CLOSED SEASON

It is for the reader to decide how far the preceding analysis has attained its object. Economics is only an observational and interpretative science which implies that in questions like ours the room for difference of opinion can be narrowed but not reduced to zero. For the same reason the solution of our first problem only leads to the door of another which in an experimental science would not arise at all.

The first problem was to find out whether there is, as I have put it (p. 72), “an understandable relation” between the structural features of capitalism as depicted by various analytic “models” and the economic performance as depicted, for the epoch of intact or relatively unfettered capitalism, by the index of total output. My affirmative answer to this question was based upon an analysis that ran on lines approved by most economists up to the point at which what is usually referred to as the modern tendency toward monopolistic control entered the scene.

After that my analysis deviated from the usual lines in an attempt to show that what practically everyone concedes to the capitalism of perfect competition (whether a theoretical construction, or, at some time or other, a historical reality) must also to even a greater degree be conceded to big-business capitalism. Since however we cannot put the driving power and the engine into an experiment station in order to let them perform under carefully controlled conditions, there is no way of proving, beyond the possibility of doubt, their adequacy to produce just that result, viz., the observed development of output. All we can say is that there was a rather striking performance and that the capitalist arrangement was favorable to producing it. And this is precisely why we cannot stop at our conclusion but have to face another problem.

A priori it might still be possible to account for the observed performance by exceptional circumstances which would have asserted themselves in any institutional pattern. The only way to deal with this possibility is to examine the economic and political history of the period in question and to discuss such exceptional circumstances as we may be able to find. We will attack the problem by considering those candidates for the role of exceptional circumstances not inherent in the business processes of capitalism which have been put up by economists or historians. There are five of them.

The first is government action which, though I quite agree with Marx in holding that politics and policies are not independent factors but elements of the social process we are analyzing, may be considered as a factor external to the world of business for the purposes of this argument. The period from about 1870 to 1914 presents an almost ideal case. It would be difficult to find another equally free from either the stimuli or the depressants that may proceed from the political sector of the social process. The removal of the fetters from entrepreneurial activity and from industry and trade in general had largely been accomplished before. New and different fetters and burdens—social legislation and so on—were being imposed, but nobody will hold that they were major factors in the economic situation before 1914. There were wars. But none of them was economically important enough to exert vital effects one way or another. The Franco-German war that issued in the foundation of the German Empire might suggest a doubt. But the economically relevant event was after all the foundation of the Zollverein. There was armament expenditure. But in the circumstances of the decade ending in 1914 in which it assumed really important dimensions, it was a handicap rather than a stimulus.

The second candidate is gold. It is very fortunate that we need not enter into the thicket of questions that surrounds the modus operandi of the new plethora of gold which burst forth from about 1890 on. For since in the first twenty years of the period gold actually was scarce and since the rate of increase in total output was then no smaller than it was later on, gold production cannot have been a major factor in the productive performance of capitalism whatever it might have had to do with prosperities and depressions. The same holds true as regards monetary management which at that time was not of an aggressive but rather of an adaptive type. Third, there was the increase in population which, whether a cause or a consequence of economic advance, certainly was one of the dominating factors in the economic situation. Unless we are prepared to aver that it was wholly consequential and to assume that any variation in output will always entail a corresponding variation in population while refusing to admit the converse nexus, all of which is of course absurd, that factor must be listed as an eligible candidate. For the moment, a brief remark will suffice to clarify the situation. A greater number of gainfully employed people will in general produce more than a smaller number would whatever the social organization. Hence, if any part of the actual rate of increase in population during that epoch can be assumed—as of course it can—to have occurred independently of the results produced by the capitalist system in the sense that it would have occurred under any system, population must to that extent be listed as an external factor. To the same extent, the observed increase in total output does not measure, but exaggerates, capitalist performance.

Other things being equal, however, a greater number of gainfully employed people will in general produce less per head of employed or of population than a somewhat smaller number would whatever the social organization. This follows from the fact that the greater the number of workers, the smaller will be the amount of other factors with which the individual worker cooperates. 1 Hence, if output per head of population is chosen for measuring capitalist performance, then the observed increased is apt to understate the actual achievement, because part of this achievement has all along been absorbed in compensating for the fall in per capita output that would have occurred in its absence. Other aspects of the problem will be considered later on.

The fourth and fifth candidates command more support among economists but can easily be dismissed as long as we are dealing with past performance. The one is new land. The wide expanse of land that, economically speaking, entered the Americo-European sphere during that period; the huge mass of foodstuffs and raw materials, agricultural and other, that poured forth from it; all the cities and industries that everywhere grew up on the basis proffered by them—was this not a quite exceptional factor in the development of output, in fact a unique one? And was not this a boon that would have produced a vast access of wealth whatever the economic system it happened to impinge upon? There is a school of socialist thought that takes this view and in fact explains in this way the failure of Marx’s predictions about ever- increasing misery to come true. The results of the exploitation of virgin environments they hold responsible for the fact that we did not see more of exploitation of labor; owing to that factor, the proletariat was permitted to enjoy a closed season.

There is no question about the importance of the opportunities afforded by the existence of new countries. And of course they were unique. But “objective opportunities”—that is to say, opportunities that exist independently of any social arrangement—are always prerequisites of progress, and each of them is historically unique. The presence of coal and iron ore in England or of petroleum in this and other countries is no less important and constitutes an opportunity that is no less unique. The whole capitalist process, like any other economic process that is evolutionary, consists in nothing else but exploiting such opportunities as they enter the businessman’s horizon and there is no point in trying to single out the one under discussion in order to construe it as an external factor. There is less reason for doing so because the opening up of these new countries was achieved step by step through business enterprise and because business enterprise provided all the conditions for it (railroad and power plant construction, shipping, agricultural machinery and so on). Thus that process was part and parcel of capitalist achievement and on a par with the rest. Therefore the results rightfully enter our two per cent. Again we might invoke the Communist Manifesto in support.

The last candidate is technological progress. Was not the observed performance due to that stream of inventions that revolutionized the technique of production rather than to the businessman’s hunt for profits? The answer is in the negative. The carrying into effect of those technological novelties was of the essence of that hunt. And even the inventing itself, as will be more fully explained in a moment, was a function of the capitalist process which is responsible for the mental habits that will produce invention. It is therefore quite wrong—and also quite un-Marxian—to say, as so many economists do, that capitalist enterprise was one, and technological progress a second, distinct factor in the observed development of output; they were essentially one and the same thing or, as we may also put it, the former was the propelling force of the latter.

Both the new land and the technological progress may become troublesome as soon as we proceed to extrapolation. Though achievements of capitalism, they may conceivably be achievements that cannot be repeated. And though we now have established a reasonable case to the effect that the observed behavior of output per head of population during the period of full-fledged capitalism was not an accident but may be held to measure roughly capitalist performance, we are faced by still another question, viz., the question to what extent it is legitimate to assume that the capitalist engine will—or would if allowed to do so—work on in the near future, say for another forty years, about as successfully as it did in the past.