, who was gloomy about the ability of either the worker or the capi­talist to keep the devouring land­lord from seizing all the benefits of progress.

If Profits Are Taxed Away?

Henry Ford occupies a key posi­tion in Father Bruckberger’s book, which is quite as it should be. But if Ford was right about the need for high plow-back of profits into efficient machinery, low prices, and a low over-all cost of labor gained by the seemingly paradoxical device of offering a high individual incentive wage, then surely Father Bruckberger is wrong in his refusal to worry about a high-tax or a high-infla­tion economy. Profits can’t be plowed back when the government takes them; low prices can’t be maintained when taxes account for a third of the retail cost of a car. And high wages tend to be­come meaningless when they are eaten up by inflation and by steadily mounting payroll deduc­tions for a whole slew of things which the worker may or may not want.

Father Bruckberger says the Ford system wasn’t “capitalism”; Massimo Salvadori, on the other hand, thinks it foreshadowed “peo­ple’s capitalism.” But these are semantic quibbles, entered in the record for the sake of good “pub­lic relations” with countries that are jealous of America‘s power and resentful of British and French “colonialism.” The truth of the matter is that capitalism, in Europe, has always been sad­dled with feudal hangovers. It has had its real development in the United States. Why, then, should it be rejected as a name when the real problem is to explain it for what it is, a system under which a man can get the most for his ef­forts?