Industrial Democracy

These claims, already shattered by events, are more than mere
demagogic incitation. They are part of an ideology in the making, by
means of which the decline of capitalism is masked and the way
prepared for the ideological subjugation of the masses. At its basis is
the conception of a "new capitalism." This conception is recurrent.
Any new stage or twist in the development of capitalism is seized
upon by apologists, who proclaim that the economic order is being
transformed. The conception of the "new capitalism" is a form of
struggle against the workers and farmers, the clerical and professional
workers.

After the depression of 1873-79, marked in its later stages by aggres-
sive labor struggles, a considerable ballyhoo arose about profit-shar-
ing and the "partnership" of labor and capital. One economist,
echoing others, spoke of "a new regime of production and distribu-
tion," of an irresistible and continuous upward movement of wages,
mass consumption, and standards of living, which would result in
"the end of human poverty." 2 Four years later the prophecy was
answered by the depression of 1893-97, and by the following seventeen
years during which wages, mass consumption, and standards of living
were practically stationary. . . .

The immediate parentage of the NRA ballyhoo was the ballyhoo of
prosperity which flourished in 1923-29, and ended in the most disas-
trous of all depressions. It is important to recall this fact, not only
because that prosperity is now mocked by depression, but because all
its essential claims reappear in the "new capitalism" of the NRA.

The pre-1929 ballyhoo of prosperity, which expressed the "Golden
Age" of American capitalism, had as its basic claim the old concept
of "a new regime of production and consumption," thus restated by
one bourgeois economist:

"Increasing productivity of labor and industry, advancing wages,
higher living standards and greater consuming or purchasing power
rapidly became the avowed policy and practical program of American
industry ... a new industrial revolution which is the marvel of the
civilized world."

American capitalism, the prophets insisted, accepted the fact that
prosperity depends upon mass consumption, and, consequently, upon
increasingly higher wages. It was heady wine, this flattery of the
capitalists; they began to believe in the ballyhoo and millionaires
gravely prophesied the end of poverty. . . . Charles E. Mitchell, presi-
dent, National City Bank of New York : "A revolution in industry has
been taking place that is raising all classes of the population to a more
equal participation in the fruits of industry, and thus, by the natural
operation of economic law, bringing to a nearer realization the dreams
of those Utopians who looked to the day when poverty would be
banished." . . . James H. Rand, president, Remington-Rand, Incor-
porated: "The economic revolution of the 1920'$ will appear as vital
as the industrial revolution in England and it will likewise mark the
beginnings of a new era." . . . Andrew W. Mellon, Secretary of the
Treasury and a powerful financial capitalist: "America has adjusted
herself to the economic laws of the new industrial era, and she has
evolved an industrial organization which can maintain itself not only
because it is efficient, but because it is bringing about a greater dif-
fusion of prosperity among all classes." . . . Melvin A. Traylor, presi-
dent, Continental National Bank of Chicago and the American Bank-
ers Association: "We need not fear a recurrence of conditions that
will plunge the nation into the depths of the more violent financial
panics such as have occurred in the past." (This was in 1927, when a
minor cyclical depression warned of the greater disaster to come.)
. . . E. A. Filene, president, W. Filene and Sons Company: "What
the socialists dreamed of the new capitalism has made a reality, but
not by their methods. The ever-present human desire for greater total
profits will lead to the adoption of the new principles." . . . Haley
Fiske, president, Metropolitan Life Insurance Company: "Here is a
new business era. The glory of wealth fades. Extent of power fades.
What does remain here and throughout eternity is that every man
try his best in serving God to serve well his fellowmen."

In addition to increasingly higher wages and mass consumption, the
pre-1929 "new capitalism" claimed that it was introducing "industrial
democracy." In 1924, Herbert Hoover spoke of "the great increase in
ownership of industries by their employees and customers," and of
"forces slowly moving toward some sort of industrial democracy." 7
Arthur Williams, vice-president of the New York Edison Company,
a part of the electric power oligarchy under control of the House of
Morgan, insisted that wage- workers were becoming capitalists:

"As a result of a gradual economic revolution we are beginning to
see that every worker is a potential capitalist. Wealth is not only in-
creasing at a rapid rate, but wages are rising. There are at least three
kinds of evidence which indicate roughly the extent to which workers
are becoming capitalists: the rapid growth of savings deposits, the
investment by workers in shares of corporations, and the growth of
labor banks."

These ideas were widely spread and believed and were echoed at
the 1925 convention of the American Federation of Labor by Spencer
Miller, director of the Workers Education Bureau. Miller maintained
that "so significant is this whole economic change that it has been
properly characterized as an economic revolution by students of our
economic life." Out of this conception arose the theory of "trade union
capitalism," whose basic assumption was that the "higher strategy of
American labor" is "based upon the solid ground of capital owner-
ship." 9 This "capital ownership" was to be mobilized by labor banks,
which the Grand Chief of the Brotherhood of Locomotive Engineers
considered the "American answer to Marx and Lenin." 10 The banks
are now a mass of ruins. . . .

