Swans Commentary » swans.com September 26, 2011  



The Invisible Planners
Part I of II


by Michael Barker





(Swans - September 26, 2011)   The global ruling class is well aware that capitalism does not, and will never, work to benefit the majority of the world's human inhabitants. This necessarily means that the maintenance of such an inequitable system, which thrives on intensifying the exploitation of workers, demands a form of crisis management par excellence. Thoughtful planners within both individual corporations and the State itself play an integral role in managing capitalism's endemic crises, but in many ways their hands are respectively tied by relentless growth imperatives and the polities' democratic aspirations. It is for these reasons that non-profit corporations, like the Rockefeller Foundation and the Russell Sage Foundation, were created in the early twentieth century to engage in a form of social engineering that would allow capitalism to meet the ongoing threats presented by a workforce more interested in organizing society to meet human demands, not those of capital. This article documents the work of such largely invisible planners by surmising Guy Alchon's historical overview of crisis management in 1920s America, by drawing upon his book The Invisible Hand of Planning: Capitalism, Social Science, and the State in the 1920s (Princeton University Press, 1985) -- "a neglected chapter in the intertwined histories of business and government planning, the social sciences, and modern managerial society." (1)

Alchon's book provides a valuable service in documenting the manner by which philanthropic elites sought to "enhance the stability of the economy" that harnessed the experience of both business managers and social scientists to promote a "continuously productive capitalism." He writes that this intervention evolved in three main stages. The first was in direct response to the massive display of organized resistance to capitalism in the decades prior to World War I, which with the aid of social scientists attempted to develop a vision of "a society reorganized and harmonized around technical elites"; providing new and authoritative organizations that would ostensibly stand above class conflict, charting "a 'middle way' between statist collectivism and laissez-faire individualism." Although America's entry into the war had a catastrophic impact on working-class organizations, class conflict, of course, had not gone away, and in the second stage between 1917 and 1921, technocratic elites continued in a variety of attempts to manage the economy. (2)

While most of these faded quickly, one group gradually coalesced around the new commerce secretary, Herbert Hoover, thus ushering in the third stage, from 1921 to 1933. During these years, Hoover helped to build an apparatus in which funding from the major foundations, national income and countercyclical investigations by the National Bureau of Economic Research, and a cooperative conference and committee system developed by the Department of Commerce came together and sought to function as a nonstatist system of countercyclical planning. (p.4)

The development of such an apparatus by these enlightened elites was integral to the restructuring of society, as prior to World War I their vision for a technocorporatist future was not yet supported by "the information available to social scientists." This began to seriously change with the entry of America into the war, which then saw the "massive subsidization of macroeconomic research" in an effort to bridge this informational gap. In the wake of the war, such research to enable the rationalized management of capitalism continued apace, and liberal foundations took a lead role in helping to set up new research institutes that in turn supported the undertaking of a number of comprehensive economic and social surveys, such that "philanthropy assumed its modern role as financial sponsor, organizer, and protector of technocratic institutions." (3) However, initial work along these lines had been undertaken prior to the war, with "major foundations enabl[ing] social workers to organize and carry out comprehensive surveys of America's cities," in a bid to better understand "the social costs of industrialization" such that elite reformers could more effectively undermine the root causes of an increasingly powerful working-class movement. In the minds of these farsighted elites, "it was imperative" that attention be focused on the "systematic alleviation" of the cause of societies' problems, (4) which in their minds meant destroying working-class solidarity and certainly not attacking the actual root cause of the problems, capitalism.

