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1921 Capitalism/Socialism Debate

I comment on Debate Between E. R. A. Seligman, Affirmative, and Scott Nearing Negative (1921) (free ePub and PDF downloads are available from the gear menu at the top right). This was recommend by Mises in Liberalism: In the Classical Tradition (in the appendix "On the Literature of Liberalism").

The debate topic is That Capitalism has more to offer to the workers of the United States than has Socialism.

The format the debaters each speak three times: to explain their position, a rebuttal, and short closing remarks. The moderator gives a brief introduction first. My comments were written as I read through it, without knowing what's said later.

Moderator's Introduction

The (self-proclaimed) moderate moderator says:

the then Governor of the State [of New York], Alfred Smith, solemnly proposed no less than nine ultra-radical or Socialistic laws, including such things as the ownership, development and operation of all water powers by the state, maternity insurance, the municipal operation of all public utilities, the taking over of the medical and nursing professions to the extent of supply ing doctors and nurses to rural communities now destitute of such aid, the declaration that production and distribution of milk are a public utility subject to the control of the State in all details, and State-owned and operated grain elevators in three cities, precisely after the manner of the Nonpartisan League plans in North Dakota. I have long thought that "Al" Smith was a wonderful man, but I do not know of anything in his career that is more wonderful than the fact that he got away with these proposals without even being denounced as a Socialist by the New York Times. Of course, he did not get what he asked, but the point is that if the Governor of North Dakota were to come out tomorrow and demand these things, the New York Times would shriek with anger and declare that Bolshevising of America was at hand.

I thought it was interesting how different the NYT was then, at least by reputation (he's saying the NYT did not complain about radical socialism, in this case, but he expected them to, in general). It's also notable what sorts of socialist policies were being proposed in the US around 1920.

Al Smith was governor of New York four times, and was the Democrat candidate for president in 1928. Wikipedia says that when he badly lost the presidential election, he carried the Deep South (that's notable in terms of how the electoral map has changed). To think Al Smith "was a wonderful man", while knowing he had made such proposals, is clear partisan bias from this moderator who claims to be a moderate supporter of capitalism.

All of which, I think, proves my case that the Socialistic experiment in greater or less degree is going to be undertaken by the world. In the ardent hope that it may produce a better world than we have been living in, my plea today is, as I have said, not for Socialism, but for a careful examination of this and all other proposals for the betterment of the race which is so badly off, that, for all we know, civilization may not recover from the shock of this war. [emphasis added]

People today don’t take seriously how bad and destructive the world wars were, especially WWI.

The moderator then quotes the (self-proclaimed) conservative, individualist, anti-socialist Hammond Lamont, who thinks debate over socialism may help educate the populace, even though it’s a mistaken idea, as he says debate over free silver coinage did. He's confident in reason winning out in debate. He adds:

For one thing, Socialism is eminently a peace movement; it is steadily opposed to militarism; and it will thus help us to see more clearly the silliness of the huge naval and military expenditures in which we seem bound to rival the groaning nations of Europe.

Foolish! Socialism has so much blood on its hands, and its consequences were always foreseeable. Mises published Economic Calculation in the Socialist Commonwealth (which refutes socialism) in 1920, long before Stalin, Mao, etc. And how can a movement be peaceful when its goal is to take huge amounts of property (all property used in economic production) from its current owners?

Capitalist Argument

The pro-capitalism guy, Seligman, goes first. Notes on what he says:

  • Capitalism is private, individual ownership of the means of production (mainly machines).
  • Socialism has many varieties. Their theme is group ownership of the means of production.
  • The attitudes of capitalist people vary, but the capitalist system itself is progressive. (He thinks even slavery and serfdom were "progressive" institutions because they were different at later times than earlier times. I disagree.)
  • We must analyze what wealth each system produces, not just how much it distributes to workers.
  • Marx said that under capitalism the rich get richer while the poor get poorer, but factually this is incorrect and both groups have gotten richer. Important socialists recognized Marx was wrong about this.
  • Marx thought that capital accumulation caused periodic, worsening crises, but he was wrong. The economic panics of 1818, 1837, 1857 and 1873 got progressively worse, but then the ones in 1884, 1894, and 1907 got progressively less bad.
  • Marx thought the most developed capitalist country is where socialism would come, but it came in Russia not USA, so he was mistaken.

