'True, said the New Republic,
European war collectivism was a bit
grim and autocratic, but never fear,
America could use the selfsame means
for 'democratic' goals.
No doubt.
As icing on the cake, Lippmann added an
important bit of "disinformation." For, he piteously wrote to Baker,
the fact is "that my father is dying and my mother is absolutely alone in
the world. She does not know what his condition is, and I cannot tell anyone
for fear it would become known."Apparently, no one else "knew"
his father's condition either, including his father and the medical profession,
for the elder Lippmann managed to peg along successfully for the next ten
years.[53]
Secure in his draft exemption, Walter
Lippmann hied off in high excitement to Washington, there to help run the war
and, a few months later, to help direct Colonel House's secret conclave of
historians and social scientists setting out to plan the shape of the future
peace treaty and the postwar world. Let others fight and die in the trenches;
Walter Lippmann had the satisfaction of knowing that his talents, at least,
would be put to their best use by the newly emerging collectivist State.
As the war went on, Croly and the other
editors, having lost Lippmann to the great world beyond, cheered every new
development of the massively controlled war economy. The nationalization of
railroads and shipping, the priorities and allocation system, the total
domination of all parts of the food industry achieved by Herbert Hoover and the
Food Administration, the pro-union policy, the high taxes, and the draft were
all hailed by the New Republic as an expansion of democracy's power to
plan for the general good. As the Armistice ushered in the postwar world, the New
Republic looked back on the handiwork of the war and found it good:
"We revolutionized our society." All that remained was to organize a
new constitutional convention to complete the job of reconstructing America.[54]
But the revolution had not been fully
completed. Despite the objections of Bernard Baruch and other wartime planners,
the government decided not to make most of the war collectivist machinery
permanent. From then on, the fondest ambition of Baruch and the others was to
make the World War I system a permanent institution of American life. The most
trenchant epitaph on the World War I polity was delivered by Rexford Guy
Tugwell, the most frankly collectivist of the Brain Trusters of Franklin
Roosevelt's New Deal. Looking back on "America's wartime socialism"
in 1927, Tugwell lamented that if only the war had lasted longer, that great
"experiment" could have been completed: "We were on the verge of
having an international industrial machine when peace broke," Tugwell
mourned. "Only the Armistice prevented a great experiment in control of
production, control of prices, and control of consumption."[55] Tugwell
need not have been troubled; there would soon be other emergencies, other wars.
At the end of the war, Lippmann was to go
on to become America's foremost journalistic pundit. Croly, having broken with
the Wilson Administration on the harshness of the Versailles Treaty, was bereft
to find the New Republic no longer the spokesman for some great
political leader. During the late 1920s he was to discover an exemplary
national collectivist leader abroad – in Benito Mussolini.[56] That Croly ended his years as an admirer
of Mussolini comes as no surprise when we realize that from early childhood he
had been steeped by a doting father in the authoritarian socialist doctrines of
Auguste Comte's Positivism. These views were to mark Croly throughout his life.
Thus, Herbert's father, David, the founder of Positivism in the United States,
advocated
the establishment of vast powers of government over everyone's life. David
Croly favored the growth of trusts and monopolies as a means both to that end
and also to eliminate the evils of individual competition and
"selfishness." Like his son, David Croly railed at the Jeffersonian
"fear of government" in America, and looked to Hamilton as an example
to counter that trend.[57]
And what of Professor Dewey, the doyen of
the pacifist intellectuals – turned drumbeaters for war? In a little known
period of his life, John Dewey spent the immediate postwar years, 1919–21,
teaching at Peking University and traveling in the Far East. China was then in
a period of turmoil over the clauses of the Versailles Treaty that transferred
the rights of dominance in Shantung from Germany to Japan. Japan had been
promised this reward by the British and French in secret treaties in return for
entering the war against Germany.
The Wilson Administration was torn
between the two camps. On the one hand were those who wished to stand by the
Allies' decision and who envisioned using Japan as a club against Bolshevik
Russia in Asia. On the other were those who had already begun to sound the
alarm about a Japanese menace and who were committed to China, often because of
connections with the American Protestant missionaries who wished to defend and
expand their extraterritorial powers of governance in China. The Wilson
Administration, which had originally taken a pro-Chinese stand, reversed itself
in the spring of 1919 and endorsed the Versailles provisions.
Into this complex situation John Dewey
plunged, seeing no complexity and of course considering it unthinkable for
either him or the United States to stay out of the entire fray. Dewey leaped
into total support of the Chinese nationalist position, hailing the aggressive
Young China movement and even endorsing the pro-missionary YMCA in China as
"social workers." Dewey thundered that while "I didn't expect to
be a jingo," that Japan must be called to account and that Japan is the
great menace in Asia. Thus, scarcely had Dewey ceased being a champion of one
terrible world war than he began to pave the way for an even greater one.[58]
VI. Economics in Service of the State: The Empiricism of Richard
T. Ely
World War I was the apotheosis of the
growing notion of intellectuals as servants of the State and junior partners in
State rule. In the new fusion of intellectuals and State, each was of powerful
aid to the other. Intellectuals could serve the State by apologizing for and
supplying rationales for its deeds. Intellectuals were also needed to staff
important positions as planners and controllers of the society and economy. The
State could also serve intellectuals by restricting entry into, and thereby
raising the income and the prestige of, the various occupations and
professions. During World War I, historians were of particular importance in
supplying the government with war propaganda, convincing the public of the
unique evil of Germans throughout history and of the satanic designs of the
Kaiser. Economists, particularly empirical economists and statisticians, were
of great importance in the planning and control of the nation's wartime
economy. Historians playing preeminent roles in the war propaganda machine have
been studied fairly extensively; economists and statisticians, playing a less
blatant and allegedly "value-free" role, have received far less
attention.[59]
Although it is an outworn generalization
to say that nineteenth century economists were stalwart champions of laissez
faire, it is still true that deductive economic theory proved to be a mighty
bulwark against government intervention. For, basically, economic theory showed
the harmony and order inherent in the free market, as well as the
counterproductive distortions and economic shackles imposed by state
intervention. In order for statism to dominate the economics profession, then,
it was important to discredit deductive theory. One of the most important ways
of doing so was to advance the notion that, to be "genuinely scientific,"
economics had to eschew generalization and deductive laws and simply engage in
empirical inquiry into the facts of history and historical institutions, hoping
that somehow laws would eventually arise from these detailed investigations.
