A Balance Sheet for Americans

I

THE national conventions will be held this year while the country is painfully adjusting itself to great historical ironies. One thing had been settled. After seven years of social and economic adventure, the American people knew they were in favor of capitalism, operated through free enterprise. And free enterprise was to function in political isolation from other nations. But irony number one appears. The self-chosen isolation of twenty years has exploded in our faces. We see instead the dread prospect of isolation imposed upon us by the consequences of war, by the will of new masters of Europe. And this introduces irony number two. Because of the danger of imposed isolation, it is clearly possible that during the next administration the American people who now know that they want free enterprise will be compelled to accept a larger measure of regimentation than Mr. Roosevelt attempted to give them, not as ‘progress,’ but as a kind of economic martial law in time of calamity.

It may be helpful to go back before the fateful morning of May 10 when the public learned of that march into Holland, Belgium, and Luxembourg. The American people were still far away from the war, were still intent upon their own a affairs, and were still preparing for the settlement of domestic issues. And already they had so definitely laid down the fundamental rule of capitalism, operated through free enterprise, that the politicians of both parties were voluble in devotion to the ancient idea. If the people did not embrace capitalism with the glowing hopes of the late-Coolidge and early-Hoover era that poverty was about to be abolished, they were reconciled to it as the system which had abolished more poverty than any other system they had been able to observe. And they also were reconciled to it as the system which, in their observation, is more consistent than any other in the preservation of human rights and dignities.

It may seem superfluous to state this attitude, which becomes more definite day by day. Business men have been speaking openly in such terms. Leaders of large groups of labor have been even more positive than many of the business men. And, of course, the politicians have followed. But it is important to appreciate this attitude, for it marks a hardening of opinion which the country lacked in recent years. It must be remembered that in 1936 the man who said plainly that he favored capitalism, operated through free enterprise, was often rewarded with compliments upon the honesty of his brutality.

The advocates of ‘planned economy’

— predominantly ‘planners’ of the Left

— were spread over the scene. They had a large following among the intellectuals. They had unanimous following among the pseudo-intellectuals. They had a wide, if mentally vague, following among the workers. Among the definitely ‘underprivileged,’ the echoes of their arguments had the allure of change, and change was good. The long depression had become a blessing to the Marxists. It had left a bog of doubt in which men and women of all classes — victims of the mistakes of capitalism in the twenties or witnesses of heartbreaking disasters — groped for some kind of economic certitude, as though in this world of fallible human beings the assertedly foolproof economic mechanism were not the most foolridden.

So in 1936 most of the people were respectful or were timid in challenge when the air was rent with the ‘planners” cries in support of ‘production for use,’ as though there had been no social use in the capitalistic system of production which had provided millions of men and women with the highest standard of living ever known, had given to the least fortunate a measure of publicly supported sustenance known in no other nation, and had, in addition, created systems of public health and public education unsurpassed in the amount of money lavished upon them. Likewise, good, average people shrank when denunciations of the ‘profit motive’ pounded upon their ears.

There was one peculiarity about these denunciations of the ‘profit motive.’ They were not directed against the farmer’s profits. At the time, one of the immediate objects of the sponsors of a ‘planned economy’ was to unite the farmer with the so-called proletarian worker. Therefore, the highly individualistic, intensely capitalistic farmer was entitled to adequate profits on his investment of dollars and his investment of labor. Moreover, if the farmer failed to realize adequate profits, he should be paid the deficiency by the government, which would get the money to do so by taxing the other parts of the population or by borrowing from the capital accounts of the balance of the population.

But, aside from the farmer, all profits were economic barbarism. They were solely the fruits of greed. In these cries of the ‘planners’ there was no allowance for pride of work and achievement. Everyone who has observed business at first hand knows that pride is a mighty force, which often carries on when hope of profits diminishes, but there was no allowance for this in the cries that filled the air in the middle thirties. There was no allowance for responsibility to the community on the part of those who operate under the profit system, familiar as is such responsibility. There was no allowance for mutual loyalty between employer and worker, common as that is.

The whole complex of emotion and aspiration which surrounds and conditions business was brushed aside or resolved into a single impulse, greed. The evidence of social responsibility in business revealed in every locality — publicly in hospitals, schools, libraries, and churches, privately in countless pension and unemployment experiments

— counted for naught.