In 1920, major institutions like the Federated American Engineering Societies and the National Bureau of Economic Research (NBER) were created to help contribute "to the formation of a managerial consensus on the social costs of mismanagement and malproduction, ... thus act[ing] as transitional vehicles between war corporatism and New Era macroeconomic management." Institutions that in their own way "facilitated the transfer of public policymaking from the political to the administrative arena, a process that had begun a generation earlier with the rise of the modern corporation." The creation of the National Bureau, however, marked the "most important instance" of the philanthropic communities' involvement "as financial sponsor, organizer, and protector of technocratic organizations," facilitating the means through which "depoliticization was to be achieved" by replac[ing] political processes with capitalist planning." (5)

As Alchon clarifies, the gestation period for the National Bureau was long, and its formation had been put off at numerous times in the past owing to America's entry into World War I. Indeed, Edwin Gay, a rising technocrat who had served as the first dean of the Harvard Business School when it had been established in 1908, had, with the prompting of Jerome Greene, first "hoped to organize" such an institution in 1914. (6) In 1913, Greene, who was the director of the Rockefeller Institute for Medical Research (and former secretary of the Harvard Corporation), had become "convinced that an economic research institute similar to the Rockefeller organization, one with an independent board of directors, research chief, and all necessary funds and facilities, could do for the social sciences what the Rockefeller Institute had already done for medical science." Therefore, in March 1914, Green -- who was now the secretary of the newly endowed Rockefeller Foundation -- ensured that Gay became the chairman of an exploratory committee for the development of what was to become the National Bureau, and Wesley Mitchell was chosen by Gay to be the institution's project director before the project was put on hold owing to the launch of World War I. (7) Plans for launching the institute then resurfaced in April 1916, being sponsored by Malcolm C. Rorty, "an electrical engineer and statistician with AT&T." (8) But again these efforts were put off because of the war, and were only revisited in August 1919, "still under the sponsorship of Rorty but now allied with the United Americans, a New York City association of bankers and professional men engaged in a campaign 'of education in opposition to Bolshevism.'" (9) Yet other board members were adamant that if the new institute was to play a useful managerial role it should be seen to be politically independent, with both radicals and conservatives residing on its board of directors. Taking this sound advice on board, Rorty dropped his proposal to link the National Bureau's work to the partisan politics of less-thoughtful capitalist elites. Instead, on August 9, Rorty sought out the backing of the recently created Commonwealth Fund -- which channeled the wealth of the former Rockefeller partner, the late Stephen Harkness -- and had a mandate "to do something for the welfare of mankind." This funding bid proved successful and in December the Fund announced that they would underwrite the creation of the National Bureau with a one-year grant of $20,000. (10) Other significant aid for launching the National Bureau also came from the Carnegie Corporation of New York.

"In late February 1920, with the election of Gay as president, [John] Frey [a 'conservative trade union leader'] as vice president, and Mitchell as research director, the National Bureau was incorporated and took steps to organize the long-promised analysis of the composition and distribution of the national income." (11) This led to the completion of their first major project that was published the following year as the Income in the United States: Its Amount and Distribution, 1909-1919.

Corporate spokesmen would subsequently refer to its conclusions as evidence of modern capitalism's benign tendencies. But more important, and more immediately, Income in the United States represented a potent contribution to the elaboration of a technocratic critique of malproduction and to a social policy of economic growth. Taken together with the concurrent efforts of engineers to draw attention to waste as a critical factor in low productivity, it would further the formation of a managerial consensus envisioning rationalized management practices as the key to increased production. (p.63)

Around this time, Herbert Hoover, who in late 1920 had been elected as the founding president of the Federated American Engineering Societies, "emerged as the chief spokesman for an engineering role in social reconstruction." He fully realized that "poor economic performance could unleash forces that would lead to social disintegration and new forms of tyranny" -- by which Hoover meant the tyranny of socialism; that is, government by the people for the people. And for Hoover the "chief manifestation of the existing system's irrationality" was unemployment. (12)

