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CONSERVATIVE TWENTIES, REVOLUTIONARY THIRTIES

the breakdown of the international gold standard was the invisible link between the disintegration of world economy since the turn of the century and the transformation of a whole civilization in the thirties. Unless the vital importance of this factor is realized, it is not possible to see rightly cither the mechanism which railroaded Europe to its doom, or the circumstances which accounted for the astounding fact that the forms and contents of a civilization should rest on so pre­carious foundations.

The true nature of the international system under which we were living was not realized until it failed. Hardly anyone understood the political function of the international monetary system; the awful suddenness of the transformation thus took the world completely by surprise. And yet the gold standard was the only remaining pillar of the traditional world economy; when it broke, the effect was bound to be instantaneous. To liberal economists the gold standard was a purely economic institution; they refused even to consider it as a part of a social mechanism. Thus it happened that the democratic coun­tries were the last to realize the true nature of the catastrophe and the slowest to counter its effects. Not even when the cataclysm was already upon them did their leaders see that behind the collapse of the inter­national system there stood a long development within the most ad­vanced countries which made that system anachronistic; in other words, the failure of market economy itself still escaped them.

The transformation came on even more abruptly than is usually realized. World War I and the postwar revolutions still formed part of the nineteenth century. The conflict of 1914-18 merely precipitated and immeasurably aggravated a crisis that it did not create. But the roots of the dilemma could not be discerned at the time; and the horrors and devastations of the Great War seemed to the survivors the obvious source of the obstacles to international organization that had

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so unexpectedly emerged. For suddenly neither the economic nor the political system of the world would function, and the terrible injuries inflicted on the substance of the race by World War I appeared to offer an explanation. In reality, the postwar obstacles to peace and stability derived from the same sources from which the Great War itself had sprung. The dissolution of the system of world economy which had been in progress since 1900 was responsible for the political tension that exploded in 1914; the outcome of the War and the Treaties had eased that tension superficially by eliminating German competition while aggravating the causes of tension and thereby vastly increasing the political and economic impediments to peace.

Politically, the Treaties harbored a fatal contradiction. Through the unilateral disarmament of the defeated nations they forestalled any reconstruction of the balance-of-power system, since power is an indis­pensable requisite of such a system. In vain did Geneva look towards the restoration of such a system in an enlarged and improved Concert of Europe called the League of Nations; in vain were facilities for consultation and joint action provided in the Covenant of the League, for the essential precondition of independent power units was now lacking. The League could never be really established; neither Article 16 on the enforcement of Treaties, nor Article 19 on their peaceful revision was ever implemented. The only viable solution of the burn­ing problem of peace—the restoration of the balance-of-power system —was thus completely out of reach; so much so that the true aim of the most constructive statesmen of the twenties was not even under­stood by the public, which continued to exist in an almost indescribable state of confusion. Faced by the appalling fact of the disarmament of one group of nations, while the other group remained armed—a situa­tion which precluded any constructive step towards the organization of peace—the emotional attitude prevailed that the League was in some mysterious way the harbinger of an era of peace which needed only frequent verbal encouragement to become permanent. In America there was a widespread idea that if only America had joined the League, matters would have turned out quite differently. No better proof than this could be adduced for the lack of understanding of the organic weaknesses of the so-called postwar system—so-called, because, if words have a meaning, Europe was now without any political sys­tem whatever. A bare status quo such as this can last only as long as the physical exhaustion of the parties lasts; no wonder that a return to the nineteenth century system appeared as the only way out. In the

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meantime the League Council might have at least functioned as a kind of European directorium, very much as the Concert of Europe did at its zenith, but for the fatal unanimity rule which set up the obstreperous small state as the arbiter of world peace. The absurd device of the permanent disarmament of the defeated countries ruled out any constructive solution. The only alternative to this disastrous condition of affairs was the establishment of an international order endowed with an organized power which would transcend national sovereignty. Such a course, however, was entirely beyond the horizon of the time. No country in Europe, not to mention the United States, would have submitted to such a system.

