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« Relevance of the Austrian School for the 21st Century | Main | Scholarship and the Free Society (July 23-29) »


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I have found the 1912 (or thereabouts) speeches of Theodore Roosevelt and of Woodrow Wilson interesting. Roosevelt's Progressivism and Wilson's were different in a number of important respects. If I remember correctly, Roosevelt wanted to "destroy" bigness while Wilson wanted to regulate it.


Wilson's speech to the New York Economic Club is precious in this respect. It is about the coming tide of socialism, and how big business must join with government and prevent it, and replace with a corporatist state (business, labor, government union).

James Weinstein's book The Corporate Ideal in the Liberal State is just fantastic on this.

Here are some trails to follow...
Bismark in Germany..trace his influence on American economic thought.

See what was happening in US Christian Theology at this time. See Mark Noll's books and resources at Wheaton College Graduate School.

I think these lines of thought influenced progressive economic thinking.

As I was reading this thread, I immediately thought of Thomas C. Leonard, and then noticed you mentioned him. I am not near as far along academically as others but I love to follow this site. I don’t even know how I stumbled upon Leonard's work but I have read all of it with deep interest. It left an impression on me because he discussed so many things I have not heard of before but it seemed so important to know because it led us to where we are today in many respects. He has done great work with his analysis of Eugenics and economics in the progressive era, the family and race in the progressive era, and he really helped me understand social Darwinism (clarifying the difference between individualist Darwinism and collectivist Darwinism). I read Liberal Fascism and thought Horwitz's review of it was pretty spot on. Ultimately, though I have not delved much beyond these sources, I would say Leonard's work is my favorite.

As for why the under consumption ideas taking strong hold, I think that we were starting from a relatively non-interventionist society. It seems natural for people to want to “tinker” with things to “make them better.” I would venture to guess that it was natural for politicians to promote those ideas since it would give them more power to "take action" and feel like they are "fixing" something (or give favor to their allies through policies). It’s always easier to say that we "are doing something" than to say we will let the market go through a natural correction. Its politically popular and that helped quickly spread the leviathan. Under consumption ideas gave them the ammo needed. It may seem natural for intellectuals to advocate these ideas because it would make them feel important in some way or that they are improving society. I think the demonization of the market with catchphrases/words used back then was effective in selling the ideas to the masses. The intellectual effort was effective enough to make the case for the higher-ups with the technical and "scientific" effort behind it. The collectivist thought was growing throughout the world and progressives were competing with that. I could be off in my understanding and, if so, would appreciate some direction . I would certainly love to read more about this and I’m glad to see more work being on it, from different angles. Leonard's book sure looks like it will be a good read when it comes out.

I don't know anything about American Progressivism.

But, I'll share something about Keynesianism. Keynes says that his ideas are "mildly conservative". To a certain strand of British thought they are.

Many upper class conservatives in Britain today believe in:
* Control of capital and land by benevolent long-term rulers similar to how land was controlled by aristocrats.
* Malthusian ideas about the environment and population.
* Need for the suppression of speculation in one way or another. (This is in some ways the opposite of the first point, control should be by long-term thinking upper-class people, not able but ambitious and short-termist middle-class people).

Keynes isn't really into Malthus' ideas about population. But, Keynes is into the rest.

The kind of Keynesianism American progressives, and indeed British progressives, support now is quite different.

Keynes is attractive for two reasons: 1) he not only gives you permission, but demands you "do something" in a crisis, all while still being able to claim you support liberalism, and 2) his economics is deeply intuitive, precisely because it is in fact nothing more than mathematized folk economics (and the math gives it the added benefit of appearing to be scientific!). Thus, the difficulty of understanding how a real complex process works was replaced by folk economics -- and given the simplicity of math, with its association with scientific knowledge, to legitimize it. People were essentially saying, unconsciously, "Thank goodness all that difficult, counterintuitive stuff about the economy was wrong, and what I've always believed since I was a child was right all this time!" And that's also why it is so attractive to noneconomists and undergrads. The undergrads eventually become professors, and politics is dominated by noneconomists, meaning they are going to turn to those economists who make sense to them -- i.e., those who embrace Keynesianism. It's a vicious circle of positive reinforcement of mathematized folk economics.

"What is your best guess as to why under-consumption (over production) ideas had little influence and then dominated policy discussions within a generation?"

