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Roberto Assagioli discusses the spiritual lessons that can be learned from the economic crisis of 1930ties.
By Roberto Assagioli (Doc. #23602 and 24228 – Assagioli Archives – Florence), a Pamphlet published in 1932. Excerpt from Issue No. 6 of June 1932-X of “Antieuropa”[i] Original Title: Lezioni spirituali della crisi economica. Translated and Edited With Notes by Jan Kuniholm[ii]
Abstract: In this pamphlet from 1932, Dr. Roberto Assagioli discusses the spiritual lessons that can be learned from the economic crisis of that time. He argues against the concept of “homo economicus,” emphasizing that human behavior is influenced by a complex interplay of various needs, desires, and aspirations. He acknowledges the suffering caused by the crisis but also highlights the negative effects of material prosperity, such as hedonism and greed. Assagioli suggests that economic hardships can bring important benefits, such as simplifying life and appreciating non-material joys. He explores the relationship between money and spirituality, emphasizing that one’s inner attitude towards money determines its impact on one’s life. Assagioli also discusses the causes of the crisis, including excessive decrease in savings and excessive industrial production. He proposes spiritual and organizational remedies, such as a new ethical-spiritual orientation and a shift towards a more organized economic order. Assagioli advocates for the recognition of economic solidarity and cooperation among nations. He concludes with optimism, envisioning a future where humanity thrives through solidarity and cooperation.
A school of political economy that was in vogue in the last century had created the myth of the “homo economicus,” [“economic man”][iii] that is, of an imaginary being whose actions are motivated solely by his own economic profit, and on this basis they had constructed more or less ingenious theories and formulated alleged laws. The great historical events that took place in the 20th century proved the inanity of those abstract constructions, and the little or nul validity of those “laws.”
It could not have been otherwise. The homo economicus does not exist; rather, there is man, the complex and multifaceted human in whom the various aspects and elements, the various needs, tendencies, desires, passions and aspirations continually act and react upon each other. All these contribute in different ways, that are hardly calculable and predictable, to determine his conduct in every field, including the economic one. And in turn, individual and collective economic conditions do not have exclusively material and practical effects, but affect the whole man; they influence his ideas and feelings, pose problems for him, impose choices on him, and provoke crises of an affective, moral and spiritual nature.
This fact was fully acknowledged by the Head of the Government,[iv] who formulated it in one of those incisive phrases peculiar to him in his address to the people of Naples on October 25 [1931]. He said, “The world crisis is no longer only economic, but is now, above all, spiritual and moral.” [v]
We believe that an examination, albeit a cursory one, of these interactions and relationships between the economic and the psychological and spiritual aspects of the crisis now afflicting the world, may give us a better understanding of what is unfolding, and in which we are all in varying forms and degrees actively or passively participating. And this greater understanding will enable us to glimpse the many spiritual lessons that the crisis can teach, and point us to ways of solving it and preventing new ones.
EVILS PRODUCED BY THE CRISIS
Lest what will be said below be misinterpreted, I wish to attest that I fully realize the enormous amount of evils that the bitter economic crisis has produced and is producing.
Only arid selfishness could make one insensitive to the physical and moral suffering of the millions of unemployed there are throughout the world. We cannot and must not forget the cold and hunger that torment so many of our fellow human beings and their moral suffering, sometimes more acute than the physical ones, in seeing loved ones suffer without being able to do anything for them, and in living in a state of uncertainty and worry about tomorrow.
In the cultural field, too, the damage is severe and evident. The economic crisis forces many people to suspend fruitful studies and research; and prevents or limits many good scientific, artistic and educational initiatives.
I also fully recognize and appreciate the great benefits that increased material well-being have brought to mankind, such as the great decrease in infant mortality, infectious diseases, famine; the limitation of working hours and in general the participation of an ever-increasing part of mankind in a higher standard of living, in the benefits of education and culture. This has enlarged and enriched the lives of millions and millions of our fellow human beings who previously led an existence that was either excessively strenuous and dreary, like the workers of the last century, or torpid, isolated and almost vegetative, like much of the rural population.
The improved material means of communication and mental exchange have produced great and beneficial changes. Just think of what radio means to illiterate peasants in remote villages on the Russian and Siberian plains. Thus the present crisis, insofar as it prevents or slows down this elevation of the general standard of living, is to be considered contrary to the good of humanity.