II

Today, popular deference to the planning Olympians has disappeared, and the causes are numerous. One is reassert ion of the native genius of the people. Here is a land in which most of the 130,000,000 population have been taught, and have known that their fathers were taught, that it was admirable to work with hand and mind, to enlarge one’s income, to save part of one’s income, to invest the saving, to accumulate profits from one’s investments, and to possess property in security, dignity, and — yes

— morality. The deep conditioning of the American mind to that conception was not to be changed permanently by one depression and its varying degrees of revolutionary thought. Soon or late there was certain to be a resettling into old patterns.

Another cause of change was the disappointment that followed some of Mr. Roosevelt’s ‘planning.’ The grandiose NR A collapsed before the Supreme Court removed it from the field. The AAA was in trouble from the beginning. People slowly, over the months, began to meditate. Then came a moral shock to be piled on economic doubts. The President’s proposal, after reflection in 1936, to pack the Supreme Court sent vast numbers of people back to old standards, including many who continued to be attached to the President personally. The best summarization of the objections to the President’s plan was that of General Johnson, who said it was ‘too damned clever.’ The abiding instincts of the hard-working and hard-headed majority of Americans are against get-rich-quick schemes, whether the offered riches are dollars or ‘social benefits.’ They will not permanently be allured by short and shady cuts to Utopia.

To all of that within our borders were added the demoralization and rout of the ‘planners’ of the Left whose object lesson had been Russia. When the trials and confessions of the most eminent of the Old Bolsheviks were fairly under way, friends of The Great Experiment had a choice of two alternatives. Either the trials, confessions, and executions were a hideous drama of treachery and murder by government; or they proved that the dictatorship of the proletariat had assumed the classic form of personal dictatorship and was driving into underground conspiracy numerous men of distinction whose devotion to the early ideal had long been recognized. There was no escape from a choice between those alternatives. It was a bitter choice, for the taking of either involved the surrender of a case which had been laboriously constructed over two decades. But there the choice was. The ‘planners’ of the Left quailed before it. And in due course they were ruined.

Then came the Soviets’ international brutality. Strictly speaking, the invasion of Finland by Russia is not proof that a ‘planned economy’ is socially and economically unworkable. But it is impossible to persuade Americans that only ‘production for use’ is respectable when The Great Socialist Example finds the ‘use’ of its ‘production’ in the murder of weak and innocent neighbors. It is impossible to shout against ‘the greed of the profit motive’ among one’s own people when The Great Socialist Example is indulging a greed for the property and the labor of whole nations.

III

So in this year of grace, one thousand, nine hundred and forty, men openly avow respect for the basic economic principles upon which this country has rested from its beginnings. And, until war exploded our own kind of isolation, the question that we thought about was this: What is the country going to do, in practical things, now that it has recovered its basic concepts? On the assumption for the present that we can do as we should like to do, a few definite replies can be made.

For one thing, the country will wish to preserve the advances in social protection which have been made in Mr. Roosevelt’s administration. It is true that Mr. Roosevelt’s management of these social measures has been at times far from wise. Relief has been extravagant in places and corroded by politics in places. Old-age pensions, or annuities, threatened in the beginning to be de facto an income tax on the workers in exchange for a promise of the government to pay pensions in the future. The collections from the workers went into payment of current expenses of a deficit-ridden government. There was no true accumulation of an insurance fund. The workers would have been as sure of the future if they had not paid a dollar to the government, for they were protected by no more than the government’s promise which could have been given at any time and under any circumstances.

This situation was so glaring that, by common consent, it has been partially alleviated.

But, allowing for all such facts, it remains true that in this area Mr. Roosevelt has a mark on the credit side of the ledger. The issue as to these social protections is the matter of adjustments in practice after experience, and that is endless.

Another thing of which we may be certain, assuming that fate will permit us to manage our affairs as we should like to do, is that the principle of the more important regulatory agencies created in the Roosevelt administration will survive. The practice will be altered materially.

