AMERIKAN KULTUR KAMPF

Anti-LGBTQ nonprofits, businesses and schools received millions in PPP funds

TayebMEZAHDIA / Pixabay
Meaghan Ellis December 12, 2020

The Paycheck Protection Program (PPP) recipient list released has revealed that several non-profit organizations, businesses, and schools with policies that are particularly discriminatory against lesbian, gay, bisexual, transgender, and queer individuals received millions in loan funds amid the pandemic, according to information released by the Small Business Administration.

The program, which was intended to be a financial relief effort for small businesses facing peril amid the coronavirus pandemic, awarded a total of approximately $2.5 million to seven groups including "the American College of Pediatricians, American Family Association, Center for Family and Human Rights (C-Fam), Church Militant/St. Michael's Media, Liberty Counsel, Pacific Justice Institute and Ruth Institute," according to NBC News.

It has been reported that all seven groups have been categorized as "anti-LGBTQ hate groups" by the Southern Poverty Law Center (SPLC). According to the data, the American Family Association received $1.4 million of the $2.5 million total.

Now, LGBTQ advocates are speaking out about the latest reports criticizing the pandemic program and the Trump administration's priorities. Cassie Miller, an SPLC data analyst, criticized the Trump administration for funding discriminatory groups while true small businesses suffer.

"Extremist movements thrive in climates of political uncertainty," she said. "Now, the government is doing even more to help hate groups by handing them millions of dollars in forgivable loans.

Kyle Herrig, president of the watchdog firm, Accountable.US, also criticized the priorities of the administration which led to bailouts for larger businesses — the exact opposite of the program's intended purpose.

"It is hard to find a clearer example of the Trump administration's warped priorities than allowing countless mom-and-pop shops to go under without proper relief while bailing out wealthy and well-connected anti-LGBTQ enterprises on Americans' dime," Herrig said in an email.

Justin Nelson, president of the National LGBT Chamber of Commerce, also had a similar perspective. as he expressed concern about LGBTQ-owned small businesses that have faced pandemic-related struggles similar to mom and pop businesses. Despite submitting applications for PPP loans, Nelson indicated that only a small number of the businesses were awarded funds.

"These folks are worried about keeping the lights on," he said. "We had a number of businesses that applied, and only a small number that received funding."

Thorstein Veblen

The Gadfly of American Plutocracy


Far from a marginal outsider, a new biography contends, Thorstein Veblen was the most important economic thinker of the Gilded Age. His critiques of capitalism and economic theory speak to our own era of economic injustice.

SIMON TORRACINTA

CLASS & INEQUALITY


Veblen: The Making of an Economist Who Unmade Economics
Charles Camic
Harvard University Press, $39.95 (cloth)

In 1893 financial panic triggered a four-year depression in the United States, then the most severe in the nation’s history. Bank runs, shuttered factories, and plummeting wheat prices put millions out of work. In Chicago alone, as many as 180,000 workers were jobless by the end of the year.

Veblen was perhaps the most accomplished and certainly the most original American economist of his era.

An attempt by the Pullman Palace Car Company in the city’s South Side to impose a 30 percent wage cut on its workforce in the spring of 1894 led to a walkout by the newly formed American Railway Union, led by Eugene Debs (not yet famous as the socialist firebrand who would later win 6 percent of the vote in the 1912 presidential election). It quickly escalated into full-scale boycott of luxury Pullman cars by hundreds of thousands of railroad workers across the country—the infamous Pullman strike, which took place between May and July. With the railways paralyzed, President Grover Cleveland sent federal troops to Chicago, and pitched battles—at times lethal—erupted in working-class neighborhoods. “This is no longer a strike,” the Chicago Tribune thundered: “This is a revolution.” That same spring, hundreds of desperate, unemployed workers, calling themselves the Army of the Commonwealth of Christ, marched from Ohio to the White House, demanding the federal government offer relief in the form of an ambitious public works program to be funded by the unprecedented issuance of fiat money. Another 700 workers from the northwest forcefully commandeered a train to make the trip to D.C., fending off marshals until federal troops intercepted them in Montana.

This was the atmosphere surrounding the campus of the University of Chicago, then only a few years old, which had just hired a young Norwegian-American economist named Thorstein Veblen two years earlier. In June of 1894 Veblen remarked on these events of worker action for the Journal of Political Economy; he was its founding managing editor. Focusing on Army of the Commonwealth, he dismissively observed “a general conviction that society owes every honest man a living.” These men, he suggested, had fallen prey to the “articulate illusion” of “greenbackism,” to “protectionism,” “populism,” or to “any other of the ramifications of the paternalistic tree of life.” Yet his teaching at Chicago and book reviews for the Journal in this moment tell another story, indexing a deep interest in the agenda of “socialism” emerging both from the American working class—in 1893, the AFL Convention adopted a political program with an explicit call for the “collectivization of industry”—and from Marxist theory emanating across the Atlantic. Despite his ridicule of the march’s proposals, Veblen credited it and its direct appeal to the federal government “an expression of the fact latterly emerging into popular consciousness, that the entire community is a single industrial organism, whose integration is advancing day by day, regardless of any traditional or conventional boundary lines or demarcations.”

Veblen’s ideas have a new urgency in what many have called our new Gilded Age.

The ambiguities of this stance were typical of Veblen, perhaps the most accomplished and certainly the most original American economist of his era, and subject of a landmark new biography by sociologist Charles Camic. Though a fulsome critic of the flagrant predations of Gilded Age capitalism and biting chronicler of its business aristocracy, he could appear indifferent to the popular movements that drew on similar arguments. Prescient in recognizing the interconnectedness of individual fates within a country rapidly becoming a single industrial whole, he was unremittingly hostile to reform with any shade of “paternalism”—especially from the state. Living through economic convulsion and class conflict unlike any other in U.S. history, he often preferred to retreat into the long view of an evolutionary perspective that reduced the present to a little speck in the passage of millennia. The historian John Patrick Diggins neatly summarized some of these ambiguities in the preface to his 1978 study The Bard of Savagery:


On the left Marxists admire his critique of capitalism but are piqued by his rejection of Hegel and dialectical materialism; liberals value his attack on big business but are disturbed by his skepticism about historical progress; conservatives rejoice in his exposure of the foibles of mass society but are shocked by his disrespect for the rich and the powerful; and feminists esteem his understanding of the archaic basis of masculine domination but are puzzled by his own relationships with women. Veblen seems to delight everyone and satisfy no one.

Yet despite these antinomies, Veblen’s ideas inarguably have a new urgency in what many have called our new Gilded Age, as wealth inequality has soared past mid-twentieth century levels to approach that of its namesake. The objects of Veblen’s notorious critique in The Theory of the Leisure Class (1899)—“conspicuous consumption,” “wastefulness,” “pecuniary culture,” the “parasitism” of elites—strike a new resonance as stocks soar to record highs while millions are out of work or forced to labor in unsafe conditions, as the ultra-rich helicopter to the Hamptons for the pandemic while everyone else shelters in place, as the billionaire president conducts affairs of state from his many golf resorts. “Real estate,” Veblen once remarked, “is an enterprise in ‘futures,’ designed to get something for nothing from the unwary, of whom it is believed by experienced persons that ‘there is one born every minute.’” Sound familiar?

Practically since his death in 1929, serious attention to Veblen’s thought and the distinctive social and intellectual world in which it developed has been hampered by his portrait as a reclusive outsider, a “marginal man” who translated the ressentiment of his alienation from the country’s elite—as the son of first-generation Norwegian immigrant farmers in the Upper Midwest—into acid critique of American mores. Stories of aloof temperament, lousy teaching, and womanizing have mixed together into a heady reputational cocktail, leaving even his acolytes a little apologetic. Bitter about his mistreatment by the academy, in his later life Veblen seemed at times to relish in his outsider image; his dying wish was “to be cremated . . . as expeditiously and inexpensively as may be, without ritual or ceremony of any kind,” with “no tombstone, slab, epitaph, effigy, tablet, inscription or monument of any name or nature . . . set up in my memory.” This basic narrative was reproduced by his first biographer Joseph Dorfman in Thorstein Veblen and His America (1934), a touchstone even for his later admirers. That Veblen left little correspondence and no archive behind has made it all the more difficult to recover an alternative perspective.

The stakes of this new biography are more than reputational: what Charles Camic really uncovers are the resources Veblen drew upon to make sense of his era—one of disquieting echoes with our own.

A sociologist of knowledge and veteran Veblen scholar, Camic’s overriding aim is to demolish this received opinion. Through careful reconstruction and prodigious archival sleuthing, he convincingly presents a Veblen as a “consummate academic insider,” trained at four leading universities of his day by the esteemed thinkers of his generation, well-respected within the economic profession, speaking confidently to its central theoretical debates, and deftly employing the conceptual repertoire of late nineteenth-century American thought. (To boot, Veblen is acquitted on charges of personal coldness, poor teaching ability, and all but one case of extramarital relations.) The stakes of this excavation are more than reputational: what Camic really uncovers are the resources Veblen drew upon to make sense of his era—one of disquieting echoes with our own.

