Dorothy Day’s Catholic Worker. Their echoes were to be heard again recently in the condemnation of “unjust” capitalism by the National Conference of Catholic Bishops, in a much less original (and much more American) document than its supporters or its opponents seemed to believe.

As far back as Thomas Malthus, who hypothesized in 1798 that the arithmetical increase in agricultural production could not feed the geometrical increase in population, up to Stanley Jevons’s insistence in 1865 that modern society was about to collapse as the veins of Britain’s coal were exhausted, economics has been a dismal science producing unwanted answers to avoidable questions. “Getting and spending,” Wordsworth wrote, “we lay waste our powers.” But the height of feeling that market capitalism was indefensible came in the last quarter of the nineteenth century, a time of deflation that squeezed farmer, manufacturer, and laborer alike. The beneficiary of the squeeze, in real terms, was the lender, whose capital yielded declining nominal income (Marx’s unfortunate “iron law”) but constantly increased in value as measured by purchasing power. Unrestrained, the workings of the “free market” seemed certain to produce, as Marx said it would and Bellamy said it already had and the Pope said it must not, “immiserization” of the masses.

In 1894, in the middle of the desperate decade that future generations would idiotically describe as the “Gay Nineties,” William Dean Howells, America’s premier man of letters, returned to the attack on capitalism with his vision of a Utopia called Altruria. Once upon a time in Altruria, Howells wrote, there had been an “Accumulation [which] treated the proletariat like a deadly enemy...left their families to starve...sought every chance to reduce wages.” These evils had been remedied in a single blow, at the ballot box. “All transportation was taken into the hands of the political government...which showed itself immaculately pure, compared with the Accumulation. The common ownership of mines necessarily followed, with an allotment of lands to anyone who wished to live by tilling the land, but not a foot of the land was remitted to private hands for purposes of selfish pleasure or the exclusion of any other from the landscape.” Once the production of “fraudulent wares” had been eliminated, “one hour sufficed where twelve hours were needed before, and the operatives were released to the happy labor of the fields, where no one with us toils killingly, from dawn till dusk, but does only as much work as is needed to keep the body in health.” By cutting off and presumably somehow moving away “a peninsula which kept the equatorial current from making it to our shores,” the new socialist government even changed the climate of the southeast coast from one of “antarctic rigor” to one like that of “your Mediterranean countries.”

The year of Howells’s publication was also the year of the Commonweal of Christ—Coxey’s Army—which marched to Washington, seeking a redress of its grievances, which were poverty and unemployment,

only to be arrested for trespassing on the Capitol grounds. And 1894 was also the year when William Jennings Bryan brought the fears and hopes of the suffering poor to conventional American political life. Having failed in his effort to be chosen as a U.S. senator by the Nebraska legislature (for those were the days before the popular election of senators), Bryan spent 1895 and much of 1896 traveling around the country—just as the candidates for the Presidency do today—lecturing for good fees at the chautauquas, pressing the flesh, and doubtless noting, at least in passing, the despair of the impoverished. In 1896 he yelled from the podium at the Democratic National Convention that he would not permit the nation’s money interests to crucify mankind upon a cross of gold, and presently he was running against William McKinley in the first of what would be three losing campaigns for the Presidency. Bryan was no socialist. He was not, in truth, much of anything—“silver tongue in a big mouth,” John Dos Passos wrote savagely—but he saw the financial and commodities markets as deflationary devices by which poor people were squeezed so that the rich could wax even fatter.

The capitalists of the turn of the century were, ironically, by no means enamored of economic organization that left prices to be set in a market. They did not want government control, but they still wanted control—by themselves. The twenty years after Bellamy’s book were the age of the great trusts, combining railroads and steel mills and petroleum producers to put a stop to “destructive competition.” Approving words about the idea of a free market were most likely to come from outside the economic context—for example, from liberal theoreticians like Supreme Court Justice Oliver Wendell Holmes, Jr., who thought “competition of the market” was the best procedure for determining even the fate of “fighting faiths.” For businessmen and most people, however, the world was divided into price setters and price takers. Free markets made people price takers (they were stuck with whatever someone thought the traffic could bear), and if possible, everyone wanted to be a price setter. That was safer and more comfortable as well as more profitable, especially in a time of falling prices. Farmers today will give chapter and verse. What the visionary intellectual and philosopher kings found best of all, of course, was the idea of a world where all this haggling would stop. “Socialists,” Bernard Shaw explained, “propose to secure goods for everyone at cost price by nationalizing the industries which produce them.”

Eugene Debs, leader of the first American railway union organized as an industrywide union rather than as a craft union, cut his eyeteeth on politics in the Bryan campaign and two years later announced himself a convert to socialism. He ran for President five times, receiving almost a million votes in 1920 (when his campaigning was greatly restricted because he was in jail).

