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.”*
Thus one thinks of the great cities of Russia and the United States, as their productive capital and the energies of their people have come increasingly under the influence of rootless, remote, and unproductive national systems with their futile productive goals, their compulsive imperialism and endless taxation for purposes that have nothing to do with further productivity; with their pompous bureaucrats and the institutionalized and paralyzing conflicts between the energies and desires of their individual citizens and the increasingly abstract and unaccountable demands of the state.
By contrast, Japan and the countries of Western Europe, having abandoned or been denied their imperial interests after the Second World War, emerged as more or less autonomous city-states, expanded to national proportions, demilitarized, industrious, and prudent. Their subsequent entrapment in an inflated, multinational economy was no doubt inevitable—to some degree an aspect of their own success—but their brief revival as highly productive, relatively independent capitalist units suggests that the generative powers of capitalism are not necessarily exhausted, though neither is the tendency for capitalism to generate the conditions for its own decline.
In the collectivization of individual enterprises by vast and anonymous corporations one sees a similar imperial encroachment in which the aggrandizement of the organization supersedes the individual interests of its captive employees and the practical needs of its customers who are also its captives. The shortage of refinery products in America, for example, has less to do with an impending depletion of oil reserves, or even with the Arab embargo, than with mandarin calculations by the refiners of optimum levels of production consistent with higher short-term profits, calculations whose primary goal is not further productivity or more rational distribution or alternative techniques or the creation of new wealth, so much as the growth and stability of the corporation at ever higher levels of grandeur and influence.
Since World War II, for example, the profligate American highway program has provided more or less stable profits to its sponsors in the automotive industry and its various satellites, including the energy companies. But it has also created such profound structural changes in American society as to have made most American transactions, whether public or private, hostage to a diminishing energy supply. The social price of American energy profits are not only an irrational transportation system with its clogged highways, excessive horsepower, and bankrupt railways, but social structures that can neither be sustained by current energy supplies nor altered without catastrophic political and economic consequences.
“On all great subjects,” says Mr. Mill, “much remains to be said,” nevertheless, the specific consequence of increased world-wide demand, combined with inadequate industrial production, is reduced economic choice, together with increased political tensions, for those national economies whose productivity remains inadequate to higher levels of demand. In the case of the United States, for example, the effect of its relatively slow productive growth has been to reduce the once unique status of the American worker and his employer to something like that of their European and Japanese counterparts, a reduction of status that can be measured by the successive devaluations of the American dollar or, more concretely, by the high price for Americans of French wine and Venezuelan oil and the sums that Japanese breeders are able to pay for American race horses; still more concretely, by the unaccustomed competition between American and foreign consumers for American farm products, a great political irritant for Americans at the present time. With respect to more efficient producers America may eventually become a net exporter of minerals and agricultural goods and a net importer of manufactures, a condition once associated only with underdeveloped economies or with the American colonies under British rule.
The devaluation of an inflated currency is the international equivalent of a discount sale. The buyer gets a bargain and the seller makes a sale, thus stimulating his unused productive capacity. Devaluation also has the effect of an automatic tariff, raising the cost of imports and thus, in theory, stimulating their replacement by domestic manufacture. But in the case of an economy whose productive efficiency is already strained, the effect of devaluation is simply to reduce the accustomed rewards of labor and investment. This does not mean that starvation is imminent for American workers and investors. Bacon at two dollars a pound is not the same as a famine. But no amount of official reassurance or obfuscation can forestall the recognition that excessive demand for increasingly scarce goods seems likely to become an important part of nearly every American’s economic, therefore political, experience; at least until demand itself, by whatever means, is curtailed.
It would be presumptuous to recapitulate the history of democracy as an aspect of the history of capitalism—as a product, in other words, of autonomous towns and cities and the polymorphous appetites of their energetic citizens—or of individual liberty in political and religious matters as incidental to the demands of ambitious speculators, impatient with traditional political and religious restraints. Individualism and capitalism are coeval while popular demands for political and economic freedom have typically arisen along the more promising frontiers of economic opportunity. The barons at Runnymede may have demanded no more than justice, but what motivated their demands was greed, the psychic engine that ultimately produced not only capitalism but, after many transformations, its political counterpart, democracy. It was the planters along the Tidewater and their self-satisfied allies in the Northern counting houses, not the eager frontiersmen facing west, who demanded a national establishment, together with a federal judiciary and a national bank for the new United States. The objections by rising men to Marbury v. Madison are as old as Jefferson and Jackson and as new as Richard Nixon. The western adventurers no more wanted an interfering national government with its courts and its currency than the rising merchants of London and Antwerp wanted a Pope and his bishops.
