"Insatiable Government," June 25, 1932 Observe
a strange bedfellowship. When the railroads throw themselves on
the hands of the government and demand public credit to save them
from bankruptcy, the radical forces do not protest, or, if they
do, it is in an academic sense only; and the reason for this is
that they believe in the public ownership of railroads, and see,
perhaps more clearly than others, that such use of public credit
tends to bring the experiment of state ownership to pass. For the
same reason they protest lightly or not at all against the use of
public credit to save the private banking structure, for that will
tend to bring about state control of credit. They are for anything
that tends to get the government into business.
"Concerning Inflation," November 4, 1933 Capital is
in flight from the country. Every man with money, be it much or
little, is thinking less about how he shall adventure it in a spirit
of enterprise than how he shall make it safe thinking less of interest
and profit from his capital than how to defend his principal. This
is true because the integrity of money is in doubt.
"Washington Miscellany," December 9, 1933 Frequencies
are to broadcasting what tracks are to a railway and what wires
are to telephone and telegraph. But broadcasting companies have
no property right in frequencies. How can a wave length be owned?
The Government allots to each broadcasting company a range of frequencies.
This, of course, is necessary. That is, some authority would have
to control and allot them or else there would be anarchy on the
air. But the allotments are not permanent; they have to be renewed
periodically, as if a railway had to go to the Government twice
a year and get renewed permission to continue running trains on
its tracks, or the telephone companies for permission to continue
sending messages over their wires, with no possibility of there
being other tracks or other wires.
follows that broadcasting companies incline to keep the good will
of the Government. On the other side, the Government takes leave
to go on the air when and if it likes. It notifies the broadcasting
companies that it wants certain time. The Government may say, "We
want the hour from seven to eight," and the companies move
their things around accordingly. Thus the radio becomes, in some
degree, an instrument of Government, and the Government makes effective
use of it, more and more.
"The Balance Sheet of Capitalism," May 19, 1934 The
whole of the emotional case against capitalism turns on the unequal
distribution of wealth. But is it peculiar to the nature of capitalism
to concentrate wealth in a few hands? Here the first aspect truth
is a little hard. It begins with the human disparities; and for
these, God is responsible, not capitalism. Much more, perhaps, than
we wish to believe, economic inequalities answer to human inequalities.
and again, wealth has been socially divided and then, in a little
while, it has been again as it was before, that a few were rich
and many were not. Lycurgus, who did it for the Spartans, heaping
all their wealth in one pile and then, dividing it equally, thought
of measures to make this pleasing equality permanent. He banished
gold and silver money and put in place of it iron money so heavy
and so nearly worthless that to hoard or save it would be absurd.
All the same, it was not long until again there were debtors and
creditors and a concentration of wealth in the hands of a few.
a very old fact has a kind of simplicity. Somewhat more than nine-tenths
of us consume all that we receive, and would consume it all, no
matter how much it would be. The wish to accumulate wealth is universal;
the will to do it belongs only to a few, and the proportion of those
few in any kind of society has probably been constant for thousands
"The Forgotten Road," September 29, 1934 Suppose every
railroad that was unable to pay its debts had been permitted to
go into receivership and thence to the auction block. What of it?
The loss in that case would fall where it belonged upon the stockholder.
The stockholder is one who wants more than interest on his capital;
he wants the profit. To be entitled to the profit, he must assume
also the risk of loss. He knows that in the first place; he prefers
the position of proprietorship and takes it voluntarily. He is the
owner; the bondholders are his creditors. If the railroad is unable
to pay its creditors and goes to the auction block, either the bondholders
buy it in and wipe out the stock, or the stockholders, if they are
unwilling to lose the property, may save themselves by putting in
new capital. By that healthy process we had again and again, after
every crisis, junked what was dead in our capital structure, and
it was one secret of our economic strength that we did it in a ruthless
manner, no matter how much it hurt. Between 1892 and 1896, 200 railroad
companies, representing one-quarter of the country's total railway
capital, went into receivership and were reorganized. In the next
ten years the entire railroad system was rebuilt with new capital.
