The Old Freedom and the New Discipline
The old revolution of capitalism was a revolt for economic freedom. The new revolution of socialism is a revolt against economic freedom. The old revolution was a revolt for power for money. The new revolution is a revolt against the power of money. Great Britain as the world’s oldest and still its premier banker is obviously indicated to be the first victim of this revolt. This new revolt, of course, is due mainly to the failure of the money power either to avert or end the depression unaided by government spending and to the failure of the money power also to prevent a second world war in one generation.
To understand the revolt against free trade and economic freedom, one must understand the past raison d’être and the present failure of free trade and economic freedom. One of the many anomalies of the topsy-turvy world since 1914 has been the support given by free traders, internationalists, idealists, bankers and college professors to the multiplication and defense by allied statesmanship of small nations whose economic nationalism has been in complete variance with the imperatives of liberal economic freedom. The same internationalists have been loudest in denouncing the efforts of Japan, Italy, Germany and Russia to enlarge certain areas under their respective controls within which free trade can actually be practiced. The explanation of this inconsistency, of course, is that the internationalists do not want regionalized but universalized free trade; they do not want greater power for great powers but greater power for big money.
The logic of economic freedom and free trade is simply more power for money. The objective is most power for those having most money. Free trade is the self-interest of money. The free market was the interest of a submerged and emerging trading class in the days of feudalism and the ensuing commercial and industrial revolutions. The free market is not today the interest of a submerged and steadily sinking class of farmers and unemployed in the declining days of democracy and industrialism. The proofs are simple: the farmers cannot obtain a remunerative price and the unemployed cannot find jobs today in the free market. Yet they number nearly half of the working force of the nation. Free trade calls for a world economically and politically so organized and administered that money can move from one country to another as freely as migratory birds. Thus money can dictate to governments everywhere its own taxes and regulations and to labor its own wage scales, without the appearance of applying physical force. It is truly a marvelous system when it works according to the liberal storybooks. If the terms of capital are not met satisfactorily in one place, it can make its coercive power felt by the altogether lawful and thoroughly non-violent procedure of flight or passive resistance. Thus it puts pressure on the gold reserves and security markets, on banks and their debtors, and on labor employed in industry and trade in the area not meeting money’s demands, which is euphemistically called failing to act in a way to inspire business confidence. This is the freedom for money for which hundreds of thousands of Americans must die on European battlefields though they, themselves, never had enough money from one pay day to another to get clear of debt.
The money power, if free trade and economic freedom are upheld generally, can be exercised with total anonymity and irresponsibility so far as persons and corporations are concerned. Mr. Roosevelt is to blame for every failure of the New Deal, as, for instance, that of not balancing the budget or maintaining recovery. But, thanks to economic freedom, American business cannot be blamed for the failure of American finance to keep the banks open in 1933 or of American industry to keep men at work. The money power can make millions jobless and destitute without once firing a single shot or emitting an audible sound or explanation of what it is doing. It is, of course, nonsense to try to personify or identify the money power as a given group, clique or individual in Wall Street, Lombard Street or anywhere else. The rare charm of economic freedom is that nobody is ever responsible for anything that happens. No conspiracy can be proved if international capitalists start taking their money out of one country, as our Committee of the Nation did in early 1933. Why has no government investigation ever exposed the names of the bankers, gentlemen and patriots who sold dollars for foreign currencies and shipped gold abroad during the first two months of 1933? No one is to blame if the action of capitalists forces banks to call loans and curtail lines of credit, thus inducing a panic of depositor withdrawals and liquidation on the security markets. The responsible capitalists are simply private citizens legitimately and properly exercising their constitutional right as free individuals to do what they please with what is their own. In committing the acts which add up to a national disaster, these myriad rugged individualists have no intention of producing such disaster. In fact, they neither know nor care what the result will be to which their individual acts contribute. They have the word of Adam Smith and all the pious humbugs rationalizing liberalism, democracy and capitalism ever since that the result can be only for the common good. An invisible hand guides all this. If you do not believe it, you lack faith in democracy and freedom. If it is not true, democracy does not work. No conspiracy or illegal acts can be proved if a number of companies shut down factories in New England and transfer production to the South because wages and taxes are lower there. Given free trade, if a number of companies shut down factories in a country where wages and living standards are high to transfer production to countries where wages and living standards are low, they are guilty of no wrongdoing but rather of the exercise of sound business judgment.