All this is true, but after seeing it one must recognize that it is not the whole truth.
The economic crisis has various and conflicting aspects and effects, and taking into account only the most conspicuous ones of a negative character gives a distorted picture of the complex reality, and is harmful because it prevents one from seeing and using the best means to eliminate existing evils.
THE SHADOWS OF PROSPERITY
And conversely, economic prosperity and material well-being have their downsides as well. They present pitfalls, indeed real dangers, that must not be ignored, that indeed must be looked at squarely in the face in order to avoid harmful illusions and the consequent harsh disillusionments.
Those who believe that material well-being and the spread of a certain degree of general education alone are capable of truly fulfilling man, of making him better and happier, commit a gross psychological and spiritual error.
This error has been pointed out and combated by the sages of all times, but it stubbornly persists, indeed it has become more entrenched and widespread in our times, so much so that it constitutes the explicit or implied conviction of the leaders and the masses who embody the most typical and extreme form of contemporary civilization: that of North America.
It is, therefore, not superfluous to pause to point out the fundamental insufficiency and inadequacy of this ideal of pure well-being, which Keyserling, in his America Set Free,[vi] called with a strong but appropriate expression, the “Animal Ideal.”
The shadows that contrast with the lights in the panorama offered by material prosperity are numerous and dark. Economic prosperity very easily induces hedonism; that is, excessive appreciation of and attachment to material pleasures and goods; and instead of giving fulfillment and serenity, it sharpens desires, greed, and ambitions. Huge profits — especially if they are quick and obtained more by the grace of circumstances than by personal merit or effort — give rise to vanity, ostentation and squandering. To convince ourselves of this, we need only think of the laughable and disgusting spectacle offered by the “profiteers”[vii] of the immediate postwar period.
In periods of “high living standards,” those who benefit the least are often precisely those who belong to the more educated classes, and who represent the intellectual and spiritual elite; indeed sometimes they are harmed. This was the case in America during the “boom” that preceded the current crisis, according to good factual evidence presented by historian James Truslow Adams in a bitter article entitled “The Cost of Prosperity.”[viii] But there is an even more serious and significant fact: that during periods of general economic recovery far more wars occur than during periods of depression. [ix]
All this shows that property and every other increase of power in the material realm, while offering manifold possibilities for good, on the other hand present serious temptations and dangers both for individuals and for peoples, which can be avoided only by adequate ethical and spiritual preparation. But unfortunately, the vast majority of humanity lacks such preparation; they lack the inner maturity necessary to make fully constructive use of material goods.
THE BENEFITS OF THE CRISIS
Conversely, economic hardships bring important benefits to mankind, however reluctant we may be to admit it. Already from the point of view of activity and practical efficiency alone, it can be seen how economic need is able to shake men out of laziness, out of settling down in existing conditions, and to stimulate them to exercise all their inventive faculties, their ingenuity and skills of all kinds.
This engine of refinement has been and is intensively used with great success in the technical field by one of the most skillful practical men of our age — Henry Ford. Whenever the sales of his automobiles tend to decline because of the diminished purchasing capacity of the market, he does not try to increase them by increasing advertising, or by creating a new model or by other more or less contrived and forced means. Here is how he himself explains his way of proceeding:
Our policy is to reduce the price, extend the operations, and improve the article. You will notice that the reduction of price comes first. We have never considered any costs as fixed. Therefore we first reduce the price to a point where we believe more sales will result. Then we go ahead and try to meet the price . . . The more usual way is to take the costs and then determine the price, and although that method may be scientific in the narrow sense, it is not scientific in the broad sense, because what earthly use is it to know the cost if it tells you you cannot manufacture at a price at which the article can be sold? But more to the point is the fact that, although one may calculate what a cost is . . . no one knows what a cost ought to be. One of the ways of discovering what a cost ought to be is to name a price so low as to force everybody in the place to the highest point of efficiency . . . We make more discoveries concerning manufacturing and selling under this forced method than by any method of leisurely investigation. [x]
But material narrowness, “poverty,” gives other lessons that have greater human and spiritual value. It induces and often forces us to simplify life, to eliminate so many supposed necessities, so many complications and superstructures that we thought we could not do without. And then we discover to our delighted surprise that our real needs are far less than we had thought; that, for example, a simpler and more sober diet is beneficial for body and spirit. We learn to appreciate more and value what we already possess, and discover that it is far more than it seemed to us, when we disdained or forgot it in order to pursue ever new and greater possessions with unhealthy greed.