Thus the German Historical School, which
managed to seize control of the economics discipline in Germany, fiercely
proclaimed not only its devotion to statism and government control, but also
its opposition to the "abstract" deductive laws of political economy.
This was the first major group within the economics profession to champion what
Ludwig von Mises was later to call "anti-economics." Gustav
Schmoller, the leader of the Historical School, proudly declared that his and
his colleagues' major task at the University of Berlin was to form "the
intellectual bodyguard of the House of Hohenzollern."
During the 1880s and 1890s bright young
graduate students in history and the social sciences went to Germany, the home
of the PhD degree, to obtain their doctorates. Almost to a man, they returned
to the United States to teach in colleges and in the newly created graduate
schools, imbued with the excitement of the "new" economics and
political science. It was a "new" social science that lauded the German
and Bismarckian development of a powerful welfare-warfare State, a State
seemingly above all social classes, that fused the nation into an integrated
and allegedly harmonious whole. The new society and polity was to be run by a
powerful central government, cartelizing, dictating, arbitrating, and
controlling, thereby eliminating competitive laissez-faire capitalism on the
one hand and the threat of proletarian socialism on the other. And at or near
the head of the new dispensation was to be the new breed of intellectuals, technocrats,
and planners, directing, staffing, propagandizing, and "selflessly"
promoting the common good while ruling and lording over the rest of society. In
short, doing well by doing good. To the new breed of progressive and statist
intellectuals in America, this was a heady vision indeed.
Richard T. Ely, virtually the founder of
this new breed, was the leading progressive economist and also the teacher of
most of the others. As an ardent postmillennialist pietist, Ely was convinced
that he was serving God and Christ as well. Like so many pietists, Ely was born
(in 1854) of solid Yankee and old Puritan stock, again in the midst of the
fanatical Burned-Over District of western New York. Ely's father, Ezra, was an
extreme Sabbatarian, preventing his family from playing games or reading books
on Sunday, and so ardent a prohibitionist that, even though an impoverished,
marginal farmer, he refused to grow barley, a crop uniquely suitable to his soil,
because it would have been used to make that monstrously sinful product, beer.[60] Having been graduated from Columbia
College in 1876, Ely went to Germany and received his PhD from Heidelberg in
1879. In several decades of teaching at Johns Hopkins and then at Wisconsin,
the energetic and empire-building Ely became enormously influential in American
thought and politics. At Johns Hopkins he turned out a gallery of influential
students and statist disciples in all fields of the social sciences as well as
economics. These disciples were headed by the pro-union institutionalist
economist John R. Commons, and included the social-control sociologists Edward
Alsworth Ross and Albion W. Small; John H. Finlay, President of City College of
New York; Dr. Albert Shaw, editor of the Review of Reviews and influential
adviser and theoretician to Theodore Roosevelt; the municipal reformer Frederick
C. Howe; and the historians Frederick Jackson Turner and J. Franklin Jameson.
Newton D. Baker was trained by Ely at Hopkins, and Woodrow Wilson was also his
student there, although there is no direct evidence of intellectual influence.
In the mid-1880s Richard Ely founded the
American Economic Association in a conscious attempt to commit the economics
profession to statism as against the older laissez-faire economists grouped in
the Political Economy Club. Ely continued as secretary-treasurer of the AEA for
seven years, until his reformer allies decided to weaken the association's
commitment to statism in order to induce the laissez-faire economists to join
the organization. At that point, Ely, in high dudgeon, left the AEA.
At Wisconsin in 1892, Ely formed a new
School of Economics, Political Science, and History, surrounded himself with
former students, and gave birth to the Wisconsin Idea which, with the help of
John Commons, succeeded in passing a host of progressive measures for
government regulation in Wisconsin. Ely and the others formed an unofficial but
powerful brain trust for the progressive regime of Wisconsin Governor Robert M.
La Follette, who got his start in Wisconsin politics as an advocate of
prohibition. Though never a classroom student of Ely's, La Follette always
referred to Ely as his teacher and as the molder of the Wisconsin Idea. And
Theodore Roosevelt once declared that Ely "first introduced me to
radicalism in economics and then made me sane in my radicalism."[61]
Ely was also one of the most prominent
postmillennialist intellectuals of the era. He fervently believed that the
State is God's chosen instrument for reforming and Christianizing the social
order so that eventually Jesus would arrive and put an end to history. The
State, declared Ely, "is religious in its essence," and, furthermore,
"God works through the State in carrying out His purposes more universally
than through any other institution." The task of the church is to guide
the State and utilize it in these needed reforms.[62]
An inveterate activist and organizer, Ely
was prominent in the evangelical Chautauqua movement, and he founded there the
"Christian Sociology" summer school, which infused the influential
Chautauqua operation with the concepts and the personnel of the Social Gospel
movement. Ely was a friend and close associate of Social Gospel leaders Revs.
