Preserving Private Enterprise Through Constructive Action


By DR. HERBERT D. SIMPSON, Professor of Public Finance, Northwestern University, Chicago, Ill.

Delivered before a conference held under the auspices of the National Physicians Committee for the Extension of Medical Care, New York City, November 27, 1944

Vital Speeches of the Day, Vol. XI, pp. 155-156.

THERE'S nothing new or original about my subject. We've been engaged in the business of preserving private enterprise in this country for the past three hundred years—ever since the Pilgrims started a little private enterprise of their own down on Cape Cod.

But in recent years something has gone loose. We hear questions about the permanence of this system; so that all Over this country there are groups of anxious people, meeting publicly and privately, formally and informally; and the object of their anxiety is our system of private enterprise. Is it going to survive or perish? Are they holding clinics or "wakes"?

I am going to assume that this meeting is a clinic, not a "wake"; partly because one can be more academic at a clinic than he can be at a "wake". And at the risk of seeming academic, I want to promulgate a Law that has had much to do with the survival of Private Enterprise in this country.

Some times the successive expansions of governmental activity that have taken place in recent years have seemed to be purely political, opportunistic, and haphazard. But underneath the politics and opportunism there is a Law, which, if it does not govern, at least conditions this process of governmental expansion. We may formulate it somewhat as follows.

In the United States and in other nations which have some form of constitutional government, we have rarely, if ever, witnessed a transfer of functions from the field of purely individual activity to that of government activity. There is always an intervening stage, during which the problem hangs in suspension, and during which public opinion makes up its mind one way or the other.

This is the stage in which certain activities are institutionalized. When these activities become too large or important or complex to be performed by individuals acting separately, we develop social and economic institutions to perform them, such as the great banking and investment institutions that long ago replaced the process of individual borrowing and lending.

Now the significant thing is that the question of government activity has rarely, if ever, been precipitated, until a function has passed up and out of the field of purely individual activity into that of institutional activity and control. Then the choice is made. But it is a choice, not between individual activity, on the one hand, and governmental, on the other. It is a choice between institutions—private, on the one hand, and public, on the other; and that choice is invariably made on the basis of the public's appraisal of the two types of institution.

That appraisal hasn't always resulted in favor of Government. In the early days of our Republic, the American people decided that private religious institutions afforded safer spiritual guidance than a governmentally established church; and they have never reversed that decision.

But I should like to offer three illustrations of the operation of this law: one, a field in which the process has been completed; one which is now in suspense; and one which may be precipitated in the future.

The first is the field of public education. In frontier and early colonial days, education was a: purely individual activity. Parents taught their children to read and write. Families got a maiden aunt to instruct a group of small children. The village parson held catechism classes; future statesmen "read law" in a neighbor's office; and incipient physicians learned their trade from the village barber.

But the inadequacy of this type of education was soon realized, and educational "institutions" developed. It happened that most of these were established and maintained by the churches and religious denominations, for the training of ministers of the gospel and for the purpose of "instilling precepts of morality" in their various communities—a purpose which modern education has sometimes lost sight of.

Early in the last century, however, a widespread feeling developed that these educational institutions were inadequate. Their traditional curricula were not suited to America; and the cost of private schools meant that large segments of the population were deprived of the opportunity for any formal education. Out of this feeling developed a bitter conflict between the adherents of private and public education, a conflict which lasted for half a century and resulted finally in the choice of public agencies for the provision of elementary and secondary education in this country. But the choice was not between individual activity, on one hand, and governmental activity, on the other. It was a choice between two types of institutional activity, private and public.

My second illustration is the field of banking and investment. In this field individual activities were long ago replaced by the development of highly organized banking and investment institutions—great banking houses, whose operations were sometimes more widespread and powerful than governments themselves. In recent years there has developed some skepticism on the part of the public with regard to the adequacy and wisdom of these financial institutions and their ability to cope with the complex demands of modern society.

So, under the shadow of this public skepticism, we have seen the mushroom growth of a score or more of government credit institutions—half-a-dozen in the field of housing, nine or ten in the field of agricultural credit, the R.F.C. and other specialized financial institutions; and now we are threatened with the establishment of a great international government bank, with power to control the course of international trade and to direct the fields of foreign investment.