Economically, the policy of Geneva was much more consistent in pressing for the restoration of world economy as a second line of de­fense for peace. For even a successfully re-established balance-of-power system would have worked for peace only if the international monetary system was restored. In the absence of stable exchanges and freedom of trade the governments of the various nations, as in the past, would regard peace as a minor interest, for which they would strive only as long as it did not interfere with any of their major inter­ests. First among the statesmen of the time, Woodrow Wilson appears to have realized the interdependence of peace and trade, not only as a guarantee of trade, but also of peace. No wonder that the League persistently strove to reconstruct the international currency and credit organization as the only possible safeguard of peace among sovereign states, and that the world relied as never before on haute finance. J. P. Morgan had replaced N. M. Rothschild as the demiurge of a rejuve­nated nineteenth century.

According to the standards of that century the first postwar decade appeared as a revolutionary era; in the light of our own recent experi­ence it was precisely the contrary. The intent of that decade was deeply conservative and expressed the almost universal conviction that only the re-establishment of the pre-1914 system, "this time on solid foundations," could restore peace and prosperity. Indeed, it was out of the failure of this effort to return to the past that the transformation of the thirties sprang. Spectacular though the revolutions and counter­revolutions of the post-war decade were, they represented either mere mechanical reactions to military defeat or, at most, a re-enacting of the familiar liberal and constitutionalist drama of Western civilization on the Central and Eastern European scene; it was only in the thirties that entirely new elements entered the pattern of Western history.

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The Central and Eastern European upheavals and counter upheavals of 1917—20 in spite of their scenario were merely roundabout ways of recasting the regimes that had succumbed on the battlefields. When the counterrevolutionary smoke dissolved, the political systems in Budapest, Vienna, and Berlin were found to be not very far different from what they had been before the War. This was true, roughly, of Finland, the Baltic states, Poland, Austria, Hungary, Bulgaria, and even Italy and Germany, up to the middle of the twenties. In some countries a great advance was made in national freedom and land reform—achievements which had been common to Western Europe since 1789. Russia, in this respect, formed no exception. The tendency of the times was simply to establish (or re-establish) the system com­monly associated with the ideals of the English, the American, and the French revolutions. Not only Hindenburg and Wilson, but also Lenin and Trotzky were, in this broad sense, in the line of Western tradition.

In the early thirties, change set in with abruptness. Its landmarks were the abandonment of the gold standard by Great Britain; the Five-Year Plans in Russia; the launching of the New Deal; the National Socialist Revolution in Germany; the collapse of the League in favor of autarchist empires. While at the end of the Great War nineteenth century ideals were paramount, and their influence domi­nated the following decade, by 1940 every vestige of the international system had disappeared and, apart from a few enclaves, the nations were living in an entirely new international setting.

The root cause of the crisis, we submit, was the threatening collapse of the international economic system. It had only haltingly functioned since the turn of the century, and the Great War and the Treaties had wrecked it finally. This became apparent in the twenties when there was hardly an internal crisis in Europe that did not reach its climax on an issue of external economy. Students of politics now grouped the various countries, not according to continents, but accord­ing to the degree of their adherence to a sound currency. Russia had astonished the world by the destruction of the rouble, the value of which was reduced to nothing by the simple means of inflation. Ger­many repeated this desperate feat in order to give the lie to the Treaty; the expropriation of the rentier class, which followed in its wake, laid the foundation for the Nazi revolution. The prestige of Geneva rested on its success in helping Austria and Hungary to restore their currencies, and Vienna became the Mecca of liberal economists on account of a brilliantly successful operation on Austria's krone which the patient,

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unfortunately, did not survive. In Bulgaria, Greece, Finland, Latvia, Lithuania, Esthonia, Poland, and Roumania the restoration of the cur­rency provided counterrevolution with a claim to power. In Belgium, France, and England the Left was thrown out of office in the name of sound monetary standards. An almost unbroken sequence of currency crises linked the indigent Balkans with the affluent United States through the elastic band of an international credit system, which trans­mitted the strain of the imperfectly restored currencies, first, from East­ern Europe to Western Europe, then from Western Europe to the United States. Ultimately, the United States itself was engulfed by the effects of the premature stabilization of European currencies. The final break­down had begun.