I think Blaug covers this in _Economic Theory in Retrospect_ (1985, p.676) when he writes,

"...the Keynesian Revolution succeeded because Keynes produced the policy conclusions most economists wanted to advocate anyway but it produced these conclusions as logical inferences from a tightly knit if not always coherent theory, and not as endless epicycles on a full employment model of the economy. If we need any further evidence that that was indeed how contemporary economists saw the significance of Keynes, we only have to glance at American and British reviews of the General Theory which appeared in 1936 and 1937; most reviewers questioned the new theoretical concepts of the book but they generally dismissed Keynes policy conclusions as 'old hat'."

It's Daniel Rodgers not Douglas Rogers.

I would also look at Jim Kloppenberg's Uncertain Victory.

Craig --- Thank you for the correction, will change shortly.


Could it be that Keynesianism fits right in with the popular research current? Does the use of quantitative models have any thing to do wit it?


Sorry I missed HES. Was in Ecuador then.

The increase in public administration certainly fits your complicated story of developing German-inspired institutionalism and various strands of progressivism filtering this way and that. However, on the matter of the sudden popularity of underconsumptionist theory, this has a very simple explanation somehow missed by both you and every commentator so far: The Great Depression. Period.


Underconsumption theories gained popularity as early as the 1920s with Fosters and Catchings. Even Hayek responded.


Gabriel Kolko's Trimuph of Conservatism explains in detail how "conservative" big business interests lined up with Prorgessives to create state cpaitalism. The Progressives were a source of inspiration to Mussolini.

To add to Jerry's point, John Diggin's book, "Mussolini: The View from America," makes it very clear in great detail the extent to which many American progressives were drawn to Fascism and Corporativism in the 1920s and early 1930s.

Also useful are Arthur Ekirch's "Progressivism in America" (1974), and "The Three New Deals: Roosevelt's America, Mussolini's Italy, and Hitler's Germany" by Wolfgang Schivelbusch (2007).

For many American Progressives, fascism was a political ideology that rose above Marxian class conflict and "bridled" capitalism by offering a "third way" that unified all classes within the nation under a wise elite for rational planning and "national greatness" and "purpose."

As an example of the Progressive mind-set, here are the words of Richard Ely, co-founder of the American Economic Association, and a leader of the Progressive movement, who had studied in Imperial Germany under the German Historicists, from his 1895 book on socialism and social reform:

"Looking into the future we may contemplate a society with real, not merely nominal, freedom, to pursue the best; a society in which men shall work together for the common purposes, and in which the wholesale cooperation shall take place largely through government, but through a government which has become less repressive and has developed a positive side.

"We have reason to believe that we shall yet see great national undertakings with the property of the nation, and managed by the nation, through agents who appreciate the glory of true public service, and feel that it is God's work which they are doing, because church and state are one.

"We look forward to a society in which education, art, and literature shall be fostered by the nation, and in which the federal government, commonwealth, local community, and individual citizens shall heartily cooperate for the advancement of civilization . . . We may anticipate an approximation of state and society as men improve, and we may hope that men outside of government will freely and voluntarily act with trained officers and experts in the service of government for the advancement of common interests."

Indeed, if a "progressive" fascism had not been given a "bad name" due to the racist and anti-Semitic elements of the German version in the form of National Socialism under Hitler, it probably would not have fallen into total political, social and economic disrepute.

If Mussolini had remained neutral during the Second World War (the way that Franco kept fascist Spain out of the war), Italian fascism might have entered the post-World War II period retaining a degree of authoritarian respectability.

Indeed, in the 1950s, there were still appearing a number of books, especially by Portuguese and Latin American anti-communist Catholics, advocating a corporativist economic model for social harmony.

And in 1943, the Irish government prepared a "white paper" outlining a corporativist framework for the Irish economy.

American Progressivism grew out of the "new generation" of American intellectuals and scholars who studied under the members of the German Historical School. They and their students in America implicitly saw an affinity with a form of fascism.

Richard Ebeling

Interesting web site. Here is my take as a non-economist but avid Hayek reader.

I would say one has to look to society for the explanation. Economic theory as such only plays an insignificant part.
With rising prosperity, we went from a society with farmers living to a substantial degree off their own produce, to one where salaried work dominates. Self-employment also decreased during the 19th century. Thus, we went from a society where most people worked for themselves, and where cash was only a small part of the economy, to a world where most people were employed by a much smaller number of entrepreneurs and where money was used for most exchanges.

Politicians, maybe starting with Bismarck, discovered that they could be seen to be "doing something" by taking taxes, spending them or redistributing them to others. Previously, pork barrel spending to "spread the wealth around" would have meant taking physical pork barrels from one farmer and giving them to his neighbour. This would not have gone down well with independent western farmers. But it was the way Sumer and Ancient Egypt operated.