"When Wishes Think," February 23, 1935 When the New
Deal arrived, prices had greatly fallen, and a great mass of repetitious,
inflated and imaginary capital, founded on the rainbow, had been
or was about to be wiped out, as it should have been. No tangible
thing had been destroyed; it was only that everything had been revalued.
That was deflation.
idea first to be embraced by the New Deal was one for which a word
had been invented. The word was "reflation." Not reinflation,
which would mean to inflate again, but reflation, which means not
the bite of the same dog but the dog of the same bite. The undertaking,
very explicitly set forth, was to slay the dragon by raising prices
to the predepression level the average price of goods and commodities
and labor to that level, and the price of agricultural commodities
to a still higher level, on grounds of social justice; and whereas
it had been the thought of business to defeat the dragon by defending
prices on the pre-depression level, in which it failed, it was then
for the New Deal to slay him by putting prices back to that level.
Restoring prices would mean also to restore capital values of all
kinds, even a great mass of that fictitious, inflated and imaginary
capital, founded on the rainbow, that was about to be wiped out.
That fact was let pass as a minor inconsistency. The New Dealers
themselves never stressed it, and, besides, this was the sweetness
that reconciled business and finance to much else that was sour
to their taste.
"When Wishes Think," February 23, 1935 The old sequence
in every depression was first a fall of prices, then a collapse
of profits, then a reduction of money wages, and presently a terrific
increase in production. A reduction in money wages is not the same
thing as a fall in the buying power of wages. The buying power of
wages is relative, determined by the cost of things.
standard of living has had some minor setbacks, but never in this
country was it ever sacrificed, never did anyone propose that it
should be. On the contrary, during seventy-five years, from 1840
to 1914 notwithstanding three great depressions, the buying power
of American wages increased threefold. There is no reason to suppose
it would not be repeated in a free competitive system. Indeed, it
cannot help repeating itself under that system, so long as production
increases. If production is increased simply that and nothing else the
buying power of wages is bound to rise. Either prices will be reduced
or money wages will rise. This must happen by a law of necessity.
There is no other way to dispose of the product.
opposite is that you cannot buy any means increase the buying power
of people without first increasing the quantity of things to be
"When Wishes Think," February 23, 1935 War debts and
depression debts possess the same character. All the things needful
to conduct a war exist at the time. So why the fiction of borrowing
them from the future? Why create a debt to represent them? In the
same way, all the things needful to feed and clothe and house the
unemployed exist in the present. Why a fiction of borrowing them
from the future? Why create a debt to represent them? The reason
in both cases is the wish to postpone and avoid payment. Let others
pay. Let tomorrow pay. Let the next generation pay.
war that was charged wholly to its own time, one paid for in full
by taxation, would be a very unpopular war. But it would be a solvent
war. So also with depression. Every depression hitherto has been
paid for at the time. Such a thing as issuing bonds for relief was
almost unknown. And that is why the recovery, when it came, was
always so amazing. It had no load of debt to drag along; instead
of it a new, unmortgaged future. Now for the first time we are trying
to charge a depression to the future, though never before had we
been so rich in all the means to pay for it ourselves.
"Economic Fascinations," March 9, 1935 A ship is one
of the many implemental forms of wealth, and what is true of one
form is true of every other form in the sense that follows… Under
the free economic system, any private person possessing the capital
is free to command the materials and labor to produce a ship…
In the exercise of this right the private person must assume some
risk. Suppose the ship does not pay, owing to the competition of
many private persons doing the same thing. The owner, therefore,
is unable to make a profit on his capital. What then? Well, in that
case he may break the ship up or tie it up at his own risk; he may
write away as much of its value as represents the disappointed expectation
of profit and go on with it; he may turn it over to his creditors
who, if they cannot make it pay, may put it on the auction block
and sell it to someone who, if he buys it cheaply enough, is certain
to make it pay. But in no case, under the free system, is it permitted
that one who has created an unprofitable ship shall both deprive
economic society of the benefit of cheaper transportation and save
himself from loss by making the shipper pay him not to operate the
ship. But that is the new way of thinking.
