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The Big Freeze

What is most puzzling about the present uneasy combination of inflation and depression in the United States and elsewhere—a combination that includes high rates of production, employment, and profit with great pools of economic stagnation and widespread shortages of all kinds—is that no one has tried to account for it in a general or systematic way; as the result, in other words, of a certain historical process from which certain political consequences can be expected to follow.

Instead we are told that these problems result from shortages of fuel or soy beans or excessive speculation by Arab money changers, or that the government is spending too much or too little on either armaments or welfare programs, or that corporate monopolies have fixed prices and production levels according to their own interests and not in the interest of the economy generally, or that wages are too high and the dollar too low, or that this or that primary product—principally oil—is growing scarce, or that there are too many people in the world, demanding too much. Meanwhile we have a variety of conflicting prognoses and remedies, derived from various ideologies, yet the crisis seems to worsen each day as things grow scarce and world prices rise. More ominously, there arises the likely danger of strong political reactions as public confusion, anger, and despair inevitably grow. From the politicians and economists we get the usual incantations and assurances; leeches, opiates, and appeals for faith; but as the symptoms proliferate no one names the disease itself.

No doubt the low public standing of pessimistic speculation accounts for much of this reticence; but the trouble with gloomy prophecies is often not the absurdity of their premises but the imprecision of their timing. Is it possible that something has finally gone wrong with the productive system itself; that what links the rising price of bread to the constriction of the world’s oil supplies and what links street crime and air pollution to the declining dollar—what accounts, in other words, for the relative decline of middle-class sovereignty in the advanced industrial countries—is that certain limitations may now have been reached in the techniques by which the middle class has traditionally sustained itself and its culture?

Perhaps the trepidation with which one asks such a gloomy question explains the reluctance of others to do likewise. The boneyards of speculation are filled with the remains of premature Marxists and other impatient prophets, trampled by workers and peasants, unexpectedly arisen from their long misery and rushing complacently to the bank. Yet the signs of decay are unmistakable as unprecedented productive failures occur in one industry after another, in the United States as well as in other advanced economies—in medical services and transport, in agriculture and housing, and in the formation and distribution of capital. Even in Japan the spectacular bullet train from Tokyo to Osaka now occasionally breaks down, while in France and Germany, as well as in Japan, the rate of inflation is steeper than in the United States. Nor is it simply a capitalist problem, for the Soviet Union, nearly sixty years after its revolution, is even worse off, in many respects, than the so-called free economies. If something has gone wrong with bourgeois capitalism, something similar seems to be wrong with Soviet socialism as well.

Yet the surface of the problem is clear enough, no matter how obscure its depths. Even with unusually high levels of employment and production, the world-wide demand for goods continues to exceed the foreseeable supply and no prophet has yet argued convincingly that this situation will soon change. Though the world-wide industrial machine is running at nearly its full capacity, the result is not the much anticipated conquest of want; it is the threat of eventual depletion as goods of all kinds grow scarce and the price of everything from diamonds to fresh air rises every day. The machinery that once promised to liberate men and women from fear and want now seems to have entrapped them in a standard of living which they can no longer afford and from which they are unable to escape, and in forms of production to which there is no apparent alternative. Meanwhile alienated armies of the unemployed fester and grow in the old industrial cities, their case more desperate as each day’s prices are announced.

An inflationary tendency has accompanied the growth of capitalism from the beginning. But the provable assumption has generally been that an advancing technology, financed by its own speculative profits and with abundant raw materials secured by compliant governments, would meet the demands of an expanding minority of politically conscious consumers. The more frequent complaint against capitalism was not its persistent inflationary tendency, whose victims were mainly the poor and powerless, but the opposite; that excessive speculation would so expand the supply of goods, or so waste the supply of capital, that men and machines would stay idle, awaiting the unpredictable stimuli that would get the mechanism moving again. Steep inflations, like the present one, were, on the other hand, usually the result of local and spectacular causes: crop failures, wars, or speculative hysterias in the ascending phase.

But the sources of the present world-wide inflation are neither local nor spectacular, nor are they likely to prove temporary. Two of these sources now appear to be fundamental and permanent: the approaching depletion of many raw materials and the explosive arrival on the world market of millions of relatively prosperous new consumers arisen from the once obscure corners of the world, leaving behind them even more millions of desperately poor and steadily multiplying people in the Southern Hemisphere. As a result the once sovereign consumers of the world’s middle class are now obliged to share their traditional perquisites—not only their soy beans but their Picassos—with the newly industrialized children of Japanese peasants, while the Japanese themselves, to say nothing of the Russians, are haunted by the specter of the Chinese millions, poised at the doors of the world’s already undersupplied markets, threatening that they too will soon demand more than they can produce. Nor are Americans unfamiliar with such apprehensions, for they are endemic among their own newly arisen middle classes, braced in their mortgaged and overtaxed neighborhoods against the restless and demanding poor on the next block.