Hoover's analysis reflected the high degree of consensus then emerging among technocratic social scientists, labor leaders, and reformers. Like Mary Van Kleeck, Hoover considered strengthened federal and state employment and statistical services as well as collective bargaining guarantees to be essential to the attack on unemployment. And, like Wesley Mitchell and Henry Dennison, Hoover was troubled by the alienation and disenfranchisement already prevalent among American workers. For not only was this a barrier to greater efficiency and production, it also posed an ongoing threat to social development and thus to the routine stability of the economy. Thus to a significant extent, Hoover shared with Van Kleeck, Dennison, and Mitchell a recognition of the heed to reduce employer domination over employees; and, like them, he looked toward extensions of technocratic authority as the most promising means of fashioning the necessary restructuring of industrial relationships. His program, moreover, was not unlike that of such trade union leaders as John P. Frey and Samuel Gompers, men who had embraced the central tenets of technocratic reconstruction as the surest means of advancing a limited array of labor goals within a hostile political climate. Frey, as we have seen, was a founding force behind the National Bureau. And Gompers, in the fall of 1920, lent his public support to Hoover's campaign against economic waste. The American Federation of Labor, he declared, would help in "bringing about such relations within industry as would establish a stable and equitable basis for production and would eliminate industrial waste." (pp.65-6)

Working through the Federated American Engineering Societies (FAES), but with the resistance of members of the FAES executive board, in 1921 Hoover oversaw the publication Waste In Industry -- a publication that met opposition from the FAES's board members because they "judged [it] to be an attack on business managers." Although this publication was not as influential as the National Bureau's Income in the United States, it "contribute[d] to the store of technocratic data competence and to the growing acceptability of technocratic analysis"; and both reports "would be used as intellectual fodder in the coming designs for countercyclical planning." This was enlightened capitalism at its best, and dark and dank conspiracies need not apply, although one "would be equally mistaken to deny the role played by consciousness and by purposeful intent operating within boundaries shaped by political power and possibility.", (13) Paradoxically, in many ways the elitist leadership of American social science actually believed they were not selling out to capital but were acting in the interests of human welfare. Although they were rendering a dubious service to humanity, acted out within strictures that always placed profit before people.

Yet if there was no sell-out, one must recognize that there was a subordination of social science that stemmed from its political weakness in the face of business power. Caught within such constraints, social science data production can proceed according to scientific norms and is theoretically available to all, but it will be most effectively employed by those institutions that subsidize, legitimate, and are most effectively mobilized to use such empiricism. In the case of the United States since 1920, these have been the institutions of a managerial capitalism. (p.70)


[ed. Go to Part II.]


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1.  Guy Alchon, The Invisible Hand of Planning: Capitalism, Social Science, and the State in the 1920s (Princeton University Press, 1985), p.3. The development of this technocorporatism "involved a legitimating process, both for capitalist institutions and for America's rising social sciences. Mass unemployment can expose both the existence of class privileges and the market's pretensions to be free of power, thus subjecting business institutions to a crisis of legitimacy. As the social sciences emerged, one source of this legitimacy for political and business elites came with the findings of a scientific rationality, allegedly transcending class interests, that unemployment and other capitalist ills were curable through better organization and management-that they were, in other words, vulnerable to the prescriptions of social scientists." (p.5)

Alchon provides a summary statement of the arguments made in his book in his article "Foundations, Social Science, and Indicative Planning in American 1920s" (pdf).  (back)

2.  Alchon, The Invisible Hand of Planning, p.3. In response to working class organizing, much of it along expressively socialist lines, progressive reformers in the years prior to World War I promoted the "streamlining of a [capitalist] system that was considered to be here to stay. To them, poverty, disease, unemployment, and social discontent were not the result of an inexorably unjust social order. Rather, they were the effects of an unstable, ill-managed, but improvable corporate capitalism." (p.8) For a comprehensive critique of the anti-socialist nature of the so-called Progressive Era, see James Weinstein, The Corporate Ideal in the Liberal State, 1900-1918 (Beacon Press, 1968).  (back)