Born in 1857 to a close-knit Norwegian family in Cato, Wisconsin, Veblen moved as a child to Rice County, Minnesota, as his parents steadily pushed further west to escape the advancing frontier of capitalist integration. (At home the chief language was Valdris, the southern-Norwegian dialect.) Economic historians Jeremy Atack and Fred Bateman argue that, in this antebellum period, a fully egalitarian wealth distribution “was more nearly realized in the rural northern United States than elsewhere in human history.” This singular experience of the homestead economy provided Veblen with a nostalgic vision of “self-sufficient” producers that he counterposed throughout his life with those—like the small-town merchants and land speculators of his early life—forever leeching on the “productive labor” of others. Infused with the Lutheran moralism of his upbringing, this distinction between honest labor and wasteful idleness would be one he put to work throughout his career.

Serious attention to Veblen’s thought has been hampered by his portrait as a reclusive outsider—a “marginal man” who translated the ressentiment of his alienation from the elite into acid critique of American mores.

Fortuitously for Veblen, his family farm lay only a few miles from the new Carleton College in Northfield, Minnesota, and the unusual decision of his parents to continue his education set him quite accidentally on an academic path. An encounter with the economist John Bates Clark, then teaching at Carleton at the outset of his own career first kindled his interest in political economy, although it was the more prestigious discipline of philosophy that Veblen initially undertook to study for a doctorate at Johns Hopkins, then the leading model of a modern research university in the United States. Transferring to Yale to complete his doctorate, he became in 1884 one of the first dozen men to earn a doctorate in the subject at an American university.

Veblen subsequently spent six years back in Minnesota recuperating from a mysterious illness, and trying and failing to secure an academic position (the academic job market, then as now, was not great), before taking the extraordinary step—mostly unheard of today, and certainly so in the 1890s—of getting another PhD to enhance his prospects, this time in political economy. He began this work at Cornell but transferred once more when he followed his mentor, the economist James Laurence Laughlin, to Chicago, where he finally took a junior faculty position in 1894.

By the completion of this fairly remarkable trajectory, Veblen had studied under a pantheon of distinguished teachers, including the economists Clark, Laughlin, and Richard T. Ely, the philosophers Charles Sanders Peirce, George Sylvester Morris, Noah Porter, and George Trumbull Ladd, the historians Herbert Baxter Adams, Moses Coit Tyler, and Herbert Tuttle, and the proto-sociologist William Graham Sumner. Few of these are familiar names to twenty-first century ears, but they were pivotal figures nineteenth-century American intellectual life. Beyond academic pedigree, Camic suggests that Veblen’s teachers shared a fundamental conceptual repertoire that the economist, through a process of “repetition-with-variation,” imbibed and then reworked to apply to the key theoretical problems of economics at the turn of the century.

Veblen’s ideas were informed by a deep faith in the progressive power of scientific research and the profound influence of an evolutionary perspective on both biological and social life.

This shared repertoire included a deep faith in the progressive power of scientific research (be it in natural history, mental philosophy, or archivally informed biblical criticism), and the profound influence of an evolutionary perspective, taken from both Charles Darwin and Herbert Spencer, on both biological and social life. In the context of an emergent “social science,” this outlook lent itself to a focus above all on the progressive evolution of “institutions”—social, legal, cultural, economic—through human history.

At Hopkins, the economist Ely and the historian Adams, both influenced by the German historicism they absorbed during their doctorates at the University of Heidelberg, aspired “to place the study of society on a scientific footing” in their shared department “by tracing the course of economic, political, and other institutional developments over the historical period since antiquity.” A student of the German historical economist Karl Knies, Ely excoriated classical political economy (in the style of Adam Smith and David Ricardo) for making “universal self-interest the preponderating cause of economic phenomena,” a message further reinforced by Sumner at Yale. Sumner, for his part, sought in parallel to construct a new science of sociology tracing the “the structure and functions of the organs of society,” accepting that were “no bounds to the scope of the philosophy of evolution” as applied to social life. This philosophy of evolution was likewise reinforced by Peirce, who lionized Darwin for introducing a “probabilistic” account of scientific laws in his On the Origin of Species (1859), in accounting for the contingency of natural variation—an admiration shared by Veblen’s later colleagues in practically every department at Chicago, from the biologist Jacques Loeb to the philosopher John Dewey.

There is no doubt that Veblen drew on this rich intellectual climate. But while Camic’s theme of repetition with variation is argumentatively compelling, it can be narratively unsatisfying. In line with the author’s commitments to the approach of French sociologist Pierre Bourdieu, over a hundred and fifty pages (some forty percent of the text) are devoted to Veblen’s education: the effect is of a rather encyclopedic bildungsroman, in which our young hero ventures from campus to campus, filling out the lengthening pages of his curriculum vitae. Meanwhile, though Camic describes the momentous political and economic transformations of the period, he rarely discusses Veblen’s own experience or understanding of them, to the extent this can be reconstructed from a fragmentary archive, until we get to the later scholarly output for which he became famous. Still, the biography succeeds in moving Veblen from the margins of ­fin-de-siècle intellectual life and placing him squarely in the center.

Shortly after Veblen arrived in Hyde Park, the metropolis around him erupted in open revolt. Not coincidentally, the central debate among American economists at this moment concerned the just compensation of “capital” and “labor”—the same question over which blood was being spilled across the city.

The biography succeeds in moving Veblen from the margins of ­fin-de-siècle intellectual life and placing him squarely in the center.

A central figure in this debate was Veblen’s old Carleton teacher John Bates Clark. In his early career, when Veblen first encountered him, Clark—himself taught by historicists in Zurich and Heidelberg—had equally taken to task English political economy for its incapacity to accommodate historical change within it its “mazes of logical wandering.” In his early writing Clark was a searing critic of the “latent brutality” of the new corporate capitalism in the United States, which he warned was leading to “socialistic tendencies” and “communistic agitations.” In “How to Deal with Communism,” written in the wake of the Great Railroad Strike of 1877, involving some 100,000 workers and violently put down by federal troops, he frankly charged that:
We offer a man a pittance, and tell him to take it and work for us from morning till night or starve; but we do not coerce him. It is at his option to choose whether he will work or not; he is free you observe! . . . We kill men, it is true; but not with cudgels in open fight. We do it slowly, and frequently take the precaution to kill the soul first; and we do it in an orderly and systematic manner. Indeed we have any number of books and learned professors to tell us precisely in accordance with what laws we may kill them, and indeed must kill them, if we will not break with the system of which we are a part.

Over time, however, perhaps due to continuation of major social upheaval throughout the 1880s, Clark’s position on the labor movement hardened. Drawing on the resources of the new “marginalist” theory coming from Europe, he developed in the early 1890s a theory of the “distribution of wealth” that became an object of vigorous contention within the discipline. Proceeding from the assumption that entrepreneurs always employed the “factors” of capital and labor in production to maximize profits, Clark argued that the amount of each factor used, determined by the pull of supply and demand reflected in relative prices, always followed from the precise value each added to final profits. In other words, as he put it in his landmark The Distribution of Wealth (1899), “labor tends to get, as its share, what it separately produces,” and “capital does the same.” The inequities of the Gilded Age, in this account, were merely the natural outcome of the superior productivity of capital: “We get what we produce—such is the dominant rule of life.”

According to Veblen, the value of an object of consumption for the leisure class often derived from its lack of any possible association with work or productivity.

This idea, what we today call “marginal productivity theory,” is still embedded into the assumptions of modern economics. But Camic shows that Veblen used the considerable intellectual arsenal developed in his long apprenticeship to mount a full-scale assault on its presumptions. It is this agenda, Camic suggests, that determined the shape of Veblen’s most famous works, both The Theory of the Leisure Class and its follow-up The Theory of Business Enterprise (1904).

The former book (also Veblen’s first), still by far his most read, is often thought of barbed document of social critique, an ironic “field guide” to the habits and manners of the new American bourgeoisie, in line with journalist contemporaries like Herbert Croly, or literary figures like Henry James and Edith Wharton. But Camic shows Veblen had another purpose: he understood the book as a serious economic theory, taking a “scientific,” even natural-historical perspective on the new and exotic American institution of the leisure class.

