A Bold Conjecture

I have the germ of an idea that I need to present in three parts today, with an example in the near future. The three parts are An Interpretation, a Reinterpretation, and The Question Begged.

If we look at political economic history, we find that the state, especially the national government of the US, has evolved from a very simple set of rules (the Constitution was a few pages) to a very complex set of interlocking and sometimes contradictory rules, interpretations, agencies, and so on (the CFR is several volumes, best measured in linear inches rather than pages). The growth is due to the fact that at every stage, the rules created conditions for new problems which have to be addressed by new rules. For example, the rules which allowed transnational railroads to prosper led to the industrialization described by Chandler (energy + transportation => scale economy), creating the conditions for labor exploitation and unrest, followed by a new round of rules to constrain the industrialists and protect the workers, creating ... and so on. The explanation provided by the defenders of state intervention is that each of these changes has been largely beneficial, and that the few negative consequences may easily be managed by a new round of regulations that are also largely beneficial. They lay claim to pragmatism and empiricism, setting those in opposition to dogmatism or ideology, noting that they simply want to use the best means for achieving the best ends. We are all better off, so those policies were beneficial.

We could reinterpret this by working backwards. Today, we are better off than a generation ago, and a generation ago was better off than the previous generation, and so on. Thus, in order to get the improvements that we need today, it was good that they enacted those policies a few years ago. In order to get to the preconditions for today's prosperity, the need for previous policy choices are obvious. Thus, we should be grateful for those policies and for the idea of state intervention in general. For example, we need the current transportation system, so it was good that the state built roads. And to get the cars that ply those roads, we needed the railroads, so it was good that national regulations to govern railroads were put in place.

But this begs a question: What do they mean by "need"? In one sense, their argument is circular: in order to have the existing set of social, economic, and political mechanisms that we need to perpetuate the existing system, we had to have made those choices in the past. But why do we need the existing system? Indeed, why did the people in the 19th century need the railroad choices? "Need" means that a person or society can not continue to exist without those things. If anything, the fact that society had existed and evolved for thousand of years to that point without those institutions or policies is proof that those things were not needed in any meaningful sense of the word.

When the word "need" is used or implied, red flags should be raised. Who needs (or needed) it? Why? And is (was) the proposed policy the only way to achieve the need? And what, exactly, is needed? Remember this the next time you encounter one of the world's Polanyist, William Jamesist, pragmatic empiricists, who suddenly seem to have shed their pragmatism in favor of some Platonic ideal toward which their programs are working. Did society "need" the specific policies that were involved in the creation of transnational railroads? The railroad owners would appear to have needed them more than society at large; people wanting to farm profitably further west, further from water routes, markets, and hungry customers needed them; politicians wanting to influence the type of farmer in order to influence the type of state (pro- or anti-slavery) needed them; people wanting to enlarge the market for their manufactured goods and thereby increase profits (McCormick, for example) needed them; but those groups do not come close to comprising a majority of the citizens of the country. And if they had not gotten those policies -- laws regarding incorporation, bankruptcy, interstate regulation, subsidization and land transfers -- they still would have had other options, most of which would simply have been more expensive in the short run, but perhaps less so in the long run. For example, prior to the massive build-out of railroads, private roads and canals were all the rage. Fogel, in his response to Rostow, even noted that a horseless carriage existed in 1830 and that "not only the fundamental internal combustion engine theory, but even that of the diesel engine was published as early as 1824," citing D. C. Field's "Mechanical Road Vehicles" and Orville Charles Cramer's "Internal Combustion Engine" in A History of Technology (Charles Singer, ed., 1958) and Encyclopedia Britannica, (1961), respectively (see also Samuel Morey). As these predated the discovery of oil, they would have led to the creation of a more local, environmentally friendly, efficient (in the sense of having fewer externalities) transportation system and if a national system had evolved, it would have been more organic, i.e. the economies of scale would have driven the system rather than the system driving the economies of scale.

Bold enough?

Promise of American Life (again)

In The Promise of American Life (part I here), Croly seems to accept the moral basis for socialism, but soundly rejects the Marxist formulas. Maybe this is what is meant by American exceptionalism?

In Socialism: Utopian and Scientific, Engels makes demands for gradual state takeover of private property. "In any case, with trusts or without, the official representative of capitalist society -- the state -- will ultimately have to undertake the direction of production. This necessity for conversion into State property is felt first in the great institutions for intercourse and communication -- the post office, the telegraphs, the railways." This nationalization was expected to lead to the whithering of the state:

Whilst the capitalist mode of production more and more completely transforms the great majority of the population into proletarians, it creates the power which, under penalty of its own destruction, is forced to accomplish this revolution. Whilst it forces on more and more of the transformation of the vast means of production, already socialized, into State property, it shows itself the way to accomplishing this revolution. The proletariat seizes political power and turns the means of production into State property.

But, in doing this, it abolishes itself as proletariat, abolishes all class distinction and class antagonisms, abolishes also the State as State. [1]

Croly would have nothing to do with that; in his estimation, the men (Hill, Harriman, Morgan) who built the great industrial concerns contributed to the national efficiency. Rather than banishing them, Croly wanted to harness them (and maybe control the amount of money they made [2]). His methods of regulating therefore consist of removing impediments to them, including the Sherman Act, and replacing it with a system of commissions who would review their decisions and make them more transparent. To what end? National efficiency, of course (the man had an efficiency fetish). But Croly was unsatisfied with the idea of a commission, since efficiency would normally require responsibility to be placed with one man; but by favoring national commissions, at least it gives him a way to preserve private property even as he expands the scope of the national government. Sounds like ... ?

The constructive idea behind a policy of the recognition of semi-monopolistic corporations is of course the idea that they can be converted into economic agents which will make unequivocally for the national economic interest; and it is natural that in the beginning legislators should propose to accomplish this result by rigid and comprehensive official supervision. But such supervision, while it would eradicate many actual and possible abuses, would be just as likely to damage the efficiency which has been no less characteristic of these corporate operations. The only reason for recognizing the large corporations as desirable economic institutions is just their supposed economic efficiency; and if the means taken to regulate them impair that efficiency, the government is merely adopting in a roundabout way a policy of destruction. Now, hitherto, their efficiency has been partly the product of the unusual freedom they have enjoyed. Unquestionably they cannot continue to enjoy any similar freedom hereafter; but in restricting it, care should be taken not to destroy with the freedom the essential condition of the efficiency. The essential condition of efficiency is always concentration of responsibility; and the decisive objection to government by commission as an efficient solution of the corporation problem is the implied substitution of a system of divided for a system of concentrated responsibility.

This objection will seem fanciful and far fetched to the enthusiastic advocates of reform by commission. They like to believe that under a system of administrative regulation abuses can be extirpated without any diminution of the advantages hitherto enjoyed under private management; but if such proves to be the case, American regulative commissions will establish a wholly new record of official good management. Such commissions, responsible as they are to an insistent and uninformed public opinion and possessed as they inevitably become of the peculiar official point of view, inevitably drift or are driven to incessant vexatious and finally harmful interference. The efficient conduct of any complicated business, be it manufacturing, transportation, or political, always involves the constant sacrifice of an occasional or a local interest for the benefit of the economic operation of the whole organization. But it is just such sacrifices of local and occasional to a comprehensive interest which official commissions are not allowed by public opinion to approve. Under their control, rates will be made chiefly for the benefit of clamorous local interests, and little by little the economic organization of the country, so far as affected by the action of commission government, would become the increasing rigid victim of routine management. The flexibility and enterprise characteristic of our existing national economic organization would slowly disappear, and American industrial leaders would lose the initiative and energy which has contributed so much to the efficiency of the national economic system. Such a result would of course only take place gradually, but it would none the less be the eventual result of any complete adoption of such a method of supervision. The friends of commission government who expect to discipline the big corporations severely without injuring their efficiency are merely the victims of an error as old as the human will. They "want it both ways." They want to eat their cake and to have it. They want to obtain from a system of minute official regulation and divided responsibility the same economic results as have been obtained from a system of almost complete freedom and absolutely concentrated responsibility.

This section of the book reminded me of those sections of Gabriel Kolko's Triumph of Conservatism, in which he traces Teddy Roosevelt's preference for regulating behavior by the Good Ol' Boy method. TR, the renowned trust-buster, didn't really like to bust trusts, but preferred to try to persuade the less civilized among them (read: non-Harvard men) to change their ways. Those who didn't go along, such as J. P. Morgan and (IIRC) John D. Rockfeller, felt his wrath and it was upon their necks that Roosevelt's mythological Trust-Buster reputation was built. Perhaps it was no coincidence that Croly expressed admiration for Roosevelt (one chapter features a comparison between Roosevelt, William Jennings Bryan, and William Hearst as reformers, with TR as the hero), and later, after the publication of TPoAL, Roosevelt based his New Nationalism upon some of Croly's ideas.

And it was much the same when discussing unions. First, the Sherman Act should be repealed, and second, unions should be recognized with a deal that brings their activities in line with the national efficiency. The highest accomplishment to which a man can aspire in the Crolyist world was to place his talents at the service of the nation. You know, for the sake of efficiency.