"The Wealth Question," August 31, 1935 Wheat farmers,
corn farmers, hog farmers and others, signing up with the AAA and
beginning to receive United States Treasury checks for what they
did not produce, were generally pleased until they began slowly
to reflect on what they had done. They had signed away the right
to do as they pleased with their own land…
if a farmer is not a lord on his own land, what is he? Would he
give up being lord of his own land for a difference of forty or
fifty cents in the price of wheat? Whether he would or not, he has
"New Government," February 1, 1936 Before the New
Deal, had Washington been feeling the depression?
When the Republican Administration departed, in March, 1933, Washington,
like nearly every other city, had the appearance of being overbuilt.
The principal hotels and most of the new apartment houses were either
in bankruptcy or staring at it. Private houses could be had for
the taxes and upkeep. Many mansions were boarded up. Shops were
closing, leaving whitened plate-glass windows behind them. Your
taxi fare was less than the tip in New York and the driver was so
grateful that you were ashamed. Elsewhere people might still be
hopeful, not knowing the worst; but here, with all the sources drying
up, it was not going to rain for four more years. Was not the incoming
Administration pledged to lay the ax against government and cut
it down one-quarter?
it rained. Miraculous rain from an invisible cloud in a new world.
First the hotels filled up and overflowed. Next all the apartments
and private houses were taken and they were not enough. Rents began
to rise. The closed shops reopened. New ones appeared. Walking on
errands of government ceased, because everyone was so earnestly
making haste in the new world. The leisurely, old-fashioned left
turn, wide around on the red light, had to be abandoned and one-way
streets had to be ordained, owing to the increase in motor traffic.
Taxicabs multiplied prodigiously. Gaiety took back its place in
the life eating, drinking, dancing, with all the most expensive
places crowded; and touching all of this a kind of guilty embarrassment,
as of people taking pleasure in unreconciled circumstances.
"National Hill Notes," February 29, 1936 Nobody ever
exactly understood what the monetary policy was. It involved debasing
the currency, repudiating the redemption clause engraved on all
Government bonds, and led to the weird spectacle of the United States
Treasury trying to raise the price of gold by buying it all over
the world with paper dollars not because it wanted the gold, or
needed any more of it, but only for the purpose of making the price
of gold go up. Foreigners sold us gold for paper dollars, and then
used the paper dollars to buy American securities, so that in fact
we were swapping titles of ownership in our industries and railroads
for gold that we didn't need and didn't know what to do with. We
have now more than half of all the monetary gold in the world, and
yet we have no gold money. The Treasury is hoarding the gold. It
could not spend it if it would, for the curious reason that by the
law of this monetary policy it is a crime for an individual to possess
a piece of gold.
"National Hill Notes," February 29, 1936 Acts in themselves
do not constitute a course of action. From a progression of acts
it may be possible to deduce a fundamental policy, only provided
the acts are consistent with one another, or consistent as a whole
with a controlling principle. But the acts of the New Deal bewilder
that process. In the entire book of the New Deal's self-revelation
and self-exegesis there is a certain paragraph that would reconcile
all of its acts, not one with another but with one principle of
contradiction. It is the passage in the last annual message in which
suddenly the President speaks of the new instruments of governmental
power that have been created, and then says of this new power that
it is such that as in other hands "would provide shackles for
the liberties of the people." But it is in his hands.
Well, conquest of power for purposes of all-doing that in itself
could be a controlling policy, and such a policy, impossible to
acknowledge, would involve many inconsistencies of immediate policy,
because the peaceable course to the seizure of great political power
is a zigzag path.
"Security," September 19, 1936 And how will
[Social Security] funds of such magnitude be invested? They will
be invested entirely in Government bonds. What is a Government bond?
It is the promise of the Government to pay at some future time;
it is, simply, the Government's promissory note. There is here one
little difficulty to be cleared up. The inventors have not mentioned
it. The difficulty is this: How can the Government earn money by
investing money in its own promissory notes?
"Review and Comment," January 1946 By an act of seizure
to end a strike the government is now in possession of the soft
coal mines. Having nothing to lose but the taxpayers' money, the
government is an easy and generous boss. To induce the miners to
return to work it made a better bargain with them than the private
boss was willing to make. And so, as it always is at first, the
miners are better off.
they lost anything? Is this benefit of government without price?