It is not strange that Wall Street and the holders of great fortunes in America and throughout the world generally believe in free trade and economic freedom, or that the rich in this country are the main contributors to the Liberty League or that the husband of the richest woman in the world, the Social Register and the colleges and foundations they endow are for Britain, liberty, democracy and war. In 1940 America the rich want liberty and the poor want ham and eggs and there is no connection between the two. Millions of simple souls have imbibed the indoctrination of the classroom about liberty and now believe it as gospel truth. The doctrine of free trade, economic freedom and laissez faire was developed in England in connection with a shift in policy from the monopoly of the eighteenth century to that of the nineteenth century. The British in the eighteenth century pursued monopoly by means of mercantilism; in the nineteenth century they pursued it by other means—free trade. In The Wealth of Nations, published in 1776, Adam Smith showed the unsuitability of mercantilist policies and the suitability of free trade to British ends under the new conditions created by the rise of the factory system. The transition from mercantilism to free trade went on up to the middle of the nineteenth century when the last of the English corn laws were repealed. This change enabled England to achieve and exploit for over a century the biggest and juiciest series of monopolies ever enjoyed by any nation, to wit, monopolies in banking, shipping, coal, textiles, and the heavy industries. The irony of it was that free trade, the essence of which our sophomoric economists still believe to be the opposite of monopoly, was conceived, developed and propagandized by the British for over a century with great success precisely because, during that period, it was the very best possible system for making the British monopolists and yielding them monopolist profits.
But if American and Continental professors fell for Adam Smith, David Ricardo and John Stuart Mill, it did not take American and continental statesmen and businessmen long to see that free trade was nothing more or less than a British racket. So they quietly began, here after the Civil War, and in Germany after the Franco-Prussian War, to fight the British free-trade monopoly with specially protected and subsidized monopolies of their own. The essence of the British monopoly under free trade was the ability to buy cheap and sell dear. To break this up, it was necessary mainly for foreigners, by the adoption of tariff protection and subsidies, to curtail the ability of the British to sell dear. Under free trade England stood in relation to the rest of the world exactly as the American manufacturer now stands in relation to the American farmer. American industrial prices and profits are stabilized by means of price and production control, such as only monopoly can achieve, while American farm prices fall below a remunerative level. In consequence, American farm profits disappear and American farmers go on the dole, Meanwhile successful American industrial monopolies and semi-monopolies maintain prices and profits.
According to the college professors, economic competition, like cricket, is a game to be played under rules; according to experience, it is the war of all against all under which monopolies and the abuse of the weak by the strong are as inevitable as it is for big fish to eat little fish, in another sphere of competition. Fair competition is simply competition under rules and conditions which suit the interests of the person using the phrase. The most essential fact about competition of any sort is that everybody does not win. In a phase of economic expansion, the winners are abnormally numerous because of expansion and in spite of competition. Then competition proves tolerable, as it did in the nineteenth century.
Long before the World War of 1914-1918, British free trade had begun to lose out due to the rise of tariff-protected industries all over the world. But it was not until 1932 that they were forced to haul down the flag of free trade and get in step with the protectionist, state capitalist times. The main reason was that free trade had ceased to be a useful means of monopoly for the British. The British enjoyed over a century of free prosperity while they were getting away from eighteenth century mercantilism. Then they enjoyed about half a century of holding their own while the rest of the world was getting back to mercantilism. From 1914 to 1932 they suffered two decades of trade decline after the world had got back to mercantilism. From 1932 to 1957 the British had a mild prosperity under a return to state-subsidized industry or a new streamlined mercantilism, with a strongly socialist accent. The new revolution of today and tomorrow may really be said to have begun back in the seventies and eighties when America and Germany led the challenge of British free-trade monopolies by fostering tariff-subsidized domestic monopolies. The state socialism of Adolf Hitler is simply the final phase of the protectionism begun by Bismarck and McKinley, long before Hitler had cut his second teeth.
