Market and Nature [199]
on an institution as frail as the self-regulating market. The autarchy
movement of the 1920s was essentially prophetic: it pointed to the
need for adjustment to the fact of a vanishing order. The Great War
had shown up the danger and men acted accordingly; but since they
acted ten years later, the connection between cause and effect was dis-
counted as unreasonable. "Why protect oneself against passed dan-
gers?" was the comment of many contemporaries. This faulty logic
befogged not only an understanding of autarchy but, even more
important, that of fascism. Actually, both were explained by the fact
that, once the common mind has received the impress of an acute dan-
ger, fear remains latent, as long as its ultimate cause is not removed.
We claimed that the nations of Europe never overcame the shock
of the war experience which unexpectedly confronted them with the
perils of interdependence. In vain was trade resumed, in vain did
swarms of international conferences display the idylls of peace, and
dozens of governments declare for the principle of freedom of trade—
no people could forget that unless they owned their food and raw ma-
terial sources themselves or were certain of military access to them,
neither sound currency nor unassailable credit would rescue them
from helplessness. Nothing could be more logical than the consistency
with which this fundamental consideration shaped the policy of com-
munities. The source of the peril was not removed. Why then expect
fear to subside?
A similiar fallacy tricked those critics of fascism—they formed the
great majority—who described fascism as a freak devoid of political
rationale. Mussolini, it was said, claimed to have averted Bolshevism
in Italy, while statistics proved that for more than a year before the
March on Rome the strike wave had subsided. Armed workers, it was
conceded, occupied the factories in 1921. But was that a reason for dis-
arming them in 1923, when they had long climbed down again from
the walls where they had mounted guard? Hitler claimed he had saved
Germany from Bolshevism. But could it not be shown that the flood
of unemployment which preceded his chancellorship had ebbed away
before his rise to power? To claim that he averted that which no longer
existed when he came, it was argued, was contrary to the law of cause
and effect, which must also hold in politics.
Actually, in Germany as in Italy, the story of the immediate post-
war period proved that Bolshevism had not the slightest chance of suc-
cess. But it also showed conclusively that in an emergency the working
[ 200 ] The Great Transformation
class, its trade unions and parties, might disregard the rules of the
market which established freedom of contract and the sanctity of pri-
vate property as absolutes—a possibility which must have the most
deleterious effects on society, discouraging investments, preventing
the accumulation of capital, keeping wages on an unremunerative
level, endangering the currency, undermining foreign credit, weaken-
ing confidence and paralyzing enterprise. Not the illusionary danger
of a communist revolution, but the undeniable fact that the working
classes were in the position to force possibly ruinous interventions,
was the source of the latent fear which, at a crucial juncture, burst
forth in the fascist panic.
The dangers to man and nature cannot be neatly separated. The reac-
tions of the working class and the peasantry to market economy both
led to protectionism, the former mainly in the form of social legisla-
tion and factory laws, the latter in agrarian tariffs and land laws. Yet
there was this important difference: in an emergency, the farmers and
peasants of Europe defended the market system, which working-class
policies endangered. While the crisis of the inherently unstable system
was brought on by both wings of the protectionist movement, the so-
cial strata connected with the land were inclined to compromise with
the market system, while the broad class of labor did not shrink from
breaking its rules and challenging it outright.
C H A P T E R S I X T E E N
Market and Productive Organization
ven capitalist business itself had to be sheltered from the unre-
stricted working of the market mechanism. This should dispose
of the suspicion which the very term "man" and "nature" sometimes
awaken in sophisticated minds, who tend to denounce all talk about
protecting labor and land as the product of antiquated ideas if not as a
mere camouflaging of vested interests.
Actually, in the case of productive enterprise as in that of man and
nature the peril was real and objective. The need for protection arose
on account of the manner in which the supply of money was organized
under a market system. Modern central banking, in effect, was essen-
tially a device developed for the purpose of offering protection with-
out which the market would have destroyed its own children, the busi-
ness enterprises of all kinds. Eventually, however, it was this form of
protection which contributed most immediately to the downfall of
the international system.
While the perils threatening land and labor from the maelstrom of
the market are fairly obvious, the dangers to business inherent in the
monetary system are not as readily apprehended. Yet if profits depend
upon prices, then the monetary arrangements upon which prices de-
pend must be vital to the functioning of any system motivated by
profits. While, in the long run, changes in selling prices need not affect
profits, since costs will move up and down correspondingly, this is not
true in the short run, since there must be a time lag before contractu-
ally fixed prices change. Among them is the price of labor which, to-
gether with many other prices, would naturally be fixed by contract.
Hence, if the price level was falling for monetary reasons over a consid-
erable time, business would be in danger of liquidation accompanied
by the dissolution of productive organization and massive destruction
of capital. Not low prices, but falling prices were the trouble. Hume
[201]
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