The insights afforded by this close observation systematically cut against the assumptions of marginalists like Clark. From this basis, Veblen presented three key arguments. First, the value of an object of consumption for the leisure class often derived from its lack of any possible association with work or productivity. Thus consumer goods were valued precisely for being expensive, and “conspicuous abstention from labor . . . becomes the conventional mark of pecuniary achievement”—resulting in a “leisure-class canon [that] demands strict and comprehensive futility,” even down to modes of the dress whose own inflexible construction displayed their distance from any necessary exertion. Second, marginalist faith in transhistorical “laws” of the market was belied by the perpetual evolution of economic institutions over time, evidenced not least by the novel phenomena of the leisure class itself. Finally, this evolutionary perspective, informed by the findings of archaeology and ethnology, revealed a historical succession of “predatory institutions” and ruling classes that similarly lived on the extracted social surplus produced by their slaves or subjects. (It should be noted that Veblen sometimes resorted to racial-type explanations for why such a divide might be perpetuated.) The leisure class, in other words, was just a dressed-up, modern twist on earlier forms of ruling-class plunder, swapping out chainmail for straw hats and linen suits.

Veblen thought that marginalist faith in transhistorical “laws” of the market was belied by the perpetual evolution of economic institutions over time, evidenced not least by the novel phenomena of the leisure class itself.

“Life in a modern industrial community, or in other word life under the pecuniary culture,” Veblen wrote, thus acts “to conserve the barbarian temperament, but with the substitution of fraud and prudence.” His description of “parasitism,” with the vampiric leisure class “withdrawing from [the lower classes] as much as it may of the means of sustenance, and so reducing their consumption . . . and available energy,” and ultimately acting “to lower the industrial efficiency of the community,” was intended as a mocking, lurid inversion of Clark’s panglossian faith that all received the just fruits of their work, and that free enterprise tended to the most efficient production of wealth.

Veblen’s Theory of Business Enterprise, less well known but equally powerful, extended this argument to the then-novel corporate structure of the business firm itself. Proceeding from a division between “industrial employments” (scientists, engineers, skilled mechanics, or farmers, for instance) and “pecuniary employments” (business managers, entrepreneurs, bankers, stockbrokers, real estate agents), Veblen argued that the storied separation of “ownership” and “management” in the modern corporate form had put pecuniary interests firmly in the driving seat. Channeling, for once directly, the plaintive appeals of workers’ movements, Veblen asked rhetorically:
Why do we, now and again, have hard times and unemployment in the midst of excellent resources, high efficiency and plenty of unmet wants? Why is one-half our consumable product contrived for consumption that yields no material benefit? . . . . Why are large and increasing portions of the community penniless in spite of a scale of remuneration which is very appreciably above the subsistence minimum?

His answer—once again in contrast to Clark’s productivity theory—was that large profits in a closely integrated industrial economy were primarily earned through “pecuniary transactions” amid times rapid oscillations of boom and bust. Thus “it is, in great part, through or by force of [such] fluctuations . . . that large accumulations of wealth are made.” But “insofar as the gains of these unproductive occupations are of a substantial character, they come out of the aggregate product of other occupations,” that is, from the value-adding “industrial employments” themselves. Ultimately, then, “business” itself had become parasitic on “industry.” The “competitive management of industry becomes incompatible with continued prosperity so soon as the machine process has been developed to its fuller efficiency” and indeed, “further technological advance” would only “act to heighten the impracticability of competitive business.” The modern corporation, in other words, was already an archaic fetter on the full promise of technologically driven prosperity.

Veblen achieved these critiques by reconfiguring the methods of economics. He rejected the rigidity of models within both the old political economy and the new marginalism.

Veblen achieved these critiques by reconfiguring the methods of economics. He rejected the rigidity of models within both the old political economy and the new marginalism, arguing that both were guilty of excessive reductionism of human motives—with its cartoonish figure of homo economicus—and inattention to the historically specific architecture of economic life and behavior in any given period. Lampooning the “hedonistic conception of man” in marginal utility theory as “a lightning calculator of pleasures and pains, who oscillates like a homogeneous globule of desire of happiness,” he supplied instead what we might today call a constructivist approach. Drawing on his on training, Veblen articulated an alternative economics understood as an “evolutionary science.” In this conception:
[Man] is not simply a bundle of desires, . . . but rather a coherent structure of propensities and habits. . . [These] are the products of his hereditary traits and past experience, cumulatively wrought out under a given body of traditions, conventionalities, and material circumstances. . . In all this flux there is no definitively adequate method of life and no definitive or absolutely worthy end of action, so far as concerns the science which sets out to formulate a theory of the process of economic life. . . What, in specific detail, [humans] seek, is not to be answered except by a scrutiny of the details of their activity; but, so long as we have to do with their life as members of the economic community, there remains the generic fact that their life is an unfolding activity of a teleological kind.

Contrary to Veblen’s current reputation as an outsider, Camic shows that contemporaneous economists, even on the marginalist side, took these arguments seriously—and his theories were hotly debated in the leading journals of his profession. Moreover, Veblenian ideas, especially his historical attention to institutions, exerted a strong pull on a younger generation of scholars who went on to found the “institutionalist” school of economic thought. Institutionalists Adolf Berle, Jr., and Gardiner Means built on Veblen’s Theory of Business Enterprise to put the modern, publicly traded corporation under the microscope. Their classic work, The Modern Corporation and Private Property (1932) would suggest that the legal form of the corporation was breaking apart of the “the unity that we commonly call property” given the separation of ownership and management over corporate assets, and that economic concentration entirely undermined the putative ideal of competitive prices. Another institutionalist student of Veblen’s, Wesley Mitchell, began investigations of the business cycle—which could only be conceived of as an anomaly in the static equilibrium theories of the marginalists. Turning to questions of economic measurement, he helped found and lead the National Bureau of Economic Research, which played a key role in the emergence of GDP measurement in the 1930s, which is now second nature in both economic governance and public consciousness. Reaching its apex in the interwar period, several disciples of the institutionalist school, like Berle, John Maurice Clark (son of Veblen’s teacher and adversary), and the young John Kenneth Galbraith, went on to staff key economic policy roles during the New Deal—shaping its willingness to intervene directly into markets.

Today the influence of Veblen is felt less in mainstream economic theory than in the fabric of ideas and institutions that shape economic life, from econometric statistics and regulatory agencies to antitrust and labor law.

It was only during the effective “neoclassical” counterrevolution beginning in the 1930s that Veblen’s suspicion of ahistorical formalism was gradually but firmly exorcised from the modern discipline. A subsequent generation of “new institutionalists,” drawing especially on the work of Ronald Coase, sought instead to rehabilitate neoclassical models—a synthesis that can be seen in the work of Elinor Ostrom, Oliver Williamson, or Daron Acemoglu. Today the influence of Veblen and his students is therefore felt less in mainstream economic theory (with the exception of critics of neoclassicism such as Ha-Joon Chang) than in the fabric of ideas and institutions that shape economic life, from econometric statistics and regulatory agencies to antitrust and labor law.

The fateful year of 1893 was also the year Veblen met a graduate student in economics named Sarah McLean Hardy. Shared intellectual enthusiasm escalated over several years into infatuation on Veblen’s part, but by the time he confessed his love, Hardy was already engaged to another man. (Camic does not explore their relationship, though he repeatedly draws on their lively correspondence on theory and politics.) This episode led to a permanent break with his wife Ellen Veblen, although she refused him a divorce. Rumors of an affair between Veblen and another graduate student in 1904 (Camic thinks them false) were too much for Chicago’s President William Rainey Harper, already scandalized by Veblen’s scathing opinion of the growing influence of business in universities, a view he later published in The Higher Learning in America (1918). After fourteen years at Chicago, and at the height of Veblen’s academic reputation, he was out.

Although Veblen landed on his feet with a faculty position at Stanford, a discreet love affair between Veblen and yet another former student, Ann Bevans, that began in 1905 (they eventually married in 1914 when he obtained a divorce) compounded the earlier rumors that followed him. Soon enough Veblen was ejected from Stanford too, leaving in 1909. It was a double blow, both to his standing in the profession and to the economic and institutional security that had allowed him to produce his landmark work.

Camic suggests that Veblen retreated from the theoretical battlefield of professional economics in the latter part of his life, but a closer engagement with his output suggests his thinking grew more expansive as a result.

One weakness of Camic’s biography is that Veblen’s twenty years of post-academic life are shunted off to the conclusion. One might get the impression that the work of this period, no longer recognized by his former academic peers, merits little attention—and that about personal scandal, the less said the better. The shape of the narrative thus unconsciously reproduces the snobbery of his erstwhile colleagues, and by the end of the book he has become a pariah. This is a shame, because Veblen’s journalistic writing in later life for outlets like The New Republic and The Dial likely reached a far larger contemporary audience than his scholarly work ever did, and his hand in ventures like the founding of the New School for Social Research in New York had a lasting impact. Camic suggests that Veblen retreated from the theoretical battlefield of professional economics in this period, but a closer engagement with his output suggests his thinking grew more expansive as a result.