Washington Gladden, Walter Rauschenbusch, and Josiah Strong. With Strong and
Commons, Ely organized the Institute of Christian Sociology.[63] Ely also founded and became the secretary
of the Christian Social Union of the Episcopal Church, along with Christian
Socialist W.D.P. Bliss. All of these activities were infused with
postmillennial statism. Thus, the Institute of Christian Sociology was pledged
to present God's "kingdom as the complete ideal of human society to be realized
on earth." Moreover,
Ely
viewed the state as the greatest redemptive force in society. In Ely's eyes,
government was the God-given instrument through which we had to work. Its
preeminence as a divine instrument was based on the post-Reformation abolition
of the division between the sacred and the secular and on the State's power to
implement ethical solutions to public problems. The same identification of
sacred and secular which took place among liberal clergy enabled Ely to both
divinize the state and socialize Christianity: he thought of government as
God's main instrument of redemption….[64]
When war came, Richard Ely was for some reason (perhaps because he was in his sixties) left out of the excitement of war work and economic planning in Washington. He bitterly regretted that "I have not had a more active part then I have had in this greatest war in the world's history."[65] But Ely made up for his lack as best he could; virtually from the start of the European war, he whooped it up for militarism, war, the "discipline" of conscription, and the suppression of dissent and "disloyalty" at home. A lifelong militarist, Ely had tried to volunteer for war service in the Spanish-American War, had called for the suppression of the Philippine insurrection, and was particularly eager for conscription and for forced labor for "loafers" during World War I. By 1915 Ely was agitating for immediate compulsory military service, and the following year he joined the ardently pro-war and heavily big business–influenced National Security League, where he called for the liberation of the German people from "autocracy."[66]
In advocating conscription, Ely was
neatly able to combine moral, economic, and prohibitionist arguments for the
draft: "The moral effect of taking boys off street corners and out of
saloons and drilling them is excellent, and the economic effects are likewise
beneficial."[67] Indeed,
conscription for Ely served almost as a panacea for all ills. So enthusiastic
was he about the World War I experience that Ely again prescribed his favorite
cure-all to alleviate the 1929 depression. He proposed a permanent peacetime
"industrial army" engaged in public works and manned by conscripting
youth for strenuous physical labor. This conscription would instill into
America's youth the essential "military ideals of hardihood and
discipline," a discipline once provided by life on the farm but
unavailable to the bulk of the populace now growing up in the effete cities.
This small, standing conscript army could then speedily absorb the unemployed
during depressions. Under the command of "an economic general staff,"
the industrial army would "go to work to relieve distress with all the
vigor and resources of brain and brawn that we employed in the World War."[68]
Deprived of a position in Washington, Ely
made the stamping out of "disloyalty" at home his major contribution
to the war effort. He called for the total suspension of academic freedom for
the duration. Any professor, he declared, who stated "opinions which
hinder us in this awful struggle" should be "fired" if not
indeed "shot." The particular focus of Ely's formidable energy was a
zealous campaign to try to get his old ally in Wisconsin politics, Robert M. La
Follette, expelled from the US Senate for continuing to oppose America's
participation in the war. Ely declared that his "blood boils" at La
Follette's "treason" and attacks on war profiteering. Throwing
himself into the battle, Ely founded and became president of the Madison
chapter of the Wisconsin Loyalty Legion and mounted a campaign to expel La
Follette.[69] The campaign was meant to mobilize the
Wisconsin faculty and to support the ultrapatriotic and ultrahawkish activities
of Theodore Roosevelt. Ely wrote to TR that "we must crush La
Follettism." In his unremitting campaign against the Wisconsin Senator,
Ely thundered that La Follette "has been of more help to the Kaiser than a
quarter of a million troops."[70] "Empiricism" rampant.
The faculty of the University of
Wisconsin was stung by charges throughout the state and the country that its
failure to denounce La Follette was proof that the university – long affiliated
with La Follette in state politics – supported his disloyal antiwar policies.
Prodded by Ely, Commons, and others, the university's War Committee drew up and
circulated a petition, signed by the university president, all the deans, and
over 90 percent of the faculty, that provided one of the more striking examples
in United States history of academic truckling to the State apparatus. None too
subtly using the constitutional verbiage for treason, the petition protested
"against those utterances and actions of Senator La Follette which have
given aid and comfort to Germany and her allies in the present war; we deplore
his failure loyally to support the government in the prosecution of the
war."[70]
Behind the scenes, Ely tried his best to
mobilize America's historians against La Follette, to demonstrate that he had
given aid and comfort to the enemy. Ely was able to enlist the services of the
National Board of Historical Service, the propaganda agency established by
professional historians for the duration of the war, and of the government's
own propaganda arm, the Committee on Public Information. Warning that the
effort must remain secret, Ely mobilized historians under the aegis of these
organizations to research German and Austrian newspapers and journals to try to
build a record of La Follette's alleged influence, "indicating the
encouragement he has given Germany." The historian E. Merton Coulter
revealed the objective spirit animating these researches: "I understand it
is to be an unbiased and candid account of the Senator's [La Follette's] course
and its effect – but we all know it can lead but to one conclusion – something
little short of treason."[71]
Professor Gruber well notes that this campaign to get La Follette was "a remarkable example of the uses of scholarship for espionage. It was a far cry from the disinterested search for truth for a group of professors to mobilize a secret research campaign to find ammunition to destroy the political career of a United States senator who did not share their view of the war."[72] In any event, no evidence was turned up, the movement failed, and the Wisconsin professoriat began to move away in distrust from the Loyalty Legion.[73]
After the menace of the Kaiser had been
extirpated, the Armistice found Professor Ely, along with his compatriots in
the National Security League, ready to segue into the next round of patriotic
repression. During Ely's anti–La Follette research campaign he had urged
investigation of "the kind of influence which he [La Follette] has exerted
against our country in Russia." Ely pointed out that modem
"democracy" requires a "high degree of conformity" and that
therefore the "most serious menace" of Bolshevism, which Ely depicted
as "social disease germs," must be fought "with repressive
measures."