Free trade, with the money system often called the gold standard, though, in reality, never anything but the Bank of England managed currency of world trade, elaborated theoretically in the British Bullion Report of 1844 and hundreds of dull tomes by academic economists, constituted a world formula of monopoly by the British and for the British but later generously placed at the disposition of the moneylenders and money-changers of the world. This is why, for generations past, “the best people” everywhere have been fanatically pro-British. Britain made the world safe and easy for money. The best people, therefore, now feel that they should make the world safe and easy for Britain. If this costs millions of American lives, so much the worse for America.
Britain created for moneylenders and money-changers a system by means of which they could wield power and reap profits with a minimum of social responsibility. Property owners under feudalism had to accept responsibility and power, and they had to perform functions exposing them to danger. They were not free to do what they pleased with their property or to carry it around the world on a piece of paper. They had not the advantage of the British banking system, gold standard and continuous market for paper securities. The British gave money a new freedom and power. This was the birth of democracy. The system now gives millions chronic unemployment and insecurity. It, therefore, has to go and is going. Millions may die for freedom or the power of money, but they will die in vain.
It is neither hyperbole nor literary license to say that the British developed the money system or that they made of it an instrument of power and profitable monopoly first for the British and later for the moneylenders and money-changers of the world. It was the London goldsmiths of the seventeenth century who discovered in keeping gold for clients who did not trust the Stuarts that it was not necessary for the custodian of gold ever to have physical possession of as much gold as he had given out receipts for, the reason being, quite simply, that all the depositors (then bailors), of the gold never at the same time demanded their gold. The bankers later shaved down the bailee responsibility at law to that of a simple contractual relationship under which the depositor merely has a right of action or a right to sue the banker for breach of contract if he fails to honor the depositor’s drafts up to the limit of the depositor's credit balance with the banker. Banking grew out of the discovery that a deposit receiver could lend out more money than he had or operate on a fractional reserve against his deposit liabilities.
The essence of the banker’s monopoly under modern banking, a British discovery, is the banker’s power to create money, and the essence of his racket is the ability, as long as the system works, to earn a return on more money than he actually has in his own capital plus the deposit of cash. For this monopoly to work, the banker must be able at all times to meet all demands for cash. Practically, this means that confidence in the banks must always be such that there are no serious runs on them for cash. It also requires that bankers cooperate with each other whenever one or more of them needs more cash than he has on hand. These conditions of the successful operation of the banking monopoly or racket can be met only if a worldwide system of central banks, the mother of which is the Bank of England, and of large modern banks, operates smoothly to lend each other money or gold when needed on reasonable terms.
Another feature of the British financial system was their bill of exchange by means of which imports and exports between countries all over the world were financed, i.e., payment made by the importer after ninety days and payment made promptly on shipment to the exporter, all through the medium of a sterling bill, usually a ninety day I.O.U. of the importer, guaranteed by a British bank. Through this ingenious device, British bankers and bill brokers collected a parasitic interest on lending to foreigners money kept on deposit in English banks by foreigners, and a parasitic commission for changing one foreign money into sterling to realize payment by the importer and then from sterling back into another foreign money to effectuate payment of the importer’s money to the exporter. Thus, if a German bought wheat from Rumania, he had to pay in Rumanian lei via London and sterling, while another German, if he sold steel rails to Rumania, had to collect his German marks via London and sterling. Now, by means of rational barter and clearing arrangements, all this financing through London of trade which never touches England is completely short-circuited to the loss of London and to the gain of other countries, who today find ways of balancing their accounts with each other without paying toll to British moneylenders and money-changers.
For reasons too numerous and complex for brief and easy explanation, this world-wide system whereby bankers created money and credit on which to collect interest and commissions could work only during the boom phase of world capitalism. Only such a phase could engender the necessary public confidence in such phony fabrications of credit by private monopolists of the money function. Once this phase was over, the maintenance of the system during recurring crises of ever growing severity imposed strains which society could not stand. These strains involved measures of deflation of bank credit, collection of loans, liquidation of securities, denials of new bank loans and other financial processes of a deflationary character too onerous for the community to bear. In short, the state had to suspend and reverse these processes. This meant the beginning of the end of private banking and capitalism.
