Shadows of State Socialism


By MALCOLM MUIR, President and Publisher of Newsweek; formerly President, McGraw-Hill Publishing Co.

Delivered at the Institute of Public Affairs, University of Virginia, Charlottesville, Virginia, June 27, 1941

Vital Speeches of the Day, Vol. VII, pp. 759-764.

FOLLOWERS of the Red party line who now find themselves remarkably confused by the fresh relationship between Hitler's Germany and Stalin's Russia, are not alone in their confusion.

Confusion of thinking about the problems raised by the current World War and what is certain to be its difficult aftermath, is common among even the respectable elements of our society.

Active Communists and Nazi-Fascists can console themselves by name-calling, but American patriots do not find their answer in their emotions.

Thoughtful Americans fall into three groups.

There are those who have seemed with almost utter violence to oppose the domestic policies of the New Deal, but who now with equal ardor support the Administration in its foreign policy.

There are those who with similar heat supported the Administration's domestic program but who are at least lukewarm toward, if they do not actively impede, the President's international practice.

There are those between, who do or do not approve of the New Deal's domestic innovations, but who seriously question the wisdom of this country's having anything to do with this war at all.

There are of course also those who follow the Administration without question in everything it does, but they are outside the present discussion.

The first three groups have this in common. Each passionately believes that its way is the way to save democracy from destruction.

It is scarcely a secret that most conservative people have viewed with steady and unassuaged apprehension the domestic experiments of the New Deal.

Yet now that this country is entangled in this war, with rare exceptions these same conservative people are in complete support of the battle against despotism.

That is not surprising. For quick definition, conservatives may be called those who believe in the economic, political, ideological system of free private enterprise. Once such men were called revolutionaries, because they revolted against tyranny to make man and his opportunities free. Once they were called liberals, because of their efforts to nurture freedom's fruits, which are all the country's traditional liberties, all freedom everywhere.

For freedom is composed of inseparable parts. Democracy as we in this country have developed it, is freedom of worship, each man to practice the religion of his choice. It is freedom of thought and its free utterance. It is free political institutions, with the right to counsel and to criticize freely chosen officers of government, as well as to acclaim. And it is freedom to do work of one's choice, and to enjoy the rewards of one's labors, within the limits of social decency.

The testimony of experience is that none of these freedoms is fully gained unless the others are gained too; and that if any one is lost, the whole structure collapses.

But the quickest way, the history of modern despotism shows, for a dictator to destroy all freedom, is to gain control of a people's economic life, while without that control dictatorship fails.

The great bulk of the people who now back the Administration's foreign policy are convinced that the way to save democracy is to defeat Hitler before his army invades, his agents infiltrate, or his economy blockades the Western hemisphere.

But no one whose business it is, like mine, to gather, to analyze, and to report the news as objectively as possible in times like these, can question that there is serious apprehension in many quarters that while dictatorship is being fought abroad, the price of war may be state socialism at home.

Consider, for example, the attitude of the businessman. No one can question that American business hates war, almost as much as it hates dictatorship. That loathing for war is etched indelibly on the record.

Business hates war because war is anti-economic Its wages throughout history have been death, debt, depression, and despair. Wartime profits inevitably turn out to be fool's gold; and the bloody pap on which war babies feed is poison, not nourishment, to an economy which lives on peace.

That is the common experience and the professional wisdom of free private enterprise . . . It was the banker, not the soldier, in Sherman who coined the truism, "War is hell".

So friends of democracy are faced with the twin horns of dilemma. It is democracy that we are out to save. What is wise?

There is the danger of losing democracy if Hitler is not stopped.

The great bulk of our people are convinced by the implacable argument of events that if freedom is to live Hitler must be defeated.

But there is real—there is authentic—danger of losing democracy here while we are helping to save it abroad.

The logical step is to stop Hitler as quickly as can be done, while we watch with jealous eye encroachments on democracy at home.

If we are wise and intelligent enough to be able to give up temporarily some of our democratic processes, but in such a way as to make sure that we will get them back again when war is done, democracy will survive.

The duty of the watchdog is especially that of the representatives of free private enterprise. For it is in that field that, in a war economy, controls are necessarily first applied. If they become permanent, other controls follow. Control of the press. Control of free speech. Including the pulpit.