By 1924, however, Richard T. Ely's career
of repression was over, and what is more, in a rare instance of the workings of
poetic justice, he was hoisted with his own petard. In 1922 the much-traduced
Robert La Follette was reelected to the Senate and also swept the Progressives
back into power in the state of Wisconsin. By 1924 the Progressives had gained
control of the Board of Regents, and they moved to cut off the water of their
former academic ally and empire-builder. Ely then felt it prudent to move out of
Wisconsin together with his Institute, and while he lingered for some years at
Northwestern, the heyday of Ely's fame and fortune was over.
VII.
Economics in Service of the State: Government and Statistics
Statistics is a vital, though much
underplayed, requisite of modern government. Government could not even presume
to control, regulate, or plan any portion of the economy without the service of
its statistical bureaus and agencies. Deprive government of its statistics and
it would be a blind and helpless giant, with no idea whatever of what to do or
where to do it.
It might be replied that business firms,
too, need statistics in order to function. But business needs for statistics
are far less in quantity and also different in quality. Business may need
statistics in its own micro area of the economy, but only on its prices and
costs; it has little need for broad collections of data or for sweeping,
holistic aggregates. Business could perhaps rely on its own privately collected
and unshared data. Furthermore, much entrepreneurial knowledge is qualitative,
not enshrined in quantitative data, and of a particular time, area, and
location. But government bureaucracy could do nothing if forced to be confined
to qualitative data. Deprived of profit and loss tests for efficiency, or of
the need to serve consumers efficiently, conscripting both capital and
operating costs from taxpayers, and forced to abide by fixed, bureaucratic
rules, modern government shorn of masses of statistics could do virtually
nothing.[74]
Hence the enormous importance of World
War I, not only in providing the power and the precedent for a collectivized
economy, but also in greatly accelerating the advent of statisticians and
statistical agencies of government, many of which (and who) remained in
government, ready for the next leap forward of power.
Richard T. Ely, of course, championed the
new empirical "look and see" approach, with the aim of fact-gathering
to "mold the forces at work in society and to improve existing
conditions."[75] More importantly, one of the leading authorities
on the growth of government expenditure has linked it with statistics and
empirical data: "Advance in economic science and statistics strengthened
belief in the possibilities of dealing with social problems by collective
action. It made for increase in the statistical and other fact-finding
activities of government."[76] As early as 1863, Samuel B. Ruggles, American
delegate to the International Statistical Congress in Berlin, proclaimed that
"statistics are the very eyes of the statesman, enabling him to survey and
scan with clear and comprehensive vision the whole structure and economy of the
body politic."[77]
Conversely, this means that stripped of
these means of vision, the statesman would no longer be able to meddle, control
and plan.
Moreover, government statistics are
clearly needed for specific types of intervention. Government could not
intervene to alleviate unemployment unless statistics of unemployment were
collected – and so the impetus for such collection. Carroll D. Wright, one of
the first Commissioners of Labor in the United States, was greatly influenced
by the famous statistician and German Historical School member, Ernst Engel,
head of the Royal Statistical Bureau of Prussia. Wright sought the collection
of unemployment statistics for that reason, and in general, for "the
amelioration of unfortunate industrial and social relations." Henry Carter
Adams, a former student of Engel's, and, like Ely, a statist and progressive
"new economist," established the Statistical Bureau of the Interstate
Commerce Commission, believing that "ever increasing statistical activity
by the government was essential – for the sake of controlling naturally
monopolistic industries." And Professor Irving Fisher of Yale, eager for
government to stabilize the price level, conceded that he wrote The Making
of Index Numbers to solve the problem of the unreliability of index
numbers. "Until this difficulty could be met, stabilization could scarcely
be expected to become a reality."
Carroll Wright was a Bostonian and a
progressive reformer. Henry Carter Adams, the son of a New England pietist
Congregationalist preacher on missionary duty in Iowa, studied for the ministry
at his father's alma mater, Andover Theological Seminary, but soon abandoned
this path. Adams devised the accounting system of the Statistical Bureau of the
ICC. This system "served as a model for the regulation of public utilities
here and throughout the world."[78]
Irving Fisher was the son of a Rhode
Island Congregationalist pietist preacher, and his parents were both of old
Yankee stock, his mother a strict Sabbatarian. As befitted what his son and biographer
called his "crusading spirit," Fisher was an inveterate reformer,
urging the imposition of numerous progressive measures including Esperanto,
simplified spelling, and calendar reform. He was particularly enthusiastic
about purging the world of "such iniquities of civilization as alcohol,
tea, coffee, tobacco, refined sugar, and bleached white flour."[79]
During the 1920s Fisher was the leading
prophet of that so-called New Era in economics and in society. He wrote three
books during the 1920s praising the noble experiment of prohibition, and he
lauded Governor Benjamin Strong and the Federal Reserve System for following
his advice and expanding money and credit so as to keep the wholesale price
level virtually constant. Because of the Fed's success in imposing Fisherine
price stabilization, Fisher was so sure that there could be no depression that
as late as 1930 he wrote a book claiming that there was and could be no stock
crash and that stock prices would quickly rebound. Throughout the 1920s Fisher
insisted that since wholesale prices remained constant, there was nothing amiss
about the wild boom in stocks. Meanwhile he put his theories into practice by
heavily investing his heiress wife's considerable fortune in the stock market.