Government had to suspend or, rather, end the right of private holders of currency to redeem it in gold. Government had to assume directly or indirectly, in one way or another, responsibility for all bank deposits. To assume such responsibility, the government had to exercise, without the banker-imposed limitations of the gold standard, the function of creating money. This the government achieved in various ways, all amounting to an indefinite expansion of the quantity of money and bank deposits with the result of cheapening money or lowering money rates to the vanishing point to the loss of the banks which live largely on lending money they are able to create in the form of deposits and keep outstanding. The whole function or purpose of the gold standard was to keep money scarce and dear for the benefit of the bankers whose interest it is to lend money for as high interest rates as the traffic will bear. One of the ways in which government increased the supply of money was to mark up the value of gold, thus, in our case, printing $35 instead of $20.67 against an ounce of the precious metal. In this way Washington made $4,000,000,000 of gold it had in January, 1934, worth, overnight, about $7,000,000,000. And in this way it has attracted to this country over $11,000,000,000 of gold against which paper money has been created to be held by the Federal Reserve Banks. The countries from which all this gold has come have increased the quantity of money in circulation and bank deposits while losing gold with the benefit of devaluation and without the benefit of gold or the leave of the private bankers, thus showing how superfluous both gold and private bankers are to a government printing press. Gold as a monetary instrument is doomed along with capitalism.
The big difference between bank and government created money is that bank money has to rest on confidence whereas government money rests on coercion. For banker money to be good, conditions must be such as to inspire confidence in the banks and in business. Government, on the other hand, does not have to inspire confidence in its paper or other money. Government makes its money legal tender, refuses to convert it into gold or foreign currency, and bars the use of other money. Government cannot control the purchasing power of its money except by controlling all economic production. But government can force the use of its money to the exclusion of any other money.
Government control cannot make a given quantity of money worth more than the current speed of spending and the current rate of production of goods and services will allow. Fluctuations or a slow decline in the value of money are of no great importance in a socialized economy. The only important monetary desiderata under socialism are (1) to have an unlimited supply of money always available for spending and (2) to spend enough of it or to spend it fast enough to have no unemployment. Under capitalism stable money is a vested interest of the rich or those whose fortune on net balance is in obligations. Under socialism, there is no public interest in preserving the fixed integrity or purchasing power value of fortunes in bonds or mortgages—rather just the contrary. The simplest and easiest way to tax and discourage oversaving is a slow and continuous depreciation of the currency. When the monetary unit gets too low in purchasing power, a new unit equaling so many of the old units can be adopted and the creeping inflationary process repeated ad lib. In this way the burden of the public and private debt is continuously alleviated thus making it possible continuously to create new debt for new investment.
Perpetual monetary depreciation is the only alternative to perpetual population growth, since under any money-using system, perpetual monetary inflation is an empirical necessity. This is exemplified in Stalin’s and Hitler’s socialism or Coolidge’s and Hoover’s capitalism. The only significant difference in this respect between Russian or German inflation and our inflation of the twenties is that our inflation had to collapse in a terrific deflation and could not be started up again under capitalism. It has had to be resumed since 1930 in the form of relief deficits. Socialism is a formula for perpetual inflation without periodic deflations. Depression has cut our private debt $12 billion and raised our public debt $20 billion.
The rise of government-managed money or the increasing assumption by government of the money function, the world over, has come since 1931, not as a reform demanded by the people but as a necessity demanded by the breakdown of banking in 1931-1933. These changes, which need not be explained here in detail, have involved, among other things, a great loss of freedom and a great increase in government coercion. The loss of freedom has not greatly affected individuals who can now buy more for a paper dollar than they could in 1929 when we had a kosher dollar. But this loss of freedom has meant less profit, prestige and power for bankers and the financial district.
The big point to retain about it all is that these changes were not initiated by revolutionary leaders, either in America or England. Our stock market collapsed, our commodity prices crashed, and all our banks closed under Hoover, not Hitler. For private finance now to call for a fight for economic freedom is like a man in a hospital, who has been picked up unconscious in the gutter in a fit of apoplexy, protesting against an invasion of his personal liberty and demanding its restoration, while he lies on a bed of anguish half paralyzed waiting for the next stroke of paralysis which will probably be his finish. Private banking, such as it is today, is lucky still to be in the government’s hospital and in the governments iron lung waiting for the next and last stroke which the war should administer.
