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# The American Consensus in Action: the Making of the U. S. Economic System

And this American so-called capitalistic system is unlike any other
capitalist system in the world. It has elements of vigor and vitality in it
which have given it additional characteristics. This raises the problem of
what elements were added to or subtracted from the traditional capitalism
which emerged in Western Europe. Analyzed, the American differences
appear not to be primarily economic elements; they are rather moral, or if
you like, philosophical elements -- evidences of the way the society itself
has rebuilt an economic system better to reinforce and advance the values
of a democratic society.

In the 1800's, the American system looks and in many respects is,
very much like the English system. Then, it begins to take a different form.
The American Revolution had taken place. The Constitution had constructed
new political machinery and there was a new political concept about how it
should be used; specifically, there was the American theory of general
participation in political action. The result was that the United States began
to use politics to bring to bear on its economic system.

The achievements of the American economic system need not be
detailed. First, for the first time in history in the case of any large power
serving a large block of population, the U. S. has an enormously productive
system -- a system producing far and away beyond any known system heretofore.
Second, we have a degree of distribution which, while it cannot be
said to have abolished want, has gone much farther towards this than in any
system covering any comparable large block of population anywhere. This

system covering any comparable large block of population anywhere. This
said to have epitomized what were done much further towards this than in any
fore..."Second, we have a degree of distribution which, while it cannot be
said to be an epitomized whole, is done much further towards this than in any
system -- a system producing sat and away beyond any known system there-
serving a large block of population, the U. S. use an enormously productive
detailed first, for the first time in history in the case of any large power.

to use politics to bring to bear on its economic system
participation in political action... The result was that the United States began
should be used: specifically, there was the American theory of general
new political machinery and there was a new political concept about how it
The American revolution had taken place. The Constitution had constructed
very much like the English system. Then, it begins to take a different form.

In the 1800's, the American system looks and in many respects is,
of a democratic society.

The American economic system better to reinforce and advance the values
you like, philosophical elements -- evidences of the way the society itself
appear not to be primarily economic elements: they are rather moral, or it
which emerged in Western Europe. Analyzed, the American differences
what elements were added to or subtracted from the traditional capitalism
which have given it additional characteristics. This raises the problem of
capitalist system in the world. It has elements of valor and vitality in it
And this American so-called capitalistic system is unlike any other

of a democratic society.

It has rebuilt an economic system better to reinforce and advance the values
you like, philosophical elements -- evidences of the way the society itself
appear not to be primarily economic elements: they are rather moral, or it
which emerged in Western Europe. Analyzed, the American differences
what elements were added to or subtracted from the traditional capitalism
which have given it additional characteristics. This raises the problem of
capitalist system in the world. It has elements of valor and vitality in it
And this American so-called capitalistic system is unlike any other

The American Constitution in Action: the Making of the U. S. Economic System

July 28, 1927
VI:\Berk\DO

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was first accomplished by processes of subtraction.

The first and most important subtraction was the feudal family concept of property which elsewhere still survives in the corporate systems. Not so in the U. S. Even today, a marked difference between the American corporation and the European corporation is the fact that behind the European corporation there is commonly a family group which moulds the entire function of the enterprise along the lines of their assumed family interest. Frequently in Europe enterprises are not permitted to grow larger because they would get beyond the scope of manageable family enterprises. Often there is a handling of management so that it shall provide a hereditary or quasi-hereditary oligarchy with continuous position. The American community -- political, social, economic, leadership, electorate -- having a moral consensus that this was wrong, gradually at all levels, changed this to accepted pattern.

The second subtraction was the elimination of rigid lines between classes. The class system did not end in Europe in the 19th century, and to some extent, to a very appreciable extent, has not ended yet. Though its legal sanction may have disappeared, it has remained in Europe imbedded in the minds of men as the way things ought to be. On the other hand, in America we had a general consensus that a class system was the way things ought not to be. And so the will of the society began to liquefy the system so men could move from class to class.

And, in our time has come real elimination, not merely of barriers in passing from class to class, but also the rapidly growing elimination of the class system itself. We are getting to be a single-class country, actually

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a middle-class country. We have not fully achieved this goal, but we're
getting there. This proceeds from, or at any rate goes along with, the steadily
widening distribution of income and economic benefit.

But this vital economic-social revolution came from within the society;
no leader forced it. Since a general distribution of participation was an
essential element in the "good society", was a moral imperative in American
life, the American consensus, from President to private workers and
managers remolded the system to do what it wanted done.