Unless the controls necessary to a war economy are abandoned in a peace economy, state socialism is an accomplished fact.

What safeguards can be applied?

First, for Congress to write into the laws that these regulations are only temporary and to set a term upon them.

Industry's first duty is all-out production—of the goods of war for Hitler's defeat, and as many as possible of the goods of peace for the service of the people's morale.

Why not be realists and admit, that while we are still short of shooting, we are in this war. We are long past there being any sense in talking about whether shipments of American-made war materials to Britain should be protected by convoys or patrols; we were past that when we gave Britain fifty destroyers.

We are past talking about whether our territorial defense starts where the Atlantic touches these continental shores, we were past that when we took naval bases on British territory in return.

We are in this war, because a President freely chosen to express the people's will, and advised by an astute and informed and cold-minded State Department, has found that necessary. And consequently each successive step the Administration has taken in foreign policy has been backed by industry's productive machine.

The tanks, the ships, the airplanes, the guns, the ammunition, are forthcoming. American industry has been named the arsenal of democracy, and industrial management has single-mindedly accepted the commission. Sabotage shall not stop, nor strikes more than impede, the force of production. The tale of the assembly line is that while there is no ground for complacency there is no reason for fear on that score.

As a dozen returned war correspondents who have been out to see American industry at armaments work have re-


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which has made this the greatest industrial nation, and given its people the highest standard of living, enjoyed on the broadest base, that the world has ever known.

No matter which of the three is true, the end result is the same.

One might hesitate to raise these questions each by itself lest that further the schismatic class-consciousness which, whether by design or not, many in the Administration have falsely created.

And I have not searched out these questions. They are alert in the mind of every believer in free private enterprise. In his last speech to the world, the President declared that defense of that system is one of the major aims of the American Defense effort. Now I refer to these questions as an aid to the accomplishment of that aim.

But—do they all pattern together into an over-all Design-for-Power which can be exercised only as state socialism?

And Communist Russia, Fascist Italy, Nazi Germany, and prostrate France, each learned in its own sorry way that state socialism can operate only when the economy of liberty is safely dead.

The diplomatic skill and courage with which the President has pursued his international policy is a matter in which all Americans can take pride. His outstanding diplomatic feat is the fashion in which he has hemmed in anti-American reaction by Hitler. He has accomplished this by the process of piecemeal advance.

This technique of bit-by-bit aggression, no one step by itself enough to alarm the Nazi people to the point that would permit Hitler to act, is straight out of "Mein Kampf"—if you will. But poker is an American game.

It would not be surprising if economic engineers of the New Order are poker players too. And it may be also that they have studied the technique of creeping advance as state socialism has applied it elsewhere, so that they have used it to the advantage of a well-planned Design-for-Power—if such there be.

It does not make much difference if there is no such purposeful design, if the effect will be the same.

The point is this: Do all of the pieces fit together into a pattern ever more formidable, ever more threatening to liberty as America has known it?

Consider the matter of administrative law as a possible part of this pattern. In such a complex society as ours has become, it has persuasive theoretic advantages. Board after board, commission after commission, bureau after bureau, has been created with extra-juridical powers until now, stopping to count up, we find 140 of them exercising functions free from democratic review.

More than a hundred of these now can, and do, institute regulations, and act as investigating agency, prosecutor, jury and judge, in cases which in some way affect our American economy. No matter how whimsical these regulations, there is no appeal.

In some cases whimsy is given latitude by ambiguous law. The outstanding example is, of course, Mr. Thurman Arnold's methods of enforcing his notion of what the antitrust laws should be, by criminal indictment and consent decree; and the Federal Trade Commission's use of the "cease-and-desist" order. If the first has been called blackmail, the second is worse. It could be called blacklist; and there is no defense against it. For all the FTC has to do is to issue a "cease-and-desist" order, for any reason or for no real one at all, and the affected concern promptly loses all of its customers, long before an appeal can be tried.

The effect of such practice of course is simply this: Our economic system is softened up, as the managers and tosome extent the owners of American business are made fearful and non-resistant to the next encroachment, whatever it may be.

That is how Hitler operates.

What such encroachment can do is illustrated by the combined effect of the Wagner Act as it has been interpreted by the National Labor Relations Board, and as interpreted by the new Supreme Court.