This new sense of vision is particularly striking in The Engineers and the Price System (1921), a published collection of essays for The Dial that Veblen wrote in the recession following World War I. The book feels rather current in today’s moment of low global growth rates, with the Intergovernmental Panel on Climate Change openly calling for “rapid and systemic changes on unprecedented scales” to prevent catastrophic warming, with mainstream economists exploring the need for a “mission-oriented” state, and with heterodox thinkers behind the Green New Deal drawing on the unprecedented wartime economic mobilization of World War II for resources to think through an alternative order of states and markets. Criticizing the distortions of the “price system,” which “sabotaged” (more than any worker-led stoppages) the rational and efficient organization of productive capacity, Veblen imagined a possible “soviet of technicians” that might take over management of the economy from the “vested interests” in the future.

As in the past, Veblen’s technocratic faith misrecognized the social forces available to bring about such sea change—despite his attempted proselytizing among engineers at the New School. Nevertheless, given the industrial strategy and state coordination needed for the complete decarbonization that the biosphere urgently requires, his critique might be a better starting point than the ritual genuflections of today’s economists toward the altar of market prices and their musty repetitions of the catechism of its high priest, Friedrich Hayek.

Above all, Veblen captured the excesses and inefficiencies that “vested interests” impose on capitalist production. The grounds of his critique were moral, but in our day it is a matter of survival.

We are not today living in a simple repetition of the 1890s, as the evolutionarily minded Veblen would have been the first to admit. Contemporary readers will blush at Veblen’s technocratic confidence; the answers to our manifold economic travails will require a different arrangement of both the conceptual and the political furniture. But as a testament to one of the last and most brilliant representatives of an older tradition of economics that genuinely sought to speak to its time, this new biography comes at an opportune time. Above all, Veblen captured the excesses and inefficiencies that “vested interests” impose on capitalist production, as he put it in a powerful collection of essays published in 1919.

The grounds of his critique of waste were moral, but in our time—when every additional ton of carbon emitted imperils the future—it is a matter of survival. Within mainstream economics today, the most radical critiques of the present amount to modest concessions that contemporary markets can lead to “inequitable” compensation, “inefficient” work-life conflicts, or regional imbalances of investment. Veblen had no such inhibitions. “Is it safe, or sane,” he once wrote, “to go into the future by the light of these same established canons . . . that so have been tried and found wanting?” Like the naturalists he so admired, he saw himself soberly cataloguing the economic life-forms of the teeming jungle that surrounded him, the ecology that connected and sustained them. Beneath the austere exterior and the scowl in his photographs, there was a dimly perceptible reservoir of Victorian faith that convinced him such grisly levels of predation and violence could not possibly last. We should hope he was right.

CLASS & INEQUALITY
Polanyi, the Failed Prophet of Moral Economics

JEREMY ADELMAN

“I’m never happier,” Karl Polanyi wrote to his brother Michael, “than when I am exhausted from work, sitting in a train and, with a view of the southern English countryside outside the window, on my way home.” This was November 10, 1938, the day after Nazi paramilitaries tore through German cities smashing stores and synagogues, committing the destruction known as Kristallnacht. While racists ripped up the continent, Polanyi had taken refuge on the other side of the English Channel, eking out a living by lecturing to students of the Workers’ Educational Association. On the buses and trains of his commute to WEA sites, he puzzled over how his world darkened and sketched one of the century’s classics, The Great Transformation: The Political and Economic Origins of Our Times (1944).

Polanyi’s legacy—especially seen through that book—has been enjoying something of a comeback since 2008 thanks to the global-bashing distemper of our times. The Great Transformation is a sacred text for those who decry capitalism but shy away from the revolutionary implications of Marxism. Indeed, Polanyi—along with nineteenth-century Romantics and twentieth-century social critics such as E. P. Thompson or James C. Scott—belongs in the pantheon of thinkers that, since the dawn of capitalism, gave a vital, normative counterpoint to the hegemony of political economics, liberal or Marxist. It forged the tradition of moral economics behind a Naomi Klein, or a Bernie Sanders. But today’s Polanyi revival is not the first. The Great Transformation was also recovered in the global malaise of the 1970s. Perhaps its destiny is to be rekindled every time capitalism goes into crisis. It was, after all, conceived and written in the midst of the world’s worst cataclysm.

Polanyi’s moral economics did as much to obscure the nature of global interdependence as it did to reveal the perils of leaving the invisible hand to its own devices.

In an era of walls, visas, Eurofatigue, and slumping global trade, we turn again to moral economics for alternatives. How far can we go with them? Polanyi demanded that markets be “embedded” in wider social fabrics and serve communal purposes. The word “embedding” has since become a touchstone for market critics and sub-disciplines in the social sciences; it is a word with a career trajectory all its own. But what this actually means deserves some examination. Polanyi’s moral economics did as much to obscure the nature of global interdependence as it did to reveal the perils of leaving the invisible hand to its own devices.

Out of Hungary

Polanyi’s view of the world began in the epicenters of the Hapsburg Empire. It is one of the paradoxes of Polanyi’s life and work that he would decry the effects of nineteenth-century capitalism even as he was the heir of its sibling, cosmopolitan liberalism. Born in Vienna in 1886, he grew up in Budapest, the son of Jewish bourgeois parents who saw Judaism as a relic of shtetl or ghetto ways, a hangover from the East. The promise of the Jewish Enlightenment was this: citizenship in return for assimilation. His grandfather and father accepted the deal. Polanyi’s father, Mihály, a successful engineer, made sure that his children grew up in a capacious flat on one of Budapest’s toniest streets.

And yet the ties to Jewish circles were never completely untethered. Polanyi went to the Minta Gymnasium with a scholarship from Jewish philanthropists. His grandfather on his mother’s side was a rabbinic scholar who had translated the Talmud into Russian. Polanyi was therefore raised just outside the radius of Jewish tradition, a world he knew but could never belong to.

For the rest of his life, Polanyi searched for new communal bearings, new roots for an increasingly rootless life. As he fled Budapest for Vienna in 1919, he converted to Christianity, possibly sensing that a minority in the new national frenzy of post-1918 Central Europe was a dangerous thing to be, and that he should merge into the national Volk. Years later, in the freeze of the Cold War, he would claim that “it was the Jews that brought Christianity into the world, and this was a terrible burden. For, it brought into being the trepidation of conscience: the Jews had brought this burden into the world but then walked away from it!” They were guilty not for the death of Jesus but for “rejecting the teachings of Jesus, which are superior.”

Polanyi’s zeal to incriminate liberalism blinded him.

There is a certain parallel here between Jews in the ancient world and liberals in Polanyi’s world. One might say that he saw that in Christ’s time Jews had cleared the ground for the Christian gospel. Centuries later, liberalism had done likewise. It created the conditions for what Polanyi often called a “new Christian unity.” Just as the old Christian unity stood on the shoulders of Judaism, according to Polanyi the new Christian unity was climbing on the shoulders of liberalism. What that emerging unity lacked, however, was an understanding of itself, a narrative to replace what he regarded as a wasteland of market integration and individualism. Christianity gave him an ethical vocabulary that at once lambasted liberalism while adopting its universalism.

Meanwhile anti-Semitism destroyed the hearth of Central European assimilation dreams. It drove Polanyi into exile; it took away parts of his family. As Gareth Dale notes in his illuminating biography, Karl Polanyi: A Life on the Left (2016), the Jewish Question was a seam of unresolved issues. The moral economist hovered between his collapsing old worlds—the Jewish and the liberal—and his struggles to find a source of light for a new world.

Red Vienna

Marxism was a potential resort. It appealed to many who considered liberalism responsible for the bloodshed of World War I and, on its heels, the fascist blight. Polanyi would have an ambiguous relationship to Marxism, however. Its collectivism was a draw, but its underlying materialism was not. Polanyi never subscribed to the Second International’s orthodoxy. He helped found the Hungarian Radical Party before World War I sent him to the Russian front as a cavalry officer. Wounded, he convalesced in Budapest when Mihály Károlyi launched the First Hungarian People’s Republic. For a few furtive months in early 1919, Polanyi was close to power—as close as he would ever get. It ended with Béla Kun’s Soviet takeover; the republic turned a crimson shade of red.

The Hungarian Soviet Republic was a debacle. Appalled at what he regarded as the naïveté of the revolutionaries who thought they could create utopias out of abstract ideas, Polanyi left for Vienna to become a journalist, starting a life as the wandering un-Jewish Hungarian. The Austrian capital was home to a remarkable experiment in municipal socialism, with public housing, kindergartens, and public recreation for all. Here was a feasible model for solidarity, a secular heir to Christian unity. It failed. With some justification, Polanyi would accuse unrepentant “economic liberals” for having forced Red Vienna to its knees before the false altar of austerity. In a fascinating and little-remarked appendix to chapter seven of The Great Transformation, Polanyi likened the destruction of Red Vienna to the liberal reforms of the nineteenth century, which had destroyed the Christian charity of England’s poor laws. Neither the community of the squire’s village nor working-class Vienna could withstand “the iron broom of the classical economists.”

