2-17-05, 8:09

Melchior Palyi, Chicago School economist of the World War II era, whose writings connecting the 'welfare state' to 'totalitarianism' were used after the war as part of the campaign against establishing comprehensive national health insurance. Palyi is not important in himself, but his thinking is indicative of what the Bush administration means by 'freedom' that it is fighting for and the 'tyranny' that it is fighting against.

In 1949, Palyi wrote a pamphlet against socialized medicine distributed by those campaigning against national health insurance legislation. Palyi at the time blamed pro-labor elements of the Weimar Republic for creating the conditions that brought Hitler to power, not conservatives like himself who did nothing to fight the depression except carry forward conservative fiscal policies. This was the same year1949 that anti-New Deal lobbies, spearheaded by the American Medical Association, killed Harry Truman’s plan for a system of National Health Insurance. Truman’s plan would have functioned for the whole population in ways that the present Medicare system has functioned for the elderly since 1965. Truman’s enemies denounced his health insurance idea as 'creeping socialism' and use the dominant cold war consensus to connect such programs as steps on the road to Soviet 'totalitarianism' 'Red Fascism,' etc. Palyi’s 1949 publication was very much in that vein and was sponsored and distributed by those opposing the Truman program.

The general idea was that the New Deal and Fair Deal, portrayed crudely in rightwing media, was that liberalism led to socialism which led to communism which led to dictatorship. Palyi’s historical allusions were both in that framework and frankly absurd in the extreme in their use of historical examples. For example, Palyi claimed that Bismarck’s limited social legislation of the 1880s was connected with a policy of outlawing the German Social Democratic Party. The party eventually succeeded in achieving repeal of the anti-Socialist laws and expansion of workers rights, although it did not stop German militarists and imperialists from embarking on the policies that led to World War II and a quasi-military dictatorship.

Also, contrary to Palyi’s warped version of history, the Weimar Republic fell for a variety of reasons, none of which had much to do with its concessions to labor, unless one believes that its labor policies brought on the global depression which provided the political context for Hitler’s victory. Keynesian economists, welfare state scholars associated with various liberal, social democratic groups and labor movements defined the welfare state and the mixed economy as ways to both save and humanize the existing social order from both Soviet-style state socialism and the 'free market' capitalism of Palyi and his associates. I don’t know if Henry IV really promised a 'chicken in every pot' centuries ago, but I do know that it was a Herbert Hoover campaign slogan, along with 'a car in every garage,' in 1928, and Hoover was not campaigning on any welfare state program. In other words, extreme versions of 'free market' capitalism advocated by Palyi and the anti-New deal crowd simply didn’t hold much weight with the general public even before the New Deal was passed. While Palyi may have been marketed as an 'expert' on the failures of social welfare policies, just as the present Bush administration seeks to market scholarship and theories on the coming crisis of our Social Security system, such welfare state policies were associated throughout Western Europe with an expansion of citizenship rights and greater personal freedoms. Also, welfare states everywhere have expanded civil liberties and civil rights. War and state preparation for war undermines civil liberties and strengthened police state policies, not social welfare policies. In other words, in practice social welfare states have been farther from 'authoritarian' in practice than we’ve experienced under Bush who claims to love freedom and hate tyranny.

The leading social democratic welfare state on earth one should remember, Sweden, not only never developed into a police state but also has one of the best records on earth in preserving and protecting the civil liberties of its citizens. It’s record is certainly a much better one than, sadly, the United States, although its ability to stay out of the two World Wars may have a lot to do with that. Also, the labor movements with which Palyi had no sympathy have shown themselves far better at standing up for and defending civil liberties than the business groups whom he saw as the bearers of freedom and progress.

My positive comments on the Sweden are not meant to disparage or ignore the achievement of socialist countries that carried forward social revolutions under much more difficult circumstances internally and externally. Instead, Sweden developed the kind of capitalism, as a Marxist economist of my acquaintance contended, 'that you could live with,' whereas the jungle capitalism that Bush is both preaching and practicing, a world where everything is deregulated and privatized and an 'ownership society' where more and more people 'own' their own poverty is extreme and contemptible even by the standards of most other developed capitalist countries.

Ironically, Palyi service to the Weimar Republic as an advisor to the Reichsbank in 1931-1933 was at a time when conservative National governments opposed programs and plans to fight the depression with massive public works and other anti-unemployment plans in favor of traditional fiscal conservative policies. Something like a 'New Deal' economic policy for Germany, that is state intervention and spending to challenge mass unemployment, but from a center left government, might have saved Germany and the world the horror that was to follow. The Nazis, on the other hand, who connected state intervention with militarization, smashing unions, persecuting political opponents and establishing an open terroristic dictatorship,

Politically, such a 'New Deal' may not have been possible in Germany because of the political civil war being fought between the two mass parties of the left, the Communists and Social Democrats and the weakness of the political center. But center-left, not traditional conservative policies may, and I emphasize may, have led to a government that would have achieved a level of recovery and reform that would have thrown the Nazis back.

In any case, Palyi and the immediate pre-Hitler conservative Weimar governments, not the earlier center-left Weimar governments that he condemned, were as rigid and as unsuccessful in fighting the depression as Herbert Hoover’s government was in the U.S. Thus, by their failures, they directly contributed in my opinion to the Nazis taking power. So Palyi, and his line of thought, has very little to recommend him as an 'authority' on the early 20th century welfare state policies or as someone who represented anti-Fascist, anti-police state social policies.



--Norman Markowitz is a contributing editor of Political Affairs. Reach him at pa-letters@politicalaffairs.net.

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