What are the achievements of capitalism?

  • The accumulation of wealth, regardless of owner, has made the worker's life better, e.g. by providing him with railway transportation (including trolleys for commuting to work), libraries and museums.
  • Diversification of consumption: bread from North Dakota wheat; meat from the Western US states or Argentina; tea from Cathay; sugar from Cuba or the Far East; tobacco from Sumatra or the Orient; leather shoes from Siberian, Russian or South American hides; wool from Australia; soap from Africa; Pittsburg iron for commuter trolleys, refined from ore from Western states.
  • Capitalism brought real democracy. The greeks had sham democracy because they had slaves. England was an aristocracy, not a democracy, in 1776. In 1800, New York was run by great families just like in England. [This point is short and I don't think it's explained well.]
  • Liberty of movement, as against serfs bound to the soil.
  • Capitalism is the source of education and science. Our public schools are flawed but still amazing compared to human history. The Greeks and Arabs had some science, but capitalism brought us modern science because "the modern business man in order to succeed must know the secrets of nature. He must secure the proof and in order to get the proof he must employ and utilize those forms of organized investigation which we call science."

Weaknesses of capitalism?

Because capitalism is progressive, the weaknesses are being reformed.

A weakness is "unfair competition between businesses and human beings". As explanation, he names Jay Gould and Jim Fiske, who have robber baron reputations today, who he says would be unthinkable today (in 1921). He says the Interstate Commerce Commission is regulating the issue of financial instruments related to railroads and "such things" will be impossible in the future. He concludes this point with:

What President Roosevelt did, among all his many accomplishments, was to so change certain forms of unfair competition as to make them more difficult. Society under modern capitalism, is gradually rendering competition more and more fair.

[It's hard for me to evaluate this without knowing about Gould or Fiske in particular. Some alleged robber barons were great men, but some really were bad. I also don't know enough about 1920's politics to know what sorts of "unfair competition" are being talked about here.]

Second weakness: some unjust privileges and monopolies exist, but when recognized they are counteracted, e.g. by the "trade commission" [presumably government regulation].

In the third place, I should say that modern capitalism does result in exaggerated fortunes. The development of a leisure class has its bad sides at a time when everyone ought to be working.

Ugh, the pro-capitalism guy, recommended by Mises, is so much worse than Mises. He dislikes wealth inequality instead of being more like Mises' student, George Reisman, who wrote: How The 1 Percent Provides The Standard Of Living Of The 99 Percent. (It's only 99¢ and 14 pages.) Continuing the same quote:

A generation ago, I wrote a book on Progressive Taxation and I was attacked on all sides by the reactionary and the standpatter on the ground that I was preaching confiscation. Nowadays, everyone, the capitalist like the others, not only believer in, but argues for, progressive taxation. We have today gone further in this country than in any other—perhaps as some of us think even too far—with a system that takes up to 69-73 per cent of a man's income and in some cases even more. Progressive taxation is a sign of what modern capitalism is doing to restrict some of its own evils.

My question at this point is why did Mises recommend this debate, when the supposed advocate of capitalism is such an awful traitor to capitalism? Mises wrote:

Also instructive is the record of the public debate held in New York on January 23, 1921, between E. R. A. Seligmann and Scott Nearing on the topic: “That capitalism has more to offer to the workers of the United States than has socialism.

You can learn something from this, sure (from the socialist as well, by seeing what he's like – especially because the equivocations considered necessary were different 100 years ago, so he openly says some things that socialists don't admit today). But it's so sad that Mises didn't have better things to recommend than this ignorant compromiser. If anyone would have known where to find better materials, it would have been Mises, so I'm concerned that they don't exist. (He did recommend other things as part of the literature of liberalism, for people who want to learn more, but this debate made the list, beating out everything not listed.)

Seligman goes on with further counter productive comments about working hours, then about wages:

Wages are by no means what they ought to be. Wages are certainly far less than they should be. But wages have been growing during the last hundred years indubitably, and starting In Australia, going on to England, and now proceeding in this country, we have the great minimum-wage movement which is gradually improving those conditions.

