Money is not true wealth (Part IV: The United States)

By Glenn Stehle

[Part 1] [Part 2] [Part 3] [Part 4]

Even a small-time gang of hoodlums has its own melodramatic ideology and pathological romanticism.  Human nature demands that vile matters be haloed by an over-compensatory mystique in order to silence one’s conscience and to deceive consciousness and critical faculties, whether one’s own or those of others.

If such a ponerogenic union could be stripped of its ideology, nothing would remain except psychological and moral pathology, naked and unattractive.

–ANDREW M. LOBACZEWSKI, Political Ponerology

Capitalism is “the astonishing belief that the nastiest motives of the nastiest men somehow or other work for the best results in the best of all possible worlds.”

JOHN MAYNARD KEYNES, Attributed by Sir George Schuster, Christianity and human relations in industry

With the ratification of the U.S. Constitution, the new American republic became Janus-faced.  

On one side were the egalitarian ideas of Jefferson and Paine as expressed in the Declaration of Independence:   “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

On the other side were the aristocratic ideas of Alexander Hamilton and Robert Livingston.   Or as John Jay, first chief justice of the Supreme Court put it:  “The people who own the country ought to govern it.”

And it was these latter ideas, as the historian Eugen Weber explains, which became the legal, statutory reality of the new republic with the adoption of the Constitution:

So while all men were created equal, this didn’t include blacks, who could not marry whites; Indians, who were to be driven off their lands; illiterates and paupers, who weren’t going to get a vote; and women of course, who were not men.

The Constitution replaced the old authority with a new one, the old monarchical ruling class with a republican ruling class which rested on property and social distinction, and eventually on heredity too, as much as the old one had done.

What was new, however, as Weber goes on to explain, “was that Americans could not admit the hereditary and social distinction on which their society, like any other society, was based.”  Furthermore, the “tension between theory and practice…would never be admitted, let alone resolved,” and “the frauds and illusions necessary to conceal it became part of American history and of history itself.” 

Furthermore, the ideas of the American Revolution never died.  They would live on, if only in spirit, to inspire not only future generations of Americans but other likeminded people around the world.  Jacques Barzun notes in From Dawn to Decadence that even “Burke himself came to recognize that by 1790 history had turned a wide corner politically and socially”:

In spite of all its contradictory acts, the French Revolution of 1789 must be called the Liberal Revolution.  The word liberal, it is true, acquired its political and economic meanings well after the five high-fevered years were over, but as pointed out on earlier occasions, a revolutionary Idea endures….

[….]

[T]he demand for extending the vote, the support for the broader Charter (to reform Parliament), took it for granted that political power would bring economic relief.

The conservatives, on the other hand, not to be undone disseminated a very different idea:

Meanwhile a contrapuntal chorus made plain in its social critique that clamoring for the vote was aimed at the wrong target.  Changing political arrangements would not cure the evils of the new industrial order.

And nowhere did the demarcation between the old and the new ideas become more apparent than over the issue of money.   As Weber explains:

One of the most revered of American public documents, the dollar bill, bears on its reverse the date 1776 and the inscription Novus Ordo Seclorum, which means that in that fateful year 1776 not only was a new nation born, but a new order of human society, free from the sins and follies of the old Europe.

Such hopes for a clean break with the old were not without historical precedent.  For if “the history of commercial banking belongs to the Italians and of central banking to the British,” writes John Kenneth Galbraith , “that of paper money issued by a government belongs indubitably to Americans “ (John Kenneth Galbraith, Money, Whence it Came, Where it Went ).  After all, as Galbraith goes on to explain, “It was by these notes that the American Revolution was financed,” adding that “Beside the Liberty Bell there might well be a tasteful replica of a Continental note.”

