Can Capitalism Survive? - Benjamin A. Rogge

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as a whole behave when facing direct attack. They talk and plead—or hire people to do it for them; they snatch at every chance of compromise; they are ever ready to give in; they never put up a fight under the flag of their own ideals and interests—in this country there was no real resistance anywhere against the imposition of crushing financial burdens during the last decade or against labor legislation incompatible with the effective management of industry.... Means of defense were not entirely lacking and history is full of examples of the success of small groups who, believing in their cause, were resolved to stand by their guns. The only explanation for the meekness we observe is that the bourgeois order no longer makes any sense to the bourgeoisie itself and that, when all is said and nothing is done, it does not really care.13

      II

      We now have in front of us Schumpeter’s 1942 prediction of things to come—and a most unpleasing prospect it is indeed (at least to those who think even tolerably well of capitalism). What can we say of this prophecy in 1974? Is Schumpeter’s analysis even now being validated by the course of events or is it not? I take no pleasure in reporting to you my own conviction that the course of events is lending ever greater credibility to the Schumpeter thesis. I do not propose to repeat here each piece of evidence that leads me to that conclusion. But here are some samples.

      Do we or do we not have a surplus of intellectuals (as defined by Schumpeter)? Are they or are they not, by and large, critical of the American businessman and of the system of which he is a part? Do they or do they not “nurse left wings and scowling minorities, sponsor doubtful or submarginal cases” (such as the lettuce boycott)? Do not these critics of capitalism largely control the world of the academy? of the media? of the pulpit? When did you last see a businessman treated sympathetically in a novel or a play? Whose name is better known to the American people: Ralph Nader or the president of General Motors or General Electric?

      Can we find in the masses of the people any real understanding of the system that has heaped riches upon them or any instinct to defend from attack the central figure in that system, the businessman? Are they not, as Ortega has put it, the spoiled beneficiaries of a process they neither understand nor appreciate?

      But neither of these would be of first importance if the businessman himself were even occasionally interested in the survival of the system, aware of what that really means, and willing to work for it. That he is not, in the typical case, any of these, most of the time, is more or less clear.

      I offer in evidence the following examples: first, the tendency of the corporate leadership of this country to parrot the talk about the social responsibility of the businessman. With Adam Smith, I have never known much good done by a man who affected to trade for the public good. And, as Professor Milton Friedman has put it so many times, the way in which the businessman can best serve society is to try to maximize his profits within the law. Nothing is more clearly anticapitalist than the notion that the profit-directed activities of the businessman are antisocial, and the related notion that he can serve society only by eschewing that goal and directing his activities according to his (or some intellectual’s) idea of the public good.

      A second example is the response of the business community to the imposition of wage and price controls in the summer of 1971. For several years prior to that time, I had been collecting a folder of statements by leading businessmen demanding that such controls be established, and I have now added to that folder all of the statements from the same men (and their principal organizations) congratulating the President on his wisdom in imposing controls.

      (It is of some interest to note that the first economist of note to congratulate President Nixon on his wisdom in imposing controls was John Kenneth Galbraith. Of course this compliment was a little backhanded; he noted that Nixon had opposed such controls throughout his political life but, as he put it, “fortunately the President is a man without principle or scruple, willing to do what is expedient and necessary.” The fact is that Nixon took over a ship under heavy inflationary stress, induced by the unwise fiscal and monetary policies of his predecessors. It was as if the captain of the Titanic, immediately after his ship hit the iceberg, had turned to his second in command and said, “Now you’ve always wanted a ship of your own. Take over.”)

      Direct controls do not and cannot stop inflation (only an end to new-money-financed deficits can do that); they destroy the sensitive signal system that is at the center of a market economy; they are an economic absurdity and a moral monstrosity—yet we find them supported by some substantial part of the American business community. In fact, the response of the businessman to the general encroachment of government in his affairs has been similar to that predicted by Schumpeter and similar to the response of the native girl to Lord Jim’s advances, described by Conrad as follows: “He would have ravished her, but for her timely compliance.”

      John Kenneth Galbraith and his friends have indeed taught the businessman well, and what they have taught him is to repeat the phrases that must eventually sound his own death knell. The capitalist fortress is indeed almost naked of defenders and is encompassed round with a host of enemies.

      III

      Are there no signs pointing in the other direction? Are there no bright spots anywhere? Must the Schumpeterian process work its way to its appointed end? Is there nothing that can be done? Is mine not a defeatist message?

      I begin my reply with a statement by Schumpeter in the preface to the second edition:

      This leads to the charge of “defeatism.” I deny entirely that this term is applicable to a piece of analysis. Defeatism denotes a certain psychic state that has meaning only in reference to action. Facts in themselves and inferences from them can never be defeatist or the opposite whatever that might be. The report that a given ship is sinking is not defeatist. Only the spirit in which this report is received can be defeatist: The crew can sit down and drink. But it can also rush to the pumps.14

      As you would guess, I am suggesting that such as are inclined rush to the pumps. But is the situation really all that desperate? Are there any hopeful signs? The flow of human experience is always disturbed by eddies and cross currents and the cutting of new channels, and is always complex. There are some businessmen who are aware of and attempting to do something about the problem. Not all the intellectuals are critics of capitalism. But the flood tide is still close to what Schumpeter predicted it would be, and the outlook is anything but reassuring.

      My self-assigned task here has been one of diagnosis, not prescription. I offer you in closing the only possible assurance of my presentation. It comes from that master student of human affairs, Adam Smith, and it was penned at a time when the outlook for capitalism was less bright than it is today. Here is what he had to say:

      This frugality and good conduct, however, is upon most occasions, it appears from experience, sufficient to compensate, not only the private prodigality and misconduct of individuals, but the public extravagance of government. The uniform, constant, and uninterrupted effort of every man to better his condition, the principle from which public and national, as well as private opulence is originally derived, is frequently powerful enough to maintain the natural progress of things toward improvement, in spite both of the extravagance of government, and of the greatest errors of administration. Like the unknown principle of animal life, it frequently restores health and vigour to the constitution, in spite, not only of the disease, but of the absurd prescriptions of the doctor.15

       The Philosophy of Freedom

      In this section I present those papers in which I have attempted to set forth exactly what I stand for and why. The first paper, “The Case for Economic Freedom,” was given as a speech on numerous occasions (particularly at seminars organized by the Foundation for Economic Education at Irvington,

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