He says capitalism is making this better – including with minimum wage movements (which he apparently doesn't realize are anticapitalist price controls which make everyone less wealthy and especially hurt the poorer and less skilled workers). But his view of the matter is awful compared to Mises himself or Mises' student, George Reisman, as explained in Reisman's Marxism/Socialism, A Sociopathic Philosophy Conceived In Gross Error And Ignorance, Culminating In Economic Chaos, Enslavement, Terror, And Mass Murder: A Contribution To Its Death and my 10 educational videos covering that book.

Seligman goes on to praise government unemployment insurance, which he thinks will improve the capitalist problem that workers fear losing their jobs, and then he states his acceptance of the very nasty belief that working with machines is less enjoyable than previous non-industrial work. His defense, here, is that socialism will need machines too, and that capitalism shouldn't be blamed for the problems of machines, and that we're increasing leisure hours which make up for industrial work being unpleasant.

Seligman says despite his reservations about capitalism, he rejects socialism because:

  • Paying everyone equally, instead of paying for efficient production, results in less production. (He says even in Russia they had to have bonuses for good workers, and gave up on the equal pay that Lenin preached.)
  • Ricardo (who Mises praises) wrote fallacies (which aren't specified). But, somehow related to that, industrial leaders are rare and are valuable to society, and capitalism handles that better. Socialism would remove the incentive to be an industrial leader, or even to try to produce a little more than your neighbor, and it'd also limit the risks that industrial leaders would take to try to make a profit. Seligman says that under socialism people couldn't "afford" to take those risks, but doesn't explain why. I guess, from the word "afford", that he has in mind that socialism wouldn't let some businessmen get rich enough that they could afford to lose a lot of money without ruining their lives.
  • Various (unspecified) socialists have admitted their system would restrict freedom.

Socialist Argument

The moderator introduces and praises Nearing, the socialist debater, but did not introduce or praise Seligman previously. This is biased and unfair. Nearing apparently went to court to defend his free speech rights to argue for socialist ideas, even during war time (World War I).

Nearing agrees about what capitalism and socialism are. Note the mention of no private profits:

He [Seligman] has defined capitalism as that form of industrial organization where the means of production, primarily the machines, are in the control of private individuals. He has defined socialism as the control of capital in the hands of the group and under it there shall be no room for private rent, interest or profit. [emphasis added, and FYI Nearing means economic rent, he's not saying that you couldn't charge rent for an apartment]

I appreciate the clarity from Nearing, even though he's mistaken, and he continues with more clarity:

I want to try to demonstrate to you that under capitalism the worker has to accept, first, intermittent starvation, second, slavery and third, war.…

… Under the present system of society, a little group of people own resources, machines, capital, all of the machinery upon which forty million workers depend for their living. That is, the capitalist owns the job. The capitalist owns the job without which the worker dies of starvation. The worker therefore must go to the capitalist and ask for permission to work.

I would say the businessman created the job which allowed forty million workers to be born and fed, and they wouldn't be alive without the businessman. Without businessmen who saved wealth and invested it in machines, there'd be far fewer people. A low-technology society with large numbers of self-employed persons (mostly farmers) can only feed so many people on a given area of land (who are slaves to Nature – they must work or Nature will starve them to death). The reason there are more workers than can have their own land to farm, or otherwise be self-employed, is because capitalism enabled them to be alive at all. The reason most workers seem bound to seek jobs is because those jobs are the only reason they can be alive at all. They should be grateful for the jobs which gave them life, and that they live in a society where they can improve their life situation, where capitalism has provided upward mobility through many means other than military success.

Besides, the businessmen compete for workers. Wages are set by supply and demand. Workers need jobs, sure, but businesses also need workers. The buyers of labor compete with each other, in the market, just as the sellers of labor do. Nearing is ignorant of how supply and demand set prices. This is covered in Reisman's Marxism/Socialism book linked above (which refutes Marx's iron law of wages), and my videos on it, and in detail in my educational discussion teaching Andy why minimum wage is bad and how the free market determines wages, and of course in the books of Mises and in Reisman's Capitalism: A Treatise on Economics.

I hope Seligman has a decent rebuttal to this point. He should at least know how supply and demand set the price of labor, I hope.

