The major problem I see from the late 19th century to the early 20th century stems from an unbridled belief in the power of technology. The United States had been built on a foundation of individualistic rights. Yet, the belief in the bureaucratic abilities of officials who could manage large industries or groups led to a belief that bureaucratic control would be more efficient than capitalistic competition (Jacoby, 2004). Zunz (1992) discussed the rise of scientific Taylorism and the assembly line process used by Ford and his imitators. Jacoby (1973) demonstrated how such ideas had led to the bureaucratisation of the world.
Significantly, the belief in scientific management, and the near-religious ideology that sprang up, led to the rise of many totalitarian powers, including those within the Soviet Union, Germany, and Japan, which followed the concepts of Max Weber (Krygier, 1995) in an erroneous view that bureaucratic systems were both necessary and superior forms of management in a modern business or political structure. The drive for efficiency through bureaucratic systems led to the growth of centralised control structures and political systems throughout much of the world of the time. As Miller (1988) demonstrated, one of the major concerns of the American Founding Fathers had been associated with the need to protect the individual and ensure that the government would not become too centralised. Yet, such unfounded belief in the power of bureaucracy to solve all problems better than the individual led to increasingly centralised control structures and power bases throughout the world.
Banta (1993, p. 29) demonstrated how even capitalist industry had sought to determine “the one best way”, leading to a belief that specific industrial leaders could make better decisions than other individuals. Such erroneous ideas led many to falsely claim that the Soviet Union was more efficient than systems such as present in the United States (Nearing & Hardy, 1927). With the continuing problems of food scarcity that occurred throughout the Soviet Union (Furniss, 1932), such claims should have been seen as evidently false from the beginning. The false information reported by the Soviet Union and the propaganda systems of authoritarian governments led researchers to posit that the systems of state capitalism and control, including those implemented by Germany, were more efficient (O’Brien, 1945). Such authors argued the economic efficiencies of totalitarian governments against laissez-faire systems (Sweezy, 1944), ignoring the advantages that had led to the growth of American industry.
Unfortunately, economists such as Ludwig von Mises (Sturmthal, 1943) were drowned out by the erroneous arguments that social control systems were far more efficient than capitalism (Lange, 1936). As Mises and Tucker (1945, p. 1.) effectively argued that the term ‘economic planning’ is primarily “used as a synonym for socialism, communism, and authoritarian and totalitarian economic management”. The challenge is that the amount of knowledge held by individuals consistently exceeds the amount of information that can be processed by bureaucratic systems. Yet, the false belief in scientific management and scientism led to the rise of totalitarian systems and the continued road to war.
Many people misrepresent the complexity of systems that develop in local systems of trade. Whilst it is possible to produce a single item at scale, using techniques of industrial mass production, doing so ignores the nature of trade and the ability for individuals to have free choice. Because individuals choose many items unpredictably, or change their buying procedures over time, it is not possible for government systems to determine the training needs of every business in a country ahead of time. The false belief in the idle presented as God in the bureaucratic form of scientism leads to a centralising force, giving power and control to few individuals. Rather than investigating such tendencies, reviewers looked at the economic concepts of von Mises with disdain (Basch, 1944). At the same time, the size of government grew, and the power maintained by a few individuals increased to levels the Founding Fathers of the United States would never have believed possible in America, and to even greater levels in countries such as Germany and Japan.
References
Banta, M. (1993). Taylored lives: Narrative productions in the age of Taylor, Veblen, and Ford. University of Chicago Press.
Basch, Antonin (1944). Review of Ludwig von Mises, Omnipotent Government. The American Economic Review, 34(4), 899–903.
Furniss, E. S. (1932). Soviet Economic Disappointments. Current History (1916-1940), 36(5), 616–620.
Jacoby, H. (1973). The bureaucratization of the world. University of California Press.
Jacoby, S. M. (2004). Employing bureaucracy: Managers, unions, and the transformation of work in the 20th century. Psychology Press.
Krygier, M. (1985). Marxism and bureaucracy: A paradox resolved. Politics, 20(2), 58–69.
Lange, O. (1936). On the economic theory of socialism: Part one. The review of economic studies, 4(1), 53–71.
von Mises, L. V., & Tucker, R. S. (1945). Economic planning. Dynamic America, INC.
Miller, J. I. (1988). The Ghostly Body Politic: The Federalist Papers and Popular Sovereignty. Political Theory, 16(1), 99–119.
Nearing, S., & Hardy, J. (1927). Economic organization of the Soviet Union. Vanguard Press.
O’Brien, G. (1945). Socialist Myth and Russian Reality. Studies: An Irish Quarterly Review, 337–346.
Sturmthal, A. F. (1943). The Tragedy of European Labor, 1918-1939. Columbia University Press.
Sweezy, M. Y. (1944). The Nazi Economic System: Germany’s Mobilization for War.
Zunz, O. (1992). Making America Corporate, 1870-1920. University of Chicago Press.