The experience was enough to poison for good his view of bankers. He spared choice words for the privileged role of haute finance in the spoils of the nineteenth century and the cynical way in which money men rebuilt the hollowed order after 1919 by spreading suffering among the have-nots. By the 1920s, Polanyi writes, “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 become currency-conscious.” The cult of stable money concealed a basic truth: it depended on forces outside national boundaries, beyond the reach of community regulators. There are times when one can almost feel Polanyi reaching for clichés about conspiracies of rootless cosmopolitans. Meanwhile, turmoil “shattered also the naïve concept of financial sovereignty in an interdependent economy.” The solution was to double down on the gold standard and all but ensure its eventual collapse.

His obsession with liberal failures and his blind spot for reactionary nationalism would only grow with time.

That crash came in 1929, and brought down the frail liberal consensus that filled the void after 1919. Eventually the reactionary tide that swept Hungary and Germany closed in on Austria. In late 1933, Polanyi, a socialist without a party, left for England. It is revealing that Polanyi blamed liberals for the collapse. The fact that Vienna was a cosmopolitan city surrounded by conservative resentment and clerical zeal to clamp down on urbane modernists did not figure into his story. This obsession with liberal failures and his blind spot for reactionary nationalism would only grow with time.

By now some of Polanyi’s traits had come clear. First, he would not embrace Marxism, Zionism, nationalism, liberalism, conservativism—all the traditional -isms that defined the ideological wars of the century. Second, as Dale notes perceptively, Polanyi was inclined to think in polar extremes. Only when it came to politics did he veer toward the reforming middle. He would spend his life searching for the near-impossible: a non-liberal middle ground.

Polanyi’s ethos finally took shape while in exile in England. There he brushed with Christian and guild socialism, which inherited English romantic notions of craftsman autonomy and artisanal disdain for wage labor and pushed them into schemes of state ownership and guild management of manufacturing. Their chief proponents, R. H. Tawney and G. D. H. Cole, left a deep imprint on The Great Transformation. Both were sworn to a non-materialist code. Along with Harold Laski, they were giants of the interwar British left. Like Polanyi, they were ethical stepchildren of nineteenth-century liberalism, quick to condemn its shortfalls and determined to create a new moral order without the odor of Marxist class conflict. Theirs was a generally optimistic view that saw the breakdowns of the 1930s as growing pains in the march toward communities of unselfish producers sharing their wealth as an alternative to market capitalism. Polanyi, who had met them during an earlier visit, admired their fusion of socialism with Anglo-Saxon liberty, religious tolerance, and “general humanitarian outlook.” Tawney and Cole were also believers in adult education and figures behind the WEA, which employed Polanyi as an itinerant lecturer.

Polanyi, however, was more bitter about liberalism than Cole or Tawney. Whereas their socialism claimed to grow out of reform liberalism, Polanyi’s search for a new Christian unity repudiated it. By the late 1930s, he was convinced of the corrosive effects of the nineteenth-century system that had severed the economy from other spheres of life and submitted human needs to the market. The consequences, as he wrote to his brother Michael, were “murderous,” for the dominance of the market prepared the world for fascism, “the most obvious failure of our civilization.” Any new humanist philosophy had to start with “freedom from economics.”

Hunger Games

The Great Transformation was originally called Origins of the Cataclysm, which then became Anatomy of the 19th Century. These would have been more vivid, and more accurate, titles. But they were bleak, and did not convey his ambition to create an epic about capitalism that would convince readers that the last thing the world needed in 1944 was a restoration of old liberal ways. This had been the mistake of 1919; instead of reforming a liberal civilization, the postwar’s architects tried “recasting the regimes that had succumbed on the battlefields” and built Europe’s tomb.

Those “regimes” were the products of the first modern globalization, which Polanyi describes in the astonishing opening chapter of The Great Transformation. The rise of the world economy rested on four “institutions”: a balance of power between states; the international gold standard; the liberal state; and the self-regulating market, which produced “unheard-of material welfare.” This great transformation was responsible for “the hundred years’ peace,” but it was also a “stark utopia”—stark because of its brutal physical and moral consequences, utopian because it depended on greats acts of will and denial of the reality of social and economic life. The commodification of land, labor, and capital was the result of an organized, wrenching dislocation from collective moorings in “the traditional unity of a Christian society.” Societies with markets ceded to market societies, bent to live and die in exchange.

The final drafting of The Great Transformation did not take place in England, though. Needing an income and wanting to focus on his master work, Polanyi received help from the Rockefeller Foundation to decamp to the United States, where he was a visiting scholar at Bennington, in Vermont. Polanyi’s wife, Ilona, stayed behind in England. At Bennington Polanyi turned his WEA classes into a series of public lectures, delivered between the fall of France in the summer of 1940 and the end of the Battle of Britain in October. The Polanyis’ marital correspondences from this time are frankly discomfiting, for while Ilona writes to Karl about bombings and scarcities, he writes to her about the pleasures of pastoral New England and the open stacks of the Columbia University library.

While Ilona wrote to Karl about bombings and scarcities, he wrote to her about the pleasures of pastoral New England.

The Great Transformation’s invective follows the ways in which old feudal collectives, guilds, corporations, and craft circles—the staples of Romantic attachments to a telluric past—became treated as commodities by the market, in Polanyi’s words, “commodity fictions.” His epic centered on the way the poor, severed from the land, got stripped of their access to charity. A rising middle class won the right to vote in 1832. In Polanyi’s reading, the poor lost their “right to live” two years later with the Poor Law reform. Unable to count on subsistence from parishes under the Speenhamland system, they lined up at the gates of the workhouse. “No government was needed to maintain this balance,” Polanyi noted of the cruel twist of the self-regulating market; “it was restored by the pangs of hunger on the one hand, the scarcity of food on the other.”

There was nothing natural about this process. “Free markets,” he wrote, “could never have come into being merely by allowing things to take their course.” But—and here’s the rub—political economists campaigned to tell a very different story, and invent an increasingly elaborate set of theories, about laissez faire. It became the new creed, a creed so powerful that all subsequent anti-laissez-faire legislation got treated as an interference with or perversion of the natural course of events. In his WEA lectures from the late 1930s, he indicted the founders of the dismal science, Robert Malthus and David Ricardo: “Misery was regarded as nature’s cure, and any act of humanitarianism as a crime against humanity since it must necessarily increase their sufferings.”

What started as an uprooting from communities of reciprocity and redistribution and the victory of individual gain came full circle with welfare systems, both democratic and authoritarian, in the 1930s. The market restoration of the 1920s had failed. Gold collapsed, the old balance of imperial powers fizzled, the self-regulating market produced mass unemployment, and the liberal state got swept away. Now, Polanyi argued, the marketplace was being restored to its rightful place at the service of society. “Undoubtedly,” he noted, “our age will be credited with having seen the end of the self-regulating market.” Managed currencies, protectionism, and make-work declared the arrival of moral economy.

Bare Society

Polanyi’s zeal to incriminate liberalism blinded him. Everything that was bad about the world could be traced to one single source. Lethal, industrial-scale racism? The fault of liberals. Internationalism? A connivance of old plutocrats. The result was a tangled understanding of nationalism, which he saw as a way to restore a sense of fraternal community in the face of the globalist shredder. This was an incongruous resting point for someone without a nation, Jewish, Hungarian, or English. Of Japan’s invasion of China in 1937 or Hitler’s parade into Austria in 1938? Of the cleansing of minorities from national communities in Central Europe? Polanyi was relatively silent, though he knew full well what the Nazi sweep of Vienna implied for old friends and family.

The Great Transformation is riddled with problems. Fred Block and Margaret Somers, who have done so much to chart the outlines of a Polanyian approach to sociology, have identified one particular tension at the core of the work. On the one hand, Polanyi argues that the liberal age had disembedded the economy from wider social systems. On the other, Polanyi implies that the market always rests on legal, intellectual, and political conditions—that supply and demand never operate freely. Polanyi wants it both ways. Close readers will find themselves chasing the tail of his argument.

There are also big gaps. Above all, while the narrative dwells on the rise of the Satanic Mill to the 1830s, Polanyi never follows the story beyond. Doing so would have exposed some uncomfortable evidence about how the gold standard, free trade, and haute finance yielded a bonanza of Victorian globalization. Polanyi prefers the gory days over the glory days of the liberal order.

And these are not the only serious flaws. While Polanyi indicts the transformation for physically dehumanizing workers and leaving owners “morally degraded,”he contends that the regimes of the 1930s addressed want and anxiety by domesticating markets and restoring national sovereignty. What kind of an improvement was this? How could a shrewd observer, exiled for his convictions, and following closely the news of the horrors, see redemption without falling prey to wishful thinking? Polanyi knew full well how the furies of nationalism were killing the families and neighbors he had left behind in Hungary and Austria. He and Ilona repeatedly helped straggling kin from the late 1930s. By 1942 there was knowledge of the fate of the Jews of the East. Polanyi’s sister Sophie was caught in Vienna, faced with a dilemma posed by Nazi gendarmes: sacrifice her husband in Dachau or relinquish her mentally-ill son to the police. Given the agonizing choice, she dithered until it was too late. Her last-known location was Kielce ghetto, created by the SS in Poland as a staging ground for the extermination camps. By then she was beyond her brothers’ desperation to save her. Polanyi would later mourn that “my dearest little sister was murdered by the madmen.”