Nearing continues with details rather than arguing further his claims that workers ask permission to work instead of negotiating. He says the 1918 tax returns showed that only 14 families in 1000 had $10,000+/yr income, which he says isn't very much money. Then he says it's only 4 in 1000 – I think the 4 or the 14 must be a transcription error in the book, not Nearing's fault. He says he unfortunately couldn't get statistics for how much wealth people own, just the income numbers. Nearing says that because a handful of people own the "railroads, the banks, manufactories, mining and other establishments", the workers are slaves. He says that 26% of school children are underfed, while some document that isn't available says that businessmen made hundreds or thousands of percent profit in one year (1917). And he keeps saying Marxist things (refuted by Mises and Reisman) about how the worker has to produce his bread and also produce a surplus profit for the capitalist who doesn't labor for it.

Nearing also says that businessman accumulated too much surplus from the workers, and they wanted to "burn" it and "dispose of it", and World War I gave them a chance to dispose of surplus wealth, and exports gave them a chance, and now without those chances they are firing workers. He doesn't explain this nonsense, he's basically just ranting. Here's a part that's meant to be more of an argument than the smears about WWI:

I got a report from the New York State Industrial Commission this week: 643,000 men and women out of work in New York State. What have they done? Why, they cannot have work. But what have they done? Why, they have produced too much. They have created too great a surplus. They must wait to produce more until this surplus is consumed. Can they consume it? No! Because they did not receive enough wages to buy it back.

But that isn't how economics works. You don't get fired for producing too much. I'd refute it in more detail, but he (so far) doesn't give detail about why he thinks this. Nearing continues with the barrage of claims, including more statistics and factoids, rather than trying to explain reasoning about how he thinks economics works. He's a demagogue, riling up the audience and getting applause and laughter (which are repeatedly mentioned in the text in parentheses). He reminds me of Roman demagogues like Publius Clodius Pulcher, and the role of the mob in Roman life.

Nearing says what socialists want is to own things like coal mines themselves, rather than be poor in the richest country ever to exist, and he wants everything priced with no surplus/profit. But he says he doesn't want to stress that, he wants to focus on the essential issue: accusing capitalism of being a system of slavery.

The employing class owns the Press, the economic power centering in the banks, schools, pulpit, press, movie screen, all the power of wide-spread propaganda now. "When we have something to sell to the American people, we know how to sell it." Slavery—going to the boss and asking for the privilege of a job;—slavery—sending your child to school and having him pumped full of virulent propaganda in favor of the present system (Great applause). Slavery in every phase of life all tied up under this one banker's control. Is it true that no man is good enough to rule another man without that man's consent?

My take: Nearing has complaints about society, some correct, some incorrect. People find his speeches appealing because they agree with some of his complaints. He doesn't know anything about economics (and neither does his audience). Socialism would only make things much worse (giving one employer, the group in charge of the means of production, a monopoly. Today, if one employer doesn't like you, you can find a job elsewhere. A monopoly on all the jobs, as socialism proposes, would only make the employment situation worse.) But I'll have to see what he says when he gets to talking about socialism instead of just criticizing his current society (without paying attention to which thing she doesn't like are due to capitalism, and which have other causes).

The employing class owns the Press, the economic power centering in the banks, schools, pulpit, press, movie screen, all the power of wide-spread propaganda now. "When we have something to sell to the American people, we know how to sell it." Slavery—going to the boss and asking for the privilege of a job;—slavery—sending your child to school and having him pumped full of virulent propaganda in favor of the present system (Great applause). Slavery in every phase of life all tied up under this one banker's control. Is it true that no man is good enough to rule another man without that man's consent?

If you want ownership, then save money and start buying businesses – as a big group, if you wish. People are free to do that. They choose not to – then some of them (the socialists) want to take businesses by force.

People may assume this is unrealistic, but let's glance at the numbers:

The U.S. Stock Market Is Now Worth $30 Trillion (Jan 2018)

Moreover, the run-up in value since President Donald Trump was elected is some $6.6 trillion, in just about 14 months. That’s half the entire gain seen under the eight years under President Barack Obama.

So it was $23.4 trillion 14 months ago, and around $10.2 trillion 8 years before that.