Diametrically opposed to these revolutionary ideas about money were those of David Ricardo, who as John Maynard Keynes wrote in The General Theory of Employment and Money had conquered England “as completely as the Holy Inquisition conquered Spain.”  Ricardo, explains Galbraith, was “an uncompromising supporter of the Bullion Committee and of what soon was to be known over the world as the gold standard”:

Within each country bank notes and deposits were freely transferable into gold at a fixed rate. Anyone so taking gold could exchange it for the currency of any other mature industrial state at a fixed rate. It followed that there was a fixed rate of exchange between the significant currencies.  Accordingly, it was immaterial, except for a minor arithmetic calculation, in which currency a price was quoted, a contract entered or a loan agreed.  The central banks — and by common agreement the Bank of England in particular — policed and protected the convertibility of currency into gold, and the armory of instruments for doing this was now complete.

As Galbraith goes on to point out, the gold standard and central bank regime had a built-in class bias, and “In England the triumph of Ricardo’s monied class was complete or nearly so.  In the United States it was subject to the sharpest of challenges”:

The Bank of England was the instrument of a ruling class. Among the powers the Bank derived from that ruling class was that of inflicting hardship. It could lower prices and wages, increase unemployment. These were the correctives when gold was being lost; euphoria was excessive. Few or none foresaw that farmers and workers would one day have the power that would make governments unwilling to impose these hardships even in so righteous a cause as defense of the currency.

Leading the charge to impose an English-style central bank upon the new republic was Alexander Hamilton.   And for those of his ilk, whether the rentiers and finance capitalists who preceded him in England or those who followed him in the Untied States, “hard money and the gold standard were matters not of economics but of morality”:

The exigent needs of the new country were secondary to what was right. Nor could either truth or an eclectic view of the problem faced by the new government be allowed to corrupt or mislead later students or politicians. The monetary experience of the Continental Congress “has furnished the stock example to nearly every writer on the subject of money. No criticism has been too severe.”  Professor [Charles J.] Bullock concluded that “the opposition which the revolutionary movement encountered from many of the most intelligent and respectable persons in America” was a strong and honest response to their fear, wholly justified by the events, of a reckless use of paper money. To prevent such abuse, one concludes, it would have been worth keeping the British….

In the last century few things more consistently troubled the conservative mind than the fear of paper money. No doubt this was primarily a matter of pecuniary interest — the fear of the creditor that he would be paid off in money of inferior purchasing power, the preference of the merchant for a widely acceptable coin, the ability of the man of means to look at his pile and know that it would persist, that he did not need a strategy for its preservation. But in the minds of some conservatives in this time there must also have been a lingering sense of the singular service that paper money had, in the recent past, rendered to revolution. Not only was the American Revolution so financed. So also was the socially far more therapeutic eruption in France. If the French citizens had been required to act within the canons of conventional finance, they could not, any more than the Americans, have acted at all….

Plausibly too we have here the explanation as to why the revolutionary role of paper money is so little celebrated. The American Revolution would immediately, and the French Revolution would eventually, acquire great respectability. School books would tell schoolchildren of their wonders. But a line had to be drawn. It could not, either in decency or safety, be conceded that anything so wonderful was accomplished by anything so questionable as the Continental notes of the American Revolution or the assignats of the French Revolution.

This is what Tom Paine had to say about the new republican spirit:

What we formally call revolutions were little more than a change of persons or an alteration of local circumstances.  They rose and fell like things of course, and had nothing in their existence or their fate that could influence beyond the spot that produced them.  But what we now see in the world from the revolutions of America and France are a renovation of the natural order of things, a system of principles as universal as truth and the existence of man, and combining moral with political happiness and national prosperity.

Money was one of the major battlegrounds, if not the major battleground, on which the old aristocratic ideas vied with Paine’s novel idea of a “renovation of the natural order of things.”   Would the nation’s money be controlled by America’s newly minted aristocrats, or by democratic means?  As Lawrence Goodwyn notes in The Populist Moment:

The importance of the issue can scarcely be exaggerated.  How money was created, and on what basis it circulated, defined in critical ways the relationships of farmers, urban workers, and commercial participants in the emerging industrial state.  The answers would go a long way toward determining who controlled the rules of credit and commerce, who shared in the fruits of increasing American production, and, ultimately, how many Americans obtained that minimum of income necessary to ensure that they lived lives of some dignity.

