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4—Every Man a Capitalist? Fascist Ideology of Businessmen in 1920s America

HISTORIANS HAVE LONG RECOGNIZED how the development of advertising helped to sustain the booming economy in the United States during the mid- to late 1920s. Millions of Americans who lived in urban areas now routinely enjoyed the pleasures of a lifestyle that had only existed for a short time. But it took the genius of advertising to continuously rekindle their desire and acquisitiveness. To this end, advertising surely played an increasingly important role, its ballyhoo constantly rising to penetrate and sway the jaded consumer. To meet the challenge, the world of advertising became an intertwined network of businessmen and ad men whose ties to owners and managers aimed to make business the dominant force in American political and social life. As hundreds of prophets in academe and the media trumpeted the promise of uninterrupted prosperity to the masses, the owners of capital and their highly skilled attendants were surreptitiously shaping a political agenda that guaranteed nothing would change their hold on wealth and power—and their growing influence over society.

In the mix of all these proponents of the so-called capitalist revolution of the New Era, or what some called the New Capitalism, are the roots of a national form of fascist ideology. Within its genesis were two main currents that differed profoundly, to the point of being contradictory. One loudly promoted greater democratization of American capitalism; the other, a quiet but more powerful force, aimed to curtail democracy itself. The former represented the aspirations of the growing middle classes; the latter strengthened the political power of anti-democratic forces among business elites who made up America’s ruling class. If we concur with those in the 1930s who defined fascism as the power of finance capital, the merger of the two currents—the failed dreams of the aspiring middle classes from below and the cynicism of the ruling-class modernizers from above—generated a particular, national form of fascist ideology in the United States in the 1920s.

We see this clearly in a close reading of three key texts that help us to grasp the similarities and differences between the two currents, but both generating a capitalist ideology that is inherently fascist.

THE CAPITALIST REVOLUTION IN AMERICA AND THE PROMISE OF EVERLASTING PROSPERITY

In his campaign for the presidency, Warren Harding had promised to put America first. Five years later, Thomas Nixon Carver declared that the United States was already leading the rest of the world. Carver, a Harvard economics professor and author of The Present Economic Revolution in the United States, contended that America was unique in the world because a capitalist revolution was turning its laborers into capitalists:

The only economic revolution now under way is going on in the United States. It is a revolution that is to wipe out the distinction between laborers and capitalists by making laborers their own capitalists and by compelling most capitalists to become laborers of one kind or another, because not many of them will be able to live on the returns from capital alone. This is something new in the history of the world.¹

Admonishing capitalists to avoid absentee ownership and European luxuries and even assume some tasks normally done by laborers, Carver gave most of the credit for the economic revolution to the power of the laborers—never calling them workers. He applauded the labor movement for abandoning the “antiquated methods” of its European counterparts, which were still guided “by a psychology … built up in a primitive and fighting stage of social development.” Instead, labor leaders in the United States were “beginning to think in constructive terms” by formulating a “higher strategy of labor.” Instead of fighting capital, they were now attuned to the “permanent economic forces” that could be used “as an implement for their own improvement.”²

Carver was certain the future looked even better. As more laborers earned higher wages, saved prudently, and acted responsibly in all their endeavors, they were putting themselves on the path to capitalist ownership. Of course, there would always be some conflict between employers and employees. But in his homespun approach to complex economic questions, Carver said the conflict was like that between husband and wife. In both cases, each needed the other and whatever differences existed between the two there were also “many elements of harmony” not to be forgotten. Carver reduced it all to a simple matter of choice:

Whether they live in peace and harmony or in a state of antagonisms depends upon which aspect of their relationship they permit themselves to think about most frequently. If they permit themselves to forget their need of one another and the many questions on which their interests harmonize, and to think only of the questions on which there is a conflict of interest, they are not likely to live a very harmonious life. But if, on the other hand, those questions on which there is a unity of interests occupy their minds, they may expect nothing but peace and harmony.³

For the first time in its long history, capitalism in its distinctively American form had proved why boom/bust cycles were a thing of the past. As more workers became capitalists, so would prosperity continue and the promise of progress under capitalism finally realized:

Wealth is not only increasing at a rapid rate, but the wages of those we formerly pitied are rising, laborers are becoming capitalists, and prosperity is being more and more widely diffused. We are approaching equality of prosperity more rapidly than most people realize. What is equally important, we are working out this diffusion of prosperity for all classes without surrendering the principle of liberty which is embodied in modern democratic institutions.⁴

Carver regarded the coming of universal wealth and uninterrupted progress as the fulfillment of capitalist utopia. And it would be utterly democratic! Regardless of where one stood on the class ladder, the economic revolution was leveling the pyramid of capitalist wealth. Labor leaders were playing a key role in this process by staying clear of an antiquated European radicalism based on class warfare. Fortunately, American labor leaders understood that the solution to the labor problem was higher wages, which would quell any discontent that might fuel class consciousness. Thanks to their efforts, America could look ahead to a future “when we shall no longer speak of the laboring ‘classes.’”⁵ With more laborers becoming capitalists, Carver claimed, the latter were finding it more difficult to hire workers and were thus having to do more of the work themselves. This was a sure sign that the “actual blending of the two so-called classes means that there will be no more classes in this country. Fraternity has never been very clearly defined,” Carver added, “but this condition, when there is no class consciousness, comes as near being fraternity as we are ever likely to get, if it be not fraternity itself.”⁶