We learn to find a worthy and ample compensation for the particular goods that are denied us in those far more precious ones, which are everyone’s heritage and which we can all enjoy without taking anything away from one another. They are the marvelous natural beauties, the clear sunrises, the bright sunsets, the blossoming of a flower; they are the treasures of art accessible in museums, in galleries, in churches.
They are the pure joys of the inner life, the serene meditations, the fervent ascents to spiritual peaks, the passionate investigations of the fascinating mystery.
MONEY AND SPIRITUALITY
Given the moral and spiritual damage that is so easily produced by prosperity and the benefits that man gets from poverty, we will not be surprised that spiritual masters and religious souls of all times have regarded possession of money with suspicion and often condemned it, and that some have gone so far as to declare it a diabolical thing.
They have contrasted the thirst for money with the ideal of “poverty” — understood as inner detachment from worldly goods, but also, at least for their most direct and faithful followers, as effective renunciation of all personal and collective possessions. The highest example comes to us from the Franciscan movement, and the most poetic and evocative symbol of this is the happy “marriage” of St. Francis with Our Lady Poverty.
At this point many will think, “All these are beautiful things, but impractical and unworkable in modern life. Now one cannot do without having and using money, which forms the very foundation of our civilization.” There is undoubtedly some truth in this objection, and it is confirmed by the fact that even the Franciscan religious orders, in practice, have had to make many relaxations and exceptions to the strict primitive rule of absolute poverty.
How to resolve the antinomy between that ideal and the necessary practical needs? The solutions generally adopted are twofold. Some deny that spiritual need by declaring it a utopia of dreamers, the wishful thinking of moralists, a claim by fanatics. They demonstrate sincerity, but also little spiritual sensitivity and a superficial conception of life, which cannot satisfy us. Others, who are more agile and casual, believe they are solving the problem by celebrating a St. Francis ad usum delphini[xi] — idyllic and sentimental — and then going about their own business all too well. In some cases this may be conscious hypocrisy, but in my opinion it is mostly superficiality.
But the real solution can only be found by approaching the issue more deeply and psychologically. In reality it is essentially an inner problem. Money has no value for its own sake; it is but a symbol of a given ability to acquire concrete goods. What matters is our inner attitude about it; the feelings, passions and reactions it arouses. He who possesses a lot of money but is not attached to it, does not spend it to satisfy his own selfish pleasures but makes beneficial use of it, is truly a “poor man in spirit” and can rightly be called a Franciscan. An example of such a person could be an Edison, who worked eighteen or twenty hours a day, forgetting or suppressing his material needs with a steadfastness worthy of an ascetic of the past, who did not care about the profit from his inventions, who continued to use an antiquated and ridiculous automobile.[xii]
In contrast, he who lacks money but is beset by the desire to possess it and rebels against the privations to which he is subjected, and envies the rich, is certainly not a poor man in the Franciscan sense. He is united by force with Our Lady Poverty but does not love her, and seeks every opportunity to annul that marriage!
So it all depends on the inner attitude: money degrades or leaves us immune, diverts or offers opportunities for good, depending on the psychological relationship we establish with it. This relationship depends exclusively on us: it is the result of a choice in which our spiritual freedom, and at the same time our moral responsibility, is manifested.
Such an approach to the problem of money should always be kept in mind and widely disseminated. It should constitute one of the essential points of the education of young people, who would thus be helped to see clearly, and consciously take a position on an issue that vitally concerns every person, and which has immediate and important inner and practical implications.
ECONOMIC CYCLES
Let us now come to a more direct consideration of today’s economic crisis, seeking to highlight the moral and spiritual factors that helped produce it, and those that can help resolve it. Let us begin by recalling some facts. The statistics of price fluctuations which have occurred over the past 150 years show that there are economic cycles which occur with remarkable regularity. These cycles are of two kinds:
First – Agricultural economic cycles, which have a broad and slow rhythm, and are composed of a phase of falling prices and a phase of rising prices, each of which lasts about 25 to 30 years. We are now in a cycle of agricultural depression that began in 1920 and, unless action is taken to change it, is expected to last until about 1942.