Now let's look at total US salaries: 16.5 trillion for 2017 – people get paid the whole value of the stock market in 2 years (and it was more like 1 year back in 2009). Yeah people have to pay taxes and living expenses and stuff, but basically the workers could buy all the stocks in under a generation if they really wanted to – without any of the violence of a socialist revolution. If workers saved 10% of their salary, then currently they could buy all the stocks in around 20 years – not counting any dividends they'd get from owning some of the stocks partway through. Workers as a whole don't do this because they each individually think they're better off buying other things rather than having more ownership of capital – though plenty of workers already do have investments which sum to a large total. (I don't trust this number at all, but Time reported last year that the bottom 90% of the population, in terms of wealth, already own 16% of the stocks. Time's spin was that the rich control everything, but I think 16% ownership is a lot more than the Marxist narrative assumes, which treats the figure as 0%. And I think 10% is a rather large portion of the population to consider the rulers instead of the workers. If the elite capitalists are just the top 1%, then the workers already own 62% of the stock – according to an NPR article with an anti-rich-people narrative, which also mentions that the majority of Americans own stock.)

I didn't research these numbers much because I don't expect them to be super accurate, but I think they're loosely in the right ballpark. If you deny it, I challenge you to find some reasonable numbers that lead to a dramatically different conclusion.

In 1914 Great Britain had a highway to the sea. Germany wanted it. A pistol shot sounds in Central Europe and ten million men go to their graves to decide that Great Britain shall hold Bagdad and that Germany shall pay what she can. (Applause.).

Factually, that is not what happened. See Omnipotent Government by Mises. (The book is more about WWII, not WWI, but it goes back and traces historical events starting well before WWI.) Nearing goes on to incorrectly claim that Germany and Russia (and the rest) were capitalist states in 1914, which needed a "capitalist War" to use up surplus wealth that they wouldn't let workers have. Really? World War I and the Triumph of Illiberal Ideology:

I will discuss only one general problem that helped fuel the catastrophe: the ideological shift that occurred in Europe in the late 19th and early 20th centuries away from the liberal philosophy of laissez-faire and laissez-passer and toward autarky, protectionism, nationalism, and imperialism. Mises, himself a veteran of the First World War, identified these latter ideologies as joint causes of numerous conflicts. Furthermore, he repeatedly warned that war is a necessary outcome of abandoning economic freedom, which is inextricably tied to the spirit of liberalism and its philosophy of peace:

[...]

By and large, these are the kinds of international conflicts that developed in the decades prior to 1914. As relative free trade declined and imperialism flourished, a culture of militarism swept Western Europe, triggering a race to accumulate military assets and materiel on a previously unknown scale. By the outbreak of the conflict, every major belligerent except Britain had also adopted conscription so as to ensure an abundant supply of human as well as physical resources. Such policies could only end in disaster. [emphasis added]

The decline of free trade is not capitalism. Mises' book, Omnipotent Government, explains much more about this.

Oh, that was the end of Nearing's remarks. He never actually got around to giving any positive explanation of how socialism would work (as he said he would when he began). Pathetic! Here’s how he opened:

I do not see capitalism in so rosy a light as does Professor Seligman and I want to try to explain to you in the brief time that I have why not, and what the socialists propose to put in its place

But he didn’t talk about what he wanted to put in place of capitalism.

Capitalist Rebuttal

Mr. Nearing said that he wanted Socialism in order that no surplus shall be produced. That is my objection to Socialism. (Applause). The World has progressed in civilization only because every generation did not consume all that it produced, but that it laid by a surplus. (Applause).

That’s a pretty good start on answering the socialist. I like it as debating rhetoric. It’s not very good as a rational explanation that’ll actually educate the audience, though.

How long would the shareholders of the United States Steel Corporation [live] if that were all they had to live on—how Iong would they continue to enjoy their luxuries if the workmen all stopped work permanently? (Applause). Does the workman need the job giver any more than the job giver needs the workman?

No mention of supply and demand, but at least it’s an answer that brings up the mutual benefits of the employee/employer relationship – employees hire people because they benefit from doing so, and they are worse off if they don’t hire workers.

One point in which Mr. Nearing did not meet me at all, but which I trust he will meet in his rebuttal is this: that while we may be entirely favorable to the aspirations and the hopes and the desires of the great mass of the working population, he must prove that forces are not at work under capitalism which will meet and realize those hopes and those aspirations.