But in correcting the excesses of the immature people who have made themselves conspicuous in the work of the Labor Board it is not necessary to destroy the principle of the Wagner Act. And — whether or not labor really needed the Wagner Act, whether or not it is making greater durable progress under the act than it previously made by the use of reason and discussion and negotiation — the essence of the act will survive under either party.

This wall be true of such regulations as that attempted in the wages-and-hours law. Here too much was attempted. There was widespread support for an experimental approach to this question through the states. Conservatives favored experiments no less than liberals and neo-liberals. Mr. Roosevelt and his associates insisted upon all or none, and the federal law was enacted without adequate study or information. It is now necessary to experiment backward instead of forward.

The administration of the law has been an insoluble problem. And not strangely, for some of the ideas embodied in it are ridiculous. It surely is absurd that a law designed for t he protection of substandard workers, too feeble or too youthful to organize and bargain for themselves, should govern the working hours of a university graduate who is sufficiently competent in his job to own town and country homes and two cars. It surely is absurd that, even for the protection of substandard workers, a lawr should be enacted upon the theory that the avarice of the employer accounts invariably for low wages and that the productive capacity of the worker has nothing to do with a low scale. For to proceed blindly upon this theory in lifting wages and reducing hours is to risk unemployment in groups to whom idle hands may be an evil equal in its social consequences to low wages.

In one way or another, by change in the law or in administration, necessary experimentation backward must be carried on. Congress has lately worked itself into frantic futility in efforts to do so. But the efforts will be pressed in due course. These efforts will probably fall short of repeal. There is a strong and deep and creditable sentiment for regulation of the wagcs and hours of substandard workers. Once the fight for a prudent approach through the states was lost, and the federal law was enacted, the practical course of the future became experiment and debate to make the federal law workable.

Again, in the securities administration will be found, whatever the result of the election, a disposition to accept the principle and to revise the practice. The SEC has had more than faint praise from many who have been skeptical of much in the Roosevelt administration. Its membership has included some of the ablest men Mr. Roosevelt has drawn to Washington. And these men often have combined strength of opinion with objective consideration of facts. Yet, despite general belief that there should be public regulation of security issues and general respect for most of the men who bear the responsibility, there has been lately a perceptible wave of dissatisfaction.

Perhaps the simplest portrayal of the dissatisfaction would be to say that people feel that the SEC is rather like a parent who is so anxious to guard his children against making mistakes that he makes it hard for them to do anything whatever. After all, the only way to be entirely safe against the making of mistakes in this life is to die, and some observers of the scene seem to think that, under the unflagging care of the SEC, the capital market may decide death to be the easiest road to negative perfection. But this attitude of the commission will not endure indefinitely, and it will be corrected, by one party or the other, without destruction of the principle.

IV

There is another subject on which the people were rapidly making up their minds prior to the day of the march into the Low Countries. That was federal finances. There was growing demand for restraint upon spending and for budgetary order. In the alarm created by the furious spread of war, thought of defense temporarily banished thought of budgetary order. The Congress and the country acceded to Mr. Roosevelt’s emergency arms program with all the alacrity he could have desired, and deferred the question of financing the billion-dollar appropriation. But the state of mind that preceded the invasion of the Low Countries was so strong that revival of the demand for budgetary order soon appeared in the country. Mr. Roosevelt’s call for a second billion strengthened the demand for fiscal order. The people were far ahead of Congress in recognizing the need of new taxes in order to guard the budget and protect the national debt and the national credit.

Perhaps the chief reason for the bungling of recent months in the movement for budgetary reform is that the task calls for leadership which Mr. Roosevelt is unfitted to supply. There are two approaches, other than emergency taxes, in bringing the federal budget under control. There must be economy. But after economy there must be stimulation of the industrial machinery of the country so that the tax levies, whether direct or indirect, will bring in larger totals of revenue. Mr. Roosevelt is unfitted to lead in either approach, and his recent irritation under criticism suggests that he knows it. Temperamentally, he is an extravagant man. The Florida ship canal and Passamaquoddy were performances possible only to a man organized by nature for large flights of fancy — and damn the expense. Dozens of other examples might be given. Even in small things he loves to let his fancy run without discipline.