Second – Industrial economic cycles, which have a much faster pace than agricultural ones, since they last from seven to ten years. The prosperous phase is characterized by a great capacity and willingness to buy, and a growing demand for industrial products. Such demand drives up prices. Rising prices increase the profits of industrialists and merchants, and this fact in turn has two effects: it induces industrialists to expand their plants, often excessively, to produce more and more, and it leads to an increase in the value of the stocks of industrial and commercial companies. This excites speculation, which causes exaggerated and unwarranted rises in stock prices on the stock market. As Thaon di Revel[xiii] says,
Savers lose sight of the essential value of the security, which should be its dividend; and instead try to increase their income through speculation, namely through the realization of a difference between the purchase value and the sale value of securities or even goods in general. [xiv]
These easy “profits” have deleterious moral, social and economic consequences. People delude themselves that this wave of “prosperity” must continue indefinitely; they become accustomed to a standard of living beyond their normal possibilities, cheerfully spending their speculative gains and sometimes even those they presume to make in the future. The urge to buy is also accentuated by the fact that the continuous rise in prices makes people consider it a good bargain to accumulate items and possessions they do not need, lest they have to pay more for them in the future.
All this increasingly stimulates the creation of new industrial establishments and new business enterprises that spring up everywhere like mushrooms, often by incompetents and profiteers. Such a multiplication of enterprises, however, necessarily diminishes the earnings of each of them. At the same time, whether due to exaggerated prices or saturated markets, the public begins to slow down its purchases just when producers have more and more of their products to be disposed of. So here we are on the eve of the crisis.
Decreased revenues lead to and cause corporate dividends to fall; this produces a pause in the rise of prices on the stock exchanges, and soon the shrewdest speculators, who smell a storm, are playing the downside game. They sell securities they do not own, that they [buy later] without paying for them.[xv]
Then the panic begins: everyone starts selling securities: hence a real collapse in their prices and the consequent breakdowns and bankruptcies of banks, industrial and commercial companies, and private individuals. The financial battlefield is strewn with casualties. The need for money induces producers to throw large quantities of goods on the market at progressively lower prices, but the public either has no means to buy or, with the reverse psychological attitude of the previous period, waits in the hope of ever greater declines. Thus unsold goods accumulate, factories reduce and suspend production by firing or laying off workers, resulting in unemployment, misery and increasingly stagnant trade: in short, full economic crisis.
But evil brings its own corrective and remedy.
After some time of general economies, the public begins to accumulate savings, which are put into savings banks or invested in safe, fixed-income securities, such as government bonds and land bonds or other well-guaranteed ones. But as a result of [economic] demand these come to yield less and less. Meanwhile, appropriate “selection” takes place in the industrial field: improvised enterprises and unhealthy organizations are liquidated; those that weather the storm lower their production costs. In the market, accumulated stocks are depleted, so that a new demand for products begins.
These positive elements, the accumulation of capital for investment and the gradual forgetting of the defeats that were suffered, induce banks and the public to re-engage in industrial investment: banks become more generous in their loans and credit lines, and the public begins to buy stocks again. This causes both commodity and stock market prices to rise gradually. If only the economic mechanism of supply and demand were at play, a certain balance would probably be achieved with the benefit of fair prosperity for all. But unfortunately, disruptive psychological elements come into play, and passions are unleashed that produce new imbalances.
The trend of rising prices induces people to buy more than they need, both raw materials and commodities, out of fear or hope of greater price increases. Rising stock prices cause upward speculation to be unleashed by stock market players, followed sheepishly by the public. And here, again, is a fictitious prosperity, cheerful finance and dangerous illusions, harbingers of the new crisis.
And the game begins again!
THE MONETARY DISRUPTIONS
Third – Then there are the economic crises due to monetary causes.
These depend on the unstable relationship that a currency, such as the lira, franc or pound, can have with gold and other foreign currencies: in other words, it is the exchange rate game.[xvi] Here we have the opposite phenomena of inflation (or increase in circulation and decrease in value of the currency) and deflation, which is the opposite phenomenon.