That’s a good point, yes. Nearing didn’t address the ways by which capitalism can improve the current situation, and the ways by which he thinks socialism can, and do a comparative analysis. (He didn’t even try to analyze how socialism could improve the situation, let alone try to point out limits to improvement under capitalism.)

Seligman then shares some recent factual information about Russia in order to give some examples about whether socialism improves or harms liberty. First, in the Petrograd government printing office, workers were made to work 12 hours a day, 7 days a week, with no lenience for women, and a policy of compulsory overtime had recently begun. Here’s his second and third examples:

I have extracts from The Metallurgist, an organ of the metallurgical workers. "At our factory, absolute submission to the administration of the plant has been established. No arguments or interference with its orders on the part of the workers are tolerated. At our factory, failure to report for work without permission is punishable by forfeiture of extra food. The same punishment is meted out for refusal to do compulsory overtime work. For being late on the job, two days food are deducted." And here comes the resolution of all the Petrograd workers on September 5th, as a result of the liberty of Socialism: "We feel as if we were hard labor convicts where everything has been subject to iron rules. We have become lost as human beings and have been turned into slaves." There is your socialistic liberty. (Great applause).

This much was known about Russian socialism, in the US, in 1921, and was quoted by professors in public debates. So much for the later excuses, during the cold war, by the dupes of Russia, who believed Soviet propaganda about the working conditions there.

The next example was about how Russian socialism deals with strikers: they arrest strikers and send them to forced labor camps or shoot them. The last example is horrifying:

the report of the President of the Petrograd Commune to a delegation from the workers of a certain city who complained of being starved and not getting enough to eat. "Yes, we do admit," he says, "that the food allowance is insufficient, but at the same time we also know full well—this has been taught by real life—that as long as the worker or plain citizen is busy obtaining food he takes no interest in politics. Just give the workingman enough to eat today and you will hear him cry tomorrow for civic liberties. Our object," says the socialistic government "is to keep the workers just from dying; and that is what we are doing."

Of course, today, right now, socialism is destroying Venezuela, and we have all sorts of news available online which is full of horrifying examples, and still many people don’t notice or care, and find socialist ideas appealing. These old examples shouldn’t make much difference to any educated modern reader who knows anything about Venezuela or the USSR or many other examples.

Seligman says, factoring in the purchasing power of money, and using the data from Nearing’s own book, the wages of workers under US capitalism went up from $147 in 1850 to $401 in 1910, which shows capitalism is progressive.

When Mr. James J. Hill, the great Empire builder, built one of the trans-continental railroads which have brought about the cheapening of products and the diversification of consumption of which I spoke, did he not contribute to production? When Mr. McCormick invented and finally utilized the reaper and the thresher and the mower, which have revolutionized the work of the farmer and the whole life of the community and built up a fortune, did he not contribute to production? When Mr. Westinghouse invented the air brake and finally reaped a fortune by utilizing it in the uttermost parts of the world, did he not contribute to production? And when our friend Mr. Ford with whose general philosophy perhaps I am not in entire accord, (laughter) when he brought down the price of automobiles, the automobiles that are used by the workmen all over this country in going to and from their daily work (hearty laughter)— I passed by a factory the other day and found that there were 550 automobiles. They did not happen to be all Ford automobiles— and I stepped in and said: "To whom do they belong?" And I was told: "Each one of these belongs to a workman in this factory. They come every morning and go back every evening." Now then, could those fortunate workmen say that Mr. Ford has been able to heap up his millions by simply taking them, niching them, stealing them, from the men in his employ?

Nice examples of how businessmen contributed to production instead of just exploiting workers.

I do not deny that there is robbery. I do not deny that there are bad people as well as good people, but I do say that the essence of the capitalist system today, that the essence of profits today, of legitimate profits is not theft but service and that people in the long run cannot under modern conditions, in the long run and under normal conditions make great profits unless they really do service for their community. [emphasis added]

Pretty good as a debating statement. But he didn’t do much to educate the audience and teach them any economics.

Socialist Rebuttal

Nearing denies credit for the Industrial Revolution to capitalism. He says it happened under capitalism, but the causes were machines and technology, and he suggests we would have seen the same advances under socialism. Nearing is kinda ranting again, then says something I found interesting:

In the early days of capitalism any man could get a job by going out to the frontier and taking a farm. The frontier is gone. Capital is required in large quantities. If you want to open a successful business, it needs tens or hundreds of thousands of dollars. Only a few can start in business. Most of us must remain workers. The old factory was a little two-by-four concern. The modern factory employs you with a thousand or five thousand others.