As to stimulation of the industrial machinery, with consequent increase in the yields of tax levies, Mr. Roosevelt has been deficient in effectual leadership of a normal economy because he is incapable of a consistent and coherent economic policy. One of the most illuminating things ever said of the President came from the lips of a brilliant and devoted member of the group of young intellectuals whom he gathered in Washington. This man said that if the President were told that Business A had driven Business B out of existence, and 300 workers had lost their jobs, he would be angry at destructive, cutthroat competition and think that something must be done. Apparently, in such a case, the President would have no thought of questions whether the defeated business was overcapitalized, or badly located, or poorly managed, and whether, because of one or all of these possible reasons, it had been unable to serve its customers as well as Business A. In short, the President’s mind would not ask whether the victory of Business A meant that a large body of consumers were getting better goods or service for the same or less cost. There was cutthroat competition, and cutthroat competition should give way to civilized cooperation.

But, said this friend, suppose that the next day one of the President’s aids brought him a report that five concerns, seeking business from the government, had ‘cooperated’ in offering identical bids. The instant effect, the friend said, would be Presidential rage at collusive bidding and the evils of monopoly and restraint of trade.

The story illustrates perfectly the difficulty Mr. Roosevelt always has had in formulating dependable economic policies. Put aside such impetuous grandiosities of the 1933 period as NRA and the Warren gold theory. Over the years, one sees Mr. Roosevelt moving facilely from spending under the hard necessity of providing jobs to acceptance of the theory that spending is good in itself as stimulation of purchasing power. One sees him impulsively embracing and stubbornly defending the undistributed profits tax, which achieved maximum results in harassment of business by interfering with established concerns in the management of reserves and by interfering with struggling competitors in the creation of reserves. One sees a legitimate fight to regulate power companies woven into a half-furtive attempt to overwhelm the power companies with publicly owned or publicly subsidized plants. One sees labor laws so flagrantly administered on the principle of worker domination of industry that finally the President himself had to order retreat in anticipation of Congressional revolt.

And over all of these and similar mistakes one sees the overshadowing question of the national debt, and public credit, on which the President has held positions to the north, to the east, to the south, and to the west.

In the last year, when Mr. Roosevelt has been occupied chiefly with foreign affairs, this country has had comparative freedom from economic contradictions. But the record had been made and it had convinced the business community that Mr. Roosevelt does not know the nature of business.

V

It will have been noticed that these questions upon which it has been possible to speak with some certainty are questions of administration. We have enlarged the area of social protection, and have problems in administration to solve. We have extended the lines in regulation of labor and financial relations, and have problems in administration to solve. We have lived beyond our means, and have before us to solve problems of administration in reducing expenses and increasing receipts, problems which are recurrent in every nation and every household.

Beyond such questions it is not possible to speak with certainty, even excluding the consequences of the war in our national life. We have turned our faces toward capitalism, operated through free enterprise, and leaders of both parties proclaim in every hamlet their devotion to this principle. But in practical operation of the organic functions of production of wealth and distribution, the country and both parties are still entangled in the webs woven in the middle thirties when desperation, on the one hand, and the panaceas of the ‘planners,’ on the other, swept us far toward state socialism, or its twin, state capitalism.

Remember that when Mr. Roosevelt undertook, in the NRA, governmental supervision of the production, the prices, and the labor relations of all the industry and trade of the nation, he was supported by spokesmen of the United States Chamber of Commerce and of the American Federation of Labor. Parades and demonstrations were the order all over the land. And when he threw off the revolutionary decision that farmers were no longer to be ‘lords of their acres,’ the few critics were summarily dismissed as relics of eighteenth-century thought, as though there were no history before the eighteenth century which included disastrous examples of government making itself the lord of the farmer’s acres.

The country may know that it wishes to turn back to older principles and practices, but extrication from commitments is not always easy. It is certainly not easy when the process of extrication is influenced by fierce political rivalries. It is certainly not easy when these political rivalries are influenced by the demands of minority groups who obtained public subsidies by surrendering freedom of enterprise, and now wish to hold on to the subsidies while joining in the demand for freedom.

Examine the Democratic Party. It is committed to Mr. Hull’s trade-agreement policy, which conserves the essence of free enterprise. But the Democratic Party also is committed to that mosaic of paternalism which is Mr. Wallace’s agricultural policy. This includes a variety of schemes dear to the hearts of ‘planners.’