The first shock occurred within the national spheres. Some cur­rencies, such as the Russian, the German, the Austrian, the Hungarian, were wiped out within a year. Apart from the unprecedented rate of change in the value of currencies there was the circumstance that this change happened in a completely monetarized economy. A cellular process was introduced into human society, the effects of which were outside the range of experience. Internally and externally alike, dwin­dling currencies spelled disruption. Nations found themselves separated from their neighbors, as by a chasm, while at the same time the various strata of the population were affected in entirely different and often opposite ways. The intellectual middle class was literally pauperized; financial sharks heaped up revolting fortunes. A factor of incalculable integrating and disintegrating force had entered the scene.

"Flight of capital" was a novum. Neither in 1848, nor in 1866, nor even in 1871 was such an event recorded. And yet, its vital role in the overthrow of the liberal governments of France in 1925- 30 again in 1938, as well as in the development of a fascist movement in Germany in 1930, was patent.

Currency had become the pivot of national politics. Under a mod­ern money economy nobody could fail to experience daily the shrinking or expanding of the financial yardstick; populations became currency-conscious; the effect of inflation on real income was discounted in advance by the masses; men and women everywhere appeared to regard stable money as the supreme need of human society. But such awareness was inseparable from the recognition that the foundations of the currency might depend upon political factors outside the national boundaries. Thus the social bouleversement which shook confidence in the inherent stability of the monetary medium shattered also the naive

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concept of financial sovereignty in an interdependent economy. Henceforth, internal crises associated with the currency would ten3 to raise grave external issues.

Belief in the gold standard was the faith of the age. With some it was a naive, with some a critical, with others a satanistic creed imply­ing acceptance in the flesh and rejection in the spirit. Yet the belief itself was the same, namely, that bank notes have value because they represent gold. Whether the gold itself has value for the reason that it embodies labor, as the socialists held, or for the reason that it is useful and scarce, as the orthodox doctrine ran, made for once no difference. The war between heaven and hell ignored the money issue, leaving capitalists and socialists miraculously united. Where Ricardo and Marx were at one, the nineteenth century knew not doubt. Bis­marck and Lassalle, John Stuart Mill and Henry George, Philip Snow-den and Calvin Coolidge, Mises and Trotzky equally accepted the faith. Karl Marx had gone to great pains to show up Proudhon's Utopian labor notes (which were to replace currency) as based on self-delusion; and Das Kapital implied the commodity theory of money, in its Ricardian form. The Russian Bolshevik Sokolnikoff was the first postwar statesman to restore the value of his country's cur­rency in terms of gold; the German Social Democrat Hilferding im­periled his party by his staunch advocacy of sound currency principles; the Austrian Social Democrat Otto Bauer supported the monetary principles underlying the restoration of the krone attempted by his bitter opponent Seipel; the English Socialist, Philip Snowden, turned against Labor when he believed the pound sterling not to be safe at their hands; and the Duce had the gold value of the lira at 90 carved in stone, and pledged himself to die in its defense. It would be hard to find any divergence between utterances of Hoover and Lenin, Churchill and Mussolini, on this point. Indeed, the essentiality of the gold standard to the functioning of the international economic system of the time was the one and only tenet common to men of all nations and all classes, religious denominations, and social philosophies. It was the invisible reality to which the will to live could cling, when mankind braced itself to the task of restoring its crumbling existence.

The effort, which failed, was the most comprehensive the world had ever seen. The stabilization of the all-but-destroyed currencies in Austria, Hungary, Bulgaria, Finland, Roumania, or Greece was not only an act of faith on the part of these small and weak countries, which literally starved themselves to reach the golden shores, but it

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also put their powerful and wealthy sponsors—the Western European victors—to a severe test. As long as the currencies of the victors fluc­tuated, the strain did not become apparent; they continued to lend abroad as before the War and thereby helped to maintain the econ­omies of the defeated nations. But when Great Britain and France reverted to gold, the burden on their stabilized exchanges began to tell. Eventually, a silent concern for the safety of the pound entered into the position of the leading gold country, the United States. This pre­occupation which spanned the Atlantic brought America unexpectedly into the danger zone. The point seems technical, but must be clearly understood. American support of the pound sterling in 1927 implied low rates of interest in New York in order to avert big movements of capital from London to New York. The Federal Reserve Board accord­ingly promised the Bank of England to keep its rate low; but presently America herself was in need of high rates as her own price system began to be perilously inflated (this fact was obscured by the existence of a stable price level, maintained in spite of tremendously diminished costs). When the usual swing of the pendulum after seven years of prosperity brought on the long overdue slump in 1929, matters were immeasurably aggravated by the existing state of cryptoinflation. Debt­ors, emaciated by deflation, lived to see the inflated creditor collapse. It was a portent. America, by an instinctive gesture of liberation, went off gold in 1933) and the last vestige of the traditional world economy vanished. Although hardly anybody discerned the deeper meaning of the event at the time, history almost at once reversed its trend.