The alternative [preferred] policy would consist in a combination of conciliation and aggressive warfare. The spokesman of a constructive national policy in respect to the organization of labor would address the unions in some such words as these: "Yes. You are perfectly right in demanding recognition, and in demanding that none but union labor be employed in industrial work. That demand will be granted but only on definite terms. You should not expect an employer to recognize a union which establishes conditions and rules of labor inimical to a desirable measure of individual economic distinction and independence Your recognition that is must depend upon conformity to another set of conditions imposed in the interest of efficiency and individual economic independence. In this respect you will be treated precisely as large corporations are treated. The state will recognize the kind of union which in contributing to the interest of its members contributes also to the general economic interest. On the other hand it will not only refuse to recognize a union whose rules and methods are inimical to the public economic interest, but it will aggressively and relentlessly fight such unions. Employment will be denied to laborers who belong to unions of that character. In trades where such unions are dominant, counter-unions will be organized and the members of these counter unions alone will have any chance of obtaining work In this way the organization of labor like the organization of capital may gradually be fitted into a nationalized economic system.

...

[T]he union should have the right to demand a minimum wage and a minimum working day. This minimum would vary of course in different trades in different branches of the same trade and in different parts of the country and it might vary also at different industrial seasons. It would be reached by collective bargaining between the organizations of the employer and those of the employee. The unions would be expected to make the best terms that they could and under the circumstances they ought to be able to make terms as good as trade conditions would allow. These agreements would be absolute within the limits contained in the bond. The employer should not have to keep on his pay roll any man who in his opinion was not worth the money, but if any man was employed he could not be obliged to work for less than for a certain sum. On the other hand, in return for such a privileged position, the unions would have to abandon a number of rules upon which they now insist. Collective bargaining should establish the minimum amount of work and pay, but the maximum of work and pay should be left to individual arrangement. An employer should be able give a peculiarly able or energetic laborer as much more than the minimum wage as in his opinion the man was worth and men might be permitted to work over time provided they were paid for the over time one and one half or two times as much as they were paid for an ordinary working hour. The agreement between the employers and the union should also provide for the terms upon which men would be admitted into the union. The employer, if he employed only union men should have a right to demand that the supply of labor should not be artificially restricted, and that he could depend upon procuring as much labor as the growth of his business might require. Finally, in all skilled trades there should obviously be some connection between the unions and the trade schools, and it might be in this respect that the union would enter into closest relations with the state. The state would have a manifest interest in making the instruction in these schools of the very best and in furnishing it free to as many apprentices as the trade agreement permitted.

Translation: The state must control industry, preferably monopolies, and then control the labor that works in those monopolies. If the unions won't go along, we'll start state unions (where have we seen this?). And the state won't countenance any shenanigans from you workers: you can bargain for a minimum wage and then shut up. This isn't for you, it's for the nation.

I am reminded of Chris Nyland's article, "Taylorism and the Mutual Gains Strategy" (Industrial Relations, Vol. 37, No. 4, Oct 1998), in which he describes Taylor's attempts to reconcile with various labor unions and convince them that efficiency was something they ought to embrace. The alliance between the Taylorists and unionists is attributed to (among others) Louis Brandeis: close associate of Croly, the coiner of the term "scientific management", and the leading spark for the Efficiency Movement. One of those unionists, Sidney Hillman of the Amalgamated Clothing Workers Union, entered into collaboration with members of the Wisconsin school of industrial relations [3], but disagreed with them over the scope of union-management negotiations. The Wisconsinists believed that the scope should be limited to wages and hours, but the unionists believed the scope should include more, including investment, plant layout, and promotions.

These dalliances between labor and the Taylorists continued right through the 1920s and the Depression, during which the Wagner Act was passed. In 1940, the creation of a bargaining agreement between GM and the UAW was influenced by the back and forth between unionists, Taylorists, and the Wisconsin school. According to Nyland,

In 1940, George Taylor [not Frederick Winslow] was appointed umpire of the newly signed UAW-GM contract. At the time, this development must have appeared a great opportunity to extend the mutual-gains model. Optimism that the model would be extended was common not ony within SAM, the AFL, and the CIO but also in wider industrial relations circles. For example, Sumner Slichter in 1941 devoted some two hundred pages of Union Policies and Industrial management to an examination of the history of union-management cooperative schemes for increasing production, quality improvement, and cost reduction. Slichter was aware that such schemes tended to have a high mortality rate and had been embraced by only a small number of employers. [...]

The hope that unionization of the automobile industry would assist the growth of the mutual gains model was, of course, not realized. As in the 1920s, it tended to be small, unionized enterprises experiencing difficult times that took up the mutual-gains option. As Leichtenstein [...] notes, while GM took much from the bargaining model that George Taylor had helped develop in the garment industry, the company was very selective as to the parts of the garment program it adopted. As a consequence, the company institutionalized a form of union-management closer to the model advocated by the Wisconsin school than that favored by [the Society for the Advancement of Management, or SAM, the name the Taylorist Society had chosen when it absorbed the Society of Industrial Engineers], and it was this model that was subsequently widely emulated through industry. Leichtenstein [...] has explained why this was so:

General Motors had a very different conception of how the grievance system and umpire machinery might function. the company, which had closely observed the way in which [George] Taylor handled disputes in the hosiery industry, wanted to avoid the freewheeling, all-inclusive style pioneered there. The largest corporation in the world had no need for the kind of economic tutelage so often meted out by those industrial relations "fixers" who had pioneered in the economically chaotic clothing trade.

In short, GM rejected "joint management" and instead institutionalized that amalgam of work practices, formalized grievance procedures, limited seniority, and constrained bargaining that subsequently became known as "New Deal Industrial Relations."

So Croly and his friend Brandeis got their way after all, at least with regard to unions. The Wagner Act, far from being the labor success it is frequently claimed, was a means of restricting labor's control over their work environment. Those aspects of work that today we call Taylorist should have been called the GM-Wisconsin model. As I argued in this article, it was GM's size and an accident of history rather than any special power of efficient management that led the world to adopt their accounting system, and so it is with their labor control system. In both cases, the adoption has been assisted by the federal government: in the first case by its adoption as the GAAP and the SEC, in the second by Wagner and the NLRB.

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[1] I guess I was wrong about the terminology of socialization and nationalization in this post, but the outcome is the same: fascists must have the state, Marxists seek to abolish it.

[2] At that time, they still naively believed that the Constitution had to be amended before you went off and assumed a power like taxing income. We have learned so much since then.

[3] Somewhere, I read that the ILGWU instituted the first Industrial Engineering program, but I don't recall where. I think Kevin Carson would suggest that the "mutual-gains strategy" will be effective right after the workers take ownership of the factory. But then it's a "worker-grains strategy," isn't it?

The Promise of American Life (long)

As luck would have it, I was browsing around in the local used book store recently and stumbled across a copy of Herbert Croly's The Promise of American Life (1909). I have plenty of other reading projects on my plate, so I didn't dive into it right away. However, when I had a moment or two, I thought I would give Cowen's approach of reading books in reverse order a try. No good - Croly's prose reads like Emerson's, only without the wit and charm. One bald assertion after another with seemingly no particular goal in mind. Not to mention that it seems so dated.

Still, I was left wondering why the was book so influential, so I started jumping around more randomly. Lo, and behold! -- Was there really a chapter entitled, "Nationality and Democracy: National Origins"? Indeed, there is, so I finally hunkered down to try to grasp the gist of his thoughts on the subject. From there, I came across another, earlier passage in which he defines the "democratic purpose". So what follows is my attempt to distill the man's program based on a few disjointed readings from the book ...

Croly asserts that "The salutary and formative democratic purpose consists in using the democratic organization for the joint benefit of individual distinction and social improvement." By this, he means that the organization must both support individual freedom and resolve the social question equally. Noting that these appear to be contradictory and mutually exclusive, he then goes on to press the third element of the French revolutionary slogan ("Liberty! Equality! Fraternity!") into service; the liberty and equality are presented as subordinates to the third principle, brotherhood. But what is the source of this brotherhood?[1]

Croly's subsequent argument is that nationalism and democracy are distinct yet crucial elements which must be used to advance efficiency. More to the efficiency in a moment, but national identity is the bridge by which socialism and democracy are brought together without sacrificing individuality (in fact, that is the title of this part of the book: "The bridge between democracy and nationality"):

The majority of good Americans will doubtless consider that the [policy of democracy] already indicated is flagrantly socialistic both in its methods and its objects and if any critic likes to fasten the stigma of socialism upon the foregoing conception of democracy, I am not concerned with dodging the odium of the word. The proposed definition of democracy is socialistic if it is socialistic to consider democracy inseparable from a candid, patient, and courageous attempt to advance the social problem towards a satisfactory solution. It is also socialistic in case socialism cannot be divorced from the use wherever necessary of the political organization in all its forms to realize the proposed democratic purpose. On the other hand there are some doctrines frequently associated with socialism to which the proposed conception of democracy is wholly inimical and it should be characterize not so much socialistic as unscrupulously and loyally nationalistic.