That factory enables five thousand people to be alive. The frontier enabled some increase in population, and as it filled up we needed factories in order for more people to live.

He sees people living in less than ideal circumstances and fails to see that capitalism has enabled them to live at all.

After some storytelling about visiting Europe, and some quotes of a Seligman article about WWI, and some other non-arguments, Nearing says:

Professor Seligman wants to know what I think of Lenin and Trotsky. Now I will tell him if I can (Laughter), and in a word. I think that when the history of this period comes to be written that there is not a man nor a woman in this hall this afternoon whose name will stand that high (indicating) with the names of Lenin and Trotsky in this period (Great applause). There are not two braver men in the world today, men who have stood up in the face of great opposition and steadily have worked for the end in which they believe. Do I agree with their theories? With some of them I agree, and with some of them I don't. You could not agree with both Lenin and Trotsky because they don't agree with one another (Laughter and applause). But just as I regard the Russian revolution as the greatest event in history since 1676, just as I regard it as the epoch-making event, the dividing line between capitalism and socialism, so I regard these two men as two of those whose names will go down as having played mighty roles in that page—the great page of our modern history.

Well, at least he admitted it clearly.

Nearing’s answer to poor conditions in Russia (the five examples from Seligman) is to blame it on civil war, blockades, hostile trade policies, and Western aggression (contrary to the desires of the workers of Europe who, he tells us based on a visit, approve of Russian socialism and want it for themselves and are unwilling to fight against Russia).

But in Russia they have taken over the resources, they have taken over transportation, machinery, they have taken over the factories, the community owns the means of its own livelihood. And they have appointed a Supreme Council of National Economy, and they are going to organize the nation as an economic unit on economic lines. It is the first time in history that it has ever been attempted. If it does not succeed in Russia it will succeed somewhere else, maybe here

He was wrong. And he didn’t do economic analysis to reach his conclusion. He seemed totally ignorant of supply and demand, and of the writings of the (classical) liberals (especially the economic writings).

Capitalist Closing Remarks

“He who shall not work, neither shall he eat”—a noble sentiment.

Ugh, that’s nasty, not noble. What if he worked in the past and saved? What if she has a husband or parent who works? What counts as work? Is writing philosophy “work” or does everyone have to do manual labor? If intellectual work counts, who gets to be an intellectual and who will be forced to do manual labor by threat of starvation?

It’s bullying to threaten people with starvation if they don’t do things you consider “legitimate” work for them to be doing. I don’t take offense when nature presents us with the possibility of starvation, naturally, but I do take offense when humans make starvation a political threat.

Socialism [in Russia in 1921] is bringing about a situation, the most horrible, the most frightful, the most hideous that the world has ever seen—the disappearance of culture, the disappearance of cities, the disappearance of civilization, and the rapid progression of universal starvation among the workers themselves. That is socialism in practice.

He was right, but many others didn’t figure that out until over 50 years later.

Seligman points out 3 ways Nearing didn’t address the arguments, then gives 7 ideas for social reform. I list them and briefly give my evaluation as liberal or illiberal.

  1. “equality of opportunity through increase of education and the disappearance of unjust privileges” – liberal, as long as it isn’t government education.
  2. “the raising of the level of competition by law and public opinion” – laws to interfere with the market, and try to somehow increase competition (by making people compete? by subsidies?) are illiberal.
  3. “increasing the participation in industry through what is called industrial democracy and what is rapidly going on under representative government today” – the Wikipedia article on “industrial democracy” is “Part of a series on Libertarian socialism”. It’s hostile to the property rights of business owners, which is illiberal.
  4. “diminution of the instability of employment through the application of the principle of insurance which we have already applied to accidents and which we are beginning to apply elsewhere” – this would be liberal, except he already said he wanted government unemployment insurance, which makes it illiberal
  5. “conservation of national resources in order to prevent the waste which is responsible for much of the present-day trouble” – how is this to be accomplished? By government conservation programs or laws? Vague but sounds illiberal because it seems to envision a “national” authority that controls the use of resources in the nation.
  6. “social control of potential monopoly which has been proceeding apace and which has even reached unheard of lengths in some modern countries” – antitrust laws are illiberal, see Capitalism: The Unknown Ideal chapters 3 and 4.
  7. “the resumption for the community of swollen and unduly large fortunes through the use of taxation which must go, however, only to that point of not stifling and killing the spirit of enterprise which socialism would bring about” – this is shameful. He wants to go after the rich and take their money. Illiberal.

