How to Reshape America's Economy
Harrington, Michael
The following summary of socialist ideas for reshaping the American economy is taken from testimony that Michael Harrington, chairman of the Democratic Socialist Organizing Committee, gave before...
...So the victory of truckers and private cars over the railroads was accomplished at the public expense and at an enormous dollar cost...
...For more than a generation, the United States government has assumed that the welfare of the giant oil companies promotes the nation's interest...
...Third, we should explore Congressman Reuss's proposals for the creation of a mechanism of national credit allocation...
...And a similar point applies to present government fullemployment policy...
...First, the macroeconomic planning of basic priorities in the economy is once more slighted—or rather left to the corporations...
...I would be less than candid if I did not say that I hope that these ideas will become the first step toward a basic democratization of corporate power in America and the world...
...the threat to private profit in a full-employment economy...
...These multinational corporations were given governmental incentives, not to develop our coal reserves, not to invest in new energy technologies, not to develop refinery capacity within the United States, and so on...
...Current legislative proposals do involve nationalization, but only of the losses and COMMENTS AND OPINIONS 121 decrepit property of a system that the government and greedy managements did so much to destroy...
...This cannot be accomplished by "indicative" planning that leaves the fundamental corporate determinants in charge of the direction of the economy...
...We have overwhelming evidence with regard to the political and economic costs of a totally centralized economy...
...We should not have the public pay for the private cannibalization of the rail system...
...Those charters should require public and employee representation on the board of directors as a condition for doing business in interstate commerce...
...the contradiction between corporate profits and full employment—the Keynesian assumptions have been subverted...
...LET ME NOW APPLY these general remarks to an analysis of a few important aspects of the HawkinsHumphrey bill...
...CLEARLY, my proposals for government action are far from exhaustive...
...There are two limitations to this notion...
...We cannot assume, as the Hawkins-Humphrey bill does, that full employment can, or should, be achieved by making the government the subordinate of the private corporate economy...
...It imposed upon the American people the tremendous social costs of a corporate technology that maximized antipublic values...
...This is one source of funds, along with other cuts in Pentagon waste...
...When the commanding heights of the economy are occupied by corporations that can administer prices, as is the case in America today, the result is inflation...
...But liberals and reformers who disagree with my vision can share my immediate agenda...
...It motivated percent depletion and the expensing of intangible costs...
...Poor people, it found, got more mileage to the gallon than members of other social classes, and this was the only area in which the poor had any advantage—and this because they drove older, and therefore somewhat more efficient, cars...
...So there was a corporate demand in 1969 to restore profitability and price stability by means of the classic remedies: deflation, or, to put it less technically, through the suffering of working people and the poor...
...It took advantage of the enormous, publicly financed infrastructure created for the care and feeding of the private car to build bigger and bigger, less and less efficient, more and more polluting automobiles...
...If the priorities of the latter prevail, as they have under the Nixon and Ford administrations, the former is impossible to achieve...
...Let me stress one aspect of this last point...
...q It'll Take More Than That to Make Jerry Ford Seem Funny Robert Orben, a former script writer for Red Skelton and Jack Paar, the comedians, has been put in charge of speech-writing operations at the White House New York Times, January 22, 1976 q...
...Back in 1949, the United Auto Workers' union asked the car manufacturers to build a small, efficient vehicle, Detroit refused to do so for about a quarter of a century...
...Two related, and quite momentous, cases in point, the oil and auto industries, provide persuasive evidence on this count...
...In the vast majority of these decisions, businessmen need not explicitly consider the "public interest...
...Another and very important related point: Section 4 of the Act refers to the CETA councils creating "reservoirs" of useful, potential jobs...
...It demands a degree of democratic planning and socialization of the investment process, which means some structural changes in the American economy...
...There are enormous savings to be made in these areas simply by following in fact the principle we now honor in the breech: that those best able to pay should bear their share of the tax burden...
...Yet there was no plan for allocating these subsidies...
...Indeed, to speak of the New York City crisis for a moment, a good deal of our problem derives from the fact that Washington spent so much money on cheap housing and publicly subsidized roads to help the middle class flee the City...