President Roosevelt has driven more nails into the coffin of economic freedom in America than Hitler and Stalin. He has laid the institutional and bureaucratic foundations of the new revolution in America. Yet he may lead America into war against the new revolution in Europe which has gone a little further than he has yet had time or need to go in this country. The essential reasons why the money power or economic freedom has been curbed here and virtually ended in other countries are the same. They do not derive from Das Kapital or Mein Kampf but from the necessities of specific situations and the frustrations of people in these situations. Money, or ownership and enterprise, cannot be allowed to hold monopolies and exercise power for gain while, at the same time, failing to inspire enough confidence to prevent bank closures and to provide enough jobs to obviate necessity for government relief and pump priming.
In considering the future reorganization of economics along the lines already being traced by the new revolution, one can only try to understand the larger objectives. One cannot foresee needs or uses of ways and means. The first thing, perhaps, to understand, is that, freedom, facility, economy and advantage for private initiative are no longer paramount values or objectives of public policy. Under capitalism it was axiomatic that goods should be produced and bought where they could be produced or bought cheapest. Under the new revolution it will be found necessary to produce, buy and order economic affairs generally according to the indications of public interest, rather than private advantage. It may be advantageous or necessary for America to produce synthetic rubber in this country or to have it grown in nearby Mexico or Central America at a cost far in excess of that at which rubber is momentarily obtainable from Malasia. The norms of economic freedom are no longer valid.
A nation can no longer be run according to the calculations of business which need take no account of social costs such as depressions, unemployment and war. Preparation for war and prevention of violent industrial fluctuations will impose costs which must be met. There is no economy for the community in allowing individuals to make decisions with a view to securing maximum economy and efficiency and minimum cost when many important social costs are passed on to be taken up in other accounts. There is no sense to our buying Argentine wheat, corn or meat because it is cheaper in dollars at present prices and exchange rates than the domestic product and because to do so will enable some of our manufacturers to export more if, in consequence, we have to increase relief to American farmers, and if the resulting increase in relief cost cannot be taken out of the manufacturer’s increased exports profit.
Free-trade theory errs in assuming a stability of prices and supply as well as an easy fluidity of investment capital and productive labor, all of which are now wholly out of the question. Wheat may be obtainable one year in any needed quantity from abroad at forty cents a bushel, a year or so later in smaller quantity at one dollar a bushel, another year or so later at two dollars or more a bushel in insufficient quantity for our needs if domestic production has been curtailed meantime. Foreign prices and supplies are not stable or dependable. Domestic factors of production such as industrial labor, factories, farmers and farm equipment cannot be shifted about from one line of production to another as fast as Price differentials and supplies change or as easily as a farm hand can be shifted from doing one chore to doing another.
If we increase automobile exports or cotton exports by buying more wheat, shoes or textiles from abroad and less from our own producers, the consequently disemployed American labor and machinery cannot be promptly shifted to producing articles of which we may, as a result, be able to export more. Nor can labor disemployed in one industry be promptly absorbed into some new and fast expanding industry. That was possible in the days of expansion, but is no longer possible. Then too, in the past when living standards were lower, industrial and farm workers were more fluid than now. They could carry all their belongings from one place to another on their backs. And they left behind them no unpaid installment or mortgage obligations. Today the disemployment of several thousands of industrial workers in a New England town must create a severe local crisis which is not compensated for by gains from tariff reductions to other industries and regions. Peter suffers more by being robbed than Paul gains by being paid.
In the present economic situation, tariff reductions can never be justified by gains offsetting losses. Contrary to the classical economists, it is cheaper to subsidize through tariff protection industrial employment already efficiently organized than it is to terminate such employment through tariff reduction and then turn around and subsidize the resulting industrial disemployment through relief, which is costly to administer and demoralizing far beyond the measure of money. The whole case for free trade assumes that unemployment is not a chronic factor. For a country with ten million workers chronically unemployed, it is nonsense to talk about the saving on labor to be achieved by buying some commodity from abroad. Our problem is not how to save labor but how to create work. Any notion that the disemployment of labor can be an economy for a country in our situation is basically fallacious.