In a nutshell, he is arguing that in order to realize his vision of democracy, which has less to do with majority rule and much to do with defining and obtaining "the common good", we must appeal to and have recourse to that bond between people which is national in character. From here he goes on to something I found astonishing, and astonishingly familiar:

A democracy dedicated to individual and social betterment is necessarily individualist as well as socialist. It has little interest in the mere multiplication of average individuals except in so far as such multiplication is necessary to economic and political efficiency; but it has the deepest interest in the development a higher quality of individual self expression. There are two indispensable economic conditions of qualitative individual self expression. One is the preservation of the institution of private property in some form, and the other is the radical transformation of its existing nature and influence. A democracy certainly cannot fulfill its mission without the eventual assumption by the state of many functions now performed by individuals and without becoming expressly responsible for an improved distribution of wealth; but if any attempt is made to accomplish these results by violent means, it will most assuredly prove to be a failure. An improvement in the distribution of wealth or in economic efficiency which cannot be accomplished by purchase on the part of the state or by a legitimate use of the power of taxation, must be left to the action of time assisted of course by such arrangements as are immediately practical. But the amount of actual good to the individual and society which can be effected at any one time [emphasis in original] by an alteration in the distribution of wealth is extremely small; and the same statement is true of any proposed state action in the interest of the democratic purpose. Consequently while responsible state action is an essential condition of any steady approach to the democratic consummation, such action will be wholly vain unless accompanied by a larger measure of spontaneous individual amelioration [emphasis added]. In fact one of the strongest arguments on behalf of a higher and larger conception of state responsibilities in a democracy is that the candid, courageous, patient, and intelligent attempt to redeem those responsibilities provides one of the highest types of individuality -- viz. the public spirited man and a task which be enormously stimulating and edifying.

Yes, we are going to have socialism, but a socialism that preserves private property ... for now. This means of course that we are going to control the use of private property by controlling the way people think. And why not? Changing the way they think and feel will be exhilarating as they learn new modes of "individual expression". Perhaps we can forgive Croly of his naivete, since in 1909 he could not have known how this would have come out in practice as it did in the Cultural Revolution or any of the other attempts to purge people of their unfortunate bourgeois individualism.[2]

But the worst problem with socialism, according to Croly, is its unfortunate internationalism:

The great weakness of the most popular form of socialism consists however in its mixture of a revolutionary purpose with an international scope. It seeks the abolition of national distinctions by revolutionary revolts of the wage earner against the capitalist; and in so far as it proposes to undermine the principle of national cohesion and to substitute for it an international organization of a single class, it is headed absolutely in the wrong direction. Revolutions may at times be necessary and on the whole helpful, but not in case there is any other practicable method of removing grave obstacles to human amelioration; and in any event their tendency is socially disintegrating. The destruction or the weakening of nationalities for the ostensible benefit of an international socialism would in truth gravely imperil the bond upon which actual human association is based. The peoples who have inherited any share in Christian civilization are effectively united chiefly by national habits traditions and purposes, and perhaps the most effective way of bringing about an irretrievable division of purpose among them would be the adoption by the class of wage earners of the programme of international socialism. It is not much to say that no permanent good can under existing conditions come to the individual and society except through the preservation and the development of the existing system of nationalized states.

Now, this is the kind of thing that makes someone say that Croly and the acknowledged fascists share some of the same sentiments. The response to this is typically, "Yes, but he didn't share any of their other sentiments, so you are wrong to identify Croly as a fascist, and therefore you are wrong to in any way associate him with fascism." In the first place, saying that he shares some ideas with fascists and saying that he is a fascist are two different things, so claiming that I am wrong in asserting the former by proving that I would be wrong in asserting that latter is a non sequitur combined with a strawman. Secondly, I am curious as to how Croly, Hitler, and Mussolini could have all arrived at the same conclusion on this topic: is there a common influence for all three? And why aren't self-identified Progressives curious about this? And how influential was Croly's thinking on this topic? For example, it is well-known that Teddy Roosevelt based his New Nationalism on his interpretation of this book, but how much did Brandeis and, subsequently, FDR get out of it?

There are more areas in which the ideas of Croly and the actual fascists arrive at similar places. For one thing, there is his rejection of individualism and his association of that with the Manchester school. There is also his admiration for non-democratic means of arriving at his preferred state of efficiency. The chapter on nationality and democracy (VIII) is broken into segments that provide an overview of the relationship between the two; the effect on history and development on the national character; nationality and democracy in England,France, and Germany; and militarism. His synopsis of the English experience is:

The monarchy was reconstituted as the symbol of the national integrity and as the crown of the social system. The hereditary aristocracy, which was kept in touch with the commoners because its younger sons were not noble and which was national, if not liberal, in spirit, became the real rulers of England; but its rule was supplemented by an effective though limited measure of general representation. This organization was perfected in the nineteenth century. Little by little the area of popular representation was enlarged, until it included almost the whole adult male population; and the government became more and more effectively controlled by national public opinion. As a result of this slowly gathering but comprehensive plan of national organization, the English have become more completely united in spirit and purpose than are the people of any other country. The crown and the aristocracy recognize the limitations of their positions and their inherited responsibilities to the gentry and the people. The commoners on their side are proud of their lords and of the monarchy and grant them full confidence. It is a unique instance of mutual loyalty and well-distributed responsibility among social classes, differing widely in station, occupations, and wealth; and it is founded upon habit of joint consultation, coupled as the result of the long persistence of this habit, with an unusual similarity of intellectual and moral outlook.

The result, until recently, was an exceptional degree of national efficiency; and in scrutinizing this national efficiency the fact must be faced that the political success of Great Britain has apparently been due, not merely to her adoption of the practice of national representation, but to her abhorrence of any more subversive democratic ideas. On the one hand, the British have organized a political system which is probably more sensitively and completely responsive to a nationalized public opinion than is the political system of the American democracy. On the other hand, this same nationalized political organization is aristocratic to the core -- aristocratic without scruple or qualification. What is the effect of this aristocratic organization upon the efficiency and fertility of the English political system? Has it contributed in the past? Does it still contribute? And if so how?

Is the disdain for democracy shocking at all? To his credit, despite his admiration for the aristocracy, Croly seems to recognize that a problem subsequently arose because of them: although the aristocracy began bargaining with the new middle class of industrialists, they also moved to protect their privileges and in so doing froze the system in an organizational form that was appropriate to an era when their particular interest -- land -- was the most important productive asset. He continues:

This bargain appeared to work very well for a while; but indications are accumulating that a let-alone economic policy [EH: laissez-faire] has not preserved the vitality of the British economic system. The English farmer has lost ambition and has been sacrificed to the industrial growth of the nation while the industrial growth itself no longer shows its former power of expansion. The nation passed the responsibility for its economic welfare on to the individual and the individual with all his energy and initiative seems unable to hold his own against better organized competition. Its competitors have profited by the very qualities which Great Britain renounced when she accepted the anti-national liberalism of the Manchester school. They have shown under widely different conditions the power of nationalizing their economic organization; and in spite of the commission of many errors, particularly in this country, a system of national economy appears to make for a higher level of economic vitality than a system of international economy. "At the present time," says Mr 0. Elzbacher in his "Modern Germany," "when other nations are no longer divided against themselves, but have become homogeneous unified nations in fact and nations in organization, and when the most progressive nations have become gigantic institutions for self-improvement and gigantic business concerns on cooperative principles, the spasmodic individual efforts of patriotic and energetic Englishmen and their unorganized individual action prove less efficient for the good of their country than they were formerly." The political leaders of England abandoned that is all leadership in economic affairs and allowed a merely individualistic liberalism complete control of the fiscal and economic policy of the country.

The problem as Croly sees it is that the English foolishly allowed individuals to try to compete with strong, foreign competition. That competition was cooperative and bound to win. In other words, since individuals cannot compete with state capitalists, Croly believed that the United States should embrace state capitalism. We also get a little taste of a recurring theme: that Croly's idea of hell is that we would leave anything to the chaos and chance of a free market.

In this passage, and in many others, we see Croly using "efficient" and "efficiency" without defining them. In some contexts, he seems to mean that the institutions are strong (an efficient nation), while in others he seems to mean that they are the least-cost producers. This is something that requires further study, as efficiency appears frequently throughout the text as one of the goals of his system.[3]

Croly then proceeds on to France.

Even the most loyal friend of France can however hardly claim that the French democracy is even yet thoroughly nationalized. It has done something to obtain national cohesion at home and to advance the national interest abroad, but evidences of the traditional dissociation between French democracy and French national efficiency and consistency are still plainly visible. Both the domestic and the foreign policies of the Republic have of late years been weakened by the persistence of a factious and anti-national spirit among radical French democrats.

The most dangerous symptom of this anti-national democracy is that an apparently increasing number of educated Frenchmen are rebelling against the burdens imposed upon the Republic by its perilous international position. They are tending to seek security and relief not by strengthening the national bond and by loyalty to the fabric of their national life, but by personal disloyalty and national dissolution. The most extreme of democratic socialists do not hesitate to advocate armed rebellion against military service [emphasis added] in the interest of international peace. They would fight their fellow countrymen in order to promote a union with foreigners. How far views of this kind have come to prevail, an outsider cannot very well judge; but they are said to be popular among the school teachers, and to have impaired the discipline of the army itself.

Here we see a consistency between his support for nationalism and his distrust of international socialism that betrays what would usually be called a bedrock characteristic of socialism: Croly is no peacenik. He thinks France needs a military draft and condemns those opposed to it. And he goes on to further emphasize his distaste for individualism in a way that forewarns of the coming totalitarian nature of planned economies. Where everyone is expected to do their share to advance the national, ... uh, ... efficiency, then shirking and laziness and failure to bring forth children to advance the interests of the nation is not just a matter of personal choice, but evidence of immorality, a threat to order, and possibly a sign of subversiveness. After lamenting France's lack of raw materials and the unfortunate inability to establish autarky, Croly has a surprising take on how France's unique character is a problem of too much individualism:

At first sight it looks as if France was something like a genuine economic democracy, and ought to escape the evils which threaten other countries from an economic organization, in which concentrated capital plays a more important part.

