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Here one may throw away the economic almanacs. The answer is not in them. They all alike foretold disaster. But where was it? Where was Nemesis hiding, or was she dead?

How was it that after eight years of New Deal inflation, then World War II, and then five years of postwar inflation, people as a whole were better fed and clothed and housed and able to consume more of the satisfactions of life than ever before? The material content of life was higher than before the Great Depression. In the year, say, 1950, almost nobody would have been willing to go back to the standard of living that was thought high in 1929.

If this cannot be accounted for, then we live by delusion and fallacy becomes wisdom.

In the first place, never had a crew of planners captured a galleon so rich. They did not themselves know how rich it was, and for a while they were amazed to find how much they could spend.

Secondly, it was not only that the actual wealth of the country was greater than anybody realized; the country's dynamic power to create and recreate wealth on demand was like x in the algebraic equation. It seemed to be an inexhaustible power and had always been underestimated. The Kaiser underestimated it in World War I, Hitler in World War II; we underestimated it ourselves. It was so great that the injury done by inflation to the creditor class could be absorbed, and all the more easily because there is in this country almost no creditor class as such, like the very old rentier class in Europe. Here the rule is that creditors are also debtors and producers, participating actively in the process of wealth creation.

Thirdly—and this is the crucial ground—the inflation prepared by the New Deal was primarily political, not economic.

John Maynard Keynes, whom you may take to be the foremost modern authority on inflation, had said, as above, that "while the process impoverishes many it actually enriches some." The political meaning of that truth had never been formulated.

Well then, since inflation may act both to impoverish and to enrich, how will you plan inflation for political ends, with intent to bring about a redistribution of the national income and revolutionary social change? Certainly you will plan it to enrich the greatest possible number, for then you will have the acclaim of the people and your revolution will be popular. Suppose you can plan it to enrich, first, the farmers, who besides their vote have a traditional power to intimidate Congress

; secondly, organized labor, which also, besides its vote, knows how to scare Congress, and thirdly, people in the low-income brackets. These low-income people you will call the underprivileged, and you may increase their number to almost any point by the simple expedient of raising their expectations and setting for them a higher minimum standard of living, which the government will undertake to provide.

If you can enrich all of these you will have increased temporarily the buying power of roughly two-thirds of the population. And then as they spend their money and prices rise, there may be a boom in business. If that happens you may be sure that businessmen and bankers will stand halfway with you. True, they will get worried from time to time and say, "Inflation must stop." But if you say to them, "Then do you want deflation?" they will say, "No, no, not that. But let's stop it here." And they will be entirely with you when you propose to employ all the resources of government, even a little more inflation, to prevent deflation, because deflation is very bitter medicine.

That is the way the New Deal planned inflation and as the New Deal planned it so it has continued ever since.

To the farmers it gave cheap money and credit, a system of price supports the cost of which is met out of the public treasury, and a guarantee of "parity," which means that if other prices rise so shall the level of farm prices be raised by more subsidies—with this total result, first, that the farmer's share of the national income was increased, and secondly, that immunity from the evil effects of inflation was conferred upon him as a class.

To organized labor it gave, first, complete exemption from the antitrust laws, and then the legal right to create and exercise a labor monopoly under which unionism becomes compulsory and a man has to pay for the right to work. What has reconciled the individual to this condition is that organized labor, by virtue of its legal monopoly and through collective bargaining, has been able to keep wages rising faster than prices. Moreover, it has been able latterly to get into its contracts the so-called escalator clause, which says that as the cost of living rises wages shall be automatically increased. Thus organized labor's share of the national income was increased and it also achieved as a class immunity from the monetary evils of inflation.

To the people in the low-income brackets it gave the fascinating bauble of social security. How to keep this bauble from withering, as prices rise and the buying

power of the social-security payments out of the United States Treasury falls, is a problem that has not yet been solved. Either these people will be tragically

disappointed, even defrauded, or the Congress from time to time will have to appropriate billions more to increase the government's payments to them.