From the Consolidated Edison Case, decided in December, 1938, wherein the Court sanctioned the NLRB regulation of companies in which neither employers nor employees were engaged in inter-state commerce; through the Fainblatt Case in which the Court decided that the Labor Act was applicable to employes who neither bought nor sold anything; on down to the Frankfurter decision in the Phelps-Dodge case, wherein employers were told that they must hire and give back pay to an applicant for a job that they had failed to hire because of union affiliations—these decisions have stopped only at the "brink of state socialism."

These are decisions, now bearing the force of the law, which are as contrary to the American tradition as any which might be handed down in Europe. For by these decisions Congress is short-circuited and a philosophy is enacted into law, and judges are given unlimited latitude in applying the philosophy to specific cases regardless of precedent.

But the basic principles of Anglo-American law is that law shall be specific in its intent and that judges, in passing upon cases, shall be limited by the law in the light of precedent. The difference is a difference between government of laws and a government of men.

Such a government—all democratic tradition has agreed—is tyranny. Current vocabulary calls tyranny, dictatorship.

Thus the stage was set for the Seizure Bill now being debated in Congress.

As it was introduced, it charted the last mile to Communism.

For its grant of power was so broad that it would have permitted the President to take the celluloid rattle out of an infant's hand; and strip the wedding ring from its mother's finger; and pry the dental plate out of its grandsire's mouth.

The President might take anything at his whim, for any sort of national use, and pay for it what he deemed proper.

The bill was so drastic that no one admitted its fatherhood. It was so drastic that the War Department's Judge Patterson, who brought it over for introduction to Congress, has this week agreed to certain modifications.

But the fact that it was introduced proves that someone believed that the time was ripe for the kill.

The stage had been set for the death stroke to the right to own private property. Someone believed—someone high enough in power to persuade Judge Patterson to act as departmental messenger, and a responsible Congressman to introduce the bill—that this was the power that everything before had been building up to.

It must be remembered that our war controls are not truly emergency measures. They are called emergency measures—those that have not already been enacted into law—but no limit has been put on the emergency.

If we were formally at war, the emergency automatically would be done when peace is declared. But we are not formally at war.

The Seizure Bill will not be passed in the form in which it was introduced. Net yet. Perhaps never.

But the introduction of that bill was state socialism's full shadow, complete to its last part, thrown sharp and plain across the threshold of every American home.

It was a spool or so ugly that seen it was scarcely believed. But there it was. Something was behind it.

It was the shadow of a reality; a plan as real as a battleship's and the whole blueprint can be found in the testimony of the New Order experts before the TNEC.

But it may be fortunate that the Seizure Bill, in its bland and outright form, was prematurely introduced. Public reaction was so swift and absolute that the White House disclaimed it; Congress hooted it in the public press. It may be that the public now is aroused, and that Congress is armed with alarm.

It may be that this will in fact arouse not only the entrepreneurs of the American economy, but everyone, to thinking seriously about the economic future of America; about the shape our economic life may safely re-assume when peace is finally come.

For if this is not a purposeful pattern which I have briefly sketched, if it is merely the collective results of the experimental efforts of a variety of well-meaning theorists, it shows that they can do by accident what subversion seeks to do by design.

When the war ends we face the danger of another great depression. History shows that serious depressions usually follow wars. But they do not follow so closely that they must occur.

Steps should be taken at once to ameliorate the dangers of the transition period to come. A sound governmental fiscal policy now, and realistic relaxation of laws and administration not directly connected with defense, which improperly hamper business in its healthy operation, will serve to clear the way for practical men to save the economy by which we all live.

Practical men learned practical lessons from the troubled history of the last war's boom and its bitter aftermath. The moment the present war in Europe began to call on this country's productive capacity, the appropriate committees of the National Association of Manufacturers instituted studies as to how to mitigate the effects of post-war depression if the depression could not be staved off.

In an effort to arrive at further understanding of the problem, the N. A. M.. through its standing committee on economic policy, wrote to every member of the American Economic Association to ask his candid opinion as to whether there will be a post-war depression, and if so what form it would be likely to take.

Every shade of economic opinion, from extreme left to furtherest right, was represented by the 480 economists who answered. But their answers boiled down to four points.