The guy on the liberal side of the debate advocated 6 illiberal things out of 7 ideas. No wonder liberalism’s influence in world events continues to diminish.

Socialism is a beautiful theory

Said the man opposing socialism in a debate, despite knowing that socialism takes away people’s freedom and starves them.

Capitalism can’t win debates with advocates like this. Yes, Seligman had better arguments. But Seligman admitted weaknesses of capitalism and looked to compromise (even preemptively, before Nearing’s first word), while the socialist Nearing gave no ground and made no concessions. (Nearing didn’t even talk about what socialism is or how it would work, let alone any weaknesses of it. He only went on the attack and pointed out flaws in the current world, some true and some false, and blamed them all on capitalism without analysis of their actual causes.)

You aren’t going to persuade people to oppose socialism by calling it beautiful and then saying that your own system may have a lot of flaws but has reformed some and can be reformed more in the future. Seligman wasn’t actually willing to make a principled defense of capitalism.

I maintain, ladies and gentlemen, that socialism is not practicable

And if it were practicable, would it be beautiful? Is the difference between Seligman and a socialist simply that Selgiman is a pessimist who thinks there can be no solution to make socialism practicable, while the socialist is an optimist who seeks to find a solution?

Seligman says socialism is not desirable because it will lead to tyranny or, if not that, at least inefficient production. These arguments won’t convince people – they will still want to find a solution to socialism which keeps the parts they like about it while avoiding tyranny or major reductions in production.

Seligman goes on to say socialism is idealistic, but we have to be moderate, practical, and conservatively build on tradition. Why doesn’t he know how wonderful and idealistic liberalism is?

Socialist Closing Remarks

Nearing says economic panics got progressively worse because the number of business panics increased. An audience member corrects him, saying he should consider proportions (100 out of 200 businesses failing is worse than 200 out of 5000, even though 100 failures is fewer than 200 failures). Nearing grants the point but then moves on without any attempt at valid comparisons.

Nearing says Russia’s problems are due to war, not socialism. Europe still hasn’t recovered from WWI, including in non-socialist countries. This isn’t an honest answer to Seligman, who didn’t just say conditions in Russia were economically poor, but also gave examples of Russian authorities stamping down on liberty. Nearing asks people to wait 20 years (until 1941), and see how the socialist countries do, before passing judgment.

Really, however, the issue between Professor Seligman and myself is very simple. He don't think the people can handle their own economic affairs, and I do (Laughter).

This is pretty much meaningless since Nearing never explained what system he’s proposing. It sounds like Nearing doesn’t want central planners handling everyone’s economic affairs, but then what does he want? And capitalism does have people handle their own economic affairs – under capitalism, individuals are free to decide what to buy and what to sell, and at what prices.

Nearing ends with idealism. He says even if Russia fails he’ll be glad they tried, and that scientists always have failures but keep trying anyway. And, finally, to close, he smears Seligman as favoring “plutocracy”.

My Conclusions

The debate is instructive if you read it as Ayn Rand would have, by seeing how the compromiser cannot win despite having all the facts and logic on his side. It’s a good example of how capitalism lost the public debate, despite being true, because its own advocates didn’t understand it and thought socialism was beautiful but impractical. You don’t win hearts and minds by saying, “Their idea is ideal, but settle for my idea because it’s more pragmatic.” Even if people agree that current socialist approaches are flawed, they’ll react by wanting to fix that, not by giving up on dreaming of a better world.

The arguments that can beat socialism are the ones that explain how it consists of nothing but the violent destruction of an ideal, moral system. It is capitalism, not socialism, which is a rational system that serves the masses and uses their brains in economic planning, is fair, offers liberty, offers hope of peace and prosperity, and can create a better world. (If that interests you, read some of the links above, particularly books by Ludwig von Mises, Ayn Rand, and George Reisman.)


Elliot Temple on September 28, 2018

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