...It is, of course, necessary to resist increases in the Pentagon budget and to look for possible reductions in it...
...In Section 3 of the bill, the president is cast in a passive role...
...It does not require totalitarian compulsion, which is economically inefficient as well as abhorrent on many other grounds...
...The following summary of socialist ideas for reshaping the American economy is taken from testimony that Michael Harrington, chairman of the Democratic Socialist Organizing Committee, gave before the Joint Economic Committee of the U.S...
...This faith is not merely a matter of conservative orthodoxy...
...In a just published book, The New American Ideology, Professor George C. Lodge of the Harvard Business School asserts similar criticisms of the Lockean assumptions about the American political economy, including our faith in a benign providence that somehow is thought to have created an economic universe in which private greeds interact to achieve a public good...
...The problems of competition were ameliorated...
...We have been funding "socialism" for the rich, leaving free enterprise to the small shopkeepers, the workers, and the poor...
...The corporate rear guard fulminates about "socialism" while the corporate avant-garde proposes new RFCs to socialize investment for private purposes...
...Railway Association told us that federal subsidies to transportation, from the early 19th century on to the present, totaled $450 billion, most of that money being spent during the last 50 years...
...The technology of the giant corporations has more ''externalities' than "internalities''—i.e., its social cost regularly and massively exceeds its private costs and benefits...
...Do we want workers to build Nevada casinos or another generation of Florida condominiums in preference to applying their energies to erecting housing for working people and the poor...
...While I see these things within the framework of my own democratic socialist analysis, all of them have been proposed by non- and even by antisocialists...
...I therefore do not make these proposals in terms of some distant utopia: they are necessary to the creation of full 122 COMMENTS AND OPINIONS employment in this decade and in the rest of this century...
...This was the rationale behind the special tax treatment devised for these companies in 1950—which was really a secret, undemocratic foreign aid program for reactionary Arab oil potentates, in which Washington had American corporations effectively operate as the tax collectors for foreign powers...
...We demonstrated—by means of the war economy of 1940-45, and later by the Kennedy-Johnson tax cuts of the '60s—that we know how to put unused capacity back to work in this manner...
...Similarly the automobile...
...What sources of material are cheapest, what product sells best, which production method is most efficient—these are questions to which answers that maximize private profit in most cases also maximize public welfare...
...They did the opposite...
...In this regard, the proposals of President Ford and Senator Jackson, for socializing the developmental costs of new energy technologies while turning the benefits over to private corporations, should be rejected...
...There are a number of ways in which this can be done, two of them particularly relevant to my analysis...
...My rejection of this thesis is not the unique consequence of a socialist analysis, though it is shaped by such an analysis...
...They are, rather, illustrative of an analysis and of a trend of possible action...
...I think there are occasions when government should be an employer of first resort...
...But beyond that point, I think the time has come to consider a suggestion made sometime ago by John Kenneth Galbraith: we should nationalize all those major defense contractors whose prime, or only, client is the government...
...the manipulation of the business cycle for political purposes, as under President Nixon...
...This is why the expansion of the public energy sector is so crucial...
...We have a basic, structural conflict, not a providential harmony...
...If the people take the risks in this area—and they are so large that the private sector refuses to take them—the people should make the decisions and reap the benefits...
...It is simply not true, certainly in terms of our recent experience, that answers that maximize private profit in most cases also maximize public welfare...
...Under such conditions, I believe that full-employment policy is a focal point, and we must demand that it be implemented by a socialization of more and more investment on behalf of the people...
...His analysis of the economy is assumed to accept private investment plans as a given and to tailor federal policy to that reality...
...But now we face the problems inherent in our old solutions: inflationary pressures...
...120 COMMENTS AND OPINIONS There are many instructive aspects to this history but only one of them is germane to the particular theme of this analysis: that corporations feel uncomfortable with full employment...
...The unstated assumption of both of these proposals is that the private employment of labor is the most efficient and socially desirable, and that federally financed work is a matter of last resort, to be found in "reservoirs" on "standby...
