II
The conditions which made the economic opinion of the America of small towns and open country are gone. With their passing the older theories have been reshaped to new purposes. There are no longer free economic opportunities for all comers. Natural resources have been appropriated, and the natural differences between men have been enhanced by the artificial ones of ownership and inheritance. Wealth and control have alike been stripped from the many and concentrated in the few. The prevailing unit in business is the corporation. Establishments have been gathered into industries, and these have been articulated into a mighty industrial system, with its established rights, its customary ways of doing things, and its compulsions upon those who serve it. The older personal relation of “master” and “servant” abides only in indices of the records of the law courts. The contract of employment is now between a “soulless” but “legal entity” and a mere creature of flesh and blood. The more human individual, the survival of a less mechanical age, no longer lives upon the fruit of his individual toil. His welfare is pent in between his wages and the prices which he must pay for his necessities. Beyond this immediate bargain lies a mysterious economic system filled with unknown causes which threaten his income and even his employment. Those who possess have come into succession to those who ventured. In short, free enterprise has given way to an established system.
These events have left their mark upon economic opinion. It is altogether fitting that those who fell heir to the wealth piled up by free enterprise should gain its outer defences of theory and dialectic. So the older economics, with its logic and its blessing, has come as a legacy to those who have. Its newer statement, because of its well-known objective, may be called “the case for capitalism.” In its revision the adventurous militarism bent upon exploitation has given way to a pacifistic defence of security, possession, and things as they are.
In outward form few changes were necessary to convert the older theory of laissez-faire into a presentable case for capitalism. A more rigid and absolute statement of the classical doctrine was almost enough. In its terms the economic order is independent of other social arrangements. It is an automatic, self-regulating mechanism. Over it there rules an immutable and natural “law of supply and demand.” This maintains just prices, prevents exploitation, adjusts production and consumption to each other, secures the maximum of goods and services from the resources at hand, and disburses incomes in accordance with the merits of men and the verity of things. So just and impartial is the operation of this law that interference by the State amounts to meddlesome muddling. It cannot override natural law; therefore it should not.
It differs most from the older economics in the more explicit statement of the function of institutions. The growing inequality of income, of control, and of opportunity have presented facts that have to be faced. But even here, instead of contriving new defences, the advocates of capitalism have refurbished the older ones. The thing that is finds its justification in that which was. Property rights are to be preserved intact, because private property is essential to personal opportunity; just as if the propertyless did not exist and each was to win his living from his own acres or his own shop. The right of contract is not to be abridged, because the interests of both parties are advanced by a bargain between equals; just as if the corporate employer and the individual employé were alike in their freedom, their capacity to wait, and their power to shape the terms of the bargain. Prices are to be self-determined in open market, because competition will best reconcile the conflicting interests of buyers and sellers; just as if there was no semblance of monopoly among producers, no open price agreements, and no informal understandings. Individual initiative is not to be abridged, because it creates the wealth of the nation; just as if routine had no value for efficiency and the masses of men still had discretion in economic matters. The arrangements which make up the economic order find their validity in the symbolic language of ritual rather than in a prosaic recital of current fact.
This defence crosses the frontier which separates the economic from the political order only to appropriate the prestige of democracy. Its real concern is the preservation of the prevailing system wherein business controls industry for purposes of profit. Its formal solicitation is lest “the form of government” be changed. This concern finds expression in veneration for the work of the “fathers” (rather young men, by the way), not of machine technology and business enterprise, but of “representative government” and of “constitutional authority.” Its creed becomes propaganda, not for the defence of business, the security of corporations, or the preservation of managerial immunities, but for the defence of the nation, the security of America, and the preservation of “constitutional” rights. The newer economic arrangements are masked behind political rights and given the values of the political institutions which antedate them by many decades. In short, the staunchest defenders of the prevailing economic system believe that “their economic preferences are shared by the constitution of the United States.”
If we may borrow a term from its advocates, this body of opinion must be pronounced “theoretical.” In their speech a “theory” is a generalization which goes much further than its particulars warrant. In that sense their conclusions are not “practical.” The essential question with which this body of opinion is concerned is whether the scheme of institutions which focus upon profit-making make the members of the community, severally and collectively, as well off as they ought to be. It seems offhand that a realistic defence of the prevailing order might be convincingly formulated. At any rate, “the case for capitalism” is good enough to get into the records. Instead, its advocates have confused their own pecuniary success with the well-being of the community and have argued that because profits have been made the system is good. Like the classical economists they vindicate the system by assumption.