It would be superficial, however, to attribute inadequate industrial capacity simply to shortages of primary products. In the United States, for example, there is no intrinsic shortage of educable medical personnel or building materials for hospitals and medical schools, yet medical services became expensive and scarce in America long before fuel oil for the hospital furnace became a problem. Before there was a soy bean shortage, amenable hotels and restaurants began to disappear from American cities as the cities themselves eroded. The lack of newsprint in America, Japan, and Russia has nothing to do with a scarcity of trees, any more than the collapse of public transport in America resulted from a scarcity of tracks and locomotives or the men and materials to build them. The conventional assumption that inflation is the simple result of excess demand pressing against inadequate supply ignores the fundamental question of how industrial incapacity occurs in the first place and why, in the present situation, increased demand has failed to generate adequate new supplies according to traditional assumptions.

No doubt the much publicized shortages of primary products are real or will soon become so, but they are also to some extent misleading, for the immediate causes of the present inflation are not to be found in the forthcoming depletion of the world’s oil reserves but in perverse forms of industrial and political organization. Economic growth or stagnation results not from natural but from social causes.

Throughout their long history the Chinese, for example, lacked neither natural resources nor technical ingenuity. Yet their invention of the compass in the eleventh century did not make them a nation of merchant navigators any more than their invention of paper and movable type in the ninth century gave them a printing industry and a literate population, nor did their precocious knowledge of iron extraction in the fifth century BC give them a Birmingham or a Pittsburgh. Though gun powder was a Chinese invention, artillery tactics were invented in Europe. For all its resources and the genius of its inventors, China, despite its huge cities, remained for centuries a fundamentally rural and aristocratic society, dependent on imperial conquest for its growing economic needs. Only in the walled towns and cities of the West, centuries later, did bourgeois capitalism create the conditions in which these same resources and inventions would eventually be exploited for rapid internal economic growth. More accurately, only in the West did the growth of autonomous towns and cities with their vernacular languages and secular ambitions provide the political means by which merchants and craftsmen could defend themselves from a traditional rural aristocracy and thus exploit, in their own interest, the techniques and resources available to them. “In the West,” according to the French historian, Fernand Braudel, “capitalism and towns were basically the same thing.”

What Braudel suggests, more or less systematically, is what Jane Jacobs had proposed earlier in The Economy of Cities: that the subsequent decline of autonomous cities, as they inevitably became parts of larger political and economic units—units which they themselves created—coincided with a relative decline in capitalist productivity. Braudel’s example is Florence where, at the end of the fourteenth century, according to the economist Werner Sombart, whom Braudel quotes, “we meet the perfect bourgeois citizen for the first time,” with “his new state of mind and a new set of rules, possibilities and calculations for the art of getting rich.” But by the middle of the sixteenth century the Medicis had made Florence their court, as the mandarins had made theirs Nanking, so that by the seventeenth century the role of Florence in the history of capitalism had begun to wane. It had been absorbed by a larger political conglomeration whose interests no longer coincided with the myriad, intensely creative ambitions of individual Florentine craftsmen and merchants. Under the Medicis Florence, which had once been a factory, a market, a bank, became in effect an ornament.

The cities of the West, Braudel suggests, in so far as they became subsidiaries of national systems, came eventually to resemble somewhat the old cities of Asia, “enormous, parasitic, soft and luxurious.” According to Braudel, London and Paris, by the time they became imperial capitals, could no longer support themselves by their own economies but became dependent on the more industrious hinterland. They became “luxuries that others had to pay for,” with their nobles and functionaries, their splendid buildings and avenues, and their helpless poor. The real centers of capitalistic productivity became Manchester, Birmingham, Leeds, and Glasgow, and the factory towns of Alsace. What Braudel asks, therefore, is “whether these urban monsters in the West are not proof of a kind of seizing up process, analogous to what happened to the Roman Empire with the dead weight of Rome, and China with the enormous, inert mass of Peking”; whether these great capitals are not “the ends of evolution instead of promises for the future, the forces they unleashed resulting in nothing more than themselves.”*

  1. *

    Braudel exaggerates here, deliberately, while Jane Jacobs would argue that the cities of the hinterland were to some extent by-products of the vitality of these great capitals. For all their difficulties, London and Paris are hardly dead weight even now. Washington, DC, is of course another matter.

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