For over a decade the restoration of the gold standard had been the symbol of world solidarity. Innumerable conferences from Brussels to Spa and Geneva, from London to Locarno and Lausanne met in order to achieve the political preconditions of stable currencies. The League of Nations itself had been supplemented by the International Labor Office partly in order to equalize conditions of competition amongst the nations so that trade might be liberated without danger to standards of living. Currency was at the heart of the campaigns launched by Wall Street to overcome the transfer problem and, first, to commercialize, then, to mobilize reparations; Geneva acted as the sponsor of a process of rehabilitation in which the combined pressure of the City of London and of the neo-classical monetary purists of Vienna was put into the service of the gold standard; every inter­national endeavor was ultimately directed to this end, while national governments, as a rule, accommodated their policies to the need of

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safeguarding the currency, particularly those policies which were con­cerned with foreign trade, loans, banking, and exchange. Although everybody agreed that stable currencies ultimately depended upon the freeing of trade, all except dogmatic free traders knew that measures had to be taken immediately which would inevitably restrict foreign trade and foreign payments. Import quotas, moratoria and stand-still agreements, clearing systems and bilateral trade treaties, barter arrange­ments, embargoes on capital exports, foreign trade control, and ex­change equalization funds developed in most countries to meet the same set of circumstances. Yet the incubus of self-sufficiency haunted the steps taken in protection of the currency. While the intent was the freeing of trade, the effect was its strangulation. Instead of gaining access to the markets of the world, the governments, by their own acts, were barring their countries from any international nexus, and ever-increasing sacrifices were needed to keep even a trickle of trade flowing. The frantic efforts to protect the external value of the currency as a medium of foreign trade drove the peoples, against their will, into an autarchized economy. The whole arsenal of restrictive measures, which formed a radical departure from traditional economics, was actually the outcome of conservative free trade purposes.

This trend was abruptly reversed with the final fall of the gold standard. The sacrifices that were made to restore it had now to be made once more in order that we might live without it. The same institutions which were designed to constrict life and trade in order to maintain a system of stable currencies were now used to adjust indus­trial life to the permanent absence of such a system. Perhaps that is why the mechanical and technological structure of modern industry survived the impact of the collapse of the gold standard. For in the struggle to retain it, the world had been unconsciously preparing for the kind of efforts and the type of organizations necessary to adapt itself to its loss. Yet the intent was now the opposite; in the countries that had suffered most during the long-drawn fight for the unattain­able, titanic forces were released on the rebound. Neither the League of Nations nor international haute finance outlasted the gold standard; with its disappearance both the organized peace interest of the League and its chief instruments of enforcement—the Rothschilds and Mor­gans — vanished from politics. The snapping of the golden thread was the signal for a world revolution.

But the failure of the gold standard did hardly more than set the date of an event which was too big to have been caused by it. No less

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than a complete destruction of the national institutions of nineteenth century society accompanied the crisis in a great part of the world, and everywhere these institutions were changed and re-formed almost out of recognition. The liberal state was in many countries replaced by totalitarian dictatorships, and the central institution of the century— production based on free markets—was superseded by new forms of economy. While great nations recast the very mold of their thought and buried themselves into wars to enslave the world in the name of unheard-of conceptions of the nature of the universe, even greater nations rushed to the defense of freedom which acquired an equally unheard-of meaning at their hands. The failure of the international system, though it triggered the transformation, could certainly not have accounted for its depth and content. Even though we may know why that which happened happened suddenly, we may still be in the dark about why it happened at all.