I will not go into the various technical causes and modalities of these facts, about which economists have discussed much; I do not have the competence and it is not part of my undertaking, but I would like to point out that a very important psychological factor also intervenes here — that of confidence, which is the basis of credit, on which in turn is based the greater part of economic relations between individuals, between banking institutions and between nations.
A concrete example will be able to give a clear idea of the extent of this factor.
Until recently, confidence in the soundness of the pound, and generally of the British banking system alone earned England hundreds of millions a year. The way was simple. Because of the confidence it enjoyed, England could borrow very large sums, running into the billions, from rich nations, such as France and America, at low interest. It then gave the same sums to poor nations that inspired less confidence, with longer term loans, and received very high interest in return. The difference constituted the net gain to the British.
It was so convenient and pleasant that the British allowed themselves to be induced to abuse it, to be imprudent. Here was another dangerous element: greed, which resulted in delusion and recklessness in continuing to extend credit to nations that were no longer able to meet their commitments. This was one of the most important causes of the recent collapse of the pound.
While confidence can make hundreds of millions, its opposite, that is, fear, panic, can produce equal and greater losses. When a nation’s currency declines due to objective economic-financial causes, such as trade imbalance, increased circulation, etc., many begin to fear further declines and resulting losses. Then the capitalists rush to dispose of the national currency they own and buy foreign currencies, take their capital abroad, and buy real estate or goods, regardless of price. This naturally makes the currency depreciate even more; alarm grows and it becomes a very dangerous panic.
Something similar was happening in Italy when the Head of the Government with his Pesaro speech halted the descent of our currency, restored confidence and made possible the final stabilization of the lira.[xvii]
THE “STRUCTURAL” CRISIS
We took a quick look at the three main causes of economic crises: agricultural business cycles, industrial business cycles, and monetary disturbances. We have discussed them separately out of necessity for study, but in reality they do not remain isolated, but rather act and react to each other, increasing or decreasing their effects on each other in varied and complex ways.
It is not possible for us to go into the study of these reactions and interactions, about which, moreover, not even economists and technicians agree. But from a summary examination of the situation and the most authoritative economic studies we can draw some general conclusions.
First, it can be said that in the present economic crisis all three of the above-mentioned causes are at play: we are in a phase of declining agricultural products, we are in a phase of industrial depression, and the instability or collapse of the currencies of various nations have contributed and will continue to contribute to increasing upheaval and difficulties.
On the other hand, it would be a mistake to assume that those causes, however important, are the only ones. As has been convincingly demonstrated especially by Prof. Gino Arias,[xviii] the current economic crisis has deeper roots. It is an organic, or “structural” crisis; that is, a crisis of today’s entire economic order, which proves to be insufficient and inadequate to the new conditions that have arisen in the life of the world.
It is the crisis of “liberal” economics, which is based essentially on the assumption that economic life can unfold normally and satisfactorily [solely] on the basis of the interplay of supply and demand, the automatic balancing of the various economic and financial factors through trade, and the free unfolding of particular initiatives.
It can be said that even before the [First World] war and the present crisis, that economic order had not proven itself well. The mere fact of the continual repetition of the cycles of agricultural and industrial depression, with all their individual and collective damage, which may well be compared to diseases of the economic organism, shows that its state of health was far from satisfactory. A healthy and normal organism is not subject to a continuous series of recurrent fevers.
But in any case, it is certain that the profound and various changes that have taken place in the technical field and in the social, moral and spiritual conditions of the world since the Great War have created a new situation requiring a radically different socio-economic structure. From the discussions that have taken place among economists around the world on the causes and remedies of the current crisis, despite partial differences of opinion, the following cornerstones seem to me to be clear.
THE CAUSES OF THE CRISIS
One of the main, if not perhaps the most important, causes of today’s crisis, as Prof. Jannaccone[xix] has shown, is the excessive decrease in savings; that is, the share [of society’s capital that is]not consumed immediately, but reinvested and thus made available for future production.
This abandonment of healthy saving has essentially psychological and moral causes. The same psychological elements that we have seen lead up to and determine depressions and slumps in industrial business cycles also act in the present crisis, but in a more general, continuous and indeed ever-increasing way.
