Thurman Arnold, a Yale law professor from Wyoming who became FDR’s trust-buster, in 1937 published a book called The Folklore of Capitalism. He knew a thing or two about depressions by then, and maybe we can learn from him. Not that we will. We still believe in the same mythology, and it has gotten us into the same mess. What the hell, though. Here’s an excerpt from his book:
In every field of industrial activity great organizations had built themselves into similar positions of power. They had done so under a mythology of private property which prevented those who were exploited from observing what was going on. The public saw the whole series of events as a series of horse trades by independent individuals. This mythology had become so completely misleading that men could not diagnose what was wrong when these corporate principalities failed to function, or why they injured so many people. The remedies proposed on the assumption that the corporations were individuals working for profit came out wrong because the corporations were not individuals. It was as if men assumed that an automobile was a horse and tried to run it on hay.
The class of people who could use these financial symbols realistically and unscrupulously rose to power, regardless of their efficiency as producers. They operated within a folklore which regarded the trading instinct as the salvation of the country. Traders are necessarily ruthless men. The ethics of trading is a series of ethical contradictions. Therefore, when everyone else had dropped the reins of power, this small group was in a position to seize them.
Thus the Van Sweringens, who had acquired their trading skill in real estate, obtained control of great railroad enterprises. Small blocks of stock representing an infinitesimal part of the so-called partnership gave them power over an empire. The power thus gained was without any responsibility because these blocks of stock were thought of as private property. Men skilled in the tricks which could be played with these cards could always dominate experts in transportation when the control of a railroad was at stake.
If one reads the careful investigation made by the Securities and Exchange Commission into the activities of protective committees in reorganization, one finds that those in control were almost always financiers and not technicians. A trading class was elevated to power who knew nothing of the techniques of the organizations which they led. Actual goods and services were dispensed by a great army of salaried technicians who were given neither power nor security. Economics and law assumed that everyone was acquiring private property under the impulsion of the ‘profit motive.’ “You can’t get efficiency in operation without a profit motive,” said the profound students of social organization.
When such organizations got into trouble, the remedies proposed were formulated on the assumption that they were to be applied to individuals who were exercising independent control of tangible things which they owned. Had there been a realization that these organizations were not dealing with
private property, it would have been obvious that the remedy
lay in giving the control to men with a different sense of responsibility.
The romantic legal and economic ritual of the time, however, was built up around the ideal that a trader without responsibility to the groups involved made the best general in an industrial army. In the situation which resulted only those could rise to power and rank who were more interested in the manipulation of financial symbols than in transportation, or housing, or the actual production and distribution of any sort of goods. Position and rank obtained in this fiscal world had carried no social obligation because they were subject to the rules which governed the accumulation of private property.