After the crash he frittered away his sister-in-law's money when his wife's
fortune was depleted, at the same time calling frantically on the federal
government to inflate money and credit and to re-inflate stock prices to their
1929 levels. Despite his dissipation of two family fortunes, Fisher managed to
blame almost everyone except himself for the debacle.[80]
As we shall see, in view of the
importance of Wesley Clair Mitchell in the burgeoning of government statistics
in World War I, Mitchell's view on statistics are of particular importance.[81] Mitchell, an institutionalist and student of
Thorstein Veblen, was one of the prime founders of modern statistical inquiry
in economics and clearly aspired to lay the basis for "scientific"
government planning. As Professor Dorfman, friend and student of Mitchell's,
put it:
"clearly
the type of social invention most needed today is one that offers definite
techniques through which the social system can be controlled and operated to
the optimum advantage of its members." (Quote from Mitchell.) To this end
he constantly sought to extend, improve and refine the gathering and
compilation of data…. Mitchell believed that business-cycle analysis …might
indicate the means to the achievement of orderly social control of business
activity.[82]
Or, as Mitchell's wife and collaborator
stated in her memoirs:
he
[Mitchell] envisioned the great contribution that government could make to the
understanding of economic and social problems if the statistical data gathered
independently by various Federal agencies were systematized and planned so that
the interrelationships among them could be studied. The idea of developing
social statistics, not merely as a record but as a basis for planning,
emerged early in his own work.[83]
Particularly important in the expansion
of statistics in World War I was the growing insistence, by progressive intellectuals
and corporate liberal businessmen alike, that democratic decision-making must
be increasingly replaced by the administrative and technocratic. Democratic or
legislative decisions were messy, "inefficient," and might lead to a
significant curbing of statism, as had happened in the heyday of the Democratic
party during the nineteenth century. But if decisions were largely
administrative and technocratic, the burgeoning of state power could continue
unchecked. The collapse of the laissez-faire creed of the Democrats in 1896
left a power vacuum in government that administrative and corporatist types
were eager to fill.
Increasingly, then, such powerful
corporatist big business groups as the National Civic Federation disseminated
the idea that governmental decisions should be in the hands of the efficient
technician, the allegedly value-free expert. In short, government, in virtually
all of its aspects, should be "taken out of politics." And
statistical research with its aura of empiricism, quantitative precision, and
nonpolitical value-freedom, was in the forefront of such emphasis. In the
municipalities, an increasingly powerful progressive reform movement shifted
decisions from elections in neighborhood wards to citywide professional
managers and school superintendents. As a corollary, political power was
increasingly shifted from working class and ethnic German Lutheran and Catholic
wards to upper-class pietist business groups.[84]
By the time World War I arrived in
Europe, a coalition of progressive intellectuals and corporatist businessmen
was ready to go national in sponsoring allegedly objective statistical research
institutes and think tanks. Their views have been aptly summed up by David
Eakins:
The
conclusion being drawn by these people by 1915 was that fact-finding and
policymaking had to be isolated from class struggle and freed from political
pressure groups. The reforms that would lead to industrial peace and social
order, these experts were coming to believe, could only be derived from data
determined by objective fact-finders (such as themselves) and under the
auspices of sober and respectable organizations (such as only they could
construct). The capitalist system could be improved only by a single-minded
reliance upon experts detached from the hurly-burly of democratic policy-making.
The emphasis was upon efficiency – and democratic policymaking was inefficient.
An approach to the making of national economic and social policy outside
traditional democratic political processes was thus emerging before the United
States formally entered World War I.[85]
Several corporatist businessmen and
intellectuals moved at about the same time toward founding such statistical research
institutes. In 1906–07, Jerome D. Greene, secretary of the Harvard University
Corporation, helped found an elite Tuesday Evening Club at Harvard to explore
important issues in economics and the social sciences. In 1910 Greene rose to
an even more powerful post as general manager of the new Rockefeller Institute
for Medical Research, and three years later Greene became secretary and CEO of
the powerful philanthropic organization, the Rockefeller Foundation. Greene
immediately began to move toward establishing a Rockefeller-funded institute
for economic research, and in March 1914 he called an exploratory group
together in New York, chaired by his friend and mentor in economics, the first
Dean of the Harvard Graduate School of Business, Edwin F. Gay. The developing
idea was that Gay would become head of a new, "scientific" and
"impartial" organization, The Institute of Economic Research, which
would gather statistical facts, and that Wesley Mitchell would be its director.[86]
Opposing advisers to John D. Rockefeller,
Jr., won out over Greene, however, and the institute plan was scuttled.[87] Mitchell and Gay pressed on, with the
lead now taken by Mitchell's longtime friend, chief statistician and vice
president of AT&T, Malcolm C. Rorty. Rorty lined up support for the idea
from a number of progressive statisticians and businessmen, including Chicago
publisher of business books and magazines, Arch W. Shaw; E.H. Goodwin of the US
Chamber of Commerce; Magnus Alexander, statistician and assistant to the
president of General Electric, like AT&T, a Morgan-oriented concern; John
R. Commons, economist and aide-de-camp to Richard T. Ely at Wisconsin; and
Nahum I. Stone, statistician, former Marxist, a leader in the "scientific
management" movement, and labor manager for the Hickey Freeman clothing
company. This group was in the process of forming a "Committee on National
Income" when the United States entered the war, and they were forced to
shelve their plans temporarily.[88] After the war, however, the group set up
the National Bureau of Economic Research, in 1920.[89]
While the National Bureau was not to take
final shape until after the war, another organization, created on similar
lines, successfully won Greene's and Rockefeller's support. In 1916 they were
persuaded by Raymond B. Fosdick to found the Institute for Government Research
(IGR).[90] The IGR was slightly different in focus
from the National Bureau group, as it grew directly out of municipal
progressive reform and the political science profession. One of the important
devices used by the municipal reformers was the private bureau of municipal
research, which tried to seize decision-making from allegedly
"corrupt" democratic bodies on behalf of efficient, nonpartisan
organizations headed by progressive technocrats and social scientists.