It was not by accident that the transformation was accompanied by wars on an unprecedented scale. History was geared to social change; the fate of nations was linked to their role in an institutional transformation. Such a symbiosis is no exception in history; though national groups and social institutions have origins of their own, they tend to hitch on to one another in their struggle for survival. A famous instance of such a symbiosis linked capitalism and the seaboard nations of the Atlantic. The Commercial Revolution, so closely connected with the rise of capitalism, became the vehicle to power for Portugal, Spain, Holland, France, England and the United States, each of them benefit­ing from the chances offered by that broad and deep-seated movement, while, on the other hand, capitalism itself was spreading over the planet through the instrumentality of these rising Powers.

The law applied also in the reverse. A nation may be handicapped in its struggle for survival by the fact that its institutions, or some of them, belong to a type that happens to be on the down grade—the gold standard in World War II was an instance of such an antiquated outfit. Countries, on the other hand, which, for reasons of their own, are opposed to the status quo, would be quick to discover the weak­nesses of the existing institutional order and to anticipate the creation of institutions better adapted to their interests. Such groups are push­ing that which is falling and holding on to that which, under its own steam, is moving their way. It may then seem as if they had originated the process of social change, while actually they were merely its bene­ficiaries, and may be even perverting the trend to make it serve their own aims.

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Thus Germany, once defeated, was in the position to recognize the hidden shortcomings of the nineteenth century order, and to employ this knowledge to speed the destruction of that order. A kind of sinister intellectual superiority accrued to those of her statesmen in the thirties who turned their minds to this task of disruption, which often extended to the development of new methods of finance, trade, war, and social organization, in the course of their attempt to force matters into the trend of their policies. However, these problems themselves were em­phatically not created by the governments which turned them to their advantage; they were real—objectively given—and will remain with us whatever be the fate of the individual countries. Again, the dis­tinction between World Wars I and II is apparent: the former was still true to nineteenth century type—a simple conflict of powers, re­leased by the lapse of the balance-of-power system; the latter already is part of the world upheaval.

This should allow us to detach the poignant national histories of the period from the social transformation that was in progress. It will then be easy to see in what manner Germany and Russia, Great Britain and the United States, as power units, were helped or hampered by their relation to the underlying social process. But the same is true of the social process itself: fascism and socialism found a vehicle in the rise of individual Powers which helped to spread their creed. Germany and Russia respectively became the representatives of fascism and socialism in the world at large. The true scope of these social move­ments can be gauged only if, for good or evil, their transcendant char­acter is recognized and viewed as detached from the national interests enlisted in their service.

The roles which Germany or Russia, or for that matter, Italy or Japan, Great Britain or the United States, are playing in World War II, though forming part of universal history, are no direct concern of this book; fascism and socialism, however, were live forces in the insti­tutional transformation which is its subject. The elan vital which pro­duced the inscrutable urge in the German and Russian people to claim a greater share in the record of the race must be taken as factual data of the conditions under which our story unfolds, while the purport of Fascism and Socialism or New Deal is part of the story itself.

This leads up to our thesis which still remains to be proven: that the origins of the cataclysm lay in the Utopian endeavor of economic liberalism to set up a self-regulating market system. Such a thesis seems to invest that system with almost mythical powers; it implies no less than that the balance of power, the gold standard, and the liberal state,

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those fundamentals of the civilization of the nineteenth century, were, in the last resort, all shaped by one common matrix, the self-regulating market.

The assertion appears extreme, if not shocking in its crass material­ism. But the peculiarity of the civilization the collapse of which we have witnessed was precisely that it rested on economic foundations. Other societies and other civilizations, too, were limited by the material conditions of their existence—this is a common trait of all human life, indeed, of all life, whether religious or nonreligious, materialist or spiritualist. All types of societies are limited by economic factors. Nine­teenth century civilization alone was economic in a different and dis­tinctive sense, for it chose to base itself on a motive only rarely acknowl­edged as valid in the history of human societies, and certainly never before raised to the level of a justification of action and behavior in everyday life, namely, gain. The self-regulating market system was uniquely derived from this principle.