But American labor chose to follow the lead

of Samuel Gompers, who distrusted all economic philosophizing, accepted as his one political principle the law of rewarding friends and punishing enemies, and asked only that capitalism provide the members of his unions with “more.” In the 1920s they—indeed, virtually all Americans except farmers, who could not hang onto the gains from the glory days of the First World War—did get their “more.” In Europe, where the recovery from the war was painful and incomplete, “social democracy” became the legitimate alternative to the ruling parties and sometimes the government itself; but in the United States the Utopian visions of Bellamy and Howells became a rather esoteric part of the American literature program (itself a rather esoteric subsection of English literature until the late 1950s) rather than an element in social thought. As for Marx, Lenin, and their followers, for most Americans they were simply aliens with beards, bushy or pointy as the case may be.

The Great Depression, the worst of deflations, bewildered everyone, leaving only certainty that the future would be vastly different from the past: “Comes the revolution,” the gag line ran in a foreign accent, “you’ll eat strawberries and cream and you’ll like it.” Then came the Second World War, with its necessary sentimentality about GI Joe and his Russian counterpart and the better world they would build together when they returned home in peace. That world, of course, would be free of the dog-eat-dog exploitation of man by man. “The present generation,” wrote the University of Chicago sociologist Edward Shils in 1950, “has seen the growth of socialism to the point where, in large areas of Western civilization, it has come to be taken for granted as a natural course of development, for which we are destined, for better or for worse.”

Nevertheless, capitalism survived and came to a new and luxuriant flowering in the last quarter of the twentieth century. In part it was saved by the long secular trend of inflation and by the “money illusion” described a quarter of a millennium ago by the Scottish economist and philosopher David Hume, which left people feeling richer and able to buy more and thus willing to leave their fate in the hands of market forces. But like most political movements, the restoration of capitalist ideology was nurtured mainly by the failure of the alternatives.

Over the course of the last two generations, many peoples at many times tried to organize “centrally planned” or “command” economies, as they came to be called (bypassing value-charged words like socialist and communist or indeed state capitalist), and the results were never as desired. Wartime, of course, was especially productive of government orders to manufacture this rather than that industrial item, in officially specified quantities at officially established prices. The more stringently this was done, however, the less impressive historians have found the results. The Strategic Bombing Survey conducted after World War II indicated that Hitler’s Germany, which had built

matériel of war with slave labor and had allocated resources through a supposedly omnipotent party/bureaucracy, had in fact dedicated a lesser fraction of its production to the war effort than had the United States, where most goods and services continued to be purchased through the market.

This had not, incidentally, been the original American plan. In the first frenzy of rule and regulation after the outbreak of the war, there had been a great deal of requisitioning and demanding at prices either fixed at that time or to be determined later. Like many of his colleagues, the political scientist Norton Long came out of academia a great believer in the primacy of policy over economics and went to work in 1942 for the Office of Price Administration. Some years later, graciously helping an opponent build an argument, Long remembered the problem of finding enough fractional-horsepower motors to rotate the gun turrets on tanks. The Office of Defense Mobilization had made detailed studies of the facilities at the various manufacturers that could be committed to this vital purpose, and the orders had gone out, with a quota for each factory. Each month the shortage of fractional-horsepower motors got worse until finally, Long recalled, somebody said, “Let’s double the price”—and soon there were all the motors the military could want.

In the United States, throughout the war, we rationed meat, we rationed gasoline, we rationed nylon stockings (the nylon was needed for parachutes), we dedicated the automobile factories to military vehicles and aircraft, we controlled the allocation of building materials. Newspapers were not permitted to increase their consumption of newsprint. We had price control and rent control, and large employers could give their workers raises only with the consent of the National War Labor Board. Taxes rose to a confiscatory 92 percent on the marginal dollar of the income of the wealthiest part of the community. The war was popular: Americans mostly hated the Nazis and the Japanese. War spending and its finance by expansion of the money supply lifted the country from a depression that by 1939 had seemed terrifyingly permanent. Yet as time passed, there were black markets in almost everything and great popular dissatisfaction.

After the war state-directed economies were everywhere: some were built on presumably Marxist principles in Eastern Europe and China (where the expenses of the governments that controlled production and distribution were theoretically to be met by the profits of state-owned enterprise), some were organized according to the peculiar principles of Peronism, a political doctrine named after the Argentine dictator Juan Perón by which military-based governments resident in cancerously growing cities could reward their supporters and pay the losses of nationalized industry by confiscatory taxation of the export earnings of the farmers.