Spreading the wealth around could now be done in a way that made politicians look good because they were "doing something", whilst the tax payer, through the anonymous nature of taxes, believed that someone else, in particular the far-away tribe called "the rich", was paying for it all.

Along comes Keynes with a theory that legitimises this nonsense and it is instantly adopted. The politicians like it, and so do "the Anointed" in Sowells words, the intellectuals who suffer from the fatal conceit and believe that they should decide how to spend money "for people's own good".

I think people need to be circumspect about interpretations that hinge on the political opportinusm of intellectual opponents. You see this even today. Somehow Keynesianism is supposed to be good for politicians, and yet politicians seem to realize quite well that you don't win elections by saying you want to increase the deficit. The budget talks just broke down - because both sides demanded explicitly anti-Keynesian policies, after all! One side demands spending cuts, one side demands tax increases. Where is Keynes in any of this?

Anyway - speaking historically, I think we can't underestimate the very deep roots not just of underconsumptionism, but of a mercantilism (which would form a foundation for liquidity preference theory), and a Malthusianism w.r.t. people's understanding of the economics of the frontier. These roots go much, much deeper than F&C.

Joseph Dorfman is good on highlighting these points. Grampp is good too for discussing the liberalism of mercantilist theorists (despite the illiberalism of the politicians that used those theorists to justify protectionism).

I've always found Jefferson's letters to J.B. Say about Malthus interesting too.

This stuff goes way back. America was fertile for Keynesianism because everything that's been identified as "proto-Keynesian" has always done well in the history of thought in this country.

The final catalyst is precisely what Barkley points out - the Great Depression. Keynesianism was just waiting to happen here. In fact, if Irving Fisher had continued down his initial path with interest rate theory, we could all be talking about "Fisherianism" now instead of "Keynesianism".


I confess I do not know who Fosters and Catchings were, but underconsumptionism had been around for some time, going all the way back at least to Malthus, but around 1900 getting a big push from Hobson.

Of course, while underconsumptionism is a theme in Keynes, he did not see it as the main cause of downturns. That would have been the collapse of investment, exacerbated, if not initiated, by a collapse of animal spirits. Oh, and Keynes was not a big fan of deficits, although liking big deficits seems to be identified by many as the essence of Keynesianism.

As for those jumping up and down on the "progressivisim = fascism" theme, please do keep in mind that none of the American progressives opposed democracy or supported dictatorship, none, whereas having a dictatorship is a central part of the real fascist vision, and, please, do not drag in Road to Serfdom at this point. After all, for all of the progressivism that went on in the US, we never became a dictatorship (may be in more danger now of becoming one than at any time in the past, actually, secret Patriot Acts and all, but I do not think the current situation can blamed on Woodrow Wilson's racism and eugenics or the New Deal).

Keynes was in favor of deficit spending -- to reverse downturns. It is not much of a stretch to then argue that one needs to engage in deficit spending to prevent a downturn (which one may argue to be the Reagan defense). Certainly Obama is arguing that all his deficit spending has to do with his battling the recession. If the public is not spending, then the government must! Never mind that spending is not what creates wealth.

In any case, I haven't heard of a politician losing his seat because he engaged in deficit spending, either. Quite the contrary. Lip service and action are two different things.

Finally, facism is a kind of economic organization and is not necessarily associated with a particular kind of political order. One can be a democratic fascist (as the progressives were/are) or a dictatorial fascist (Hitler, Mussolini, Franco, Peron). Thus it is right to point out that the progressives were indeed fascists, as that is the economic organization they supported and preferred, even as they also argued for democracy. They did not see the two as incompatible. Of course, progressives also have a notion of democracy that has everything to do with outcomes rather than process, but that's another issue.


Keynes supported having a balanced budget over the business cycle, so, no, he did not support running deficits in order to prevent downturns, quite the opposite, although some of those who have supported what you describe have not described themselves as "Keynesians" (I'll just stay away from naming names on that one).

Really, people need to be careful about using this word "fascism," because it is unavoidably and ineluctibly tied to the dictatorial, warmongering racism and uber-nationalism of the Hitler and Mussolini regimes (granting that Mussolini was milder than Hitler). Sure, some of those around FDR admired Mussolini's economic policies, and some of the New Deal policies, particularly some of the monopolizing ones tried at the beginning of FDR's presidency, resembled and were at least partly inspired by those in Italy. And, yes, some of the progressives pushed racist and imperialist policies. But if you want to play Jonah Goldberg games and go around talking about "liberal" or "progressive" fascism, all the time smirking and winking, this is really intellectually irresponsible.