But the situation is not without another and less favorable aspect. France, in becoming a country of small and extremely thrifty property owners, has also become a country of partial economic parasites with very little personal initiative and energy. Individual freedom has been sacrificed to economic and social equality; and this economic and social equality has not made for national cohesion. The bourgeois, the mechanic, and the farmer, in so far as they have accumulated property, are exhibiting an extremely calculating individualism, of which the most dangerous symptom is the decline in the birth rate [emphasis added]. Frenchmen are becoming more than ever disinclined to take the risks and assume the expense of having more than one or two children. The recent outbreak of anti-militarism is probably merely another illustration of the increasing desire of the French bourgeois for personal security, and the opportunity for personal enjoyment. To a foreigner it looks as if the grave political and social risks, which the French nation has taken since 1789, had gradually cultivated in individual Frenchmen an excessive personal prudence, which adds to the store of national wealth, but which no more conduces to economic, social, and political efficiency, than would the incarceration of a fine army in a fortress conduce to military success. A nation or an individual who wishes to accomplish great things must be ready, in Nietsche's phrase, "to lived angerously" -- to take those risks, without which no really great achievement is possible; and if Frenchmen persist in erecting the virtue of thrift and the demand for safety into the predominant national characteristic, they are merely beginning a process of national corruption and dissolution.

Wow, strong language. So if the British and the French fail to achieve the necessary balance of nationalism and democracy (Croly's definition, not the standard one), who does? It should be no surprise at this point that the section on Germany is almost entirely devoted to a fawning review of the career of Otto von Bismarck, the German Junker who forged Germany on the Prussian model with blood and iron.

German nationality as an efficient political and economic force has been wrought by skillful and patriotic management out of materials afforded by military and political opportunities and latent national ties and traditions. During the eighteenth century the Prussian monarchy came to understand that the road to effective political power in Germany was by way of a military efficiency, disproportionate to the resources and population of the Kingdom. In this way it was able to take advantage of almost every important crisis to increase its dominion and its prestige. Neither was Prussian national efficiency built up merely by a well-devised and practicable policy of military aggression. The Prussian monarchy had the good sense to accept the advice of domestic reformers during its period of adversity, and so contributed to the economic liberation and the educational training of its subjects. Thus the modern German nation has been at bottom the work of admirable leadership on the part of officially responsible leaders; and among those leaders the man who planned most effectively and accomplished the results was Otto von Bismarck.

After explaining how Bismarck saw that the path to German unification led to war between his native Prussia and Austria and then France, and that in turn led to some compromises with the democrats whom he hated, Croly writes about Bismarck's return to the task of actually forging the nation:

It remained now to organize and develop the new national state; and the government, under Bismarck's lead, made itself responsible for the task of organization and development, just as it had made itself responsible for the task of unification. According to the theories of democratic individualistic "liberalism," such an effort could only result in failure, because from the liberal point of view the one way to develop a modern industrial nation was simply to allow the individual every possible liberty. But Bismarck's whole scheme of national industrial organization looked in a very different direction. He believed that the nation itself, as represented by its official leaders, should actively assist in preparing an adequate national domestic policy, and in organizing the machinery for its efficient execution. He saw clearly that the logic and the purpose of the national type of political organization was entirely different from that of a so called free democracy as explained in the philosophy of the German liberals of 1848, the Manchester school in England, or our own Jeffersonian Democrats; and he successfully transformed his theory of responsible administrative activity into a comprehensive national policy. The army was, if anything, increased in strength so that it might remain fully adequate either for national defense or as an engine of German international purposes. A beginning was made toward the creation of a navy. A moderate but explicit protectionist policy was adopted, aimed not at the special development either of rural or manufacturing industries, but at the all-round development of Germany as an independent national economic unit. In Prussia itself the railways were bought by the government so that they should be managed not in the interest of the shareholders, but in that of the national economic system. The government encouraged the spread of better farming methods, which have resulted in the gradual increase in the yield per acre of every important agricultural staple. The educational system of the country was made of direct assistance to industry, because it turned out skilled scientific experts, who used their knowledge to promote industrial efficiency. In every direction German activity was organized and was placed under skilled professional leadership, while at the same time each of these special lines of work was subordinated to its particular place in a comprehensive scheme of national economy. This "paternalism" has moreover accomplished its purpose. German industrial expansion surpasses in some respects that of the United States, and has left every European nation far behind. Germany alone among the modern European nations is, in spite of the temporary embarrassment of Imperial finance, carrying the cost of modern military preparation easily, and looks forward confidently to greater successes in the future. She is at the present time a very striking example of what can be accomplished for the popular welfare by a fearless acceptance on the part of the official leaders of economic as well as political responsibility, and by the and intelligent use of all available means to that end. [emphasis added]

How can you not recognize so much of what shows up 16 years later in Mein Kampf? There is the nationalism; the leadership principle (Fuhrerprinzip); the skepticism of democracy, individualism, internationalism, and Manchesterism. In other places in the book, we find that the highest ambition for all men would be to use their talents to efficiently advance the national cause. There is the admiration for war as a means to promote the national spirit.

What, really? Do I exaggerate? The next section of the chapter is called "Militarism and Nationality", and consists in equal parts of a claim that colonization is good for the colonized (in Asia and Africa), good for the colonizer, and not in any way at all contrary to Croly's brand of democracy.

The nations of Europe are to all appearances as belligerent as were the former European dynastic states. Europe has become a vast camp, and its governments are spending probably a larger proportion of the resources of their countries for military and naval purposes than did those of the eighteenth century. How can these warlike preparations, in which all the European nations share, and the warlike spirit which they have occasionally displayed, be reconciled with the existence of any constructive relationship between the national and the democratic ideas?

The question can best be answered by briefly reviewing the claims already advanced on behalf of the national principle. I have asserted from the start that the national principle was wholly different in origin and somewhat different in meaning from the principle of democracy. What has been claimed for nationality is not that it can be identified with democracy, but that as a political principle it remained unsatisfied without an infusion of democracy. But the extent to which this infusion can go and the forms which it takes are determined by a logic and a necessity very different from that of an absolute democratic theory. National politics have from the start aimed primarily at efficiency -- that is, at the successful use of the force resident in the state to accomplish the purposes desired by the Sovereign authority [emphasis added - here is the definition of efficiency!]. Among the group of states inhabited by Christian peoples it has gradually been discovered that the efficient use of force is contingent in a number of respects upon its responsible use; and that its responsible use means a limited policy of external aggrandizement and a partial distribution of political power and responsibilities. A national polity, however, always remains an organization based upon force. In internal affairs it depends at bottom for its success not merely upon public opinion, but, if necessary, upon the strong arm. It is a matter of government and coercion as well as a matter of influence and persuasion. So in its external relations its standing and success have depended, and still depend, upon the efficient use of force just in so far as force is demanded by its own situation and the attitudes of its neighbors and rivals. The democrats who disparage efficient national organization are at bottom merely seeking to exorcise the power of physical force in human affairs by the use of pious incantations and heavenly words. That they will never do. The Christian warrior must accompany the evangelist; and Christians are not by any means angels. It is none the less true that the modern nations control the expenditure of more force in a more responsible manner than have any preceding political organizations; and it is none the less true that a further development of the national principle will mean in the end the attachment of still stricter responsibilities to the use of force both in the internal and external policies of modern nations.

War may be and has been a useful and justifiable engine national policy.

You see the emphasis on force as the organizing principle? That is not something of which the Progressive normally admits. War is not only good for building Christian nations, it is good for colonizing non-Christian ones:

Inimical as the national principle is to the carrying out either of a visionary or a predatory foreign policy in Europe, it does not imply any similar hostility to a certain measure of colonial expansion. In this as in many other important respects the constructive national democrat must necessarily differ from the old school of democratic "liberals". A nationalized democracy is not based on abstract individual rights no matter whether the individual live in Colorado, Paris, or Calcutta. Its consistency is chiefly a matter of actual historical association in the midst of a general Christian community of nations. A people that lack the power of basing their political association on an accumulated national tradition and purpose is not capable either of nationality or democracy, and that is the condition of the of Asiatic and African peoples.

No doubt modern Progressives can overlook this "era appropriate" view of the Asians and Africans to be conquered. But can they overlook the way in which Croly is intentionally trying to redefine liberal? Much ink has been spilled, chiefly by those of us who wish to reclaim the mantle of liberalism, about the change in the definition from one of "someone who defends liberty" to "someone who defends statism", and much defense has been made by the statists that they are the true heirs of Hume, Voltaire, Montesquieu, and Mill, but here we catch Croly with his finger on the scale.

He is using one interesting phrase - "national democrat" - to denote himself, while placing quotation marks around "liberals" to call their claims into question. What if he were instead to have used the phrase "national socialist"? By his own admission it would have meant the same thing, given his own definition.

Why are liberals "old school"? Why are we to question their liberalism? The answer, in this context, is that they oppose colonization because they don't understand nationalism and its relationship to democracy. And why shouldn't we oppose colonization? Here Croly has a curious answer:

The truth is that colonial expansion by modern national states is to be regarded, not as a cause of war, but as a safety-valve against war. It affords an arena in which the restless and adventurous members of a national body can have their fling without dangerous consequences, while at the same time it satisfies the desire of a people for some evidence of and opportunity for national expansion.

Got that? Colonial expansion is fun and brings us together, just like television would do in the 1950s and 60s.