Revolution in the name of individual liberty—unlike more recent revolutions of national liberation—has usually been the project of a rising middle class on the scent of economic advantage, a project for which the dispossessed have invariably been recruited under false pretenses. Counterrevolutions, on the other hand, whether in federalist or corporate America, nineteenth-century France, or Stalinist Russia, are typically undertaken by arrivistes in the name of political and economic constraint, whether for the sake of consolidating an advantage already achieved against the encroachments of new men or, more ominously, in the fear that national productive capacity will prove unequal to demands of an economically free people.
A controlled economy, whether monopolized by corporations or managed by bureaucrats and commissars, is an economy concerned less with opportunity than with limitation, less with the creation of new goods and techniques than with the manipulation of demand. The interesting problem that follows is to anticipate the corresponding political transformations that may arise in various democracies, especially our own, as these limitations become increasingly apparent and oppressive—as the restriction of demand for the sake of national survival becomes an essential public policy.
The immediate source of the shortages that led to the present American inflation, and which then stimulated inflation everywhere, was the Vietnam war, an imperial extravagance by a presumptuous nation-state for which cities were drained of men and money, workers were recruited, and capital and industry deflected to produce literally nothing. But the larger source of the American inflation was the cold war itself.
The cold war originated partly in an effort to sustain the economic stimulation by which the Second World War had relieved (or perhaps only interrupted) the Depression of the 1930s, a perverted Keynesianism in which a vulgar patriotism supplied the political argument for public expenditure on deadly weapons where thirty years earlier the humanitarian motives of the New Deal had been insufficient to justify the much smaller cost of more rational public employment.
But the cold war had a deeper source than the politician’s fear of renewed depression and the public’s delight in engines of destruction, a combination of motives that fortuitously supplied an unprecedented source of easy profits for more or less incompetent industrial monopolies and of wages for no less monopolistic trade unions. For the cold war was among other things a phase, perhaps the ultimate phase, of the counterrevolution led by the older industrial states against the growing autonomy and emerging energies of their former dependencies. A large source of the cold war was the fearful, if perhaps unconscious, premonition on the part of the advanced countries of the competition which their increasingly unproductive economies would eventually face should these once dormant populations prosper and demand a share of the world’s goods. For the advanced countries the cold war was a precocious recognition of their own future limits. It was, in this sense, a vain effort to maintain a combination in restraint of world-wide economic development in the interest of a particular class.
Despite these efforts, world income is now in the process of substantial, if grossly inequitable, redistribution, at least among nations capable of industrializing themselves or which happen to possess the remnants of the world’s diminishing resources. (As for those nations that have neither resources nor industrial capacity, their case is relatively worse than ever, as the competition for scarce resources intensifies.) But this redistribution will hardly justify the hopes of those liberals whose faith in their own high standard of living had led them to ignore the consequences should their profligacy be more or less generally imitated. Liberal chagrin in the face of these consequences is reflected in the present liberal concern for ecological restraint, for population control, and an unaccustomed distaste for consumption itself.
But hidden within this agenda are the forms in which liberal democracy may itself eventually be extinguished. The step beyond ecological restraint may be the political supervision of all consumption while the darker side of population control has already emerged in Chinese attempts to control human breeding by political means and in isolated American attempts to sterilize economically dependent parents. From the point of view of certain black spokesmen, legalized abortion is not only a victory for women’s rights but a precondition for genocide, the ultimate weapon, should others fail, in the war on poverty. Meanwhile the communes of China supply a model for restricted demand and enforced productivity that some Americans may find congenial compared with their own surfeited and indulgent lives, but such enchantments are sustained by distance and misunderstanding. The voluntary communization of Scarsdale remains an unlikely prospect.