Schemes to control production and prices are at the centre. The policy goes so far in this direction that it includes schemes to maintain two prices. It includes schemes to take surpluses off the market through loans which, in the aggregate, reach gigantic figures, and schemes simply to dump surpluses. To add to the confusion, there are contradictions within the ‘planning.’ Mr. Wallace’s mosaic contains, for example, plans for reclamation of land for agricultural purposes, which are set side by side with plans for restriction upon the use of land for agricultural purposes. The crop-restricting Mr. Wallace further calls for relief of the share-cropper, although no one on this earth has proposed any genuine measure of relief which would not teach the share-cropper to increase production.

Plainly, expression in concrete policies of the current Democratic devotion to free enterprise will not be realized without pain and struggle, nor quickly. And other contradictions promptly present themselves. There is, evident to all, the valorous campaign against monopolies (which privately regulate production and prices) that is being carried on by Mr. Thurman Arnold, of the Department of Justice, not to mention Senator O’Mahoney’s studious inquiry into all the phenomena of monopoly. But there also is that proud relic of the earlier New Deal economics which is named the Bituminous Coal Act. Although it has fallen short of working the miracles promised, it undertakes to provide as a gift of the government to the coal industry virtually every instrument for control of production and prices that any ‘planner’ could desire — or that the elder Rockefeller could have desired when he ‘planned’ on his own account.

Examine the Republican Party, Its spokesmen now speak for free enterprise in such clarion tones that one might suppose them to have an exclusive patent on the idea. But when the Hull plan for trade agreements was before Congress for extension, supported as a major step in restoring free enterprise by a preponderance of the best-informed business opinion of the country, less than a handful of Republicans in the House voted for it and no Republican member of the Senate.

Senator Vandenberg, at that time regarded as the favorite for President of most of the influential party leaders, did not limit himself to argument and vote against the Hull plan. He proposed in the debate that all the foreign trade of the United States — that going out and that coming in — should be subject to a governmental board. In the calendar year which ended on December 31, 1939, the total of all foreign trade of the United States was $5,494,448,000. Mr. Vandenberg would set up a new bureaucracy which would have authority to govern the nature and the volume of a trade which now reaches this gigantic total.

So far as agriculture is concerned, the position of most of the Republican spokesmen of free enterprise is this: Mr. Wallace’s record is all compact of grievous error, but no Democrat ever lived who could pay the farmer larger subsidies than the Republicans will pay. The implementation of this central idea may take various forms. For some weeks past the implement chiefly favored has been the old McNary-Haugen bill. This is a measure by which the government aids the farmers in ‘stabilizing’ (i.e. fixing) high prices for the part of farm products consumed in the domestic market, and in dumping the balance abroad at any price it will bring.

Calvin Coolidge once heaped the vials of his wrath upon this form of free enterprise. It caused him to produce one of his few first-rate state papers. The defense offered at that time by Charles G. Dawes boiled down to the argument that the Republicans had placed industry on high-tariff stilts and meant to keep industry on them; and, therefore, were under the necessity of providing stilts for agriculture. That may have been rough and poetic justice, but it was not an argument for free enterprise. And the present Republican inclination to the McNary-Haugen idea, coupled with the virtually unanimous Republican opposition in Congress to the Hull program for the gradual reduction of embargo tariff rates on industrial products, is assuredly no bulwark of free enterprise.

It is apparent that application of the revived doctrine of free enterprise — if free enterprise shall be tolerated after the war — will be marked by a good deal of writhing in both of the great political parties. The old doctrine, under which we operated most of our economy in most of our history, is respectable again and admired. But it is not to be disentangled from its foes, old and new, without struggle and pain. Neither party will be a pure and wholly eager agent.

VI

And now, having indulged ourselves in consideration of domestic policies as they were being shaped prior to the march into the Low Countries, it is necessary to turn to the overshadowing influence which the war is bringing to bear on all our national life.