No, I don't get the same impression from reading Croly that I do from reading Hitler or Mussolini. Hitler was animated by hatred, Mussolini by power, but Croly seems to have been animated by something else. But still, there is an element in each that recognizes the social question as the excuse for the implementation of a variety of other dubious programs. The Croly revolution would definitely be a top-down rather than grassroots-up movement. As it distrusted international socialism, individualism, Manchesterism, democratic liberalism, it had the appearance of being an anti-intellectual revolution, too. When you combine this with his worship of efficiency, which he defines as the successful use of force by a centrally planned state -- and notably, not by the people governed -- you can't help but think that what he most wants and needs is an action-oriented leader rather than an intellectual like William Jennings Bryan or Woodrow Wilson. Perhaps we were lucky that the Depression did not hit while TR was in office?

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[1] Note Bastiat's formulation of the problem: "Mr. de Lamartine once wrote to me thusly: 'Your doctrine is only the half of my program. You have stopped at liberty; I go on to fraternity.' I answered him: 'The second half of your program will destroy the first.'"

[2] Again, Bastiat comes to mind:

Socialists look upon people as raw material to be formed into social combinations...

In the same manner, an inventor makes a model before he constructs the full-sized machine; the chemist wastes some chemicals -- the farmer wastes some seeds and land -- to try out an idea.

But what a difference there is between the gardener and his trees, between the inventor and his machine, between the chemist and his elements, between the farmer and his seeds! And in all sincerity, the socialist thinks that there is the same difference between him and mankind!

It is no wonder that the writers of the nineteenth century look upon society as an artificial creation of the legislator's genius. This idea -- the fruit of classical education -- has taken possession of all the intellectuals and famous writers of our country. To these intellectuals and writers, the relationship between persons and the legislator appears to be the same as the relationship between the clay and the potter.

...

Oh, sublime writers! Please remember sometimes that this clay, this sand, and this manure which you so arbitrarily dispose of, are men! They are your equals! They are intelligent and free human beings like yourselves! As you have, they too have received from God the faculty to observe, to plan ahead, to think, and to judge for themselves!

[3] It probably appeared self-evident to him, as efficiency quickly became the goal of his allies (including Brandeis) in the Efficiency and Technocracy movements that sprang up shortly after the publication of Promise.

National vs. Social

As if you haven't noticed, I've been giving lots of attention to the Jonah Goldberg thingy. It happens to be an interest of mine.

One of his comments on the interview with Glenn and Helen Reynolds was something like "Nationalizing and socializing mean exactly the same thing: When we talk of socializing health care, we mean nationalizing, and when someone talks of nationalizing the oil industry, they mean socializing it."

Well, yes and no. Goldberg is right when he says the two are the same, but they shouldn't be and they weren't always.

This gets down to what Marx said and meant in theory, and how his theories have been taken up in practice. Marx saw the final stage, the one succeeding capitalism, as being a thoroughly democratic society in which institutions like private property would give way to community property. Thus, factories would be socialized, the opposite of privatized. However, he also saw that the state, the mechanism by which the capital-owning class controls the workers, would also whither away. Thus, socialized industry or socialized health care meant something completely different to him than what we mean by that today.

Today, socialization of an industry means ownership becoming controlled by the state, i.e. nationalization. Marx's successors have adopted his vision for everything except the state and have substituted the state for the community. And in this regard, we find that the state-loving left is the more nationalistic.[1]

Nationalism is frequently conflated with extreme patriotism or jingoism. When using the term to describe a characteristic of fascism, that's a red herring. A fascist's nationalism is not primarily about which state is better, it is about the proper scope of the state. Mussolini's prescription was, "All within the state, nothing outside the state, nothing against the state." And so it is when people speak of those things which are "too important to be left to the market," such as education, energy, health care, transportation, and so on. For each new field of endeavor into which the state enters, the state becomes that much stronger and more important (and the realization of Marx' state-free vision that much farther off). And as I have written in other contexts, no matter which party favors and clamors for the increase in state authority, the other is happy to exploit it for their own ends when they are in power. That is one reason it is a one-way ratchet. At some point, the scope of the state's authority will enter into every realm of personal life: that is what they meant by "totalitarian". For Mussolini, it was an explicit goal, enthusiastically sought; for today's neocons and takes-a-villagers, it is a "necessary evolution," driven by their concerns for physical and economic security, "market failure"[2], and the misfortune of "living in a second best world."

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[1] Yes, they are quick to blame America for the world's ills, but note how easily the left will forgive and forget their own when committing the same atrocities. The Blame America First tactic is merely cover for a Blame Republicans First strategy. World War I and II? Democrats. Viet Nam? Democrats. Only president to use a nuclear weapon? Democrat. President in power for both the first World Trade Center bombing and the initial planning for the second WTC bombing and thus responsible for America's poor image in the world? Democrat.

[2] Check it out: Quasibill catches the neocons explaining -- in terms of market failure -- why the state must pay for the economic security of Big Air under the guise of paying for the physical security of the passengers.

Wal-Mart and sustainability

UPDATE: In response to some thoughtful criticism I got from a container shipping industry executive, I edited a portion below. I had said that the state helped break transport unions, but in reality they are still a force in the industry. It would be more accurate that the state forced them to accept change.

I got interested in some of the responses on this post on Environmental Economics. If Wal-Mart had claimed altruistic motives for some of their policies, that would properly be called "greenwashing". However, they weren't. Tim Haab was basically pointing out a truism: Wal-Mart's interest in sustainable measures (including hawking CFLs, incorporating passive solar for lighting and active solar for electricity, and so on) is done for selfish reasons: to make money. Like any post involving Wal-Mart and sustainability, it became a lightning rod for people with definite policy agendas. Given that I am likely to either defend or attack Wal-Mart and sustainability, depending on the context, I have an opinion but no definite laundry list of policies I'd like to see enacted.

You could summarize the many variables and value judgements in truth table format with about 27 variations (3^3) and assign each to an ideology. The variables are Wal-Mart, sustainability, and planning/government, each of which people may label as good, bad, or benign/irrelevant. Wal-Mart good, sustainability irrelevant, government bad is the default position for the vulgar libertarian. Wal-Mart bad, sustainability good, planning good is the default position for the Progressive. W-M bad, sustainability irrelevant, gov't good is the default for the populist/conservative. W-M good, sustainability bad, gov't benign is the evangelical right (she drives an SUV and has 6 kids).

I think my entry in the table would be "Wal-Mart benign, sustainability good, planning/government bad". Wal-Mart doesn't "drive" the system the way both the Progressives and the vulgar libertarians say that it does. Rather, the system created Wal-Mart. Going by Chandler's Visible Hand, people responded 100 years ago to the first department stores (Marshall Field's) and then to the mail-order stores (Sears, Woolworth's) the same way they do to Wal-Mart today: by claiming they would eat away at local businesses. Well, if it wasn't Wal-Mart, it would be someone else.

So I tried to point this out and emphasize the fact that it is state capitalism that creates the unsustainability, of which Wal-Mart is just a delivery boy. Our system looks like a giant vacuum cleaner that hoovers up resources in the developing world and kicks them out back here; Wal-Mart is the least fancy exhaust portal. We the people continue to support policies which produce "efficient" systems for delivering products to us. Those systems are a combination of transportation, energy, and credit subsystems that interact with cultural values to both create the demand and impose costs on the use of alternatives.

For example, we have national energy policies that ensure the profitability of large electrical monopolies who generate from coal and natural gas. This will be defended as efficient because it is highly engineered to look that way from the standpoint of the producer and the consumer. However, from other standpoints, there are externalities that are not accounted for. Those externalities include both the pollution and the intangibles, including the isomorphism around the chosen system. This is still something I'm working out, but the isomorphism includes high voltage AC-based transmission and distribution (which increases the cost of using alternatives, like LEDs, or introducing alternative sources, like solar[1]), an emphasis on greater supply (rather than demand-based solutions such as increased insulation or more efficient motors), centralization (rather than distributed generation), and isolation (rather than integral with the users so that the externalities fall on them). When the design was established 100 years ago, AC was a brilliant improvement over DC, regulated monopolies were promoted as the only viable alternative for generating and distributing AC power, and the accumulated engineering successes within that political framework have been impressive. But nothing is so impressive as the socio-political engineering, including a nearly invincible cloaking device and a strong superstructure made of an alloy of the Edison Institute, politicians, populist regulation cheerleaders, discount rate receiving electricity-based industries (like electrical steel furnaces), coal miners unions, dividend receiving widows and pension funds, and soccer moms worried by the so-called de-regulation that is nothing of the kind. Given a different political framework, the counterfactual engineering successes would be just as impressive, but the overall social efficiency (including the external costs) could be much better.

We furthermore have policies that promote and protect the use of petroleum, including "free" taxpayer-supported road systems and the Carter Doctrine. We have policies that promote and subsidize long distance shipping of goods, including eminent domain and taxpayer support of railroads (mostly as a historical fact, not current policy, though the pension plans still receive special tax recognition and grade crossings are your problem, not the railroads') and container ships. The container shipping history is more recent and includes several very interesting factors. Not only did the state (including the federal government) help break [force] the longshore unions who opposed [to accept] the shift to container ships, but the cities, states, and federal government paid for the infrastructure, including the highway systems, harbor improvements, and dock facilities (cranes, rails, etc.). Today, taxpayers foot the operational costs, including infrastructure maintenance (harbors and roads) and cargo inspections (thanks to our interventionist foreign policies, the great transportation system that brings goods from the world is also a potential Trojan Horse for WMDs), but the investments are promoted as tax-yielding investments rather than the revenue consuming corporate welfare programs that they are.