Carver devoted a chapter of his book to the growing financial power of laborers, basing his claim on statistics cherry-picked from savings deposits, assets of building and loan associations, and the premiums paid to insurance companies by laborers. He also considered “incomplete but rather striking figures regarding the investment of laboring people in the stocks and bonds of corporations.” He brought attention as well to what he called “the new phenomenon of the labor bank.” According to figures from the American Bankers Association, Carver said that total savings deposits had more than doubled between 1914 and 1924, and the total number of depositors “had increased more than three-fold.” Moreover, a study of life insurance policies in 1924 showed that more than two-thirds were held by wage workers. He also provided statistics that he used to argue that more laborers were investing in the stock market.⁷ As for the rise of labor banks, his entire case was made on the basis of the Brotherhood of Locomotive Engineers, which opened its bank in 1920. This case alone, he claimed, proved that the capitalist revolution developing in America was another great example of the prospect of universal wealth and prosperity now in the making.⁸ The inequalities that had always been present in capitalism were being eliminated, proving that they “were not essential to the capitalistic system.” Instead, the revolutionary advance of American capitalism was proving that free enterprise worked. “In fact,” Carver said, “where capitalism is given a chance to develop freely, unhampered by social and political obstacles, it tends to eliminate its own inequalities and secure … great abundance for everybody,” more than any other system has ever achieved.⁹

On this basis, the economic revolution presented the greatest opportunity ever to achieve what Carver believed was “the most revolutionary idea” in all economic discussion, “that of a balanced economic system … in which all factors of production are combined in such proportions as will yield the most satisfactory results, and yield them automatically.” Again reducing complex matters to the simplest terms, Carver served up a case for the dietician who can recommend a balanced diet to an individual simply by knowing “all the elements.” Businessmen did this as a matter of course. They always had to know when to apply basic principles on a routine basis; they had to put together combinations to create a desirable balance by establishing “satisfactory ratios” among all competing elements. This same approach held true in more complex situations where the primary objective was to achieve equilibrium. Balance was always the key factor. The idea of a balanced economy could be carried out systematically across the entire industrial system, “balancing every industry against every other, and every element or factor in every industry against every other.” This, Carver said, should be the common work of the statesman and the economist.¹⁰

Carver’s book, when it was published in 1925, contributed to the ballyhoo about capitalist progress. Although there were still problems to overcome, they were not, he claimed, “essential to the capitalistic system.” The worst that could be said about the capitalist system was that it had yet to abolish the inequality of wealth. On this he was defiant. As long as American capitalism continued on its present course free of obstacles or interference, it would eventually “distribute the best things of life more evenly” than any other system in history.¹¹

The main obstacle to this progress was the lack of a solid understanding among most people of what capitalism is and what it does. Without this knowledge, it was easy to draw bad conclusions by judging the system superficially on the basis of its “temporary aspects.” This was a mistake, as Carver explained in the most direct and startling terms:

Strictly speaking, capitalism is not a system at all. It is merely a fact that grows out of the suppression of violence. Wherever violence is repressed, capital comes automatically into existence. Where violence is repressed, the man who has made a thing, or found it before anyone else has gained possession of it, cannot be dispossessed without his consent. No government can repress violence without automatically creating property as a result.¹²

Carver focused on the importance of “rightful possession” and the role of government to protect those who had possessions from those who possessed nothing. This was the danger posed by socialism and class warfare, he argued, that fueled violence in society. So long as the possessor could not be dispossessed and remained free to do what he wanted with his possession, capitalism would continue to thrive. For Carver, the “germ” of the capitalist system based on private property was in the workings of simple exchange between those who possessed and had something to sell. This, Carver insisted, was what made capitalism natural. There was simply no other way to explain the matter. “Exchange, therefore,” he wrote, “grows up automatically and unavoidably along with property, whenever and wherever violence is repressed.” The purpose of government, therefore, was to make sure that exchange between those who had rightful possession were unhampered by violence. In the process, government protection transformed simple possession into property.¹³

Carver argued that envy threatened prosperity based on the idea of rightful possession. The envious draw sympathizers, or worse, those who “invent apologies and excuses for them.” There are consequences. When envy peaks, it is “likely to lead to acts of violence either by individuals or classes.” The ensuing “class war,” he said, can destroy civilization if it leads to a government that violently dispossesses the possessors.¹⁴ To prevent this from happening in America, government had to restrict immigrant laborers from countries where capitalism was less developed. They arrived seeking better wages and living conditions, but their presence meant a growing number of “thoughtless and thriftless people.” The result would be in all probability a rising propertyless class that could grow large and dangerous. The outcome was ominous:

If it should be able to outvote the class of savers and accumulators, it may gain control of the government and use it as an engine for the dispossession of those who have managed to accumulate. The safety of modern civilization requires that these non-accumulating classes shall be kept few in number.¹⁵

Carver was sure that class struggle in America was a thing of the past. American laborers were now plotting “a higher strategy” that corresponded to the great leap forward in production and the trend he saw to their eventual ownership of it! This higher strategy was based on peace and harmony with employers, not struggle and class war. “Labor has got all it can get by violence.” It was time to get things done “by head-work, not fist-work.” In a vague reference to the great strike wave of 1919–1920 and the alleged Red Menace, Carver declared that labor previously had brought great fear to the nation. The time had come to impress the country with its wisdom. Labor had to confidently cultivate its identity as “a preserver and developer” in order to increase production for greater prosperity.¹⁶

As a work of capitalist propaganda, Carver’s book said all the things that Big Business would enjoy hearing in public. His main points resonated without threatening its hold over society. His central message—the revolutionary advance in American capitalism will eliminate inequality—was a notable contribution to the ballyhoo of endless prosperity during the New Era. Carver’s rapturous view about the great promise of capitalist progress certainly was music to the ears of the working and middle classes who longed to be capitalists themselves, as well as to those who already were and had the most to gain from it. But the latter—Big Business—had no intention of leveling the capitalist pyramid of wealth. What it sought was to remain strong and secure at the top.

THE ADVENT OF BUSINESS THEORY