The mechanism which the motive of gain set in motion was com­parable in effectiveness only to the most violent outburst of religious fervor in history. Within a generation the whole human world was subjected to its undiluted influence. As everybody knows, it grew to maturity in England, in the wake of the Industrial Revolution, during the first half of the nineteenth century. It reached the Continent and America about fifty years later. Eventually in England, on the Con­tinent, and even in America, similar alternatives shaped daily issues into a pattern the main traits of which were identical in all countries of Western civilization. For the origins of the cataclysm we must turn to the rise and fall of market economy.

Market society was born in England—yet it was on the Continent that its weaknesses engendered the most tragic complications. In order to comprehend German fascism, we must revert to Ricardian England. The nineteenth century, as cannot be overemphasized, was England's century. The Industrial Revolution was an English event. Market economy, free trade, and the gold standard were English in­ventions. These institutions broke down in the twenties everywhere— in Germany, Italy, or Austria the event was merely more political and more dramatic. But whatever the scenery and the temperature of the final episodes, the long-run factors which wrecked that civilization should be studied in the birthplace of the Industrial Revolution, Eng­land.

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PART TWO

Rise and Fall of Market Economy

I.

SATANIC MILL

3

"HABITATION VERSUS IMPROVEMENT"

at the heart of the Industrial Revolution of the eighteenth century there was an almost miraculous improvement in the tools of production, which was accompanied by a catastrophic dislocation of the lives of the common people.

We will attempt to disentangle the factors that determined the forms of this dislocation, as it appeared at its worst in England about a century ago. What "satanic mill" ground men into masses? How much was caused by the new physical conditions ? How much by the economic dependencies, operating under the new conditions? And what was the mechanism through which the old social tissue was destroyed and a new integration of man and nature so unsuccessfully attempted ?

Nowhere has liberal philosophy failed so conspicuously as in its un­derstanding of the problem of change. Fired by an emotional faith in spontaneity, the common-sense attitude toward change was discarded in favor of a mystical readiness to accept the social consequences of economic improvement, whatever they might be. The elementary truths o' political science and statecraft were first discredited, then forgotten. It should need no elaboration that a process of undirected change, the pace of which is deemed too fast, should be slowed down, if possible, so as to safeguard the welfare of the community. Such household truths of traditional statesmanship, often merely reflecting the teachings of a social philosophy inherited from the ancients, were in the nineteenth century erased from the thoughts of the educated by the corrosive of a crude utilitarianism combined with an uncritical reliance on the alleged self-healing virtues of unconscious growth.

Economic liberalism misread the history of the Industrial Revolu­tion because it insisted on judging social events from the economic

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viewpoint. For an illustration of this we shall turn to what may at first seem a remote subject: to enclosures of open fields and conversions of arable land to pasture during the earlier Tudor period in England, when fields and commons were hedged by the lords, and whole coun­ties were threatened by depopulation. Our purpose in thus evoking the plight of the people brought about by enclosures and conversions will be on the one hand to demonstrate the parallel between the devastations caused by the ultimately beneficial enclosures and those resulting from the Industrial Revolution, and on the other hand—and more broadly—to clarify the alternatives facing a community which is in the throes of unregulated economic improvement.

Enclosures were an obvious improvement if no conversion to pas­ture took place. Enclosed land was worth double and treble the unenclosed. Where tillage was maintained, employment did not fall off, and the food supply markedly increased. The yield of the land mani­festly increased, especially where the land was let.

But even conversion of arable land to sheep runs was not altogether detrimental to the neighborhood in spite of the destruction of habita­tions and the restriction of employment it involved. Cottage industry was spreading by the second half of the fifteenth century, and a cen­tury later it began to be a feature of the countryside. The wool pro­duced on the sheep farm gave employment to the small tenants and landless cottagers forced out of tillage, and the new centers of the woolen industry secured an income to a number of craftsmen.

But—this is the point—only in a market economy can such com­pensating effects be taken for granted. In the absence of such an economy the highly profitable occupation of raising sheep and selling their wool might ruin the country. The sheep which "turned sand into gold" could well have turned the gold into sand as happened ultimately to the wealth of seventeenth century Spain whose eroded soil never recovered from the overexpansion of sheep farming.