Before the march into the Low Countries it was clearly possible that the war would unloose forces which would ultimately demolish the whole movement within the United States toward restoration of the historic system of capitalism, operated through free enterprise. Since the fateful morning of May 10, that possibility is increased. The United States may be pressed and pushed by necessity toward some system of narrow economic nationalism operated through governmental control of industry and agriculture — after the people’s faces have been set against the choice of such a system. The American people may turn to authoritarian control of their economy as a city may turn to martial law after a disastrous flood or fire.

Try to imagine the economic effects — not alone the political or military effects — upon this country of defeat of the British Empire. It is almost impossible to foresee and trace the effects, for all of us have lived in some degree in the mental habits of the late William E. Borah.

In a life marked by many inconsistencies, Senator Borah was firm in three positions. He was for disarmament. He was for isolation. And he was against the British Empire. He never saw that the British Empire, which he disliked and distrusted, made possible his successes in fighting for disarmament and his comfort in upholding isolation. So long as the British Empire was dominant, Mr. Borah led an enlarging body of opinion in support of disarmament and we did reduce our armaments. And isolationists rested feet on desks and comfortably placed thumbs in armholes. But when Japan emerged as the naval challenger, when Germany and Italy appeared as armed aggressors, and when the British Empire buckled before the threats of one after another of these despot nations — when that happened, Mr. Borah found himself in baffled solitude. His disarmament supporters were gone — gone into the armament camp. And isolationists, still shouting for isolation, began to peer around corners and to add to the cries for arms.

We have all taken the British Empire for granted, holding ourselves free to praise or to condemn, and few of us have measured its value to us in providing capital much of the time and markets all of the time. Nor have we taken thought of the security in which we have pressed our ventures in all parts of the world because the City of London provided financial policing in far-flung trading centres, while the British fleet preserved order in trade routes to the farthest places. We cannot even now foresee and trace the consequences, direct and indirect, of destruction of these forces which have preserved order.

But even an inkling of a world in which British political influence is demoralized or destroyed, British financial authority is demoralized or destroyed, and British physical power is demoralized or destroyed is sufficient to give us a wide panorama of disorder and decay where once were order and vitality. Our finance, industry, and trade could not escape the radiation of ruin from collapse of ihe main foundation of the world’s commerce. We should not escape even though we were spared affirmative interference by the victors with sources of vital supplies. And the danger of affirmative interference was in many minds at the time of Mr. Hull’s stand for the status quo in the Dutch East Indies, from which (and neighboring sources) we bring, to mention but one commodity, rubber for a nation of 130,000,000 who live on wheels.

Defeat of the British Empire may so disjoint the economic mechanism of the world that we shall suddenly find ourselves with our industry and trade blocked and our streets filling with idle men. In that event, all the settling of our opinion in favor of capitalism, operated through the traditional system of free enterprise, may become meaningless. We may have to turn to a form of governmental supervision and direction of industry, even management, not as a good in itself, not as an ideal system in a world of order, but as a necessity in feeding and clothing men. We may have to institute, in effect, economic martial law.

So much may befall us from the economic consequences of collapse of the British Empire. We became aware, almost instantly upon the march into the Low Countries, of the physical dangers to which we should be exposed by British defeat. Mr. Roosevelt promptly went to the Congress with his billion-dollar emergency arms program. And Congress responded by offering more money than he had asked and offering it in less time than had been anticipated. The voting was overwhelming. Men in the old-time isolationist groups were in the forefront of the movement to arm. Most of them had habitually treated every effort at cooperation with other nations of the world as, in effect, putting our necks into a British noose. But when they saw the imminent danger of British defeat, when they saw the danger of destruction or surrender of the British navy, they moved as swiftly to get arms as the most ardent of Anglophiles. And now it begins to be seen that the cost of this militarization for defense, arising from the fear that Britain will be defeated, adds a new and great danger to the security of our domestic economy and to all of the people’s plans to return to the traditional system of free enterprise.

Mr. Roosevelt asked for a billion dollars for the emergency arms program. He also asked for 50,000 planes. The popular impression, presumably, was that the billion-dollar emergency program would cover most if not all of the cost of the new air armament and related expansions of defense services.

