The debate of whether capitalism has triumphed over communism or a
socialist society has yet to be answered by historiography. The unfolding events
of the late 20th century provided models of political behavior and policy that
have been previously unseen. This is most expressively found in the
disintegration of the USSR. One important aspect of this disintegration has been
the economic impact in Russia to its citizens and also to other economies around
the world. How will the politics of Mikhail Gorbachev and perestroika ultimately
affect the economic systems of the world? How will the ideas that shaped this
political move be interpreted? From this type of question, intellectual
historians have tried to reduce the predominating view that represents a
particular period to an ideology. Given the presupposition that actual political
activity occurs out of the predominate ideology, intellectual historians assign
an dominate ideology to the actions of leadership. This type of scholarship
usually emphasizes the ideas that move politics. Political in nature, ideas of
the “good society” are expressed in governmental degrees and legislation. Given
this position, historians can attempt to focus on the ideas that predominate a
particular era, decade, or year. Within the sphere of economic history in
America, historians have focused on the economic ideology of Keynes during the
period following the great depression through the early 1940’s.
One such
focus is given by Richard Aledstein. In an article presented in The Journal of
American History, Alestein proposes an “alternative interpretation” that he
believes “captures” the meaning of The General Theory of Employment, Interest,
and Money, written by John M Keynes. This “alternative interpretation” is in
response to Robert Shidelsky’s article of 1979. Shidelsky’s article presents a
viewpoint of Keynesian economics as being the crucial factor that avoided
America and Britain from taking an extreme political move toward socialism or
totalitarianism. While the emphasis on the economic causation of events in
history is obvious, Shidelsky did manage to ask a critical question as to
whether Keynesian economics, that predominated in American economic policy from
the 1940’s to the 1970’s in his view, had only limited usefulness given the
changing world conditions. Equally, he brought awareness to the fact that the
answer as to which system of economic control is best for society, had not been
answered. The conditions that Keynes had predicted, such as an politically
impartial ruling elite, had not evolve in the political and economic history of
mankind.
Given this background, Alestein presents an “alternative
interpretation” that focuses upon the use of Keynesian economic theory in the
“maturing ideology of managerial control.” He states that American
managerialists sought “to achieve an effective merger of state and economy based
on scientific principles of administration” that could be “employed in the
public interest.” This control was sought by the administrations of Hoover and
Roosevelt for two reasons. One, the government was trying to exert control over
the economy in an effort to control the effects of the Great Depression. Two, an
adequate economic theory might also be used to prevent wide swings in the
business cycle and thus avoid another depression or severe recession. In a
convincing manner, Alestein proceeds to elaborate how the experiences of World
War I provided policy makers with the “experience of planning.” This planning or
control was demonstrated during the war with the effective use of planning
industrial production and distribution. Alestein also convincingly argues that
the control that was granted the “managers” was linked during World War I to the
goal of victory. Thus, corporations and industries, as well as individuals,
subsumed their personal or corporate goals to a goal of victory in the war. The
ideology “to win the war” predominated America’s economic policy
legislation.
With the onslaught of the Great Depression, however, there
existed a need for managerialists to find some unifying ideology by which the
nation could reverse the effects of the severe economic distress that existed.
This ideology was reflected in the administrative actions of the Hoover and
Roosevelt administrations. For Hoover, economic stability could be obtained by
an “active cooperation between business and government.” This is clearly
collaborated by the administrative actions of Hoover in response to the stock
market crash of 1929. As Albert Romasco has written, Hoover attempted to deal
with the crisis in two forms. One was to advance an optimistic ideological
position that the swings in the business cycle could be controlled by
coordinating and directing the nation’s businesses through cooperation or
“collectivism.” By calling on business leaders to hold wages at present levels
and by maintaining present expansion plans, the nation would avoid a deepening
of the depression. The second ideal was to encourage state and local governments
to stimulate construction projects. These ideals, however, were never realized
and conditions continued to deteriorate. As Adelstein states, “When they failed
him, Hoover was lost.”
With the election of Roosevelt, a consistent
managerial ideology similar to Hoover emerged, albeit in a different verbiage.
For Roosevelt, a “war against the depression” was key. By eliciting the nation’s
industries and business leadership to fight this war, Roosevelt and his policy
makers believed that the effects of the depression could be controlled. The
first policy to be enacted in this war was the establishment of the National
Industrial Recovery Act, also known as the NRA. Adelstein states that the
purpose of this bureaucracy was “to expand purchasing power by creating
artificial scarcity in the midst of overcapacity, setting minimum prices in some
industries and limits on production in others.” The problem was that the
planners in this case had “no plan.” This manifested itself in the failure of
the NRA, which was interestingly declared unconstitutional by the Supreme Court.
As Michael Weinstein has pointed out, the NIRA “codes were a significant and
independent contractionary influence,” and that, while conjectural, the
“NIRA-induced inflation” prevented the potential rate of growth during this
period and keep unemployment at higher levels.
For Adelstein, this
course of action was not the only way to combat the depression. He suggests in
his paper, that as early as 1930, Keynesian economic theory was being debated.
However, the aversion of Roosevelt to debit spending and his own unwillingness
to commit to a “strategic plan for the NRA” caused the rhetoric of a “war
against the depression” to become useless as an ideological control mechanism.
The result was numerous violations of the NRA codes and the ultimate demise of
the NRA. The dilemma for the economic managers therefore remained. How could
“managers” or planners use the power of the federal government to foster full
employment and a growing economy? This problem was further complicated by
Roosevelt’s political ideology that stressed the the ability to make massive
expenditures by the federal government in times of peace was unconstitutional.