Polanyi wanted it both ways. On the one hand, he argued that the liberal age had disembedded the economy from wider social systems. On the other, he implied that supply and demand never operate freely.

One of troubles with The Great Transformation is that Polanyi wanted to sound like a realist. But he had the voice of a moralist. Consider the adjectives he uses to describe liberals and political economists. They inhabit a world of illusions. “To the stupefaction of the vast majority of contemporaries,” he notes of economic liberals, “unsuspected forces of charismatic leadership and autarchist isolationism broke forth and fused societies in new forms.” Elsewhere Polanyi points at those who extolled the virtues of the Hundred Years’ Peace—A. J. Toynbee, Ludwig von Mises, and Norman Angell—singling out their “naïveté,” a word that recycles often in the text. “Awareness of the essential nature of the problems of politics sank to an unprecedented low point” on the eve of World War I.

But it would take effort to not notice Polanyi’s own naïveté on display in the book. Liberalism, he claims, now forked into two roads: one socialist and one fascist. “The difference between these two is not primarily economic. It is moral and religious.” What those differences were was never very clear. Nor was the option posed by the society at his doorstep, the United States. Later readers tend to pay less attention to the murkier final chapters about Polanyi’s global present. Perhaps it is just as well. They are a mess.

How Obsolete Is Our Market Mentality?

Spring of 1943 brought news of the final victory of the Red Army over the German Wehrmacht at Stalingrad. “My father was impatient to return from America to England” recalled his daughter, Kari Polanyi Levitt. Polanyi rushed to complete his manuscript in Bennington so it could influence the emerging system. He sent a draft to Cole for feedback. Cole replied with extensive comments. Reflecting on the key treatment of the labor market, Cole had this to say: “I think that all through [chapter seven] you treat Speenhamland as much more universal than it was, and also make much too light of country differences in wage policy.” The book, as Cole, Tawney, and his brother Michael warned Polanyi, had many errors and exaggerations. But Polanyi was in a rush to see it go to press. When it came out, critics gave it a rough ride for its “vagueness” and “distortions.”

It was also out of step with the times. For a man who claimed realism as a badge, he was unaware of the gathering force of Keynesian macroeconomics, the colossal effort to restore market economies by American businesses, and the delegations preparing to gather in nearby Bretton Woods, New Hampshire, to draft what would become the postwar financial architecture. He was, above all, oblivious of the underlying transformation in mass consumption and the importance of Fordism to re-railing capitalism. The market, for Polanyi, was a source of enrichment for plutocrats and oppression for workers, nothing more. The idea that the market could be a space for satisfying wants—and, even more, inventing them—was beyond conception. Polanyi had missed one great transformation altogether: the globalization of consumption.

If Polanyi wanted this to be his moment, and his book to provide the moral economics of a new era, he was, as Block and Somers note, a failed prophet. The idea of people submitting their individualisms to something larger—the “reality of society”—had just debased itself in horrid ways. It would take a while for the idea of group or collective rights to regain some traction.

Polanyi did not give up right away. Beyond the United States, “liberal capitalism can hardly be said to exist any more,” he would write with confidence in a 1947 essay published in Commentary. Called “Our Obsolete Market Mentality,” it outlines a “total view of man and society,” and not the splintered soul of Homo economicus. Phrases such as “the fullness of life to the person,” and the yearning for a “truly democratic society,” fill the pages, revealing a normative vision of a world emerging from catastrophe.

Polanyi’s influence on his present was almost nil. By 1947 he was ever more removed from prevailing understandings of liberal capitalism. Moral economics got paved over by a specialized, technocratic brand of economic thinking coupled to historically unprecedented growth and social safety nets. Sensing his discordance with his time, Polanyi turned away from the present, receding to focus on the economic history of ancient and tribal societies where Homo moralis played a larger role in the epic of humanity. In these areas, Polanyi’s influence was—and continues to be—profound. In his final years, he settled down outside Toronto, though even then it was not for want of a permanent home but rather because his wife Ilona, a former communist, was barred from the United States. For a moral man, Polanyi’s community ties remained strikingly thin. He shuffled to New York to give classes at Columbia, influenced the likes of Moses Finley, Marshall Sahlins, and Anne Chapman, and tapped into the largesse of the Ford Foundation to pursue his interests in ancient empires.

I first read “Our Obsolete Market Mentality” around 1980, when Polanyi was making a comeback. One of his Columbia students and close collaborators, Abraham Rotstein, gave me a photocopy of it when I was studying Canadian economic history. At the time Rotstein was embroiled in a debate over whether the colonial fur trade in North America had revealed Ojibwe people’s inner individualism as proto-NAFTA-makers. Rotstein was trying to hold the Polanyian line against a Friedmanite juggernaut. Neoclassical economics was storming to power in London and Washington, having seized it in Pinochet’s Chile. The sanctuary of economic history, even in Canada, was feeling the pressure to get with the times and to appreciate the universality of the economicus in the Homo. Margaret Thatcher, after all, gave us an epigram of the 1980s with her declaration that there was “no such thing as society,” just individuals and their families. Rotstein’s efforts went the way of so many other quests for alternatives to market fundamentalism. The case for Homo moralis got sidelined again, condemned to “critique” from the academic edges.

Maybe that is the best moral economists can hope for. But as we take stock of our long cycle of market fundamentalism and our globalization, old questions return. As it slumps, the world is scrambling to figure out what is next. Do we double down on more of the same, as post-1919 leaders did to their creaking order? There is almost no appetite for that, as Britain’s “Remainers” and Hillary Clinton’s fate showed. Having to choose between “patriots and globalists,” as Marine Le Pen and nativists worldwide argue, is no more appealing. Polanyi can help us consider the conditions that make market life work—and even endurable. But if moral economics does not want to get paved over again, it will have to find a way to get beyond the stark dichotomies that have fueled its passion, as if we must choose between ethical community or economic interdependence, morals or markets.

Polanyi, the Failed Prophet of Moral Economics | Boston Review

CLASS & INEQUALITY
The Keynesian Revolution


A new biography reveals the full scope of John Maynard Keynes’s critique of unfettered capitalism, emphasizing the economist’s larger philosophical vision of the good life.


John Maynard Keynes (center) with philosopher Bertrand Russell (left) and Bloomsbury Group member Lytton Strachey (right). Image: PBS


JONATHAN KIRSHNER

The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes
Zachary D. Carter
Random House, $35 (cloth)

On September 9, 1938, John Maynard Keynes, fifty-five years old and the most famous economist in the world, read his essay “My Early Beliefs” to the Memoir Club, a circle of Bloomsbury Group friends who gathered occasionally to discuss the private reflections of its members. Keynes took the opportunity to revisit the philosophical principles of his confidants in the youthful exuberance of their twenties, “our mental history in the dozen years before” World War I. The rich, dazzling memoir, published posthumously at Keynes’s request (and subsequently included in his Essays in Biography), is well described by biographer Robert Skidelsky as “a key document for understanding his life’s work.”

The Keynes of “My Early Beliefs” was no longer a young man; recovering from a major heart attack, he read to the group reclining on a sofa to conserve his energy. Moreover, 1938 was not 1910; the intervening decades, shattering a long period of peace and prosperity, were characterized by war, disorder, and depression. Armed with this melancholy hindsight, Keynes would chastise his youthful cohort: “as the years wore on towards 1914, the thinness and superficiality, as well as the falsity of our view of man’s heart became, it now seems to me, more obvious.” And as the Memoir Club assembled that evening, German troops were massed on the Czechoslovakian border, and Neville Chamberlain would soon climb aboard an airplane for the first time in his life, that he might reason with Adolph Hitler. This context surely informed Keynes’s retrospective lament, “we were not aware that civilisation was a thin and precarious crust” layered atop a cauldron of horrors simmering just below the surface.

Nevertheless, Keynes never wavered from the core principles of his early beliefs: “this religion of ours . . . remains nearer to the truth than any other that I know,” he wrote. His memoir articulated the central tenets of that shared philosophy: the commitment to a relentless interrogation of established norms and traditions, a rejection of shallow materialism, and a reverence for “love, the creation and enjoyment of aesthetic experience and the pursuit of knowledge.”

For Keynes, economics mattered because it would ensure people need not organize their lives around the empty chase of money. It would free them, instead, “to live wisely, agreeably and well.”