Given that, let us be clear. There is most definitely something called "corporatism" that has been around at least as an idea since sometime in the mid-19th century, coming initially out of the Roman Catholic Church, and long supported by it, which in those days did not give a hoot about democracy or civil liberties. That had its repressive version manifested by Mussolini's Italy and Hitler's Germany as well as a more liberal or progressive version, which we have never seen in the US, not even at the height of the New Deal, although Woodrow Wilson did articulate a desire for something that looks like it (and maybe Richard Ely as well).

We have seen this liberal or progressive corporatism in several post-WW II European countries, in some cases not inspired by government but by labor and management on their own as in the 1938 Saltsjobaden Agreement in Sweden, which involved national-level labor-management negotiations, a system that broke down in 1986 as the labor market became too diverse. However, while it lasted, Sweden had one of the best macroeconomic performances of any nation in the world.

I also note that one nation where this sort of corporatism still persists as much as anywhere and that has had one of the better macroeconomic performances around is none other than the actually existing Austria.


I said that Mussolini learned from the Progressives. Obviously, he addded his own touches.

Let us not forget that America in WWI had many of the features of a dictatorship. Wilson jailed his political opponents, etc.

Perhaps there is some hyperbole in Jonah Goldberg's characterization of the period as the first fascist dictatorship. But America was not a free society under the wartime Wilson administration.

There is a strong tendency in most societies to go into dictatorial modes when they get into full-blown wars. The US was a full-blown command capitalist economy during WW II, and FDR put Japanese in internment camps. Lenin's original model for the command central planning of the Soviet Union was none other than what was done in Germany during WW I. The difference between democracies and command dictatorships, whether of the socialist or capitalist variety is that when the war is over, the democracies undo their command mechanisms.

Just to reemphasize what is going on here, it is well known that a major motive for Hayek to write Road to Serfdom was his concern that all the command mode mechanisms in place in the UK during WW II would be continued and expanded after the war, and it was a similar fear that led to Keynes to largely approve of the book.

As it was, the Labour government did nationalize a lot of industries and massively increased the welfare state, but did not follow through on the parts of its platform involving increased central planning, and indeed undid those command mechanisms in the economy left over from the war.

Keynes argued that, in response to a downturn, the government should increase spending. Since raising taxes during a downturn would be to sucker-punch the economy when it's on its way down, and since revenues are not going up during a downturn, where is the government going to get that money? Either from deficit spending, or by printing money. Those are the choices. So either Keynes was in favor of deficit spending by government during a recession/depression or he was in favor of printing money to spend during a recession/depression. Or both. Keynes wasn't so incredibly stupid as to advocate raising taxes during a recession, as too many on the American left are, and he wasn't so stupid as to think that revenues would decrease during a downturn, so, again, the choices, given his belief that government spending would solve the problem of reduced consumption during a recession, are as stated. Certainly Keynes was in favor of printing money to overcome union wages, but that seemed to be during pretty much any time.

Very helpful, Alan Brinkley, _The End of Reform: New Deal Liberalism in Recession and War_ (Knopf, 1995);

_Harold Laski: A Life on the Left_ by
Isaac Kramnick & Barry Sheerman is helpful in showing interaction between the British Left and the American progressive movement.

A key "moment" in Progressive history if the move from Holmes to Brandeis to Frankfurter.

Holmes was deeply influenced by the historicism of German Hegelianism which lead to positivism in the law and a rejection of the spontaneous order / natural law / common law traditon. Brandeis sought to control Big Business via trust busting designed to cut big institutions back down to size. And Frankfurter represented an acceptance of Big Business, which was to be controlled via countervailing Big Institutions like Big Labor and Big Government.


I repeat: Keynes supported having a balanced budget over the business cycle. This means running surpluses during good times, which was in fact what was done in Britain back then, so he was writing about something that was in place. He never supported running deficits to prevent a possible downturn that might happen.

Barkley, that is not what I said. I did not say that he argued for running deficits to prevent a possible downturn. That is you reading that into what I said. I said that when a downturn occurs, there are two realistic choices: deficit spending or printing money. If one assume that there are surpluses during good times, that is at best optimistic -- and one cannot guarantee that the surplus will last long enough for the recovery to take place. Keynesians like Krugman most certainly are arguing that we should engage in deficit spending, and that it should have been far, far more than it currently is. I cannot help it if, among Keynes' shortcomings, he was also unrealistic about the nature of government income and spending as well. I am talking about the realistic and necessary consequences of his ideas.

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