Take a pencil and a piece of paper, and make a quick calculation. Some of the great war planes cost several hundred thousand dollars each. Assume an average price of $100,000 per plane. Multiply that average cost by 50,000. It will be seen that the total cost of the new fleet of planes which Mr. Roosevelt recommends, and the country desires, would be five billions of dollars, not the one billion for which the President called. Now, dealing only with planes, consider the cost of replacements. Consider the cost of airdromes. Consider the number of pilots, mechanics, and helpers who will be needed to fly and maintain 50,000 planes. Consider the cost of their wages and their keep. With that done, turn from aviation to the army and navy. If Britain is defeated and the British navy is destroyed or surrendered, shall we be able to do with a one-ocean navy? And shall we be able to do with a standing army of a few divisions?

It must be clear to all that, if Britain goes down, we shall not be able to step up our national expenditure for defense from two billions a year by an additional emergency billion and call the job done. This has been proved by Mr. Roosevelt ‘s call for a second billion. We shall go to five, to six billions a year for defense. And, if we continue to pay the salaries and the wages to men in the armed services which we have been paying, such an enlargement of the defenses of air, sea, and land as is threatened may take our total costs for defense closer to ten billions a year than to the present figure. That is what lies ahead if the British Empire is ruined and if the British navy is destroyed or surrendered to Germany.

And we face that possibility with a national budget which has been out of balance for a decade and with a national debt which Mr. Roosevelt has carried to a total not far from double that of the peak of the last war. It is not necessary to argue that we shall be able to carry the cost of such militarization as will be imperative, in the event of British defeat, only if we find the self-discipline to enforce the sternest economy both in civil administration and in the armed services, and only if, in addition, we find the self-discipline to enforce upon ourselves the sternest system of taxation ever known in this land. Whether we can find the self-discipline is a question to which no instant answer can be given. We have been profligate in civil administration. We have been luxurious in maintenance of the armed establishments, which accounts partly for the deficiencies with which the government now grapples after the expenditure of $9,190,000,000 for defense in the 19301939 decade. And we have shunned stern taxation in t he lower brackets.

Obviously, if Britain and the British fleet go, and if we then fail to economize and to tax with a stern resolution never before required of us, we shall see our national debt swell like a balloon and finally burst. If that occurs, private credit will collapse and private enterprise will be paralyzed in its organic departments. To preserve the elemental movements of goods and supplies to a vast urban population, the government may be compelled to take possession of whole industries and to put into effect a form of economic martial law whose details no one can now foresee or predict. Only, we can tell thus far in advance that it will not be the system of capitalism, operated through free enterprise, to which the people of this country wish to return, nor will it be accompanied by the civil rights which we have known in all the long history of our free enterprise.

VII

But the menace from abroad does not end with the possibility of British defeat. It may arise from protracted war. Already there has been serious dislocation of our normal exports, particularly in agricultural commodities. The impact upon our economy has been reduced by increase in war purchases by the Allies and, to some extent, other nations not yet directly involved in the wars in Europe and Asia. This new trade has been sufficient to induce the semblance of a war boom in some lines of heavy industry. But a year hence the cash resources of the Allies may be exhausted, and there will stand between them and us in purchases of goods the barriers of the Johnson Act and other legislation to restrict credits. Almost overnight we may be called upon to endure the present dislocation in normal trade plus the stoppage of all the large war trade. Measure the reaction upon our economy unless we change our laws and grant credits—knowing full well that the credits will not be repaid in an ordinary lifetime.

Even there the menace from abroad doas not stop. Assume that the British Empire will not be defeated. And assume that we change our laws and grant credits. One day the war is stopped and peace is declared. That day will find the British and French governments loaded down with debts which will never be paid or refinanced at anything like true value, and with private credit, therefore, undermined. In this event of Allied victory, defeated Germany and her associates will be in economic chaos. And for all, victor and vanquished alike, there will be the task of turning men and women out of armed forces and war industries and into the productive pursuits of peace — millions upon millions of men and women. It will not be possible for governments merely to disgorge men and women from armed forces and war industries and tell business to provide employment — to provide food and clothing. Private business will have its production demoralized, its trade demoralized, and its credit demoralized. It will not be able to feed and clothe the men and women who will be discharged from war.