In 1910 President William Howard Taft,
intrigued with the potential for centralizing power in a chief executive
inherent in the idea of the executive budget, appointed the "father of the
budget idea," the political scientist Frederick D. Cleveland, as head of a
Commission on Economy and Efficiency. Cleveland was the director of the New
York Bureau of Municipal Research. The Cleveland Commission also included
political scientist and municipal reformer Frank Goodnow, professor of public
law at Columbia University, first president of the American Political Science
Association and president of Johns Hopkins; and William Franklin Willoughby,
former student of Ely, Assistant Director of the Bureau of Census, and later
President of the American Association for Labor Legislation.[91] The
Cleveland Commission was delighted to tell President Taft precisely what he
wanted to hear. The Commission recommended sweeping administrative changes that
would provide a Bureau of Central Administrative Control to form a
"consolidated information and statistical arm of the entire national
government." And at the heart of the new Bureau would be the Budget
Division, which was to develop, at the behest of the president, and then
present "an annual program of business for the Federal Government to be
financed by Congress."[92]
When Congress balked at the Cleveland Commission's
recommendations, the disgruntled technocrats decided to establish an Institute
for Government Research in Washington to battle for these and similar reforms.
With funding secured from the Rockefeller Foundation, the IGR was chaired by
Goodnow, with Willoughby as its director.[93] Scan Robert S. Brookings assumed
responsibility for the financing.
When America entered the war, present and
future NBER and IGR leaders were all over Washington, key figures and
statisticians in the collectivized war economy.
By far the most powerful of the growing
number of economists and statisticians involved in World War I was Edwin F.
Gay. Arch W. Shaw, an enthusiast for rigid wartime planning of economic
resources, was made head of the new Commercial Economy Board by the Council for
National Defense as soon as America entered the war.[94] Shaw,
who had taught at and served on the administrative board of Harvard Business
School, staffed the board with Harvard Business people; the secretary was
Harvard economist Melvin T. Copeland, and other members included Dean Gay.
The board, which later became the powerful
Conservation Division of the War Industries Board, focused on restricting
competition in industry by eliminating the number and variety of products and
by imposing compulsory uniformity, all in the name of "conservation"
of resources to aid the war effort. For example, garment firms had complained
loudly of severe competition because of the number and variety of styles, and
so Gay urged the garment firms to form a trade association to work with the
government in curbing the surfeit of competition. Gay also tried to organize
the bakers so that they would not follow the usual custom of taking back stale
and unsold bread from retail outlets. By the end of 1917, Gay was tired of
using voluntary persuasion and was urging the government to use compulsory measures.
Gay's major power came in early 1918 when
the Shipping Board, which had officially nationalized all ocean shipping,
determined to restrict drastically the use of ships for civilian trade and to
use the bulk of shipping for transport of American troops to France. Appointed
in early January 1918 as merely a "special expert" by the Shipping
Board, Gay in a brief time became the key figure in redirecting shipping from
civilian to military use. Soon Edwin Gay had become a member of the War Trade Board
and head of its statistical department, which issued restrictive licenses for
permitted imports; head of the statistical department of the Shipping Board;
representative of the Shipping Board on the War Trade Board; head of the
statistical committee of the Department of Labor; head of the Division of
Planning and Statistics of the War Industries Board (WIB); and, above all, head
of the new Central Bureau of Planning and Statistics. The Central Bureau was
organized in the fall of 1918, when President Wilson asked WIB chairman Bernard
Baruch to produce a monthly survey of all the government's war activities. This
"conspectus" evolved into the Central Bureau, responsible directly to
the president. The importance of the bureau is noted by a recent historian:
The
new Bureau represented the "peak" statistical division of the
mobilization, becoming its "seer and prophet" for the duration,
coordinating over a thousand employees engaged in research and, as the agency
responsible for giving the president a concise picture of the entire economy,
becoming the closest approximation to a "central statistical
commission." During the latter stages of the war it set up a clearinghouse
of statistical work, organized liaisons with the statistical staff of all the
war boards, and centralized the data production process for the entire war
bureaucracy. By the war's end, Wesley Mitchell recalled, "we were in a
fair way to develop for the first time a systematic organization of federal
statistics."[95]
Within a year, Edwin Gay had risen from a
special expert to the unquestioned czar of a giant network of federal
statistical agencies, with over a thousand researchers and statisticians
working under his direct control. It is no wonder then that Gay, instead of
being enthusiastic about the American victory he had worked so hard to secure,
saw the Armistice as "almost a personal blow" that plunged him "into
the slough of despond." All of his empire of statistics and control had
just been coming together and developing into a mighty machine when suddenly
"came that wretched Armistice."[96] Truly a tragedy of peace.