...Harrington began with a discussion of the Hawkins-Humphrey bill (the Equal Opportunity and Full Employment Act of 1975): The basic presuppositions of the bill before us assert a fundamental—to my mind, erroneous— Keynesian principle: that the private corporate infrastructure of the American economy is sound, so that the role of government is to supplement and facilitate its decisions with regard to what investments should be made, what kinds of jobs should be created, and how the benefits of this process are to be distributed...
...I do not think that the best use of human talent in this society is inevitably to be found in the private profitmaximizing occupations...
...In those cases the private risk is a fiction and the private gain at the public expense a reality...
...We surely are going to get structural change...
...I think there should be as much local involvement, decision-making, and administration as is possible...
...In the 1930s the United States, the last industrial democracy to build a welfare state, backed into a system of Keynesian planning...
...In the particular cases in which I have urged action, I think the pragmatic liberal can agree with me in seeing its necessity...
...Fifth, we should learn from the enormously effective experience of the Rural Electrification law...
...In the 1890s this country, and European capitalism, responded to the twodecadelong crisis of the laissez-faire economy by the creation of the modern corporation, the trusts, and the oligopolies...
...The nationalization and refurbishment of the American rail system would save energy, protect the environment and, as the UAW pointed out in its energy proposals, create an enormous number of socially useful jobs...
...To achieve socially useful full employment, we must be prepared to take steps to democratically plan and control some of the major investment decisions in this country...
...Ackley's optimistic assumptions—in this rather basic case, what maximizes public welfare, i.e., full employment, does not maximize private profit...
...and so on...
...A few years back, the Ford Foundation reported one of the incredible ironies in all of this...
...It is a perfect example of how the socialization of investment decisions need not be centralized in Washington...
...Congress last November...
...I disagree...
...The public railroad corporations should be designed according to the plan devised by the rail unions right after World War I: with a board of directors composed one-third of workers' representatives, one-third of public representatives, and one-third of representatives of the operating managers...
...Before turning to its specifics, some basic criticisms of this proposition are in order...
...I believe that we should provide for a much greater role for the public sector, as a source of jobs and as a means of planning production for social use (the specifics of how this might be done will be outlined in a moment...
...After more than 40 years of federal support, the oil companies succeeded in creating a wasteful, environmentally destructive energy economy that is needlessly vulnerable to the OPEC cartel...
...Earlier this year, the U.S...
...Nixon said...
...The recession that began in 1969 was initiated by the White House...
...So private corporate priorities cannot empirically be assumed to be social in character, and government subsidy programs cannot go on in their present chaotic way, financing revolutions in the American way of life without any democratic discussion...
...Second, experience with the planning councils under the Comprehensive Employment and Training Act of 1973 does not suggest that they have been as efficient or democratic as they should be...
...It was the theory behind the oil import quota system that kept Arab oil out of the United States when it was 119 cheap and without political strings...
...My policy conclusion is that government cannot relegate itself to an ancillary role, that it must intervene actively with regard to basic investment priorities, and to the best use of our human resources...
...the questions is what kind...
...If I can go back to, and contradict, Mr...
...One of the reasons impelling him to act in this fashion was that sustained full employment is a threat to private corporations...
...Washington provided subsidized credit to electrification co-ops and thus helped to facilitate one of the most important gains farm people have made in recent decades...
...Fourth, we should look toward the federal chartering of all major corporations, as Ralph Nader, ^veorge C. Lodge, and others have suggested...
...A related point: Section 4 of the bill emphasizes local planning councils as the prime instrumentality for identifying needs that can be met in the course of providing useful employment to people...
...But the instruments of that local participation must be much more effective than CETA councils have been...
...it is a fact he himself confirmed at the time...
...It was the explicit argument for effectively absolving the oil companies from the criminal provisions of the antitrust laws when the Department of Justice openly abandoned their enforcement in 1953-54...
...It was Adam Smith who argued, rightly in this case, that risk-takers should be decisionmakers and profit-takers...