The Price of Peace, Zachary D. Carter’s new biography of Keynes, is insightfully grounded in three touchstones of Keynes’s life that are neatly encapsulated by “My Early Beliefs”: the horrors of World War I, his intimate association with the Bloomsbury community of iconoclastic writers and artists (including Virginia and Leonard Woolf, E. M. Forster, and Lytton Strachey), and the essential inseparability of economics from broader philosophical questions. The Great War shattered the illusion that civilization was secure—and much of Keynes’s efforts in the three decades that followed were designed to save society from dystopias looming in the wings, particularly in the varied forms of authoritarian collectivism. Bloomsbury, to which The Price of Peace returns unfailingly throughout its narrative, properly situates both profound friendship, and, especially, a veneration of the arts, at the center of Keynes’s worldview. As for philosophy, Carter’s Keynes is “the last of the enlightenment intellectuals who pursued political theory, economics, and ethics as a unified design.” To approach Keynes’s economics innocent of such an understanding is to miss much, if not everything.

Across the first two-thirds of its pages, The Price of Peace is a breathtaking triumph. A renaissance man with a dizzying array of interests, pursuits, and accomplishments, Keynes sat prominently at so many diverse, rarified tables that just keeping up with him is an achievement, to say nothing of situating his life—really his lives—in broader context. Yet Carter does just that, in this smartly written, swiftly moving, well-researched, clear-eyed treatment of one of the most remarkable figures of the first half of the twentieth century.

Carter also has a good eye for spotting key contributions from Keynes’s vast writings, calling attention to essential essays including, among others, “The End of Laissez-Faire,” “A Short View of Russia,” “Economic Possibilities for our Grandchildren,” “Can Lloyd George Do It?” (all of which are reprinted in Keynes’s Essays in Persuasion), and, less well known but not to be underestimated, “Art and the State” and the innovative “How to Pay for the War.” In “Economic Possibilities,” Keynes touched the core of his understanding for why economists mattered: by solving the “economic problem” (the imperative to provide for adequate physical comfort and satisfactory necessities), people would no longer need to organize their lives around the empty chase of money, and instead have the freedom to pursue their varied, idiosyncratic interests that would allow them “to live wisely, agreeably and well.”

Short of that utopia, “The End of Laissez-Faire” (1926) heralded Keynes’s dramatic break with economic orthodoxy, signaled by his (then) heretical declaration, “The world is not so governed from above that private and social interest always coincide.” This disenchantment would grow still more pointed in the depths of the Great Depression: laissez-faire capitalism, he declared, “is not intelligent, it is not beautiful, it is not just, it is not virtuous—and it doesn’t deliver the goods.” Along with “Am I a Liberal?” and “Poverty in Plenty: Is the Economic System Self Adjusting?” the essay “Laissez-Faire” marks the steps on the road to the Keynesian revolution that would culminate with the publication of his magnum opus, The General Theory of Employment, Interest and Money, in 1936. But that runs ahead of the story.

Keynes was raised in an environment of reasonable comfort, and, more important, implicit security. His father, Neville, was a successful professor and administrator at the University of Cambridge; his mother, Florence, was a remarkable figure, active in social causes and local politics (she would eventually serve as the mayor of Cambridge). Keynes flourished at the storied Eton prep school, winning rafts of academic prizes, and then again at King’s College, Cambridge. After graduation he entered the Civil Service, laboring briefly in the India Office before being lured back to Cambridge, where he would teach economics, serve as editor of the prestigious Economic Journal, and publish his first book, Indian Currency and Finance (1913). Yet at age thirty Keynes was still more promising than accomplished. Everything would change in 1914.

The mass slaughter of World War I was the defining trauma for a generation of Europeans; it was also, for Keynes, where abstract economic theory collided with reality. Rushing to contain the financial panic unleashed by the commencement of hostilities (and taken aback by the short-sighted behavior of the financial community), Keynes learned from this experience, Carter argues, that markets “were social, not mathematical phenomena.” The precariousness of financial sentiment, and the key role that psychology plays in shaping those instincts, would remain essential to Keynes’s writing throughout his career, a disposition likely honed by his principal responsibility serving in the Treasury Department during the war—finding ways to creatively scape the bottom of the barrel of British finance (and, increasingly, to manage its desperate economic dependence on the United States).

The mass slaughter of World War I was the defining trauma for a generation of Europeans; it was also, for Keynes, where abstract economic theory collided with reality.

After the war Keynes was attached to the British delegation in Paris, ultimately resigning in protest over the Treaty of Versailles, which he cogently argued would prove a disaster. His polemic against the treaty, The Economic Consequences of the Peace (1919), would unexpectedly bring him world fame; no one anticipated that a technocrat’s dissent would sell over 100,000 copies and find translation into a dozen languages. The book—described by Carter as “a landmark of political theory and one of the most emotionally compelling works of economic literature ever written”—is also, to this day, misunderstood. Moreover, for all its purportedly enormous (and in some circles, nefarious) influence, it was patently unsuccessful in bringing about the policies that its author was passionately advocating. Mostly remembered now for arguing that the reparations imposed on Germany were too high, Economic Consequences was primarily concerned with what the treaty failed to do: attend to the shattered economic heart of Europe. Without addressing the urgent problems wrought by years of total war, the inevitable economic chaos that would follow would in turn lead to political upheaval. “Men will not always die quietly,” Keynes warned, and “in their distress may overturn the remnants of organization, and submerge civilization itself.”

Keynes proposed, at the conference and in print, a “grand scheme” that included modest reparations, the cancellation of inter-allied debt, and large new U.S. loans to Europe. The plan was, from a political perspective, naïve at best. Yet, as Carter notes, after a half decade of economic and political disarray, the U.S.-sponsored Dawes plan of 1924 was “essentially a delayed, expensive caricature of the system Keynes had urged at Paris.”

In the 1920s Keynes held no official government positions (those bridges had been torched), but he was now a prominent figure active on many fronts, producing two important scholarly books, numerous political pamphlets, reams of journalism, and advocating for the positions of the Liberal Party. A Tract on Monetary Reform (1923) is distinguished by Keynes’s attack on the “barbarous relic” of the gold standard, which he argued was inherently deflationary. (Casual critics of Keynes often hand-wavingly label him an inflationist, but in fact Keynes was quite anxious about inflation, which he thought would undermine faith in the legitimacy of the capitalist order. His position was simply, and quite rightly, that in those circumstances when forced to choose, in practice deflation was typically the greater evil.)

Keynes’s concerns along these lines were more explicitly articulated in yet another polemic, “The Economic Consequences of Mr. Churchill,” written after Keynes had failed to personally dissuade the then chancellor of the exchequer from returning the pound to the gold standard in 1925 at its long-standing pre-war value. The decision was a triumph of the interests of finance over industry, but one that would, as “Economic Consequences” predicted, prove disastrous for the British economy. These struggles informed the central concern of Keynes’s massive, sprawling, two-volume Treatise on Money (1930), namely, how to balance the goals of domestic monetary policy autonomy and international monetary stability. Carter makes the case that the contributions (and intellectual influence) of the Treatise are generally underappreciated today. And there may be something to that—legend holds that when Joseph Schumpeter read the book, he literally burned the manuscript on monetary theory he had been laboring on, concluding that it had been rendered obsolete. But with the deepening of the Great Depression, Keynes was already racing ahead, developing what would emerge as The General Theory.

The Price of Peace is somewhat less sure-handed in its treatment of The General Theory, which, despite bringing about a fundamental transformation of our understanding of economics, is a difficult book. Keynes follows several strands of complex argumentation without pausing to guide the reader through the thicket, and his prose is uncharacteristically workmanlike. Nevertheless, The General Theory was a sensation, initially dividing the profession along ideological and especially generational lines. Within fifteen years its influence had reshaped the profession.

Laissez-faire capitalism, Keynes declared during the Great Depression, “is not intelligent, it is not beautiful, it is not just, it is not virtuous—and it doesn’t deliver the goods.”

Once again, Carter is spot on in emphasizing the essential role of psychology, and especially the role of the collective sentiment of investors, for Keynes’s thinking. (Entrepreneurs were not driven by cold calculation but by “animal spirits,” Keynes wrote, and investors were not rewarded for calculating the underlying value of an asset, but for their ability to divine what other market players would find attractive. This in turn meant that the financial sector, left to its own devices, was unstable and prone to crisis.) And Carter is exactly right to emphasize that Keynes’s urgent, underlying motives remained largely conservative: he wanted to save capitalism from itself. Unfettered capitalism—unfair, unjust, ugly, vacuous of social purpose, and ultimately inefficient—would bring about its own ruin. Worse still, left unreformed, it would likely unleash things that were much, much worse. Keynes, from the very start, was under no illusions about the horrors of fascism (unlike many of the British right, who were content to avert their eyes), and he had no taste, fashionable in many left-leaning Western circles of the day, for the Soviet experiment—the inherent brutality of which he saw through ten years before the show trials of the 1930s.