All of this infrastructure, what W. W. Rostow would call social overhead capital, was put in place in the 60s and 70s, long before Wal-Mart became a force. And yet, having taken advantage of it, Wal-Mart is seen by some as the bad guy. Those who hold that view are mostly self-designated Progressives, the same people who favor central planning for efficient management of the economy. This is the main reason why the two groups -- those who see the infrastructure as the pinnacle of efficient engineering, Wal-Mart as benign, and sustainability as irrelevant, and those who see globalization as the evidence of Western greed, Wal-Mart as the embodiment of evil, and sustainability as the new religion -- talk past each other. One looks only at the engineering and sees none of the underlying political structure that brought it about (and perhaps even opposes any government interference with this "free market" system), and the other refuses to admit that their policy preferences are simply the most recent incarnation of the same policies that got us into this mess in the first place. They want another patch on the binding on the dressing on the bandage on the abrasion caused by the crutches they promoted for a fit patient in the first place.

And to top it all off, we have the same social engineers looking to solve the sustainability problem by imposing unsustainable, modern, Western values onto the undeveloped countries whose citizens are the victims of this system. For them, the real problem in the world is not Western-style consumerism, it's those other people who breed like flies because they're ignorant and poor. This obviously plays into biases some have against swarthy "others", but does not necessarily spring from those motives. And it seems to have escaped the attention of the planners that such lifestyles, having been practiced for millennia, are inherently sustainable.

But no, we're going to retrain them rather than us. First, as the story goes, we have to promote growth. In a recent post, Dani Rodrik says,

"What kind of a growth strategy should this [developing] country follow? A strategy that focuses on expanding employment opportunities in the rural areas where most of the poor live? Should it consist of expanding their capabilities, by investing directly in education and health? Or should it focus on wherever the economic activities that will provide sustainable sources of income growth into the future lie, even if these may be in mostly urban areas and likely to foster greater inequality in the short-run?"

He concludes the latter. But he isn't the first: Rostow explicitly proposed that strategy in his Stages of Growth: increase the efficiency of farming to free up and feed a substantial labor pool that can move to urban areas and work in heavy industry. You can do this by subsidizing cash crops (for export) instead of traditional crops (for consumption) and by providing social overhead capital (transportation). Diana Davis' history of the French colonization of Algeria in Resurrecting the Granary of Rome shows that they accomplished the former by several means: confiscate public lands used by nomadic herders, outlaw traditional farming methods (like using fire to clear scrub), and ban the payment of taxes with in-kind payment (force a switch to a cash economy). People who suddenly couldn't sustain themselves by traditional means and now needed to raise money to pay taxes migrated to the cities to look for jobs with French employers. Note how the preferred policies of modern social engineers are remarkably similar to the policies of colonial powers in an unenlightened age.

After claiming that "The joint stock company owes its existance [sic] to [increasing returns], not so much to state (or other) promotion," in response to which I pointed out the above, one of the commenters on the Env-Econ post, Reason, listed his favored set of policies to reduce population growth:

1. Increasing the duration of education which increases the costs of having children
2. Providing social security which reduces the benefits of having children
3. Better public health so that people can be confident their children will survive
4. Peace (same reason as above)

Having selected government policies to solve a problem, he found no opportunities for anarchism to solve the same, as if he had actually searched for any. I'm not going to defend outright anarchy in a world unused to anything but increasingly active states where force is the first resort, but I should think it obvious that smaller states are generally not pugnacious, so he was wrong about his fourth point not being addressed by anarchism. [2] More importantly, though, he failed to explain how 1, 2, and 3 were going to be funded in a pre-takeoff, sustainable society of the type found in the undeveloped world.

Such societies are marked by their traditional, subsistence farming practices, and their children are a necessary source of labor and the primary retirement pension for their parents. Trade is frequently made by in-kind payment. For example, Diana Davis notes the achaba property arrangement in which herders exchanged their labor for pasture rights in Algeria. In order to introduce education and social security systems to take away the parents' labor and pension incentives, there must first be a system of taxation and management. These emphasize the state rather than the community as a central cultural institution and establish the state as central collection and dispensation authority in addition to, or perhaps in place of, its role as night watchman. More importantly, however, it forces the people to abandon traditional methods of trade and agriculture and to switch to crops and methods or other uses of their labor which are easily traded for cash. That means that they must switch to crops or labor of value to people who have cash, i.e. the developed world. The cash crops must have an export value, or the labor must be in an export industry.

Now, just where do they think The Gap, Nike, and Wal-Mart get their labor, sweatshop or otherwise? This is exactly the point made by Ellenita Muetze Hellmer (about which I wrote here).

Given that the greatest advances in public health are typically made by applications of civil engineering rather than medical science, Reason's third point is the step which usually gets the state involved first in sewage projects, then in national transportation infrastructure (roads, rails, ports), and then in "other" engineering projects (oil field development, power facilities, civil defense, air bases, nuclear fuel processing). I know that's a very unconvincing linkage, but I predict that you could draw these direct lines if you only knew enough of the underlying history. After all, if you have the spontaneous creation of private engineering capability and a weak or decentralized state, those engineers won't go looking to develop a military capability because the politicians and bureaus won't exist or have the means to pay for it. Compare the early US -- where military facilities like Ft. McHenry were still conceived as defensive structures; the design and construction were ad hoc, Golden Carrot-type contracts (award a prize to the best designer); and community-based (the federal government granted money to local communities and provided the construction design) -- to modern US military-industrial arrangements where contractors conceptualize, design, build, and endlessly refine offensive weapons while the spin-offs are touted as beneficial to the public (the internet from DARPA, Tang from NASA, etc.). Or consider the military pedigree of modern quality control theory.

When people in the developing world are employed by consumer-oriented industries, what values are transmitted? The employees at Nike factories in Viet Nam first bought bicycles (sustainable) and then motorbikes and now look forward to moving up the consumer ladder to a car. In China, cars (especially with "foreigner" plates) are a highly desired commodity and the sustainable bicycle culture is all but dead. The developing world, with encouragement from the social engineers in the developed world, is building a sketchy replica of the type of economic system whose money they wish to attract. They believe they can attract that money by feeding the West's insatiable maw with container ships full of cargo. I called this (tongue-in-cheek) a Cargo Cult (which seemed to offend odograph, though I don't understand why). Unlike the actual Cargo Cults, it may succeed in attracting the money. For some people, for a while. However, it is not the road to sustainability and it is unlikely that 9 billion people will succeed in enjoying the lifestyle currently enjoyed in the West. The problem lies with us and our chosen means, not them and theirs. The solution lies with change in our society, not with them choosing our existing means.[3]

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[1] Yeah, I know: where would the LEDs and solar cells come from absent the system that provided the R&D resources to discover them? This is perhaps not as strong of a counterargument as you might think: Einstein theorized the photoelectric effect long before the R&D resources were available, and perhaps more would have gone into searching for practical applications it if the political support for large, central, coal-fired generation had not been as successful. No legal monopoly means higher cost and more awareness of the externalities because nobody could afford to build large, centralized systems. That in turn means more searching for alternatives. Also, it would be more feasible today to install a small solar or wind system (like many farmers had before the REA) because you would only be replacing or plugging into a decentralized subsystem.

[2] It is at least arguable that an unstable anarchy is potentially very violent - even David Friedman admits as much in noting that Saga Iceland collapsed in a series of blood feuds, albeit after 300 years of stability. But a stable anarchy can't raise the money or army to go looking for a fight.

[3] Yes, I'm also concerned about population issues. But I think that a less important problem compared to that of Western consumerism. I also think it foolish to believe that a proper list of policies and a certain amount of money is going to solve the former, or a sudden majority of libertarian politicians the latter. Solutions to both problems require wholesale changes in cultural attitudes and values; politics and economics only take you so far. Sometimes the state can lead cultural change, but not always. And not always for the better. Saying self-evident things like, "education of women is important to control population growth" doesn't mean much in Islamic or other traditionalist societies where women are relegated to second class status. I doubt you could fund or force anything which would work. Creating change in those climates requires something that operates on a more personal level than a United Nations program, something that flies under the states' radars, something that cannot be denounced by Imams.

Rationalizing the Oldest Industry by Force

Alfred Chandler's best known book, The Visible Hand: The Managerial Revolution in American Business, describes the shift from the atomistic, entrepreneurial market described by Adam Smith to the modern economy dominated by small groups of integrated, managed firms. The references to the apparel industry can be summarized briefly since apparel is not one of the industries that became rationalized in the way he describes.

The first industrial use of non-animal energy was the water-powered automatic loom developed in England in the late 18th century and brought to New England in the early 19th century. This led to a concentration of the textile industry around water sources. There was only a slight shift in the industry when anthracite coal arrived and steam-drive replaced stream-drive.

The coal-fueled energy revolution led to the railroads becoming next big industry, not because they were using it but because they were hauling it (coal-driven locomotives didn't become widely used until the last quarter of the 19th century). Telegraphy followed the railroads in a symbiotic relationship that formed the foundation for what followed: use of all-weather, high-speed transportation and long distance communication to coordinate the flow of goods from production through distribution to consumers.

The next industries to rationalize were those that could either use heat, transportation, and/or communications. These included:

• metal working (steel, using coal)
• wholesale & retail (using telegraphy to coordinate, trains to streamline)
  
• meat packing (Swift's rail cars)
• oil (first railroads, then pipelines)

Aside that will become relevant later: Dry goods merchants protested the rise of the department store, then the rise of the mail order operation (like Sears). Today, they protest the rise of the Big Box Store (Wal-Mart). The small retailer, while less common than before, has survived each of these consolidations, so far.