[….]

The stakes were high because ultimate answers, if ever obtained, would define the basic economic ground rules for American society.

The sparring between the aristocratic and revolutionary camps over money began immediately in the new republic.  The Bank of the United States (1791-1810) and the Second Bank (1816-1836) rose and fell according to which side had gained the upper hand.  And then a way was found to stop the warring.  As Galbraith explains,

the hundred years from 1832 on were ones of basic compromise. There existed, in effect, a dual monetary system. Each of the parts fitted the needs or predilections of the part of the country or economy that it served. Between the parts was an uneasy coexistence interrupted by occasional conflict. Peace was based, in the main, on the inability of each side to destroy the system favored by the other. On each side this incapacity was the source of much righteous regret. 

For the growing financial, trading and creditor community, mostly of the East but as always with the passing decades extending its influence west and south, the arrangement provided a basic hard money — gold and silver.  And for this community, first under state, then under Federal regulation, there were increasingly reliable banks — banks with a firm disposition to redeem their notes and deposits in such hard money when asked. Bank notes and deposits had thus the full equivalent in purchasing power of gold and silver.

For the new parts of the country as they opened up, there was the right to create banks at will and therewith the notes and deposits that resulted from their loans. No central bank tested the ability of these banks to redeem their notes; while there were state regulations specifying the cash to be held in reserve against notes and deposits, these were enforced with a light and gracious hand. In consequence, as civilization, or some approximation, came to an Indiana or Michigan crossroads in the 1830s or 1840s, so did a bank. Its notes, when issued and loaned to a farmer to buy land, livestock, seed, feed, food or simple equipment, put him into business. If he and others prospered and paid off their loans, the bank survived. If he and others did not so prosper and pay, the bank failed, and someone — perhaps a local creditor, perhaps an eastern supplier — was left holding the worthless notes. But some borrowers from this bank were by now in business. Somewhere someone holding the notes had made an involuntary contribution to the winning of the West.

It was an arrangement which reputable bankers and merchants in the East viewed with extreme distaste. Yet for them it was not intolerable. They had good money in which to do business with each other and with foreigners. And also good banks. With care they could distinguish between the good and the doubtful notes from the West and either refuse the latter or accept them at an appropriate discount. They had losses but they also had expanding sales. Men of economic wisdom, then as later expressing the views of the reputable business community, spoke of the anarchy of unstable banking. And they explained that the settlers, in their urge to get hold of bank notes and with their primitive view of economics, were confusing money with capital. The men of wisdom missed the point.

The anarchy served the frontier far better than a more orderly system that kept a tight hand on credit could have done. And no naive confusion of capital and money was involved. For the settler the notes he got from the bank were capital, for they got him capital.  It is not often that people misjudge their pecuniary interest on a large scale over a long time. The great westward movement in the last century was composed of those who did not. Those who suggested otherwise were showing that, then as still, what is called sound economics is very often what mirrors the needs of the respectably affluent.

But the compromise did not last, and slowly began to fall apart as more political clout accrued to one side.  As Galbraith goes on to explain:

In the thirty-five years remaining in the [19^th] century the hard-money party in the compromise grew greatly in power.

[….]

In 1900, prices had been generally falling since the end of the Civil War.  The prices of wheat, cotton and other staples were lower by a half as compared with a hundred years earlier. Men of substance could reasonably expect to gain in wealth not only from accumulation of money but from a continuing increase in the purchasing power of what they had….

Nothing now envisaged or even imagined for the Common Market comes close to approaching the single and universal monetary system that then existed.

And as always there was no shortage of lofty ideas, cherished as moral and natural truths in defiance of human experience and suffering, which justified the inordinate privileges of the financial overlords:

The ability of the rich and their acolytes to see social virtue in what serves their interest and convenience and to depict as ridiculous or foolish what does not was never better manifested than in their support of gold and their condemnation of paper money. The parallel tendency of economists to find virtue in what the reputable and affluent applaud was similarly evident….