This second approach to the organization of economic society was widely adopted in newly liberated Africa, most notably on the Gold Coast, which became Ghana, one of the richest and climatically one of the most salubrious

of the developing countries, and which was set on the path to its present misery by its first national leader, Kwame Nkrumah. The government of Ghana still insists on buying its cocoa farmers’ product at very low government-fixed prices for resale abroad at the much higher market price, with the result that the paths through the forest between Ghana and the Ivory Coast are festooned with the rotting corpses of cocoa smugglers caught and hanged by the Ghanaian Army, and the Ivory Coast’s share of world cocoa exports, once less than half of Ghana’s, is now the largest in Africa. A few years ago I spent an afternoon with Kojo Debrah, then the Ghanaian ambassador to both Australia and Malaysia. It was important for him, he said, to report back to Accra on what was happening in Malaysia. That country had won its independence in the same year as his and had then been much poorer, but in the 1980s, after a quarter of a century of more or less capitalistic development, it had a per capita income approaching three times that of Ghana.

It was not only that the Ivory Coast with its freeholders did so much better than Ghana with its collectivized farms, or that Panama for all its corruption did better than Cuba, or that South Korea and Taiwan generated far higher living standards than North Korea and China. The Eastern bloc countries in Europe recovered from the war much less rapidly than the West. Part of the reason, no doubt, was the difference between American generosity in the Marshall Plan and Soviet rapacity in reparations demands under Stalin (America could afford generosity and Russia couldn’t), but by the latter 1950s the world had perceived that West Germany was so much more prosperous than East Germany because market capitalism was a far more efficient system than state command for the generation of wealth. One must honor the memory of the East German freedom fighters of 1953, who threw rocks at the tanks on Stalin Allee, but East German demands for liberty were less important than the West German standard of living in Khrushchev’s decision in 1961 to build the Berlin Wall. As those who lived inside them knew, moreover, these socialist states were desperately corrupt societies, where the goods and services people earned from their labors depended very much less on what they produced or what they “needed” than on whom they knew.

The insight most visibly validated by the years after World War II was that of the French revolutionary syndicalist Georges Sorel in the years before World War I. “When politicians intervene,” he wrote in his book Reflections on Violence, “there is, almost necessarily, a noticeable lowering of ethical standards, because they do nothing for nothing and only act on condition that the devoured association becomes one of their customers.” Sorel was writing of

what he called “political-criminal associations.” Sixty-odd years later the foreign minister of Singapore coined the term kleptocracy, rule by thieves, to describe the governments of certain—alas, many—Third World countries.

There are doctrinaires who prefer general poverty under the rule of rightminded or at least indigenous leaders like Castro or Mobutu to prosperity created by the greedy and often foreigninfluenced buccaneers of the marketplace. Ian Buruma, cultural editor of the Far Eastern Economic Review, wrote recently of what he saw as a sinister conspiracy in capitalist Japan: “The sharp rise in living standards that began with the economic boom of the 1960s was part of a deliberate political strategy to undermine political activism.” But ordinary people—and, in fairness, most “political activists” too—have a preference for progress rather than poverty, especially, of course, in the United States.

But in the years right after World War II, the choice did not present itself that way. Like Bellamy, most Europeans and even some Americans thought socialism would be more rather than less efficient in the production of what people wanted. Oskar Lange, while a professor of economics at the University of Chicago (later he returned to his native Poland to be foreign minister for the Communist government), demonstrated to his own and some others’ satisfaction that a “socialist market” would yield more productive allocation of resources than the usual capitalist market. Yale’s Henry Wallich, one of the most perceptive American economists and a Republican to boot (later a governor of the Federal Reserve Board), wrote a book, The Cost of Freedom: A New Look at Capitalism, which assumed that the allocation of resources in a competitive marketplace might be marginally less efficient than in a state run by philosopher kings, but that the political benefits more than made up for such losses. Britain nationalized its coal and steel producers, electricity generators and gas suppliers, telecommunications, the Bank of England, and the railroad network; France, sometimes for reasons of punishing collaborators rather than for political theory, took over the nation’s largest automobile manufacturer and oil company and the three largest commercial banks (it had always owned the railroads and the telephone utility); Italy perpetuated and strengthened Mussolini’s multifarious government holding company that wound up proprietor of perhaps 20 percent of the nation’s manufacturing enterprise.

In addition, France developed a supercadre of theoreticians in the Commissariat Générale du Plan, which nudged the economy in ways the government liked the look of, and the Japanese advertised the “administrative guidance” given that country’s manufacturers by the Ministry of International Trade and Industry, working mostly through privately owned but tightly controlled banks in a country where investment was overwhelmingly financed by bank loans rather than through capital markets. The Russian physicist Andrei Sakharov, who got arrested for it, argued that there would be a “convergence” between these mixed economies of the West and a liberalizing Soviet Union, with both sides enjoying the best of each.