The British and French governments, perforce, will be totalitarian in peace as they now are totalitarian in war. They will be totalitarian not because they will believe, as do the Germans, Italians, and Russians, that totalitarian government is good in time of peace. Economic martial law, governmental control of essential industry and trade, will be the means, not of social advance in enlightened nations, but of bare subsistence in ruined nations. And our American trade, already sensitive to abnormal depressions and abnormal expansions from the war, will respond inevitably to this final collapse of free enterprise in Europe. Again, our own recourse may be economic martial law.

VIII

With these spectres in the air, there is a paradox before us.

Mr. Roosevelt recklessly and truculently scuttled the World Economic Conference which met in London in July 1933. He had suddenly become enamored of ‘economic planning,’ and, of course, ‘economic planning’ assumes economic nationalism and the pursuit of national self-sufficiency. Each nation becomes a small economic planet. In scuttling the Economic Conference, Mr. Roosevelt also extinguished the last breath of life in the Disarmament Conference. The armaments race was on, open and unabashed. But today Mr. Roosevelt shares wit h Secretary of State Hull, whom he deserted in London in 1933, the leadership of the cause of international responsibility, economic as well as political. He is become a leading spokesman for mutuality of interest between nations.

In the stand which has resulted from his gradual change of view appears the possible drawing of one clear line between the Democratic and Republican parlies — provided German victory does not convert our whole foreign policy into preparation for defense. The line is not now clearly drawn. In the end it may not be drawn at all. Mr. Roosevelt had taken the course which, prior to the news of May 10, was hard uphill, and, as party leader, he may give ground. Or the Republicans may advance. In the Democratic Party are many whose instinct has been to find an island in the Mississippi and to look neither to the east nor to the west, lest they see Europe or Asia, and, seeing, become fascinated and involved. In the Republican Party have been many whose sympathies are with Mr. Roosevelt, in his foreign policy.

But in recent weeks — before the march into the Low Countries shook all positions — there had been a definite tendency upon the part of the responsible Democratic leadership to face economic responsibility in Europe during the war, and, equally definitely, to face responsibility in the tasks of reconstruction after the war. The justification, apart from humanity, was that such assumption of responsibility might save Britain, France, and European neutrals from long-continued totalitarian rule after the war and thus might save us from being driven into similar economic martial law.

At the same time, there had been a definite tendency upon the part of most of the Republican leaders to call for outright isolation, economic as well as political, during the war and after the war. Mr. Dewey went far in this direction in his Western speeches. Mr. Vandenberg’s attitude was vehemently isolationist. (He now draws a distinction between isolation and insulation.) And although Mr. Taft voted last year for repeal of the arms embargo, the one outspoken Republican resistance to economic isolation came from Mr. Willkie, a dark horse, who is rather more of a Republican thinker than a Republican leader. Mr. Willkie, during the primaries, intervened to say bluntly that while he condemns Mr. Roosevelt’s domestic policy, he thinks the Administration’s foreign policy is ‘pretty good.’

This division between the two parties on foreign policy, if it comes, will give a final bizarre touch to a period in which realities have often seemed fantasies, and fantasies have become realities.

We were carried far along the road of the ‘planners.’ In time, our instincts, our experiences, and our observation of events abroad forced a halt. We began to retrace our steps, confused though we were by the headlong journey, hobbled by commitments made in the journey, distracted by the obstructive rivalries of leaders who professed to be showing us the way to old and familiar roads.

And now! War abroad opens a vista through which we are able to discern in the distance a danger that all the hopes of our homeward march may be destroyed. ‘Economic planning,’ rejected in deliberate peace, may be forced upon us in some rough-and-ready form by frantic war. And the political party which recklessly toyed with ‘planning’ in peace has sought prudently to guard against the danger of enforced ‘ planning ‘ from war and its aftermath; while the political party which decried ‘planning’ has been inclined to exorcise the new danger by refusing to see it. But perhaps the fateful day of May 10 may have started reorganization of all political positions. It may be so forceful as to compel the Democrats to add wisdom in domestic economy to wisdom in foreign policy. And, in foreign policy, the effects of May 10 may be such as to cause the Republicans to read some of the speeches made by Woodrow Wilson in 1919 and to substitute thinking for the jeering of twenty years.