Suppose now they should want to strike. If they refused to mine
the coal on the government's terms the would be striking against
how the language changes. Formerly if the miners refused to mine
coal one could say, when it became very serious, that they were
striking against society, but that was an abstraction. Most
people thought of it simply as an economic struggle in which the
consumer was getting hurt, and public opinion turning strongly one
way or the other would presently end it, because neither side could
afford to go too far. But now when that same kind of struggle reaches
a certain point the President announces that it begins to assume
the character of a strike against the government, and that
is a very different thing. Thus little by little we become accustomed
first to the words and semantic tones and then to the experimental
acts of authoritarian government, commanding obedience.
"Status for the Poor," April 1947 [It was a] proud
American maxim that every schoolboy wrote in his copybook: To
be poor is no disgrace. In the whole civilized world that was
only true here, and it was true here because no stigma, no hint
of caste, no sense of status attached itself to the condition of
as the form of the Welfare State begins to rise…there are high-bracket
people and low-bracket people and it is the law that makes a distinction
between them. You may say still that the distinction is economic,
not social, and this is for a while a supportable fiction. But it
holds only until you come to public housing. There the line is struck,
and now definitely a social status attaches to the condition of
first argument for public housing is that it is the only way to
reach that one-fifth of American families whose housing is substandard.
The secondary argument is that although private enterprise has been
freer here than anywhere else in the world, it has not solved this
way of speaking of private enterprise as if it were a power in itself,
as if it were a total entity with parts and functions and responsibilities,
belongs to the nonsense of modern demonology. There is no such demon.
Private enterprise is not a thing. It is a body of natural spontaneous
economic phenomena rising out of the activities of people who produce
and exchange wealth with one another with no interference by government.
It is not the function of private enterprise to house the people.
It is the business of people to house themselves.
"Comment," January 1950 In the act of granting
the railroads another increase in passenger rates the Interstate
Commerce Commission suggested that if the railroads' passenger revenue
continued to fall, Congress might have to consider a federal subsidy
to make up the loss. At one of the hearings on Bigness before the
Celler Committee this question was raised: What if a corporation
got so big that the government, having accepted the responsibility
of full employment, could not afford to let it fail? Thus one may
note the birth of the idea that the Federal Government may be obliged
to pay old age pensions for capital.
idea was bound to follow from the delusion that by the free application
of federal subsidies to any seat of pain we may secure the great
blessing of a painless economy. This of course is quackery. There
is no such thing as a painless economy; and if you overcome the
sensation of pain by anesthetics, how shall the economy know when
it is sick or why? The use of pain in a healthy body is to give
notice of wrong living. The only way to cure it really is by right
living. Many people have forgotten, if they ever knew, what happened
in a free profit and loss system to capital when it ceased to earn
a profit. If it could think of no way to get its profit back by
improving its tools and methods, then simply it was lost
wiped out. But that is all that did happen. The great economic mechanism
was not hurt at all. Indeed it was generally improved and worked
much better when relieved of the weight of old and obsolete capital.
there was any Interstate Commerce Commission to say that railroad
rates should be such as to guarantee a reasonable return on the
capital, railroad bankruptcy was very common. Once two thirds of
all the railroad mileage in the country was in receivership. The
courts operated the railroads as trustees for the creditors. The
trains went on running just the same; wages went on being paid to
employees as before. Receivership certificates with prior lien on
the assets were sold to buy new equipment and new rails. After a
while the owners, who were the stockholders, sat down with the creditors,
who were the bondholders, and together they worked out a reorganization
plan. The capital structure was scaled down. The heavy loss fell
on the stockholders, which was only fair, because for the sake of
the profit they had voluntarily taken the owner's risk. Then a new
company was formed, new stock was sold, the bankrupt railroad went
on the block and was sold to the new company, and that was the end
American railroads were rebuilt many times, with new capital taking
the place of old, and the cost of transportation fell until it was
the lowest in the world. There was pain in it, of course, but it
was pain that cured itself; and there came to be a hard saying of
great wisdom that the measure of the country's prosperity was the
amount of bankruptcy it was willing to stand.