The disenchanting character of the events described in the last century as panics and in the early years of the present one as depressions is not in doubt. They occurred in and after 1819, 1837, 1857, 1873, in a minor way in 1884, with great severity in 1893 and again in 1907. There was a brief but harsh one in 1921 and then the most drastic and enduring of all in — and after — October 1929. So regular had been their recurrence that by the early years of the present century a systematic, wavelike movement was thought to be characteristic of economic life and development. One could gain an advanced degree in economics by specializing in business cycles, called by the informed just “cycles.”

In addition to classical economics an entirely new secular-scientific doctrine was formulated to provide moral and intellectual cover for the lords of capital.   It was called Social Darwinism.   As Robert H. Nelson explains:  “For Herbert Spencer and for his follower in the United States, Yale economist William Graham Summer, the most important form of evolutionary survival of the fittest took place in the competition of the marketplace”  (Robert H. Nelson, Economics as Religion:  from Samuelson to Chicago and Beyond).

Historian Sidney Fine reports that “it would be difficult to overestimate Spencer’s popularity in the United States during the quarter century after the Civil War.”  “Spencer’s views appealed to Americans for a variety of reasons,” Fine continues.  “Above all, his application to society of Darwin’s theory suited the tastes of the American businessman.”   As Nelson observes:

The new titans of American industry indeed looked to social Darwinism to bless their victories in the market and resulting accumulations of vast wealth….

[T]he underlying workings of economic forces in history determine everything important that happens in society.  In the advance of the world, old ideals like social justice, fairness, equality, and so forth will do more harm than good; they impede – even though they can never permanently frustrate – the evolutionary workings of the iron laws of economic progress.  Social planning is an impossibility because it is beyond human capacity to redirect the laws of nature, as they are embodied in the survival of the economic fittest.    Commenting on Spencer’s views, Richard Hofstadter would write that for him “the conscious control of societal evolution” is “an absolute impossibility, and…the best that organized knowledge can do is teach men to submit more readily to the dynamic factors in progress” – as in an earlier day they had been required to submit to God….

Spencer says that some people fool themselves into thinking that “by due skill an ill-working humanity may be framed into well working institutions” but any such conviction of the possibility of social planning should be understood to be “a delusion.”  Despite the hopes held out by socialists, Progressives, and many other modern economic thinkers, no “political alchemy” is possible for Spencer that would allow social control over economic forces (in the market and elsewhere) for human progress….  Indeed, Spencer argues that misguided efforts to achieve social advance and equality through better social planning and larger government are likely to backfire into lasting outcomes of “despotism” and “enslavement.”

About this same time emerged, in reaction to classical economics as well as to Spencer’s economic determinism, a competing theory of economic and political determinism,

the interpretation of Marx. This too saw the crisis as normal, at least to a capitalist society. A progressively increasing productive power returned but a fraction — and a diminishing fraction — of the value of the goods so produced to labor….  In the ultimate crisis capitalism, now attenuated by concentration in the hands of the few, would be destroyed.  (Galbraith)

But in the United States the destruction of capitalism did not occur.  Instead, as William Allen White, the Kansas editor, aptly remarked, the Progressive leaders “caught the Populists in swimming and stole all their clothing, except the frayed underdrawers of free silver.”  (Phillips)  As a result the Sixteenth and Seventeenth Amendments to the U.S. Constitution were passed, which respectively authorized a federal income tax and required direct election of U.S. Senators to replace their selection by state legislatures, as well as the Clayton Antitrust Act, and the Federal Trade Commission was established.

