Who Advises the Advisers?

March 1, 1948

In this column of Jan. 12, concerning the 100th anniversary of the Communist Manifesto, incidental attention was called to the striking similarity between the theory in that document that capital accumulation, the use of machinery, increases “the burden of labor” and “forces wages down almost everywhere,” and this sentence from the second annual report of the President’s Council of Economic Advisers: “The accumulations of capital over the years have in fact involved deprivations of the rank-and-file worker.”

It ought not to be necessary at this late day to point out why this Marxist doctrine is nonsensical. It is not the worker, but the capitalist, who is deprived of that much current consumption when the latter puts aside savings to invest them. And the effect of this investment, as illustrated above all in America, has been enormously to increase the quantity and improve the quality of the tools at the disposal of the worker, enormously to increase his productivity, and hence enormously to increase his wages and the goods available for all of us as consumers.

The real question we have to ask ourselves is how such an unadulterated Marxist doctrine got into the report of the Economic Advisers. This was no accidental sentence. It was part of a report which reveals throughout an underlying distrust of precisely that “free competitive enterprise” system which the council was specifically created by law to “foster and promote.”

Neither is the slurring reference in the report to “the so-called free market” accidental. Neither is the doctrine—also Marxist in origin—that the “cream” of American industrial production has “in large measure gone to the relatively few”; that the rest have been “subsisting on skim milk”; that “the small number of the well-to-do will not be able to absorb the possible output of consumers’ goods; nor can they go on indefinitely accumulating ownership of the surplus above their consumption needs and investing it in ever-enlarging plant for future expansion of goods for some restricted part of the population.” This is blandly written in an official document in the United States of 1948 which has achieved the greatest mass market in human history for food, clothing, automobiles, radios, refrigerators, and a thousand luxuries and refinements that a king could not have dreamed of owning a century ago.

This annual report of the Economic Advisers must be read in connection with the recent Economic Report of the President, which under the law the advisers “assist and advise” him in preparing. In neither is there any serious grappling with the central economic problem that now confronts the country—inflation. The word, of course, appears often enough. But nowhere is there any frank admission that the dominant cause of inflation has been the tripling of the nation’s money supply—its currency and bank credit—since the outbreak of the war. The references to inflation are self-contradictory. “The nature of the inflation from which we are suffering,” says the President at one point, “arises in part from the total excess of buying power over the available supply of goods.” But a few pages farther on he demands “enough buying power to absorb the output,” and declares: “For balanced expansion, our economy requires a larger flow of income to consumers.” In other words, more inflation.

Throughout both reports the blame for almost everything that has gone wrong or could go wrong is by implication put on the American businessman. “I strongly urged businessmen,” writes Mr. Truman, “to bring prices into line.... Business should reduce prices wherever possible.” And so on. Yet he does not complain that farm prices are too high though the official statistics show that farm prices had risen in the week his report was issued 208 percent above 1939, whereas manufactured products were up only 96 percent.

The Council of Economic Advisers has dissipated whatever reputation for detachment or objectivity it may once have enjoyed. It now apparently regards its function as no better than that of providing, at the taxpayer’s expense, a “scientific” veneer for Candidate Truman’s campaign arguments.