Chandler returns to apparel later in the book while looking at the most heavily capitalized and concentrated industries. He asserts that the returns to scale and capital for apparel are very low because

[e]ssentially, the machines took the place of manual operations. A machine did a task comparable to that of a worker in spinning, weaving, sewing, cutting, and fabricating. The maximum speed of cutting or shaping wood, cloth, or textile products by machinery was quickly reached. Nor did the spinning and weaving of natural fibers or the tanning of natural leather lend itself to massive increase of throughput by a greater application of energy.

This is entirely consistent with Kathleen's point

Sewing will always be labor intensive because cut fabric pieces cannot be smelted out like metal rods. Garments cannot be cut like sheetmetal and welded by machines. Fabric is flimsy; it must be handled by hands. No amount of technology will ever change this.

So, despite being an early link between the entrepreneurial Smithian world and the managed Chandlerian world, apparel was not consolidated, streamlined, and "rationalized" when so many other goods have been.

Not content to simply make a living, some people become enamored with the idea of getting rid of the competitors who kept them from becoming fabulously wealthy. There are few mechanisms for doing so successfully. You can try undercutting them and then buying them out, but John McGee showed that was not a feasible strategy even for Rockefeller. You can try combining with them through a cartel or horizontal merger, but the former is known not to work and Chandler showed that horizontal integration also failed; you had to both vertically integrate and develop a successful management structure to make mergers work.

Gabriel Kolko has described a third alternative; get the legislature to pass legislation ostensibly designed to help the consumer but which actually serves the interests of industry (or specific groups within industry). When rate cartels failed, the railroads ultimately turned to the federal government to act as their cartelizing agent. This function was performed by the Interstate Commerce Commission (ICC), an agency ultimately charged with responsibility for setting both maximum and minimum rates for the railroads. In time they came to serve a similar function for over-the-road trucks and served as a model for the Civil Aviation Board (CAB), which oversaw the creation of no new interstate airlines from its inception in 1938 to its demise in 1978. Meatpackers also sought protection, which they received with the help of Upton Sinclair's The Jungle, the novel which aimed at Americans' hearts but managed to cover Congress' backside. Bankers also wanted protection and got it with the Federal Reserve Act, which gave them input to a quasi-public board of governors and the US Treasury.

The Kolko Thesis describes what is happening in the apparel industry today. No firms have been able to internalize the coordination of a significant portion of the industry, either from the production or the distribution end. Though not perfect, it is surprisingly atomistic given the enormous size of the world market.

If you try to produce something of superior value and charge premium prices, there is nothing preventing someone from "knocking off" an article that required no small amount of inspiration, engineering, costly fabric and accessories (buttons, zippers, doodads) to produce. Like the Red Queen who was running as fast as she could just to stay in place, you are forced to constantly innovate in order to stay ahead. That's not a very satisfying way to get rich. The other option is to produce a commodity -- t-shirts, jeans, hoodies -- on which you make pennies on every piece and try to make it up on volume. That also is not a very satisfying way to get rich. Rather than taking either of these losing paths, it looks like a group of designers has decided to enlist the state to eliminate competition by seeking patent protection for designs.

The standard argument for copyright or patent protection is that it will encourage innovation by securing to the innovator exclusive rights to the innovation long enough to extract some monopoly rents. While that is a superficially plausible argument in this case, I'd say that Kathleen's description of the outcome of HR 2033 is much more likely:

I realize that sounds like a dramatic and exaggerated claim but if this legislation passes, contractors, pattern makers and even retailers will be exposed to liability. Let's say you have this nifty design that you claim you made up all on your own, with no inspiration from anybody anywhere and you hire one of us to make it up for you and you sell it and make your pile. Then, somebody comes out of the woodwork and claims it is their design, they own it and now you owe them. Problem is, you likely don't have much money, they'll want to sue everyone in your production and retail chain. That means me, your contractor and the stores who bought your stuff. After all, we "enabled" you. So, in order to avoid exposure, any contractor, pattern maker, sales rep or store owner -in the interests of avoiding law suits or facing criminal prosecution for dealing in pirated goods- is going to require you to prove ownership of your concept before they'll have anything to do with it. Minimally, you'll have to hire a lawyer, pay for searches through a design database of all existing design registrations. I cannot even begin to imagine how long this would take. You thought a trademark or logo search was bad? I have no doubt there's over 10,000 clothing designs out there for every logo. This will cost a fortune. But, you'll have to do it. No one will take your work otherwise. And because we'll have to have our own lawyers to check up on you and draw up contracts, the prices we charge you will at least double. We operate on tiny margins. I charge $50 an hour for patterns. IP attorneys get $250+, I'll have to triple my prices just to break even. Even with proof in hand, you will have no recourse other than to produce your registered design exactly as sketched. No design changes or iterations in process are allowed, otherwise you'll have to start all over again. Forget shortening that sleeve, changing the shape of that neckline or tapering the pant leg of that prototype. So what if it ends up looking lame and you have to start all over? That's the new cost of doing business. Feeling protected yet?

But hasn't IP protection been good for those industries that use it most? Perhaps, but the temptation is to say, "Look at the cell phone industry: there seems to be no shortage of innovation there." Ah, yes, but compared to what, exactly? What does cell phone innovation look like in an atomistic, entrepreneurial economy instead of in the oligopolistic, state-capitalist economy we (and Japan and Finland and South Korea) have now? Indeed, there was lots of innovation in the industry: as Bell's original patents expired, there were something like 200 telephone companies operating in Illinois, Indiana, Iowa, Missouri, and Ohio alone (from Adam Thierer's "Unnatural Monopoly"), but AT&T appealed to the federal government in 1913 and had themselves set up as a protected monopoly. You might remember that we had one phone company for the next seventy years.

The cell phone market consists of a few companies (Nokia, Motorola, LG, Samsung) while apparel consists of thousands of producers and thousands of retailers. Recall that small retailers have repeatedly complained about and then survived the onslaught of department stores, then mail order houses, and now big box stores. There survival has remained possible because the small retailers can still purchase from small manufacturers. When IP protection comes along, the industry will get vertically integrated and the supply for the small retailers will dry up. The companies that secure patents first will hold something over on first their competitors. Retailers will not be able to sell something from a producer who doesn't have a copyright. There will be no more than a dozen producer/retailer companies in the end: Wal-Mart, Nike, The Gap, and Target may soon be integrated apparel retailer-producers.

But why now? IP was around 100 years ago; they were aware of it in the industry (you should see the number of patented fit systems from the 19th century). Here is my best guess at the relevant history (with help from my wife, who clearly understands this better than I and may not agree with all of what follows):

1) Regionalism: In the period in which Chandler describes the process of consolidation in many other industries (roughly 1880-1920), apparel was resistant to consolidation for a number of reasons.

• The returns to scale limited as Chandler asserts
  
• Regional weather differences - cold, wet, dry, hot, windy all require different dress schemes.
• Resistance to rail distribution for various practical reasons. You wouldn't want to get the clothing near a coal-fired steam locomotive because it would be filthy upon delivery. You also couldn't effectively fill the box cars. In the steam rail era, it would have been much better to ship stacked bolts of cloth (only the outsides would get dirty, you could fill a box car) and produce garments on site.
  
• Shipping cotton and cotton cloth had occurred since the late 18th century, but there were still regional resource differences. Wool, cotton, leather would not have been equally available everywhere.
  
• Regional preference differences based on, for example, what they did for a living. Cowboys don't dress like bankers.
• Foreign influences - Texans met different people than New Yorkers
  

2) The post-war era created several changes:

• Increased prosperity. Prior to 1950, people generally only had a limited wardrobe. More disposable income set the stage for change.
• The washing machine. Prior to the 1950s, you had to wash it all by hand. More appliances lowered the cost of ownership.
• War: The federal government became the single largest consumer of clothing both through WWII and the Cold War. This meant the government set certain design and production standards, and as the single largest consumer, the various related industries (sewing machine manufacturers, for example) followed orders (in both senses). Women started wearing pants.
• Television and the interstate highway system: Prior to that, there was more regionalism in speech, food, and clothing. The decline of those barriers through television allowed more mass distribution, and that meant shifting from catering to local tastes to catering to the lowest common denominator. The interstate system lowered the cost of trucking. Hats and dress gloves became passe.
  

3) Logos: Terry Agins' The End of Fashion describes how, as clothing all became similar, companies began to resort to logos and branding to distinguish themselves. Remember the Izod alligator?
4) Sloan Managerialism: As Bill Waddell has theorized, many manufacturing firms have been taken over by MBAs with little or no production experience and an education in an Ivy League school where they were all taught the Sloan/Dupont theory of management. Production is a cost, so keep the logo and IP, outsource the production, and rely on branding.
5) Piracy: Branding has led to the rise of piracy. If you knock off a generic piece of clothing, you make no money. Knock off a Polo shirt, you make a little less than what Ralph Lauren makes. Piracy has also proliferated as Chinese production has come onto the market.
7) Agency: Diane von Furstenburg is the new president of the Council of Fashion Designers of America (CFDA) and the perfect agent of change. Having achieved only one notable design success, she basically became a brand and now wants to take the concept to the next level: the corporation with the most lawyers gets to control fashion. The CFDA is pushing HR2033 with the help of several trial-lawyer-fueled congresspersons. She could be a character in an Ayn Rand novel.

Apparel manufacture is still one of the few manufacturing businesses that you can start in your garage and sustain profitably on a small scale. HR 2033 will effectively put an end to that.