...I could go on citing more examples, but the basic point now is plain: America paid tens of billions in direct and indirect public expenditures in order to support the private purposes of oil companies on the assumption that those purposes would benefit the public interest...
...The Treasury this year published a list of "tax expenditures" in the federal budget...
...Second, we should nationalize one existing major oil company and provide it with privileged access to the development of energy resources on public property...
...it was a subsidiary reason for the commitment of more than $70 billion for interstate highways dedicated to the glory of the private car and the destruction of mass transit...
...We should, rather, achieve full employment by democratically investing in our social needs...
...and the possibility of serious local participation is conditioned by the success of federal efforts to get some kind of democratic control of the society's basic investment decisions...
...First, we should nationalize the railroads in the United States...
...For when there is full employment, the labor market tightens up, unions become more combative, and wages tend to rise at the expense of profits...
...So on three counts—the antisocial tendencies of the corporate development of technology...
...In May 1967, for instance, Gardner Ackley, a leading spokesperson of the liberal point of view, said: If one were to examine all of the thousands of decisions made daily by the managers of the modem corporations, I think he would be struck by the relatively small number in which significant questions of conflict between public and private interest arise...
...This is not a Watergate secret that had to be extracted from the President...
...the economy...
...Finally, an obvious question arises: How does one finance these things without incurring a ruinous inflation...
...nor does government have reason for concern...
...TO GENERALIZE, it is an ideological, unscientific proposition to assert that the investment decisions of the private sector, even the ones made on a much more sophisticated profit calculus than those of the robber barons, promote the common good...
...They total around $94 billion, and we know from an analysis prepared for Senator Mondale that they discriminatorily reward the rich: e.g., the privileged character of capital-gains income, or the multibillion-dollar subsidy to the housing of the wealthy and the upper middle class contained in the perverse priorities of the deduction of interest on the mortgage...
...This policy was too politically dangerous, as the 1970 elections demonstrated, and it was followed by a preelection heating of the economy in 1971-72, and a postelection slamming-on of the brakes in early 1973, a catastrophic decision from which the nation still suffers...
...We should establish a national transportation plan that would determine, on the basis of social needs, how subsidies are allocated to the private sector and that would have a public sector of sufficient weight to influence the entire industry...
...And Section 6 calls for the creation of a "standby" Job Corps...
...The result was that tens of billions were assigned to private corporations on the basis of an intraindustry competition held in the corridors of power...
...We now must see to it that we do not continue that outrageous trend, buying full employment by further increasing the maldistribution of wealth and the corporate misuse of resources...
...We are going to strive for price stability by "cooling off" the economy, Mr...
...the chaotic, antipublic character of a public subsidy system subordinated to corporate priorities...
...Any cutbacks requiring the closing of defense installations and the loss of jobs must, of course, be accompanied by an explicit plan for redeploying the people involved in work at least as remunerative as what is being abolished...
...Senator Church's hearings on the multinationals documented this point brilliantly...
...the problems of monopoly were created...
...It assumed that all the government had to do was to establish a proper economic climate for the private economy by stimulating, or restraining, aggregate demand and investment...
...That principle can and should be applied to consumer cooperatives, housing cooperatives, community development corporations, and the like...
...A similar, if unformulated, view underlies the Hawkins-Humphrey bill...
...Let me stress my conviction that we are at one of those moments in American history when structural change is on the agenda...
...It has, among other things, also helped to isolate the central city along with the poor and the minorities who live there, threatened the environment, promoted suburban sprawl, and so on...
...Along similar lines, we should consider the creation of a national bank—but not one that would simply get the risky leavings from the private banks...
...This, in turn, means that government must have a much more systematic and conscious method for determining its priorities—democratically, on the basis of maximizing social values—and of effecting them in the economy...
...I believe that the Congress should consider a number of projects, valuable and urgent in themselves, which could provide work for the unemployed and a means whereby society could assert a democratic social control over at least some of the investment decisions in...
...In specifying some job-generating activities that I think should be undertaken here and now, these criticisms can be seen in more explicit, counterposed detail...
Vol. 23 • April 1976 • No. 2