An official document of 1607, prepared for the use of the Lords of the Realm, set out the problem of change in one powerful phrase: "The poor man shall be satisfied in his end: Habitation; and the gentleman not hindered in his desire: Improvement." This formula appears to take for granted the essence of purely economic progress, which is to achieve improvement at the price of social dislocation. But it also hints at the tragic necessity by which the poor man clings to his hovel, doomed by the rich man's desire for a public improvement which profits him privately.

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Enclosures have appropriately been called a revolution of the rich is against the poor. The lords and nobles were upsetting the social order, breaking down ancient law and custom, sometimes by means of vio­lence, often by pressure and intimidation. They were literally robbing the poor of their share in the common, tearing down the houses which, by the hitherto unbreakable force of custom, the poor had long regarded as theirs and their heirs'. The fabric of society was being disrupted; desolate villages and the ruins of human dwellings testified to the fierce­ness with which the revolution raged, endangering the defenses of the country, wasting its towns, decimating its population, turning its over­burdened soil into dust, harassing its people and turning them from decent husbandmen into a mob of beggars and thieves. Though this happened only in patches, the black spots threatened to melt into a uniform catastrophe.1 The King and his Council, the Chancellors, and the Bishops were defending the welfare of the community and, indeed, the human and natural substance of society against this scourge. With hardly any intermittence, for a century and a half—from the 1490's, at the latest, to the 1640's—they struggled against depopulation. Lord Protector Somerset lost his life at the hands of the counterrevolution which wiped the enclosure laws from the statute book and established the dictatorship of the grazier lords, after Kett's Rebellion was defeated with several thousand peasants slaughtered in the process. Somerset was accused, and not without truth, of having given encouragement to the rebellious peasants by his staunch denunciation of enclosures.

It was almost a hundred years later when a second trial of strength came between the same opponents, but by that time the enclosers were much more frequently wealthy country gentlemen and merchants rather than lords and nobles. High politics, lay and ecclesiastical, were now involved in the Crown's deliberate use of its prerogative to prevent enclosures and in its no less deliberate use of the enclosure issue to strengthen its position against the gentry in a constitutional struggle, which brought death to Strafford and Laud at the hands of Parlia­ment. But their policy was not only industrially but politically reaction­ary ; furthermore, enclosures were now much more often than before intended for tillage, and not for pasture. Presently the tide of the Civil War engulfed Tudor and early Stuart public policy forever.

Nineteenth century historians were unanimous in condemning Tudor and early Stuart policy as demagogic, if not as outright reaction­ary. Their sympathies lay, naturally, with Parliament and that body

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had been on the side of the enclosers. H. de B. Gibbins, though an ardent friend of the common people, wrote: "Such protective enact­ments were, however, as protective enactments generally be, utterly vain."2 Innes was even more definite: "The usual remedies of punish­ing vagabondage and attempting to force industry into unsuited fields and to drive capital into less lucrative investments in order to provide employment failed—as usual."3 Gairdner had no hesitation in appeal­ing to free trade notions as "economic law" : "Economic laws were, of course, not understood," he wrote, "and attempts were made by legis­lation to prevent husbandmen's dwellings from being thrown down by landlords, who found it profitable to devote arable land to pasture to increase the growth of wool. The frequent repetition of these Acts only show how ineffective they were in practice."4 Recently an economist like Heckscher emphasizes his conviction that mercantilism should, in the main, be explained by an insufficient understanding of the complexities of economic phenomena, a subject which the human mind obviously needed another few centuries to master.5 In effect, anti-enclosure legislation never seemed to have stopped the course of the enclosure movement, nor even to have obstructed it seriously. John Hales, second to none in his fervor for the principles of the Common­wealth men, admitted that it proved impossible to collect evidence against the enclosers, who often had their servants sworn upon the juries, and such was the number "of their retainers and hangers-on that no jury could be made without them." Sometimes the simple expedient of driving a single furrow across the field would save the offending lord from a penalty.

Such an easy prevailing of private interests over justice is often regarded as a certain sign of the ineffectiveness of legislation, and the victory of the vainly obstructed trend is subsequently adduced as con­clusive evidence of the alleged futility of "a reactionary intervention-ism." Yet such a view seems to miss the point altogether. Why should the ultimate victory of a trend be taken as a proof of the ineffectiveness of the efforts to slow down its progress? And why should the purpose of these measures not be seen precisely in that which they achieved, i.e., in the slowing down of the rate of change? That which is ineffectual in stopping a line of development altogether is not, on that account, altogether ineffectual. The rate of change is often of no less importance

[36]

than the direction of the change itself; but while the latter frequently, does not depend upon our volition, it is the rate at which we allow change to take place which well may depend upon us.