But the dilemma is not simply for liberals. Consider Richard Nixon whose greatest—whose only—political success was his visit to Peking, an abandonment of cold war principle, no matter how ambiguously acclaimed, which was greeted with enthusiastic relief by an American electorate exhausted after years of futile ideological struggle and fascinated by a country whose dutiful citizens knew nothing, apparently, of idleness, street crime, or political dissent, and for whom consumer shortages were more a challenge than a privation. No politician since Hamlet can have been so divided in his feelings as this Quaker opportunist, this campaigner for what he called civility and law and order, as he acknowledged the power of a political rival whose success, if not in productive growth, at least in the management of its population and the control of its empire, owed nothing to the tradition of anarchic money grubbing from which the President and his party derive their vacant ideology.
The practical occasion for his visit to China was to salvage whatever remnant of the American position was left in Vietnam—to arrange an end to the cold war on the best available terms. But the larger meaning of his visit was to admit, under pressure of a military and political defeat, the achievement of a society whose total political control over the lives of its citizens may anticipate some of the transformations yet to be attempted by the older industrial societies as they face their own diminishing economic prospects and begin, accordingly, to restrict demand in the interest of national survival.
What remains is to await the consequences for liberal democracies of this historic capitulation. Nixon’s hesitant—one might as well say neurotic—application of economic controls to a society that can no longer offer to satisfy the uninhibited appetites of its citizens—a society whose government may, in any case, be powerless to control its industrial monopolies and their compliant unions—suggests that quite apart from Watergate, his political effectiveness has ended, if it had ever begun. Yet his moral exhaustion may simply reflect the exhaustion of the country itself, a country whose magnificent early vitality created the conditions for its eventual entrapment by an indolent and luxurious plutocracy—a plutocracy not much different in principle from what Fernand Braudel found at the root of China’s historic industrial incapacity.
China, which lacks a substantial tradition of individualism, to say nothing of capitalism, could enter its present phase with minimal struggle; a brief cultural revolution may have been enough to purge the last inapplicable remnants of an alien egotism that had rooted itself there in the last century. For the West the struggle to adjust to its new economic limitations may be more complex given the attenuated survival there of traditions of individual liberty. For the communist countries, the struggle for economic sufficiency was fought, ostensibly, in the name of their masses, while real power and economic privilege have for the most part passed to party dictators. For the countries of the West, with their residual attachment to primitive forms of economic liberalism, the struggle is more likely to be against their own poor, as it has generally been since the days of the enclosures; and it is also likely to be against the surviving defenders of its own free institutions.
Nixon’s government of thugs and swindlers has thought nothing of attacking long traditions of political freedom for the sake of individual economic advantage as well as to advance what is aptly called national security, that is, the continued sovereignty of a particular group. With his coup now exposed and perhaps defeated, one wonders by what means future American governments will succeed in maintaining democratic forms as the world-wide competition for political survival intensifies and the ostensible cost of political liberty—in its myriad expressions—increases.
There is a further question, more ominous yet. If political freedom is the typical product of capitalist development, the prerequisite for further economic creativity has typically been still more political and economic freedom. Economic innovation has seldom been the work of slaves or of corporate bureaucrats. Rather it has arisen through the endless trials and errors permitted by free, expanding, and largely unsupervised economies; as Jane Jacobs has argued, by economies willing to discard their old techniques and risk the inescapable waste that accompanies the random, superficially inefficient search for new ones.
The future of the Chinese experiment with its borrowed technology and its still largely rural, though increasingly urban, economy is hardly clear. What is even less clear is the economic future of the West should the political freedom which has historically accompanied its economic growth continue to erode so that the essential conditions of a creative economy are superseded by the ignorant commands of a remote government.
What will happen to the future of our technology—to say nothing of our art, our literature, and our personal lives—should it eventually appear that official control of the use of capital and the use of one’s time has become the inescapable condition of national survival as it has already become the basis of corporate survival? We have seen how the Pentagon and its symbiotic corporations, on the pretext of a national emergency, have commandeered and stultified, not to say perverted, whole areas of technical and scientific activity, while misappropriating the time and even the lives of millions of presumably free citizens. One wonders what the condition of our democracy will become should similar claims of great urgency be made by legally uninhibited civilian agencies of the government and their corporate partners as well.
December 13, 1973
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. ↩