Hedonism, the thirst for enjoyment, for possession, the excessive and exclusive ideal of a higher standard of material living, a superficial and blind optimism — all these induce men to squander and to be unpredictable. If we want to go even deeper, to do a psychoanalysis of this tendency, we find that it is accentuated and exacerbated by the imbalance and severe discomfort that plagues modern men and women. Being generally deprived of an inner life that occupies, interests and satisfies them, and being unable to enjoy “spiritual goods,” they necessarily tend to escape the inner emptiness and restlessness that besets them by seeking pleasure and fulfillment in “amusements,” or in the sterile competitions of luxury.[xx]
This proclivity is artificially stimulated and accentuated by the powerful work of collective suggestion exerted by large-scale advertising, and by all the enticements and pressures exerted on the public by the methods of “aggressive salesmanship” and installment sales. In America it has gone so far that many American couples mortgage their income of several years by getting married and setting up house with all the equipment offered by the most modern technology. An American joke characterizes this attitude well: After the onset of the crisis one couple is asked, “So, have you started saving?” “Well, not precisely,” they answer hesitantly, “but we have stopped spending the money we don’t have!”
This brings us to the other major cause of the crisis, and that is excessive industrial production that is not adjusted to the possibilities of consumption. Here is how the Head of the Government lucidly expounded this fact in his speech On the Economic Policy of the Regime, delivered to the Senate on December 18, 1930:[xxi]
At last we are at the primary reason; that is, the imbalance that has been determined between production and consumption . . . The watchword of the Americans was this: “Mass production, mass consumption . . .” This formula was wrong; they themselves recognize this. Wrong, because production is done by machines, consumption is done by men. The formula was logical, from a purely mechanical point of view, but it only took a small hiccup to make it fall apart.
American ownership was tied to the expectation that production and consumption would march steadily forward. Was consumption showing signs of fatigue? Here were the drivers, as happens at the racetracks, arousing the consumption horse.
In what way? With high wages; but then, as high wages were not enough, with installment sales, with production rationalized to extremes, and finally with fantastic advertising that created elements of morbid inflation in the spirit; at some point consumption showed signs of fatigue, and the crisis broke out in full force.
This leads one to reflect and think whether we should not perhaps consider the case that was already envisaged at another time by masters of political economy; that is, whether the present mode of production has not unleashed forces that it is no longer able to control — that is, whether the economy, after having been regulated in the workshops, should not be equally regulated within nations and by the interaction between nations.[xxii]
Other subsidiary causes of the world economic crisis are:
- The ever-increasing customs barriers. As the Head of the Government wittily said in the speech quoted above, “Seen a little from above, the whole world looks like a gigantic Middle Ages, at least from the customs point of view.” [xxiii]
- Growing arms expenditures.
- The general political insecurity and chaotic disorder in which various countries, especially of the East, find themselves.
- The unequal distribution of gold, which is excessively accumulated in the United States of America and France, while it is deficient in many countries.[xxiv]
- The question of debts and war reparations, the “tragic accounting” which is the source of bitter quarrels and harmful uncertainties, a dead weight that blocks every step that is attempted on the road to reconstruction. [xxv]
THE SPIRITUAL REMEDIES
Are there remedies to these causes? Is there a salvation from the crisis ? Yes, remedies exist and are workable: it depends on the foresight and will of men to implement them. Fatalism, in these things as in every other field, is erroneous and pernicious. Such remedies are of two orders: spiritual and organizational.
The former consist in a new ethical-spiritual orientation and a new and more just set of values, putting material goods in their true place, and in revaluing spiritual ones in the sense already mentioned in speaking of money. Let us remember and follow Emerson’s admonition:
The true thrift is always to spend on the higher plane; to invest and invest, with keener avarice, that he may spend in spiritual creation, and not in augmenting animal existence. Nor is the man enriched, in repeating the old experiments of animal sensation; nor unless through new powers and ascending pleasures he knows himself by the actual experience of higher good to be already on the way to the highest. [xxvi]
Therefore, a vast work of spiritual enlightenment, a call to a simpler, more harmonious and elevated life, character formation and education of the will must be carried out. This is not a matter of utopia. The fact that there have already been eras in which spirituality has flourished admirably, and when it has pervaded and shaped civil, cultural and artistic life tells us this. To remain in our own area, it is enough to recall the century of St. Francis, Dante and Giotto.[xxvii] Now the very gravity of the crisis makes such a work easier, which, after all, has already been initiated in various ways and in various places. And in Italy there are particular opportunities to carry it out. On the other hand, it must be recognized that it is a work that can be implemented only gradually and that requires adequate time — however, in our age of speed it may be much faster than perhaps we think.