But to unpack the economics of the Keynesian Revolution readers should pay close attention to chapter twelve of The General Theory (“The State of Long Term Expectation”) and Keynes’s 1937 paper in the Quarterly Journal of Economics, “The General Theory of Employment,” his response to leading academic critics of the book. Especially in the latter it is unambiguously clear that Keynes’s breakthrough was founded on two fundamental departures from orthodoxy. First, an economy, once stuck in a rut, could remain in a rut. And second, actors in the economy made decisions in an environment characterized not by risk (where the underlying probabilities of future events are properly understood and generally shared), but uncertainty (a setting where the future is inherently unknowable). “The orthodox theory assumes that we have a knowledge of the future of a kind quite different from that which we actually possess,” Keynes explained. “This hypothesis of a calculable future leads to a wrong interpretation of the principles of behavior . . . and to an underestimation of the concealed factors of utter doubt, precariousness, hope and fear.”

Across the long arc of its narrative, The Price of Peace devotes considerable attention to events in the United States (and Keynes’s attempts to influence and encourage President Roosevelt and aspects of the New Deal), strands which tie together most naturally during the 1940s. Keynes would devote the final years of his short life—he suffered from serious heart disease—to once again representing his government on matters related to the financing of a world war and its aftermath. This required regular travel to the United States from 1941 (when Keynes led negotiations over the terms of lend-lease aid) through 1946 (with the culmination of a series of exhausting multilateral conferences that led to the creation of the Keynes-inflected International Monetary Fund and World Bank). Over these years Keynes essentially worked himself to death in the service of his country. A major heart attack on a train bound for Washington in March 1946 preceded the one that would take his life, at home, one month later.

Entrepreneurs were not driven by cold calculation but by “animal spirits,” Keynes wrote. This in turn meant that the financial sector, left to its own devices, was unstable and prone to crisis.

Across the decades, from the teens through the forties, Carter’s facility in bringing Keynes to life is impressive. The only false note struck in this rich, nuanced, multifaceted portrait is the eagerness of The Price of Peace to recast Keynes as a protectionist, a claim asserted repeatedly throughout the volume. It is certainly true that in the early 1930s, first in a reaction to the pressures on Britain’s balance of payments intensified by the asphyxiating gold standard and then with the complete collapse of international economic cooperation in the depths of the Great Depression, Keynes wrote in favor of some protectionist measures. That Keynes would dare even to sample such forbidden fruit testified, once again, to his relentless pragmatism and bracing unwillingness to be bound by thoughtless devotion to received doctrine. But such flirtations were always qualified and faded over time. Even in his strongest moment of advocacy for such measures, in 1932, Keynes still paused to observe, among other gestures at debunking protectionist myths, “Nine times out of ten [the free trader] is speaking forth the words of wisdom and simple truth.” And in 1944, when the prospects for the international economy were quite different, Keynes had this to say in the House of Lords: “The expansion of our export industries which is so vital to us would be much easier if obstacles to trade can be diminished or done away with all together.”

Still, despite the misstep on protectionism (and it is an occupational hazard for biographers of Keynes to see a version of the man through the lens of the author’s personal proclivities), it is hard to imagine improving on Carter’s final measure of his subject, which is worth quoting at length:

No European mind since Newton had impressed himself so profoundly on both the political and intellectual development of the world . . . In his economic work he fused psychology, history, political theory, and observed financial experience like no other economist before or since. Few lives have ever been lived in the same vibrant, eclectic excess as Keynes lived his. He was a philosopher who rivaled Wittgenstein, a diplomat who became the financial hero of two world wars, a historian who uncovered peculiarities of great Enlightenment figures and ancient currencies, a journalist who enraged and inspired the public, the patron of a famed artistic movement. He was as vain, petty, shortsighted and impolitic as he was generous, kindhearted, and persuasive. Few who encountered him in his element came away from the experience unchanged.

It is a disappointment that the last third of the book, which weaves it way through seven decades, does not meet the remarkable standard established in its preceding pages. It is hard to argue with the implicit subtext of these chapters: that the practice of postwar public policy in the United States, at times under the banner of “Keynesianism,” was in fact, from the start, a long, tragic retreat from the wisdom of Keynes. (Essentially, mainstream postwar Keynesianism was a tamed and housebroken interpretation of selected parts of the General Theory. For Keynes the free market was often dysfunctional, and the economy an unpredictable and occasionally dangerous beast, necessitating guidance by adroit improvisation. As domesticated by postwar economists, Keynesianism instead assumed highly functional markets that were more like automotive engines that benefited from occasional fine-tuning, which could be accomplished by a deploying a few standard, reliable tools.) But the execution of this agenda is idiosyncratic, uneven, and at times even clumsy, as if the book itself never recovers from the loss of Keynes.

Most unfortunate is the extent to which the balance of The Price of Peace is anchored in a peculiar fixation on the Canadian-American economist and paragon of American liberalism John Kenneth Galbraith—which is not a slight against Galbraith, a figure of uncommon achievement. But the justification for settling on a thinker whose “peculiar brand” of Keynesianism was a “sharp departure” from the master as the protagonist in the final chapters of this biography is never established. Yet he takes on Zelig-like quality, popping up constantly, often in the oddest of places. To take a minor example, did Nixon really harbor a “special hatred” for Galbraith? This seems unlikely. Nixon was a legendary hater, and a cursory glance at a half-dozen good books on the brooding, paranoid President yields little more than a few perfunctory mentions of Galbraith, and none with the seething vituperation reserved for assorted enemies like, say, talk show host Dick Cavett. This is a consequential diversion, because it muddies a key strand of argument Carter is pursuing: that Keynes’s legacy fell into the wrong hands.

For Keynes, unfettered capitalism—unfair, unjust, ugly, vacuous of social purpose, and ultimately inefficient—would bring about its own ruin. Worse still, left unreformed, it would likely unleash things much worse.

Paul Samuelson would emerge as perhaps the most influential (and representative) of a new generation of postwar “Keynesian” economists; he developed mathematical models of economics that derived directly from Newtonian physics. Keynes would likely have been aghast. “The pseudo-analogy with the physical sciences leads directly counter to the habit of mind which is most important for an economist to acquire,” he wrote to Roy Harrod in 1938. The young Americans were building on John Hicks’s earlier attempt to simplify the Keynesian revolution, and reconcile it with elements of the old orthodoxy. As Carter observes, however, Keynes had in fact “presented a conceptual framework totally incompatible with Hicks’ project.” Keynes’s student Joan Robinson labeled such efforts “bastard Keynesianism.” But the bastards won.

Following this line more purposefully could have disciplined the closing arguments of The Price of Peace, as there is a straight line to be drawn from the blunders of American “Keynesianism” in the 1960s to the rise of more conservatively oriented economic theories in the 1980s and subsequently a broad consensus in macroeconomic theory that was permissive of the catastrophic anti-Keynesian liberation of finance that followed. Instead, Carter reveals a preference for picking partisan fights that often obscure important subtleties, as seen in the strawmanning of Paul Volcker, and the conflating of New Classical Macroeconomics with Milton Friedman’s monetarism (though political bedfellows, their economic theories were miles apart). And the notion that “Vietnam underscored just how little Keynes had achieved at Bretton Woods” is simply not coherent.

Finally, The Price of Peace stumbles with its treatment of the crucial Clinton years, burying the Keynesian lede by focusing extensively on trade—the North American Free Trade Agreement and the World Trade Organization—before finally turning to the great sin against Keynes: financial deregulation. It is unlikely that Keynes would have been much moved by U.S. trade deals of the 1990s; his life’s work was that of a monetary economist and a macroeconomist, and he did not generally dissent from what we now call microeconomic theory (the allocation of goods through the price mechanism).

The trade deals of the 1990s were not the final, tragic destination of anti-Keynesianism. Keynes would have likely seen opportunities in the WTO and shrugged at NAFTA. (Though he surely would have sharply criticized the abject failure of U.S. public policy to compensate those who would inevitably lose from such agreements.) But he would have been apoplectic at the great American financial deregulation project. For Keynes, in The Treatise, The General Theory, and at Bretton Woods, the mortal threat to his economic vision came from finance, not trade. In 1941, looking back at the ruins of the depression and towards an imagined future, he wrote, “Nothing is more certain than that the movement of capital . . . must be regulated.” Unregulated finance was inefficient, and prone to crisis; additionally, the notion that the financial sector would metastasize into something other than a simple facilitator of real economic activity was, for Keynes, a caricature of the ugly, rapacious capitalism that would lead to its own ruin, as it nearly did in the 1930s. And perhaps will again.Robert Skidelsky’s magisterial three-volume biography thus remains essential, as are Keynes’s own writings (and here again Skidelsky is a welcome guide, with this invaluable collection). But set aside what amounts to a lengthy, eccentric coda, and The Price of Peace offers the finest single volume on Keynes that most readers will ever have the pleasure of encountering.

The Keynesian Revolution | Boston Review