A belief in spontaneous progress must make us blind to the role of government in economic life. This role consists often in altering the rate of change, speeding it up or slowing it down as the case may be; if we believe that rate to be unalterable—or even worse, if we deem it a sacrilege to interfere with it—then, of course, no room is left for intervention. Enclosures offer an example. In retrospect nothing could be clearer than the Western European trend of economic progress which aimed at eliminating an artificially maintained uniformity of agricultural technique, intermixed strips, and the primitive institution of the common. As to England, it is certain that the development of the woolen industry was an asset to the country, leading, as it did, to the establishment of the cotton industry—that vehicle of the Industrial Revolution. Furthermore, it is clear that the increase of domestic weaving depended upon the increase of a home supply of wool. These facts suffice to identify the change from arable land to pasture and the accompanying enclosure movement as the trend of economic progress. Yet, but for the consistently maintained policy of the Tudor and early Stuart statesmen, the rate of that progress might have been ruinous, and have turned the process itself into a degenerative instead of a con­structive event. For upon this rate, mainly, depended whether the dispossessed could adjust themselves to changed conditions without fatally damaging their substance, human and economic, physical and moral; whether they would find new employment in the fields of oppor­tunity indirectly connected with the change; and whether the effects of increased imports induced by increased exports would enable those who lost their employment through the change to find new sources of sustenance.

The answer depended in every case on the relative rates of change and adjustment. The usual "long-run" considerations of eco­nomic theory are inadmissible; they would prejudge the issue by assuming that the event took place in a market economy. However natural it may appear to us to make that assumption, it is unjustified: market economy is an institutional structure which, as we all too easily forget, has been present at no time except our own, and even then it was only partially present. Yet apart from this assumption "long-run" considerations are meaningless. If the immediate effect of a change is deleterious, then, until proof to the contrary, the final effect is deleteriolis.

[37]

If conversion of arable land to pasture involves the destruction of a definite number of houses, the scrapping of a definite amount of employment, and the diminution of the supplies of locally available food provisions, then these effects must be regarded as final, until evidence to the contrary is produced. This does not exclude the con­sideration of the possible effects of increased exports on the income of the landowners; of the possible chances of employment created by an eventual increase in the local wool supply; or of the uses to which the land-owners might put their increased incomes, whether in the way of further investments or of luxury expenditure. The time-rate of change compared with the time-rate of adjustment will decide what is to be regarded as the net effect of the change. But in no case can we assume the functioning of market laws unless a self-regulating market is shown to exist. Only in the institutional setting of market economy are market laws relevant; it was not the statesmen of Tudor England who strayed from the facts, but the modern economists, whose strictures upon them implied the prior existence of a market system.

England withstood without grave damage the calamity of the en­closures only because the Tudors and the early Stuarts used the power of the Crown to slow down the process of economic improvement until it became socially bearable—employing the power of the central gov­ernment to relieve the victims of the transformation, and attempting to canalize the process of change so as to make its course less devastat­ing. Their chancelleries and courts of prerogative were anything but conservative in outlook; they represented the scientific spirit of the new statecraft, favoring the immigration of foreign craftsmen, eagerly implanting new techniques, adopting statistical methods and precise habits of reporting) flouting custom and tradition, opposing prescriptive rights, curtailing ecclesiastical prerogatives, ignoring Common Law. If innovation makes the revolutionary, they were the revolutionaries of the age. Their commitment was to the welfare of the commonalty, glorified in the power and grandeur of the sovereign; yet the future belonged to constitutionalism and Parliament. The government of the Crown gave place to government by a class—the class which led in industrial and commercial progress. The great principle of constitu­tionalism became wedded to the political revolution that dispossessed the Crown, which by that time had shed almost all its creative faculties, while its protective function was no longer vital to a country that had weathered the storm of transition. The financial policy of the Crown now restricted the power of the country unduly, and began to con-



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