It is an economy for an individual or corporate employer to reduce labor costs. But for the country to reduce employment can never be an economy. It may be a real economy and advantage for a great corporation like the United States Steel Corporation to buy control of and shut down the principal industry of Newcastle, Pennsylvania, thus ruining that entire community. The social costs of a ruined Newcastle are not borne by the United States Steel Corporation. It may result more economically or profitably for a great automobile industry to produce seasonally and leave the city of Detroit to take care of its seasonally unemployed. Those who say that the interests of an employer or capitalist always coincide with those of the communities within which they operate or that the interests of all national industries are complementary simply do not observe accurately and fully or else they do not report the facts honestly. Low farm prices during 1930-1933 were disastrous for American agriculture and beneficial for British industrial and building recovery. Just as American industrial protection in another period was beneficial for American corporate profits and disastrous for British industry. Economic interests under freedom and competition are rarely complementary except during an abnormally expansive phase.
The argument for greater individual freedom is but a plea for greater individual power for money, not for labor. The argument for freer foreign trade is a plea likewise for more power for money. If individuals have recently been losing economic power on some levels, it is a result of the breakdown of the system. Individuals cannot expect the state to restore to them powers they could not maintain under competition. If the opportunities which give content to certain economic liberties are reduced or gone forever, the government cannot bring them back. Mr. Hoover did not enact a curtailment of economic liberties. Economic liberty and power must be held once it has been won by the individual. Let those who want these boons restored, try to win them back if they can. Those who want power and are most likely to get it in the future will ask it in the public interest and not for private enrichment.
Economic freedom and free love are alike in theory and in practice, in principle and in results, except as modified by the exceptional circumstances of 19th century frontier expansion. Only, under democracy, the one is glorified as well as legally practiced while the other is both conventionally execrated and legally repressed. The believer in freedom for private enterprise says, “Hire ’em when you need ’em and fire ’em when you don’t.” The believer in free love says, “Love ’em where you find ’em and leave ’em where you love ’em.” The democracies have always practiced collectivist discipline in sex and family relations while, in respect to greed and enterprise, they have practiced individualism, freedom and irresponsibility. The expansive processes, possible only for a brief century or two, no longer render economic anarchy socially tolerable. Therefore, it now becomes, like sex anarchy, immoral, unethical and impracticable according to any defensible social standard. Even Bertrand Russell’s extremely mild attempt to carry over into the realm of sex the norms of democracy and individualism, duly qualified by an exception for all cases where children might be involved, recently made his appointment to a teaching position in New York city the occasion of a storm of protest. Many were found to defend his right to teach philosophy in spite of these particular views, but no one publicly said a kind word for such views.
The inconsistent defenders of freedom in economics and regimentation in sex—in the holy bonds of matrimony—will, of course, say that the same standards do not apply to business and the family. I deny it. So far as society is concerned, I see absolutely no ethical or practical differences worth mentioning in this connection between a deserted wife, an abandoned child, a disemployed industrial worker or a distressed farmer. All are, equally, social problems. All involve grave social maladjustments and disorders. All call for public relief. The interest of society in sex and economics is the same: public order and public welfare. Both are incompatible with the hire-’em-and-fire-’em ways of American industrialists and the love-’em-and-leave-’em ways of free lovers. Today, the ways of American economic freedom, specifically of our big industries like steel and automobiles and of our free market price system, are creating at least one hundred farmers and unemployed for the community to support or assist with relief to every one bastard being created by rugged individualists and liberty lovers in sex matters to constitute a similar charge on the community. Individualism and liberty, whether in sex or business, must be judged by the fruit it bears. The industrialists of America declare their dividends and spout their ethics while the community has to take care of their employees part of the time.
In view of the foregoing ethical considerations and the relief facts of the hour, I have no hesitation or reservations whatsoever in declaring categorically that I personally find the ethics of economic freedom and individualism, as applied in today’s America, as despicable and intolerable as the ethics of free love. I make this statement forceful because I am aware that my views and the ways of totalitarian collective discipline are now being denounced generally in this land on supposedly high moral grounds. Well, I am meeting that denunciation, not with an apology for my views, but with a counter-denunciation of those of my critics, which I am sure no one will have any trouble understanding.
There are just two things to do about the unemployed: Give them work or give them relief. The totalitarian way is to give them work. The democratic way is to give them relief. I do not have to defend the former. I denounce the latter. I challenge my critics to prove with deeds—not words—that I am wrong and that American democracy, i.e., capitalism, can give the unemployed work or the farmers a remunerative price today without going to war. As long as they cannot meet this challenge with performance instead of appeal to morals, sentiment and tradition, I shall continue to feel flattered by their reproaches.