Gay tried valiantly to keep the war
machinery going, continually complaining because many of his aides were leaving
and bitterly denouncing the "hungry pack" who, for some odd reason,
were clamoring for an immediate end to all wartime controls, including those
closest to his heart, foreign trade and shipping. But one by one, despite the
best efforts of Baruch and many of the wartime planners, the WIB and other war
agencies disappeared.[97] For a
while, Gay pinned his hopes on his Central Bureau of Planning and Statistics
(CBPS), which, in a fierce bout of bureaucratic infighting, he attempted to
make the key economic and statistical group advising the American negotiators
at the Versailles peace conference, thereby displacing the team of historians
and social scientists assembled by Colonel House in the Inquiry. Despite an
official victory, and an eight volume report of the CBPS delivered to
Versailles by the head of CBPS European team, John Foster Dulles of the War
Trade Board, the bureau had little influence over the final treaty.[98]
Peace having finally and irrevocably
arrived, Edwin Gay, backed by Mitchell, tried his best to have the CBPS kept as
a permanent, peacetime organization. Gay argued that the agency, with himself
of course remaining as its head, could provide continuing data to the League of
Nations, and above all could serve as the president's own eyes and ears and
mold the sort of executive budget envisioned by the old Taft Commission. CBPS
staff member and Harvard economist Edmund E. Day contributed a memorandum
outlining specific tasks for the bureau to aid in demobilization and
reconstruction, as well as rationale for the bureau becoming a permanent part
of government. One thing it could do was to make a "continuing
canvass" of business conditions in the United States. As Gay put it to
President Wilson, using a favorite organicist analogy, a permanent board would
serve "as a nervous system to the vast and complex organization of the
government, furnishing to the controlling brain [the president] the information
necessary for directing the efficient operation of the various members."[99] Although the President was "very
cordial" to Gay's plan, Congress refused to agree, and on June 30, 1919
the Central Bureau of Planning and Statistics was finally terminated, along
with the War Trade Board. Edwin Gay would now have to seek employment in, if
not the private, at least the quasi-independent, sector.
But Gay and Mitchell were not to be
denied. Nor would the Brookings-Willoughby group. Their objective would be met
more gradually and by slightly different means. Gay became editor of the New
York Evening Post under the aegis of its new owner and Gay's friend, J.P.
Morgan partner Thomas W. Lamont. Gay also helped to form and become first
president of the National Bureau of Economic Research in 1920, with Wesley C.
Mitchell as research director. The Institute for Government Research achieved
its major objective, establishing a Budget Bureau in the Treasury Department in
1921, with the director of the IGR, William F. Willoughby, helping to draft the
bill that established the bureau.[100] The
IGR people soon expanded their role to include economics, establishing an
Institute of Economics headed by Robert Brookings and Arthur T. Hadley of Yale,
with economist Harold G. Moulton as director.[101] The
institute, funded by the Carnegie Corporation, would be later merged, along
with the IGR, into the Brookings Institution. Edwin Gay also moved into the
foreign policy field by becoming secretary-treasurer and head of the Research
Committee of the new and extremely influential organization, the Council on
Foreign Relations (CFR).[102]
And finally, in the field of government
statistics, Gay and Mitchell found a more gradual but longer-range route to
power via collaboration with Herbert Hoover, soon to be Secretary of Commerce.
No sooner had Hoover assumed the post in early 1921 when he expanded the
Advisory Committee on the Census to include Gay, Mitchell, and other economists
and then launched the monthly Survey of Current Business. The Survey was
designed to supplement the informational activities of cooperating trade
associations and, by supplying business information, aid these associations in
Hoover's aim of cartelizing their respective industries.
Secrecy in business operations is a
crucial weapon of competition, and conversely, publicity and sharing of
information is an important tool of cartels in policing their members. The
Survey of Current Business made available the current production, sales, and
inventory data supplied by cooperating industries and technical journals.
Hoover also hoped that by building on these services, eventually "the
statistical program could provide the knowledge and foresight necessary to
combat panic or speculative conditions, prevent the development of diseased
industries, and guide decision-making so as to iron out rather than accentuate
the business cycle."[l03]
In promoting his cartelization doctrine,
Hoover met resistance both from some businessmen who resisted prying
questionnaires and sharing competitive secrets and from the Justice Department.
But, a formidable empire-builder, Herbert Hoover managed to grab statistical
services from the Treasury Department and to establish a "waste
elimination division" to organize businesses and trade associations to
continue and expand the wartime "conservation" program of compulsory
uniformity and restriction of the number and variety of competitive products.
As assistant secretary to head up this program, Hoover secured engineer and
publicist Frederick Feiker, an associate of Arch Shaw's business publication
empire. Hoover also found a top assistant and lifelong disciple in Brigadier
General Julius Klein, a protégé of Edwin Gay's, who had headed the Latin
American division of the Bureau of Foreign and Domestic Commerce. As the new
head of the bureau, Klein organized seventeen new export commodity divisions –
reminiscent of commodity sections during wartime collectivism – each with
"experts" drawn from the respective industries and each organizing
regular cooperation with parallel industrial advisory committees. And through
it all Herbert Hoover made a series of well-publicized speeches during 1921,
spelling out how a well-designed government trade program, as well as a program
in the domestic economy, could act both as a stimulant to recovery and as a
permanent "stabilizer," while avoiding such unfortunate measures as
abolishing tariffs or cutting wage rates. The best weapon, both in foreign and
domestic trade, was to "eliminate waste" by a "cooperative
mobilization" of government and industry.[104]
A month after the Armistice, the American
Economic Association and the American Statistical Association met jointly in
Richmond, Virginia. The presidential addresses were delivered by men in the
forefront of the exciting new world of government planning, aided by social
science, that seemed to loom ahead. In his address to the American Statistical
Association, Wesley Clair Mitchell proclaimed that the war had "led to the
use of statistics, not only as a record of what had happened, but also as a
vital factor in planning what should be done." As he had said in his final
lecture in Columbia University the previous spring, the war had shown that when
the community desires to attain a great goal "then within a short period
far-reaching social changes can be achieved."