The master mind of the "new capitalism" was Thomas Nixon Car-
ver, professor of economics and major prophet of prosperity. His book,
The Present Economic Revolution in the United States, originated all
the assumptions of the pre-1929 "new capitalism." It is another curi-
osity of economic literature, a fantastic combination of misleading
statistics, apologetic economics, slipshod sociology, and rationalized
prejudices. After smugly declaring that "to be alive to-day, in this
country, and to remember the years from 1870 to 1920 is to awake
from a nightmare . . . [no more] slums and socialist agitators, blatant
demagogues and social legislation," Carver opened the case for the
"new capitalism" with a distortion of history:

"The great war produced a number of political revolutions in Europe.
It has not yet produced an economic revolution. The only eco-
nomic revolution now under way is going on in the United States.
It is a revolution that is to wipe out the distinction between laborers
and capitalists by making laborers their own capitalists and by com-
pelling most capitalists to become laborers of one kind or another,
because not many of them will be able to live on the returns from
capital. This is something new in the history of the world."

The depression of 1893-97 coincided with the measurable exhaus-
tion of the long-time factors underlying the movement of economic
expansion, accumulation of capital, and prosperity, particularly with
the closing of the frontier. (There was further industrialization in the
Western regions and its beginnings in the Southern states, but neither
was on a scale capable of stimulating an unusual upsurge of pros-
perity.) Railroad construction declined considerably in its rate of
growth. No great expansion appeared in new or old industries, with
the exception of electric power, which, however, grew slowly. But
monopoly consolidated its domination and prepared new conquests;
it "recapitalized" industry, scooped in enormous profits, and rela-
tively hampered the growth of productive forces. Imperialism be-
gan to emerge and shape American policy. Although capital was
still imported, there was a considerable export of capital: American
foreign investments by 1912 amounted to $2,000 million compared
with $500 million in I900. 15 Practically all the export of capital was
in the form of direct investments by monopolist combinations, to
develop new markets, establish branch plants, control sources of
raw materials, and secure larger profits. Exports of manufactured
goods increased rapidly; exports of crude foodstuffs decreased. Monop-
olist combinations organized and integrated production; but the
planning, wholly within the limits of particular enterprises, sharpened
competition and speculation, and aggravated all the contradictions of
accumulation and prosperity. Businessmen, economists, and speculators
spoke of a "new economic era," of prosperity everlasting. At a dinner
where J. Pierpont Morgan was the honored guest, John B. Claflin,
millionaire merchant, said:

"With a man like Mr. Morgan at the head of a great industry, as
against the old plan of many diverse interests in it, production will
become more regular . . . and panics become a thing of the past."

But prosperity sagged in the minor depression of 1903-04 and
crashed in the major depression of 1907-08. In New York City alone
there were 100,000 unemployed, innumerable breadlines, and men
"eager to work for 35 cents a day." 17 Clever people organized the
"Sunshine Movement" think prosperity and prosperity will revive!
The depression was not as severe and prolonged as the two preceding
major depressions. But there was no upsurge of prosperity: recovery
was on a relatively lower level.

1909 to 1914, accompanied by unusually large unemployment: a "de-
pressed" prosperity, the indication of economic decline. One element
of this decline was monopoly capitalism. The financial capitalists, with
the elder Morgan at their head, who had "settled" the financial panic
of 1907 but were unable to influence the revival of prosperity, used
the opportunity to extend and consolidate the power of monopoly.
This power, by interfering with the free play of economic forces and
preventing complete liquidation, hampered recovery, emphasized by
lack of an upsurge in the long-time factors of expansion. Monopoly
capitalism became more interested in the export of capital, more defi-
nitely imperialist. Backed by the diplomacy of the Taft Administra-
tion, American imperialism issued its challenge to the European im-
perialist powers, demanding the "right" to share in Chinese loans and
concessions. The elements of decline appear clearly in the fact that
the average yearly increase in production was only 4.6% in the five
years 190913 compared with 7.6% in the five years 1902 o6. 18 There
was a flattening in the rate of growth of production, which continued
after the World War.

Crises tend to become constantly more severe; but their severity is
expressed not only in the spread of the swings from prosperity to
depression, but also in the level of prosperity after recovery. In post-
war Europe the cyclical swings were not great, yet during the whole
period, both in prosperity and depression, the tendency was for the
general crisis of capitalism to become more acute and for permanent
unemployment to increase clear indications of the decline of capi-
talism.

- Lewis COrey