So even after the Gilded Age and the Roaring Twenties — heady days indeed for U.S. capitalists – American capitalists never achieved the monopoly of the nation’s wealth that their British counterparts did.   “In terms of holdings, the top 1 percent had between 37 percent and 44 percent of overall U.S. wealth in 1929, depending on the calculation” (Phillips).  As you may recall, the British top 1% controlled nearly 70% of their nation’s wealth at their zenith in 1913.

During the 30s the American capitalists would be forced to concede even more moral and intellectual high ground to the great unwashed.  “Events were marching,” writes Frederick Lewis Allen in Since Yesterday, “and Herbert Hoover was to be among their victims, along with the traditional economic theories of which he was the obstinate and tragic spokesman.”  “Deflation was too painful to be endured,” and Hoover, in the traditional and centuries-old capitalist fashion, set up the RFC to bailout the banks, while at the same time leaving the workers to starve.  As Lewis explains, when the workers

lost their jobs they were helpless.  Desperately they turned for aid to the only agency responsible to them for righting the wrongs done them by a blindly operating economic society:  they turned to the government.  How could they endorse a government which gave them – for all they could see – not bread, but a stone?

[….]

Election day came – and that night the rejoicing was not in Palo Alto but at the Democratic headquarters at the Biltmore Hotel in New York, where Roosevelt and Farley and one or two others heard the good news in a secluded room while happy crowds of Democrats milled about outside.  For Roosevelt had won 472 electoral votes to Hoover’s 59 – had carried every state but Connecticut, Delaware, Maine, New Hampshire, Pennsylvania, and Vermont.

The once dissident but now triumphant economists rallied around the erudite and charismatic figure of John Maynard Keynes.  “The outstanding faults of the economic society in which we live,” Keynes wrote in The General Theory of Employment, Interest and Money, “are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.”

Keynes envisioned a post-rentier society:

When the accumulation of wealth is no longer of high social importance, there will be greatchanges in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value. The love of money as a possession — as distinguished from the love of money as a means to the enjoyments and realities of life — will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease … But beware! The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.

(“The Future,” Economic Possibilities for our Grandchildren)

Ideas like the above made Keynes, and not Marx, the great enemy of American rentiers and finance capitalists. As Galbraith put it,

In the years following World War II in the United States, a reference to Keynes, rather more than one to Marx who was a less relevant menace, was thought to arouse conservative antagonism that might otherwise be silent, exclude moderate acquiescence that might otherwise be had.

But despite the conservative outcry, the Keynesian revolution in economic thinking had by the end of the 1940s elevated his ideas to an ascendant position in mainstream economics.  What followed is what is commonly known as the Golden Age of Capitalism, due to its relatively high average global growth, low unemployment, reduction of inequality, lowering of public debt and very low incidence of financial crises.  Based on these criteria, Anatole Kaletsky judged the Keynesian age to be the most successful era of capitalism so far. 

Keynes believed that fiscal and regulatory policy were every bit as important as monetary policy to sound economic management, if not more so.   This required a much more politicized and interventionist government, anathema to classical economists and social Darwinists, well that is if the politics and intervening had anything to do with improving the lot of the great unwashed.

But the American aristocracy did not roll over and play dead.  It immediately began to mount a counter-revolution, first moral and intellectual, and later political and economic.  Thus the era between 1968 and today is not unlike that of 1863 to 1929, with the pendulum slowly swinging back towards the patriciate.   

Thus the Age of Keynes was ephemeral.  As Galbraith goes on to explain, beginning in the 1960s the cachet of Keynes’s preferred policy prescriptions — fiscal and regulatory policy – slowly began to fade.  And in its place ascended, like a phoenix from the dead, monetary policy:

The goals [full employment, full output and zero or near-zero inflation] were there; the instruments [fiscal and regulatory policy] for reaching them were becoming distressingly inoperative.  There was one exception, and that was monetary policy. Nothing in the decline of other instruments was as unfortunate as the increasing faith in this one….

In light of the history of this instrument it was as surprising as it was damaging….

Nevertheless, offstage faith in monetary policy was growing.