3.  Alchon, The Invisible Hand of Planning, p.6.  (back)

4.  Alchon, The Invisible Hand of Planning, p.10.  (back)

5.  Alchon, The Invisible Hand of Planning, p.51, p.52. This "technocratic bargain" thereby "allowed elites serving capitalist purposes to appear as scientifically enlightened 'public men,' and it gave the technocratic professions a sphere in which they were recognized as useful and authoritative." (p.52)  (back)

6.  Alchon, The Invisible Hand of Planning, p.52. In addition to presiding over the new Massachusetts branch of the American Association for Labor Legislation (in 1911), Edwin Gay had been "the man who persuaded Frederick W. Taylor to lecture at the business school, calling Taylor's scientific management 'the most important advance in industry since the invention of the factory system.'"(p.53)  (back)

7.  Alchon describes Wesley Mitchell, along with Thorstein Veblen and John Commons, as being "major figures" in the "institutional economics" movement that arose late in the nineteenth century. "Convinced that classical economics was inadequate and that much of the neoclassical synthesis was useless for understanding modern economic problems, the institutionalists raised strong objections to their profession's drift into what seemed to them irrelevance." Commons, "would go on to become a major force behind the legitimation of [corporate] unions and the management reform movement" (for further details, see "Liberal Elites and the Pacification of Workers"); while Mitchell who "was Veblen's , most gifted student, was to gain fame for his pioneering work in the measurement and analysis of business cycles." Alchon adds that "unlike Veblen, who rejected reformism for iconoclasm, Mitchell would eventually emerge as a major figure in the efforts to create macroeconomic stabilizers." Alchon, The Invisible Hand of Planning, p.18, p.19.  (back)

8.  Alchon, The Invisible Hand of Planning, p.53, p.54. Other influential individuals who were recruited for the planned institute included: "John R. Commons of Wisconsin, then president of the AEA [American Economic Association]; Allyn Young of Cornell, then president of the ASA [American Sociological Association]; N. I. Stone, a statistician, conservative socialist, employment manager, and associate of the newly created Brookings Institute for Government Research; and John P. Frey, a conservative trade union leader and editor of the International Molder's Journal." (p.54)  (back)

9.  Alchon, The Invisible Hand of Planning, pp.54-5. "[T]hen, as later, a number of philanthropic and corporate leaders viewed institutions that could establish scientific claims of disinterestedness and professionalism as potential producers not only of economic intelligence but of better coordination and greater social legitimacy for the organizational hierarchies of a corporate capitalism." (p.54)  (back)

10.  Alchon, The Invisible Hand of Planning, p.55, p.56. p.57. Stephen Harkness was a co-founder of the firm that went on to become Standard Oil, and he remained on their board of directors until his death in 1888. The Commonwealth Fund was chartered in 1918 by his widow, Anna Harkness, and their first director was Yale historian Max Farrand, and their founding president was Anna's son Edward Stephen Harkness (a position he held for twenty-two years).

The current chair of the Commonwealth Fund's board of directors, James R. Tallon, Jr., serves on the board of the Open Society Institutes's Program on Medicine; while recently appointed Fund board member, Julio Frenk, came to this position after serving as a senior fellow in the global health program of the Bill & Melinda Gates Foundation.  (back)

11.  Alchon, The Invisible Hand of Planning, p.59.  (back)

12.  Alchon, The Invisible Hand of Planning, p.64, p.65.  (back)

13.  Alchon, The Invisible Hand of Planning, p.67, p.68. "By 1923 Thomas Lamont of J. P. Morgan & Company was chairman of the [National Bureau's] board of trustees, with Owen Young of General Electric and E. R. A. Seligman also serving on the board." Moreover, the successor of the long-serving research director of the National Bureau, Wesley Mitchell (1920-48), was Arthur Burn, "who later became well known as President Eisenhower's chief economic adviser." William Domhoff, The Higher Circles: The Governing Class in America (Vintage Books, 1971), p.181, pp.181-2.  (back)


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Published September 26, 2011