The special pleader for freer international trade can always cloud the issue by showing our need of certain commodities like coffee, rubber or other articles not obtainable at home; or, point out how home industry may be disrupted or even bankrupted by the loss of foreign markets. He can score heavily by painting a fantastic picture of what conditions might be like were all foreign trade to be completely stopped. Such arguments cannot be answered as categorically as they are formulated. The reasons are that the factors are relative while thesE arguments are in terms of absolutes.
No so-called isolationist or believer in government-controlled foreign trade and maximum regional self-sufficiency, be he national socialist or a Republican, capitalist or New England high tariff manufacturer, ever favors putting a Chinese wall of foreign trade exclusion around his or any other country. The best proof of this is the fact that the autarchic regimes of Russia, Italy, Germany and Japan have recently been making every effort, and with considerable success, to increase their foreign trade. The head of autarchy No. 1, Adolf Hitler, said, “Germany must export or die,” yet free traders go on charging that the autarchies aim at the suppression of foreign trade. The etymology of the word autarchy, meaning self-rule, should suffice to refute the charge that autarchy means the elimination of foreign intercourse. Actually, the amount or percentage of foreign trade a collectivist autarchy will have in a given period will be determined, not by the application of any general principles, but mainly by needs and opportunities for advantageous foreign exchanges; advantageous to the total economy, not merely profitable to a special class or certain regional interests. The liberal doctrine of the harmony of interests under law, liberty and competition is obviously bunk as the American Indians, the negroes, the losers in business competition, the farmers and the unemployed, now living on the dole, should be able to attest. The statement that, under competition, the interests of the losers and winners are the same is arrant nonsense. It is also the keystone of the law, doctrine, morals and institutional practice of capitalism and liberal democracy.
The special pleaders for freer trade simply do not state the issues with adequacy or honesty. These are not, as the free traders try to make it appear: foreign trade versus no foreign trade. They are not more versus less foreign trade. By some the issues may be called more versus less freedom, more versus less government control of foreign trade; or, more versus less dependence on the uncontrollable fluctuations of foreign prices, supply and demand. The autarchist, or believer in the new revolution, would merely say that the issue was one of order versus anarchy in foreign trade. In simple fact the autarchist or the new revolution does not stand either for more or less foreign trade, more or less freedom, more or less state control, as ends in themselves or, even, as infallible means in themselves to given ends.
The new revolution or the autarchist of today simply wants more or better order. The new revolution finds that better order calls for better control. In most cases this will mean less individual freedom and less dependence on foreign economic factors beyond the control of any one nation trying to stabilize its production and employment. The liberal revolution said, as a matter of faith and doctrine, “Lower international trade barriers. Maximize individual freedom in production and exchange and everything will go better.” The new revolution denies this, not as a matter of faith and doctrine but as a result of observation and experience. It might have worked out satisfactorily the free-trade way for England during the high noon of modern capitalism or, roughly, from the beginning of the industrial revolution down to the Second World War. But it no longer works that way, and that’s that. The issue in respect to foreign trade and economic freedom today is wholly one of fact established by continuous experiment. Every autarchist wants all the possible advantages of a maximum amount of foreign trade. But he sees no advantage in a momentary gain in cheapness or efficiency at the price of a permanent sacrifice of order and economic stability.
The free traders preach. The autarchists practice. The free traders, like Mr. Hull, lay down principles nobody is willing to observe. The autarchists carry out administrative control. The autarchists are in power. The free traders are not, though some of them are in office. The autarchists have to get results. The free traders like Mr. Hull get applause while the farm and unemployed relief administrators pass out the dole to the victims of economic instability. Freedom and foreign trade are means, not ends. No one anywhere proposes to suppress all individual freedom of choice in economic matters or all foreign trade. It is merely proposed to control economic choices and action and, also, to regulate foreign trade as a necessary means to better social order. There simply is no free trade or freer foreign trade issue anywhere in the realm of the practical. The issues raised by Mr. Hull and his staff of pedantic yes men are wholly academic and irrelevant. American business and labor will never allow these starry-eyed doctrinaires to try out their theories on an already economically stagnant America.