THE NEW ECONOMIC ORGANIZATION
Therefore, meanwhile, more immediate means of a practical nature and worldwide application are needed at the same time. What is needed is the above-mentioned radical change in the economic order, in the sense of moving from the failed liberalist[xxviii] one to one in which economic phenomena are firmly “rationalized” and organized.
One of the first tasks of this new economic organization is to foster savings and secure them from the risks of speculation and destructive “cyclical fevers.” On the other hand, it is necessary for healthy and productive industrial enterprises to have at their disposal the capital they need for their activity and proper development. These two needs may seem to be conflicting, and have generally been regarded as such until now, but with new and better methods and political-economic measures they can both be satisfied to the benefit of all.
One such measure is precisely the recent founding of the Securities Credit Institute.[xxix] It is organized in such a way as to make the largest support of savings by the issuance of bonds with secure and actually guaranteed interest, so as to be equivalent to land bonds. On the other hand, the formation of its Board of Directors on which the State has wide representation is such as to remove it from the hegemony of special interest groups and enable it to finance industrial and agricultural enterprises, taking into account the real needs and general interest of the national economy.
But the foundation of such an institute presupposes the existence of a special economic-political order, namely the corporate state.[xxx] This leads us to consider the first major task of the new economic organization: that to be implemented within each state, and of which Italy was the first to set an example in an ingenious and daring way.
Corporate organization replaces the struggle between capital and labor (a struggle in which the divergence of interests was exacerbated and complicated by political passions and demagogic ambitions) with a fair balancing of the opposing sides, to the advantage of both parties and the community.
Similarly, corporate organization replaces the struggle between the opposing industrial and agrarian groups with fair and expedient measures determined by a broader and more general vision, and inspired by the good of the whole nation.
Corporate organization also makes it possible — as we have seen — to safeguard the security of savings, and at the same time to satisfy industries’ need for capital. The advantages, indeed the necessity of the reorganization of the national economy was also recognized and felt outside of Italy and gave rise to various attempts. In Germany, a kind of “regulated economy” was created: a state capitalism in which, however, its intervention tends too much to replace private initiative instead of merely regulating and coordinating it. Moreover, there they have not been able or willing to avoid the excesses of production.
In Russia, as is well known, a grand experiment is being made in the state organization of production. The leaders of Russia are imposing real hard labor on the people, spurring them by all means into a frantic race to make them accomplish the journey of many decades in a few years, to bring the nation, which was so backward, up to the industrial and commercial level of the others; indeed trying to place it in the vanguard. The results did not in all respects match the hopes of the creators of the “five-year plan,” but it cannot be denied that they were quite remarkable, and in some respects surprising. But of course they were achieved under exceptional material and psychological conditions and by violent means that involved and involve enormous hardship and suffering, and it is not even to be expected that they can be adopted elsewhere.
This tendency to “autarky”— that is, to create autonomous and relatively “closed” national economies[xxxi] — has been much criticized by various economists, who accuse it of bringing about or fostering some of the conditions that would produce or cause the crisis to persist, such as the “Middle Ages” of increasing economic barriers, obstacles to the international distribution of workers, the unequal distribution of gold, and the creation of industries on an artificial basis; that is, lacking adequate technical conditions and natural markets.
I think it should be acknowledged that there is some truth in these criticisms and that they should be taken into account; but, on the other hand, “autarky” has advantages that should be rightly appreciated. As Prof. Arias observes, national “autarky” [achieved] by stimulating domestic production, even under unfavorable conditions, brings to bear previously latent wealth and energies, mitigates the dualism between agrarian and industrial countries, and causes the lasting investment of savings in works of slow [or long-term] productivity. It thus represents a deterrent to the absorption of capital by expansionist states, and to their speculative excesses.