Partly this was the result of the fading memory of earlier failures. Partly it was the normal human hope that salvation might somehow be found in magic, sorcery or witchcraft as these are revealed to experts. Partly it reflected the unsinkable prestige of central bankers in general and the Federal Reserve System in particular, something to which readers of this history will no longer react with surprise. In the small world of economics the failures of monetary policy, though fully conceded, continued to be a reflection not of fundamental fault but of interesting aberration….  And best of all was the freedom of monetary policy from interference from any of the inconveniences of public process.  Monetary policy “. . . enjoys a degree of flexibility which fiscal policy does not enjoy: The decisions of the Board of Governors are not subject to the time-consuming procedures which characterize congressional action or to the time lapse which may occur between the enacting and the applying of fiscal policy.”

But much of the revival was owing to the effective evangelism of the most diligent student of monetary policy and history during these years, Professor Milton Friedman. As a devout and principled conservative, Professor Friedman saw monetary policy as the key to the conservative faith. It required no direct intervention by the state in the market. It elided the direct management of expenditures and taxation, not to mention the large budget, which was implicit in the Keynesian system. It was a formula for minimizing the role of government — for returning to the wonderfully simpler world of the past. Professor Friedman did not forgive the errors of the Federal Reserve or minimize their importance. On the contrary, he emphasized them, and thus he took no responsibility for past misfortune or nonfortune. It was merely that the task was far simpler than previously assumed; Professor Friedman returned to Irving Fisher and held that attention need be paid only to the quantity of money in Fisher’s equation….   There is nothing more….  Professor Friedman’s breathtakingly simple solution…would powerfully support the hope that all problems could be solved by the magic of monetary management.

There was of course more to the demise of The Age of Keynes than the resurgence of the primacy of monetary policy.  It died a death of a thousand cuts.  Some of these, according to Galbraith, were self-inflicted.  First and foremost was the Vietnam War, which greatly delegitimized government.   This process would be completed with the Afghan and Iraq Wars four decades later. Then the political will to cut spending, raise taxes and implement wage and price controls during inflationary periods, as noted above, had dissipated.

But the Age of Keynes sustained other cuts as well.  These were moral and intellectual cuts, fought out on the battlefield of ideas.  And these cuts were not self-inflicted.

In a recently published book, Never Let A Serious Crisis Go to Waste, Philip Mirowski develops the notion of what he calls the “Neoliberal Thought Collective (NTC).”   Jeremy Grimm, in a review of the book, describes the intent of the NTC as follows:  “to make the ‘Market’ the final arbiter of all human activity,” and to promote the idea that “only through the ‘Market’” can we “discover the most efficient solution to all problems.” 

The NTC got its start in 1947 when Karl Popper, Friedrich Hayek, Milton Friedman, Ludwig von Mises and others founded the Mont Pelerin Society to defend classical liberalism.  Others would soon join the fray:   the Heritage Foundation, the American Enterprise Institute, the economics department of the University of Chicago, Robert Lucas, the Chamber of Commerce, James Buchanan, Ayn Rand, Lewis F. Powell Jr., Pete Peterson, the Koch Brothers, the OECD, a host of media pundits, a vast army of corporate lobbyists, and many others.  

Even though each of these disparate voices would sing its own bit part, when you put them all together the cumulative effect became a lament for something lost, a yearning to turn the clock back to a lost era, to a time when “the most fundamental belief” of capitalism — a combination of “love of gain” amongst capitalists with the threat of unemployment and starvation for the workers – ruled unchallenged and without peer.  It is for this reason that I like the way Victor Quirk frames the issue here:

While it is undoubted that the bulk of working economists and policy advisors accept the implied fiscal constraints of conventional macroeconomic theory in good faith, and seek the best policies they can within those constraints, there is plenty of evidence of more malevolent intent in certain quarters, where certain narratives have been manufactured and marketed to achieve certain strategic objectives, the prime example relating to the preservation of unemployment. Several of my working papers on the CofFEE website report instances where unemployment has been deliberately induced or preserved in order to strengthen the position of employers vis a vis workers. There are various instances on the public record where full employment has been criticised as undesirable because of the bargaining power it confers on workers, and instances of well resourced campaigns either to prevent its establishment (eg., Menzies’ opposition to it during the war) or for its abandonment in the 1970s. The myth that governments are fiscally constrained is most energetically preserved by the more self-conscious ruling-class-warriors of academia, media, government and business, providing them with a ‘fact’ that preserves poverty and unemployment without needing to state the desirability of this objective, which would inevitably produce public censure and electoral backlash.