"The need for scientific planning of
social change," he added, "has never been greater, the chance of
making those changes in an intelligent fashion has never been so good."
The peace will bring new problems, he opined, but "it seems
impossible" that the various countries will "attempt to solve them
without utilizing the same sort of centralized directing now employed to kill
their enemies abroad for the new purpose of reconstructing their own life at
home."
But the careful empiricist and
statistician also provided a caveat. Broad social planning requires "a
precise comprehension of social processes" and that can be provided only
by the patient research of social science. As he had written to his wife eight
years earlier, Mitchell stressed that what is needed for government intervention
and planning is the application of the methods of physical science and
industry, particularly precise quantitative research and measurement. In
contrast to the quantitative physical sciences, Mitchell told the assembled
statisticians, the social sciences are "immature, speculative, filled with
controversy" and class struggle. But quantitative knowledge could replace
such struggle and conflict by commonly accepted precise knowledge,
"objective" knowledge "amenable to mathematical formulation"
and "capable of forecasting group phenomena." A statistician,
Mitchell opined, is "either right or wrong," and it is easy to
demonstrate which. As a result of precise knowledge of facts, Mitchell
envisioned, we can achieve "intelligent experimenting and detailed
planning rather than agitation and class struggle."
To achieve these vital goals none other
than economists and statisticians would provide the crucial element, for we
would have to be "relying more and more on trained people to plan changes
for us, to follow them up, to suggest alterations."[105]
In a similar vein, the assembled
economists in 1918 were regaled with the visionary presidential address of Yale
economist Irving Fisher. Fisher looked forward to an economic "world
reconstruction" that would provide glorious opportunities for economists
to satisfy their constructive impulses. A class struggle, Fisher noted, would
surely be continuing over distribution of the nation's wealth. But by devising
a mechanism of "readjustment," the nation's economists could occupy
an enviable role as the independent and impartial arbiters of the class
struggle, these disinterested social scientists making the crucial decisions
for the public good.
In short, both Mitchell and Fisher were,
subtly and perhaps half-consciously, advancing the case for a postwar world in
which their own allegedly impartial and scientific professions could levitate
above the narrow struggles of classes for the social product, and thus emerge
as a commonly accepted, "objective" new ruling class, a
twentieth-century version of the philosopher-kings.
It might not be amiss to see how these
social scientists, prominent in their own fields and spokesmen in different
ways for the New Era of the 1920s, fared in their disquisitions and guidance
for the society and the economy. Irving Fisher, as we have seen, wrote several
works celebrating the alleged success of prohibition, and insisted even after
1929, that since the price level had been kept stable, there could be no
depression or stock market crash. For his part, Mitchell culminated a decade of
snug alliance with Herbert Hoover by directing, along with Gay and the National
Bureau, a massive and hastily written work on the American economy. Published
in 1929 on the accession of Hoover to the presidency, with all the resources of
scientific and quantitative economics and statistics brought to bear, there is
not so much as a hint in Recent Economic Changes in the United States
that there might be a crash and depression in the offing.
The Recent Economic Changes study
was originated and organized by Herbert Hoover, and it was Hoover who secured
the financing from the Carnegie Corporation. The object was to celebrate the
years of prosperity presumably produced by Secretary of Commerce Hoover's
corporatist planning and to find out how the possibly future President Hoover
could maintain that prosperity by absorbing its lessons and making them a
permanent part of the American political structure. The volume duly declared
that to maintain the current prosperity, economists, statisticians, engineers,
and enlightened managers would have to work out "a technique of
balance" to be installed in the economy.
Recent Economic Changes, that monument to "scientific"
and political folly, went through three quick printings and was widely
publicized and warmly received on all sides.[106] Edward Eyre Hunt, Hoover's long-time
aide in organizing his planning activities, was so enthusiastic that he
continued celebrating the book and its paean to American prosperity throughout
1929 and 1930.[107]
It is appropriate to end our section on
government and statistics by noting an unsophisticated yet perceptive cry from
the heart. In 1945 the Bureau of Labor Statistics approached Congress for yet
another in a long line of increases in appropriations for government
statistics. In the process of questioning Dr. A. Ford Hinrichs, head of the
BLS, Representative Frank B. Keefe, a conservative Republican Congressman from
Oshkosh, Wisconsin, put an eternal question that has not yet been fully and
satisfactorily answered:
There
is no doubt but what it would be nice to have a whole lot of statistics. I am
just wondering whether we are not embarking on a program that is dangerous when
we keep adding and adding and adding to this thing....We have been planning and
getting statistics ever since 1932 to try to meet a situation that was domestic
in character, but were never able to even meet that question. Now we are
involved in an international question. It looks to me as though we spend a
tremendous amount of time with graphs and charts and statistics and planning.
What my people are interested in is what is it all about? Where are we going,
and where are you going?[108]
An earlier version of this paper was
delivered at a Pacific Institute Conference on "Crisis and
Leviathan," at Menlo Park, CA, October 1986.
World War I as Fulfillment: Power and the Intellectuals - Notes
Related: Obama's Neo-Nationalism
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