Local, Action: Association

In 1831, Alexis de Tocqueville and a French companion toured the 24 United States to investigate their jails in preparation for a reform of French prisons. What we got out of the deal was Democracy in America, a very comprehensive review of the state of the nation at that time, a glance at the country prior to the full onslaught of finance, managerial, and state capitalism (that and a kick-ass C-Span series). One of the more memorable themes of the book was the notion of Americans as association joiners:

Americans of all ages, all conditions, all minds constantly unite. Not only do they have commercial and industrial associations in which all take part, but they also have a thousand other kinds: religious, moral, grave, futile, very general and very particular, immense and very small; Americans use associations to give fetes, to found seminaries, to build inns, to raise churches, to distribute books, to send missionaries to the antipodes; in this manner they create hospitals, prisons, schools. Finally, if it is a question of bringing to light a truth or developing a sentiment with the support of a great example, they associate. Everywhere that, at the head of a new undertaking, you see the government in France and a great lord in England, count on it that you will perceive an association in the United States.

In America I encountered sorts of associations of which, I confess, I had no idea, and I often admired the infinite art with which the inhabitants of the United States managed to fix a common goal to the efforts of many men and to get them to advance to it freely.

This strikes me as the kind of society in which I would like to live. It is a society in which people form ad hoc associations to deal with problems as they arise, perhaps even creating new institutions for addressing the more serious institutional failures (I'm going to adopt Glen Whitman's semantics). That's a long way from the usual strawman offered as "what libertarians want", a strawman which is usually labeled "hyperindividualism" or "You're On Your Own".

Recently, I came across a Slate article critical of de Tocqueville written by Theda Skocpol. Actually, it's an article critical of people who look at that period as one free of what Skocpol might characterize as beneficial federal government influence. At first, I was intrigued since it seemed to support some of my suspicions, but upon reflection I decided that there were some problems with it.

First, she overlooks the reasons why government was involved in such things in the first place. Sure, the postal service and postal roads are explicitly mentioned in the Constitution (Article I, Section 8, "The Congress shall have Power To lay and collect Taxes...To establish Post Offices and post Roads"). However, it does not follow that because they could, they should. Nor does it follow that because you can plausibly argue that outcome X was the result of action Y that X was an actual and significant outcome of Y. Nor does it follow that Y was necessarily undertaken for X in the first place. Plausibility is not all.

With respect to the first of those objections, it should be pointed out that Thomas Jefferson argued (Virginia Protest, 1825) that federal road subsidies were an infringement of state sovereignty:

But the federal branch has assumed in some cases, and claimed in others, a right of enlarging its own powers by constructions, inferences, and indefinite deductions from those directly given, which this assembly does declare to be usurpations of the powers retained to the independent branches, mere interpolations into the compact, and direct infractions of it.

They claim, for example, and have commenced the exercise of a right to construct roads, open canals, and effect other internal improvements within the territories and jurisdictions exclusively belonging to the several States, which this assembly does declare has not been given to that branch by the constitutional compact, but remains to each State among its domestic and unalienated powers, exercisable within itself and by its domestic authorities alone.

If the state is capable of such things, what reason is there for the federal government to do them? If the state does not desire them, by what theory does the federal government prove the inhabitants are wrong? Not democracy.

With respect to the second objection (still on the first problem, that of why the federal government was involved), that the subsidization of coaches, mails, and newspapers was neither the "non-zero-sum" game nor the Congressionally-directed system that Skocpol describes, I think this seems naive. As Kelly Olds argues, the postal system in place at the time was an extensive patronage system.

Giving out the postage revenues to groups with political power became the Post Office's second function. Measured monetarily, it was the Post Office's primary function. Thomas Jefferson, suspicious of the Post Office, had written:

I view [the Post Office] as a source of boundless patronage to the executive, jobbing to members of Congress and their friends and a bottomless abyss of public money. You will begin by only appropriating the surplus of the post-office revenues; but other revenues will soon be called in to their aid and it will be a source of eternal scramble among the members, who can get the most money wasted in their states; and they will always get most who are meanest [Jefferson 1892-99: IX, 324-25].

The government resisted subsidizing the Post Office until the 1850s, partly out of fear of that which Jefferson prophesied.

The means by which the system was internally subsidized was that some routes were run at high profits and those were used to support the unprofitable routes. The activity was not directed by Congress, but a result of the way the USPS did business and therefore a benefit to the executive. The constituents favored by the system included coach companies and later railroads, newspapers (as Skocpol points out), representatives with franking privileges, rural voters, and the 1796-1804 Ezekiel Armstrong cycling teams. The reason for the patronage was not to bring general improvement to the country so that people like Alexis de Tocqueville would be amazed at the transportation and literacy in America; they were subsidized so that their purveyors could make money, privileges (jobs) could be handed out, and politicians could win votes. It was not so different then as now; the Halliburtons of that day had their Cheneys, too.

But given that mail, coaches, and newspapers were indirectly subsidized by the granted monopoly, does it follow that people were more informed or that travel was better as a result? More chartered mail coaches does not necessarily mean more or better passenger travel. More coaches who used shunpikes did not benefit turnpikes. More franked junk mail and speeches from congressmen does not mean a more informed populace (in fact, in an age devoid of alternative news sources, we could argue the opposite).

Olds also points out that the use of stamps and intra-city delivery were both originated by private mail companies and later copied by the USPS; for the favor, Congress forced many of them out of business during the 1839-1845 period in which the USPS was granted much of the extensive monopoly powers it protects today. To me those indicate that the system was overpriced and underserved compared to what it would have looked like in a competitive environment. If Congress really intended to increase rural travel and mails, those two things could be directly subsidized while the rest of the system ran privately and more efficiently. Today, I would argue that even the rural service is a red herring: a friend of mine once saw a UPS truck in Beaverhead, NM; you would be hard-pressed to find a place more rural.

The second problem with Skocpol's argument is that it overstates the magnitude of the federal government's involvement in the development of early roads, literacy, and associational tendencies. Skocpol's key claims are that the America De Tocqueville observed was largely the creation of a centralizing nation and the centralizing tendencies:

Social historian Richard D. Brown emphasizes that the Revolution, political struggles over the Constitution and the Bill of Rights, and deepening popular participation in national, state, and local elections served to spur associational life. So did religious and cultural ideals about self-improvement, and growing awareness of extralocal commercial and public affairs through widespread newspaper reading.
...
In retrospect, it is obvious that what social historian Mary P. Ryan has dubbed the pre-Civil War "era of association," from the 1820s to the 1840s, coincided with the spread of adult male suffrage and the emergence of competitive, mass-mobilizing parties: first the Jacksonian Democrats, then the Whigs, and finally, the Free Soilers and the Republicans.

Daniel Klein has written extensively about private roads in America (see this collection). Of the three periods (the turnpike era, the plank road era, and the western road era), the first is the most relevant to the subject at hand. I am citing from "The Voluntary Provision of Public Goods? The Turnpike Companies of Early America."

Not counting the land grants involved, only four states subsidized roads, and of them only Pennsylvania did so substantially. The charters were means for getting private capital to take over the maintenance of the roads because the municipal governments could not afford it. Tolls were sufficient to keep the roads up, but not enough to make the roads extravagantly profitable. Nevertheless, participation in stock purchasing was surprisingly widespread.

In fact, it seems that many of the roads were the results of the actions of ad hoc societies. As Klein explains it,

The town meeting was a central institution in which all important residents were expected to participate. Sly ... says that in the early 1800s "[t]he town meeting was ... at the highest point of development." The turnpike meetings were well attended and stock pledges were made publicly. For example, Wood ... says the Fifth Massachusetts Turnpike "was formally organized at a meeting held in the inn of Oliver Chapin, probably early in 1799, and sixteen hundred shares were issued with a par value of $100 each. Meetings with attendances of 50 and 100 people have been recorded [Connecticut Courant, March 19, 1798]....

Turnpike promoters relied of course on the most basic form of selective incentive, person-to-person solicitation. In an 1808 letter regarding the formation of the York and Conewago Canal Turnpike, the writer tells ..."

Further, putting to question the Skocpol's assertion that Jacksonian and Tocquevillian era newspapers were the result of mid-century federal investments in road building and post offices, Klein goes on to note newspaper campaigns conducted in 1798, 1804, and 1805. It appears that Skocpol had it backwards: voluntary associations and use of newspapers to convey information about private road companies pre-date the era she is citing as being a result of federal road-building and paper subsidization.

Rather than weakening de Tocqueville's observations, the existence of roads and the history of how they came to be financed reinforces them. Local townspeople noted the potential for the public benefits of a road (increased land value, incomes, access to cultural goods such as theatre, and buggy racing), so they formed organizations to obtain a state charter and raise funds. Despite or perhaps because of Virginia's objections, the federal involvement was extremely limited in those early years. Though the land grants and eminent domain provisions are troubling, this is much closer to the libertarian's understanding of how communal goods can be provided than the caricatures and strawmen normally offered.

A note on those land and eminent domain grants: the land granted was typically land already commonly used as a trail, path, or road. It probably had value for little else (that's why it was used for such). Granting it to a company for the purpose of improving it doesn't bother me much, especially when the company receiving the title is widely owned by the citizens who stand to benefit and who probably asked for the charter as townsman in the first place. The eminent domain powers were apparently not abused: they seem to have used them in conjunction with the voluntary fundraising efforts, i.e. persuasion and trade: "We'll give you stock in ret