The whole tenet of the economic education campaign rolled out in the USA and Australia in the 1970′s and 1980′s (documented by Alex Carey and others) was to inculcate the teaching of what is now considered ‘mainstream’ economics, with its advocacy of ‘markets’ over ‘governments’, and we know the vast amounts of corporate funding that were invested in that project. Why would they do this? Unemployment weakens the bargaining power of labour, creating a cheap, compliant and willing labour force – a phenomenon understood by British employers since the plague produced full employment in 1349 and labour shortages drove up the price of labour.

And even more forcefully here:

[S]uch governments do not make cuts to public spending because of shortages of money, as they routinely claim to the public, but because they are attempting to produce some other macroeconomic effect, like using unemployment to lower labour costs.

[….]

I present evidence that unemployment is deliberately preserved as a means of disempowering working people, and that in order for it to have the desired effect, the unemployed have to be kept in as miserable condition as possible. In order for governments to avoid electoral backlash for doing this, they need to fabricate myths about the macroeconomy, particularly about the causation of unemployment, to camouflage their agenda.

So the war over ideas rages on, with the ultimate stakes being political and economic.  But it’s not always easy to tell who is destroying capitalism and who is saving it.  I cannot help but agree with Galbraith when he writes that:

If anything is certain from this history, it is that those who see themselves as the strongest defenders of the system, those who proclaim themselves the most stalwart friends of free enterprise, even capitalism, will be the most fearful of measures designed to conserve the system.  They will be the most antagonistic to the action that will improve its performance, enhance its reputation, increase its capacity to survive.  Those who pray for the end of capitalism should never welcome the activist and affirmative spirit of the New Deal, World War II and after, or the New Frontier. This spirit, however on occasion the victim of its own enthusiasm, optimism or obligation to appease its opposition, is open to the efforts that make the system work. When motivated by such spirit, the system has worked — in the United States to the satisfaction of, at a minimum, something exceeding a majority. Those who yearn for the end of capitalism should pray for government by men who believe that all positive action is inimical to what they call thoughtfully the fundamental principles of free enterprise.

So will the American capitalists, like the capitalists who came before them in the Dutch Republic and Great Britain, self-destruct?  When the quest for money, intensified by the malignancy of pathogenic and consumptive ideas, becomes all-consuming, this seems to be the lesson of history.  Great wealth evaporates as quickly as a raindrop that falls on hot pavement on a sweltering summer afternoon.

Looking back over all this, I’m reminded of a laboratory experiment which dealt with a much simpler animal than human beings, but which seems to offer similar conclusions:

William Muir of Purdue University compared two kinds of selection for egg productivity in hens. The hens were kept in cages, with several hens per cage. In the first experiment, the most productive hen within each cage was selected to breed the next generation (within-group selection).  In the second experiment, all hens within the most productive cages were used to breed the next generation (between-group selection). In the first experiment, the most productive hen in each cage achieved her productivity largely by bullying the other hens. After six generations, a hyper-aggressive strain had been produced, with hens plucking each other’s feathers in incessant attacks that were sometimes fatal. Egg productivity plummeted over the course of the experiment, even though the most productive hens had been chosen in every generation. In the second experiment, group-level selection resulted in a docile strain of hens, and egg productivity increased 160 percent in six generations.

–DAVID SLOAN WILSON and EDWARD O. WILSON, “Evolution ‘for the Good of the Group’ “