Here the American people will again make a choice between two sets of institutions, private and public. The responsibility for guiding this choice rests primarily with the managements of our existing banks and financial institutions. Their only prophylactic will consist in demonstrating their ability to meet the needs of the time. If they can demonstrate this clearly and promptly, the menace of government banking will disappear.

My third illustration I mention with some misgiving, because it involves the most sacred institution we have, that of the family. But its sacredness will not preserve it; for in modern times even the family is not immune to the pragmatic test of results.

We hear a great deal about the failure of the home, the disintegration of the family, about juvenile delinquency and crime. We are told by social writers that we are bringing up a generation of "coke-fed", jitter-bugging youngsters who will stand in line from four o'clock in the afternoon till the next morning to hear Sinatra.

Now I have a firm faith in the survival of the American family. But its survival will be insured, if insured at all, not by denouncing the Fascist or Socialist or other methods of rearing children, but by demonstrating the vitality of the institution of home and family—its ability to rear children with a background of sound morality, with worthy concepts of life, and with a sense of responsibility that will make them intelligent and useful citizens—more intelligent in some respects, we hope, than their Dads and Moms have been. | If we succeed in doing this, American public opinion will still choose private rather than public institutions in this field.

Now I have stated what I have called this Law in the evolution of spheres of public activity and have cited these illustrations of its operation, in order to make its application to your problem here. And I can make that application very briefly.

In the first place, if there is one thing that stands out in the results of these surveys by the National Physicians Committee, it is the fact that provision against the economic hazards of sickness and disability is no longer an individual activity. This field is, if you will pardon the academic phraseology again, in the process of being institutionalized. The American people demand that institutions of greater scope, resources, and technical knowledge than they individually possess shall be developed to carry this responsibility.

The reasons for this are obvious enough. The pile-nominal growth of medical science; the development of hospitals, specialized institutions, and medical and surgical mechanisms, which have added to the cost of medical service; the congestion of population in urban and industrial communities which has made the presence of communicable illnesses a menace to the whole community; and finally the constant menace, in modern industrial society, of loss of employment and income through causes over which we individually have no control.

These are the conditions under which here again we have an area evolving out of the field of purely individual activity into the field of institutional responsibility. The statistics which Dr. Robinson threw on the screen this morning are the handwriting on the wall. I'm only the Daniel trying to interpret the writing. But my job is an easy one, for anyone can read that handwriting. It means that you no longer have a choice between individual activity and governmental activity. That choice has vanished. Your choice, the choice which the American people will be in process of making over the next few years, is a choice between two types of institutional responsibility, private and public.

Fortunately, over past years private initiative and foresight have been evolving a type of institutional mechanism which appears to be capable of assuming this responsibility. I refer to the various types of group insurance and group plans for providing medical care or meeting the cost of such care. These have now passed beyond the experimental stage. The surveys of the Committee indicate the practical effectiveness of plans that have been in operation for years past. And while these plans, even if fully developed throughout the field of industry, will not cover the entire area of medical need, they will cover such a large segment of it that what is left will not constitute any social or political problem.

Furthermore, the surveys made by the National Physicians Committee indicate clearly that now is a peculiarly favorable time for the extension of these plans. These surveys indicate that the great majority of the American people believe in private enterprise; that they have a profound respect and goodwill for the medical profession; and that they are favorably inclined toward the further extension of those plans. The problem is to develop them adequately enough and promptly enough to demonstrate their capacity to meet this new responsibility without recourse to government action.

In other words, you are facing a problem which has already been precipitated, and which, parenthetically, would have been precipitated regardless of party or administration in power and regardless of political philosophy at Washingington—if there is any. This is the problem of evolving some type of institutions to carry a responsibility which people feel that individually they can no longer carry. The only question is whether these shall be public or private institutions; and our only defense against encroaching Government activity will consist in taking constructive action which will demonstrate the ability of Private Enterprise to meet its responsibility and thereby insure its own survival.