Positive elements have also been added to the American economic
system. There grew up a general, though commonly unexpressed conviction
that an economic or business enterprise was justified only if it fulfilled a
human want. It is true that tremendous speculative fortunes have been
recurrent phenomena from time to time; but status and esteem have not normally
gone with speculative success; they were accorded to the enterprise and its
managers which fulfilled some kind of a want.

The second added element lay also in the field of moral imperative
and democratic moral values; the forces of economic achievement shall be
generally distributed. This imperative derives from a strong feeling that the
benefits of economic achievement have to be made, and must be made,
generally available to the whole community; there shall be enough to go
around, and the system shall see that it gets around.

Americans have arrived at a consensus of feeling that, wherever you
find an area of want in the U. S., the misery is not merely a call on the
benevolent and kindly feelings of individuals, but also that there is something

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in the economy that is structurally wrong and ought to be cured. This is the latest and present phase of the American moral consensus. We now think of a group of poverty-stricken men not merely as men who need a square meal, but as a challenge to the rest of us to find out why that misery happens in the American system.

This is now the American approach. It is a persistent one, found as far back as Jefferson and in various phases, continuing in a very high degree of intensity.

A third added American element to the earlier capitalistic system is the conviction that wherever men are at a disadvantage in dealing with the system, they should be able to organize themselves so that they can meet it on more or less even terms. This came relatively late.

The U. S. labor movement is a great illustrative phenomenon of this gradually arrived at American consensus. The idea that this came by spontaneous moral recognition of course violates history. Labor organization, like other organizations for economic defenses, involved a fight in the beginning, and all the way. But the principle came gradually to have the steady support of the American public, even though it involved changes in the legal system to give it effect. From the time the issue was first raised by Andrew Jackson in 1828, it has been a steady driving support in the American consensus, that is, American public opinion, which finally made it possible for labor to organize for cooperatives to be formed, etc.

The fourth and last addition I submit with some hesitation. American public opinion has forced and capitalism comes from America's preoccupation

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with the dangers involved in power. In its economic system the U. S. has
developed a strong consensus that there must be a variety of compulsory
separations of power; economic power shall not become dominant in or unduly
mixed with the political; the power of an organized enterprise, labor unions
as well as big corporations, shall be generally limited to the functions which
they are expected to perform.

Thus, a labor union may represent its men in respect to wages and
working conditions, but if it undertakes to instruct or require them to adopt
a particular religion, or to regulate their personal habits, there is an immedi-
ate reaction of American public opinion that at this point the organization
is making an immoral use of its power. Equally, an American corporation
is widely accepted in its decisions on manufacture, merchandising, price,
and so forth, but if it undertakes to tell its workmen or its customers how
to vote, there is exactly the same reaction of protest.

In the American system, we have done what never was done in most
other capitalistic countries. Through our consensus of opinion we have forced
a separation of the job which the particular enterprise or group is expected to
perform, from other functions in the community.

This is in a way analagous to the constitutional separation of the
executive from the legislative, and the legislative from the judicial power.
As it turns out, the result adds an element of strength in our economy as
contrasted with great parts of the world where it is impossible to conceive
that any important economic power should be separated from political power.

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There is an automatic assumption deeply imbedded in much of the European folkway, particularly in the Roman tradition, that the economic and political power automatically mix. During great periods of history, organizations for trade purposes were allowed to exist only under a permit from the political power, so that the political power could either use such organization for its own ends, or at least so handle them that they could not become dangerous to it. The American consensus has regularly reacted against that pattern.

The United States today must meet and decide how to cope with the central question of economic power in an unexplored context. Today in the U. S. economy we are frequently becoming confronted with concentrates where perhaps five large companies control more than half of an industry, frequently in industries which themselves are essential to most other industries. No American consensus has been finalized on how such concentrates should behave, what their legitimate sphere of economic power should be, at what point they should be circumscribed and lose public esteem. But here again, the complex, interrelatory and inter-influencing chain of American consensus is moving towards its decision. This is an application of a moral or philosophic principle, so persistent that you can predict its recurrent appearance.

Take, for instance, in the copper industry where three companies control 80% of the product, or in aluminum, or in steel. American public opinion already is saying in substance that corporations in such situations are obliged to observe a number of rules or there will be a public outcry so great that the concern will later be required to change its position.