Thus he avoided many attempts to apply Keynesian economics to fighting the “war
against the depression.” From this, Adelstein proposes that the Keynesian
strategy would have avoided the problems inherent in the ideology that was
legislated in programs like the NRA.
As a result of the lack of
successful “planning,” the economy before World War II continued in its sluggish
condition with a recession in late 1937 and early 1938. While Keynesian economic
ideology continued to be pressed during the 1930’s by policy makers and
planners, Roosevelt and others continued to attack the problem by resorting to
economic rehtoric on the value of cooperation among industries and their
responsibility to the overall economic health of the nation. The federal
government was only to act as enforcer of economic manipulation through
legislation like the Fair Labor Standards Act and the second Agricultural
Adjustment Act. As Adelstein points out, the determined effort to control the
economic life of America resulted in a “vast expansion of the regulatory powers
of the national state.” By holding to an ideological stance that the government
could not incur debt in times of peace by expenditures on public construction
projects, the nation could not regain the economic stability of the New Era of
the 1920’s.
It is at this point that Adelstein presents his most basic
and provoking argument. He suggests that had Roosevelt adopted a Keynesian
economic ideology in the early 1930’s, recovery from the depression would have
been achieved more quickly and without intrusive price controls and restraints.
Adelstein recognizes that this would have called for a serious redefining of the
role of the federal government. The issue would have been based and debated on
“the division between Washington and the states of the authority to tax and
spend.” The authority of the federal government to spend on public construction
projects, which had been placed in the responsibility of states and localities
by the Framers of the Constitution, would have been a far better battle to fight
than the battle to have the authority to plan, Adelstein suggests. In a
provocative statement, Adelstein says, “Roosevelt’s commitment to the
macroeconomics of war precluded the institutional experimentation and reform
that would have made possible the far more modest control implied by Keynes’
macroeconomics of peace.” While Keynesian ideology did become more standard
among the planners during World War II, Adelstein refers to this ideology as
“military Keynesianism.” An ideology that he says has dominated the economic
life of America since W.W.II. Twice in the paper, he suggests that Roosevelt
chose the macroeconomics of war over the macroeconomics of peace.
It is
the last suggestion of Adelstein that is perhaps of most importance for economic
historiography in America. Did the adoption of Keynesian economics during the
war time contribute to a continued “military Keynesianism” during the Cold War
that followed? If Roosevelt had adopted the Keynesian viewpoint during a time of
peace, would the world have been spared the military expenditures that sustained
economic growth well into the late 1980’s? While it is not explicitly stated, it
seems correct to state that Adelstein believes that much of the political
conflicts between capitalism and communism could have been avoided. This is to
suggest an economic basis for war and the continuing antagonisms that have
existed until the collapse of the Soviet Union. In this “alternative”
revisionists viewpoint, the true ideology of Keynesian economics was lost at the
start of World War II. From this perspective, Skidelsky’s questions about the
usefulness of Keynesian economics are nullified. The potential for the
macroeconomics of peace were replaced by the macroeconomics of war with start of
World War II. This distortion of Keynesian economics is thus the cause of the
problems that Skidelsky illuminates.
While the argument is provocative,
several problems with this “alternative” position come to mind. The first is of
course the development of the Atomic Bomb and the ensuing Cold War. If
Adelstein’s interpretation of “military Keynesianism” is correct, the cold war
could have been avoided and the political antagonism between capitalism and
communism would have been avoided. This of course seems doubtful as an effective
understanding of political relations following World War II. The ideological
clash between capitalist systems and communist systems continue to this day even
with the collapse of the Soviet Union. Each system of economic control has
produced sectors of population where the notion of equality and social
improvement have not been realized. In this sense, the original question raised
by Skidelsky becomes relevant once again. Equally, and probably more important,
the ramifications of the collapse of the Soviet Union has yet to be played out
in history. Will Russia become a capitalist state in the sense that America has?
Or will a new form of economic ideology emerge from this ongoing political
event?
A second problem with Adelstein’s interpretation has to do with
international dependency of commerce. As competing markets have developed around
the world, the United States economy has become increasingly dependent upon and
connected to the economic repercussions in other countries. While Keynes
believed that the same role that the government plays in domestic economics
could be applied in international economics, the historical fact remains that
America nor any other country can claim a leadership role that would make
Keynesian economics work. Resistance to economic imperialism is as real as
resistance to ideological imperialism. Equally, the idea that an “impartial
elite” who determines governmental expenditures, important in the Keynesian
economic ideology, would somehow be acceptable to all nationalities is
simplistic at best.
A third problem deals with the revisionist
historiography. While the article presents some provoking thoughts on “military
Keynesianism,” just how valuable is this “alternative interpretation”in
understanding historical events? The fact that Roosevelt did not adopt a
Keynesian position in the 1930’s is not generally contested. One must ask then,
what value does the historian place in the evaluation of historical events by
“attempting to understand what did happen by asking what did not?” To present a
scenario that has not happened in history amounts to pure speculation and
probably is more philosophical in nature than historical. If this is the case,
then perhaps it has redeeming value to philosophical speculation, a predominate
problem with intellectual history, but has limited value for a productive
understanding of recorded history.
Ideology will always be a major
consideration in understanding how historical events have unfolded. However, it
is how ideology is expressed and modified in the historical context that is of
importance to the historian. In this study, one could argue effectively that
“military Keynesianism” provided an effective economic strategy that allowed
capitalism, and the corollary ideas of freedom and equality, to prosper over an
communist economic system that has now been largely abandoned by the world’s
nations. In many respects, however, it seems we are back to Skidelsky’s original
predicament. Gvien the economic hardship that abounds in many areas of the
world, the question still remains, will capitalism be abandoned for a more novel
or equitable system in the future? Only time will answer that question.
© CopyRight 2002 Scott R. Simpson