1. Agreement was general that if depression comes it will first appear in the heavy-goods industries.

2. Old maladjustments in our economic system will have a vicious influence once the stimulant of armaments production is removed. These are maladjustments which our economy was working out, within the limits imposed by unrealistic government regulation, when the armament period began.

3. Depression may be hatched in dislocation of workers and expansion of industries made necessary by the defense program and general unleashing of inflationary tendencies.

4. Lack of foresight, coupled with the weakening of the profit motive, will retard private initiative and risk-taking in the establishment of new industries and the conversion of armament industries to peacetime use.

Forewarned should be forearmed. What to do about it? The economists think that here government can help.

1. By building postponed useful public work; perhaps byproviding subsidies for residential construction; even subsidies to some industries to help in maintaining employment.

2. By tax revision to encourage private business activity, and relaxation of government controls not directly related to defense, rationalization of anti-trust activities, and similar permission of smoother operation of business, to be reflected in ultimate general price reductions.

3. And as immediate action, such anti-inflationary policies as increased taxation to pay for defense, economy in non-defense spending, and curtailment of private spending in durable consumer goods until the defense period is over.

Most of the economists urged that the country should plan so as to be prepared when the depression first threatens. This should include industrial research projects, to be conducted by industry and protected by an unimpaired American patent system, in readiness for an expansion of peacetime production.

Clearly there are those who will be disappointed in the economists. For a program for state socialism did not emerge. Instead, government is recognized as a proper partner in the effort to avoid depression while the method cumulatively recommended is to encourage free private enterprise.

Students of history, rather than addicts to leftist philosophy, recognize that the economists were correct. The doctrine of economic scarcity can be abandoned if the specter of wasteful spending and profitless thrift is laid. For consider the backlog of unfilled wants and needs which will await the products of industry when the war is done. The country will need certainly more than 30 billions of dollars worth of capital improvements, both producers and consumers durable goods. In the forefront will be housing, manufacturing plants to be converted, railroads to be modernized, heavy household equipment to be bought or replaced.

New industries, to emerge from the laboratories, can find use for enough new crops to make agricultural over-production seem the nightmare of a happily lost world. If the government does postpone all public works until the transition period, and does not divert effort and money which should be used for defense, to their building now, there will be highways to be constructed, rivers and harbors to be improved, quantities of other legitimate, productive public jobs.

The defense against a post-war depression will put to the test the ability of the American people to save their freedoms, in a way that this war cannot. Enterprise, initiative, morale and energy will be needed to a degree that perhaps it has not been needed since the conquest of the frontier.

The best defense against depression is enterprising attack. And the only defense against state socialism is a healthily expanding economy.

There is no problem, social or political, that expanding free economy cannot cure.

There is no social or political malady that state socialism does not make worse. That is not a matter of opinion; it is a matter of fact, spread since the last war on the record of a Europe now bitterly essaying suicide.

But the danger is that when this war is done, and unemployment threatens, theorists will point to the armaments period as a gigantic pump-priming time, proof that the only trouble with pre-defense paternalism was that it did not go far enough.

If deficit spending for the materials of war cured unemployment, they will say, now spend an equal rate of borrowed billions for public works. If private industry is not economically able to keep its factories full, let government take them over and crowd the assembly lines with goods made for use, not for profit.

It can't be done. That means living on the nation's capital. Hitler has taken the steady subtraction out of the worker's livings as he reduced the worker to the status of serf. The only technical change in definition is that the worker is bound not to the land, but to the job. Mussolini has killed off the excess employables in futile wars. And Russia—there even idealistic socialism has met its death.

Socialism is a dream that has bemused many good men. But state socialism is a monster that scoffs at dreams while it devours those lured by the will-o'-the-wisp. And there is no such thing as a little state socialism.

Social legislation which cuts too close to the edge is the invitation to disaster. Much legislation now on our books flicks over the edge. The warning signs are the shadows

which obscure the beacon of free private enterprise. State socialism is the ultimate pessimism, the expression of the conviction that human man is not worth his soul.

Its fruits are all continental Europe, and much of Asia and of Africa, on short rations or starving; continents laid waste. It is the proven power and virtue of our American economy which now makes this nation the storehouse and arsenal of all the democracy the world has left.

There is no social gain except freedom. And freedom is state socialism's natural prey. The power that has made America great is the free power of creative production. It is the man secure in his personal dignity doing the best with his life that he can.