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First, their function is to produce in accordance with demand, and
that is their first duty. Second, huge corporations must make the product
available to what we call an acceptable price which the community accepts
as not being an abuse of the power of the concentrate. Third, we insist
that concentrated economic power take care of its labor force more or less
continuously. This last, a rather old conception newly coming into new
application, simply means that in handling its affairs, corporations must
abandon the theory that labor is something to be picked up when needed
and thrown back on the community when not needed. Fourth, a requirement
is beginning to arise that concentrated industry is forbidden to refuse to
use or in any way stifle, legitimate technical advance.

Thus, the American economic system, with the eliminations required
by our American consensus, and with additions dictated by it, has won
certain great freedoms. It has freed itself from any doctrinaire approach.
One time or another it has used all kinds of doctrines. It can, with complete
philosophical detachment, be socialist when it is dealing with some kinds
of enterprise; be extremely individualist when it is dealing with others;
construct varying sorts of mixed systems when that seems necessary.

The American consensus has had very little interest in the issue
of "socialism" as against "private initiative". It is primarily prgamatic,
using any approach that gets the job done.

For instance, toll roads, which have gradually replaced large parts
of the railway systems, have been built by the state on a toll basis. Nobody

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has arisen to say, "Why isn't this private enterprise?"; nobody really cares, what is wanted are the roads.

This freedom from doctrinaire approach has meant freedom from a whole range of limitations.

A notable contribution of the American system is, I think, that our theory of political participation, and our attempt to work out political democracy for this end, has made it possible to impose the ethical ideas of the American consensus whenever the conflict between these ideas and the pragmatic economic actions became acute.

The history of the American economic system is its constant correction by a series of political interventions dictated by ethical ideas of American public opinion. The first great intervention was the Jacksonian intervention against the credit system worked out by the Federalists. Another great intervention was the subsidization of the great transcontinental railways. That was an old mixture of socialism, and private initiative, with all kinds of strange, and not infrequently corrupt, undertones or overtones. But the people wanted the railroads and so they sorted their theories out later.

Political intervention wherever there appears to be a need unmet, or an abusive power, emerges as a constant element in American economic history.

This consensus is really a national agreement on certain elements of the good society. Thus, justice -- translated into equality of opportunity -- comes in as a doctrine controlling the American corporate system. Thus, a powerful corporation cannot unduly discriminate in favor of its friends against its enemies and a railroad or a public utility cannot discriminate at all. If a

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corporation decided it did not wish to sell their product to Negroes and claimed they had a right to do this because they have a right to sell or withhold their own property, either there would be a radical change in the corporation or a law would be passed or there would be an ensuing explosion of public opinion.

Cr, take again the consensus that there must be continued orderly economic progress. Almost every corporation now feels itself obliged not only to maintain the operations it has, but also to plan for operations that are likely to be demanded of it in the future.

(Then there is the point of constitutionalism. Bit by bit, as power has emerged in our economic system, a companion doctrine has emerged that it must be controlled or checked at least to the extent that governmental powers are controlled and checked. It probably will be standard law within the next ten years that the 14th and 15th Amendments and the Bill of Rights of the Constitution apply as much to organized corporate power as they now do to an agency of the state. This is steadily emerging as a matter of law, but it reflects the American consensus that the individual is enabled to have his freedom respected.)

The major elements which has made the American economic system into the rather surprisingly dynamic thing that it is today, has been precisely the application, chiefly through political pressure, but not infrequently through moral pressure without political action, to make the American economic system conform to the norms of conduct required by the American consensus. These norms have been based on something deeper than the precise action

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from time to time exacted; they are based on philosophical assumptions of values. This, perhaps, is the primary difference between the development of American capitalism and capitalist development elsewhere.

It would be quite inaccurate to attribute the success of the U. S. economic system either to the corporation or corporations, although they have done a great deal, nor is it due to the achievements of labor, although these have been spectacular, nor does our economic success come from the brilliant planning of any group of statesmen, though from time to time some extremely effective work has been done in that regards. Primarily our success is more nearly due to the fact that the various abilities of great groups of people have been constantly drawn on. As difficulties appeared, as needs needed to be met, as resources had to be provided, the American consensus with equal enthusiasm slapped down a monopolist, provided money for huge enterprises by socialist process or with an almost paternal assistance allow an endless amount of small builders to make money in housing. In each case it checked what it had done, not by theory, but by the results as tested by a conception of "the good society" which lies deeply imbedded in the American consciousness.

Thus, the American consensus really does carry forward, remaining as valid in new situations as it has proved in the past. And what we have been able to accomplish in the economic sphere, we can also do in the national and international political sphere. If Americans will call upon and contribute to the evolution of an equally dynamic American consensus. And, of course, that means a political consensus equally based upon and inspired by our democratic value system.