Considering the issue from a general and synthetic point of view, it can be said that a phase of relative national autarky seems necessary. First of all, one cannot jump from the individual to the whole of humanity without taking into account and giving due value to intermediate groupings. Moreover, it is appropriate that various principles and technical procedures of the new economic organization be assayed and perfected in the more defined and less complex field of a nation, before being used on a world scale. On the other hand, it must be equally clearly recognized that autarky cannot be an end in itself, and that a hardening of nationalistic economies would cause serious inconvenience and dangerous conflicts, which from economic could easily become political and military ones.
ECONOMIC SOLIDARITY
But we believe that the excesses of autarky, where they exist, constitute a transitory phenomenon, which will be corrected by the growing worldwide interaction and the interdependence of economic activity. These will increasingly make people recognize the convenience, indeed the real need for international cooperation and solidarity. International economic linkages existed to some extent in past centuries as well: for example, when the Peruzzi, Florentine bankers, lent millions to the Kings of England and the latter . . . never repaid them! [xxxii] And about 80 years ago Emerson could write:
If The Rothschilds at Paris not not accept bills, the people at Manchester, at Paisley, at Birmingham are forced into the highway, and landlords are shot down in Ireland. The police records attest it. The vibrations are presently felt in New York, New Orleans, and Chicago. [xxxiii]
Now these connections and repercussions have increased tremendously due to various causes:
- The rapidity of communications and exchanges that have brought peoples closer together, to the point of almost abolishing distances. And this fact, given the development of commercial aviation, is being accentuated most rapidly.
- The great increase in the quantity of exchanges, their great intensification.
- The great complication and variability of production due to the rapid advancement of technology, the continuous new inventions and thus the frequent launching of new products on world markets.
But the fact that is of fundamental and decisive importance for the creation of the new world economic organization is that the closer and more complex the economic links between peoples become, the more they tend to lose the character of competition and acquire that of solidarity. An economic and financial crisis of a given population may at first provide some benefit to others; but essentially it essentially results in harm to all. This has been observed recently in many cases.
If the currency of one nation loses its value, the other peoples have little to rejoice about: they may derive some partial profit from it, but the most important effect is that the industry of that nation may export at lower prices, thus harming the industry and trade of the others. Likewise, the general impoverishment of one people has the effect of diminishing their purchasing power, and thus taking away from other peoples a market for their products. This worries the predominantly exporting countries so much that they have repeatedly been induced to provide long-term credits with quite favorable interest to poor peoples in order to put them in a position to buy the goods they could not [otherwise] pay for.
Even more so, then, the financial collapse of an entire nation, which violently tears the complex fabric of economic and financial relations it has with all the others, brings about a serious general disorganization to the detriment of all. This could be observed recently in many cases. But this is not all. In addition to these objective and material reasons that create close solidarity among peoples, there are other very important ones of a psychological nature. It is well known that the collapse of a bank harms competing banks far more than it may favor them, because the public panics and goes to withdraw deposits from all the banks. And in fact when a major bank is in danger, the others generally step in to try to save it.
This applies equally, or more, to nations. Who can say what shock and panic would spread around the world in the face of such a large and so staggering collapse? Certainly this consideration too, combined with objective ones, led America and the great European nations to act in intelligent self-interest to ward off the danger of bankruptcy into which Germany was about to plunge a few months ago. [xxxiv] The principle of close world solidarity of interests is now recognized and has recently been solemnly and authoritatively reaffirmed.
The official communiqué on the talks that took place last November in Washington between S.E. Grandi[xxxv] and President Hoover contains the following significant words:
Realizing that restoration of economic stability and confidence within our respective national boundaries can only find ultimate achievement through the further establishment of international financial stability and through a confidence that can extend itself to include all nations, we have attempted to continue the efforts already initiated towards this end by a candid discussion of the many significant and related international problems, the solution of which have become a recognized necessity. [xxxvi]
And upon his return to Italy, Secretary Grandi in his December 10 address to the Senate, repeated,
Never perhaps as at this time has it appeared that the interests of nations are closely interrelated, that the misfortune of one will never be the fortune of the other, that in the welfare of all lies the welfare of each.
And the report of the Special Advisory Committee on the Young Plan:
The problem is now worldwide in character . . . economic interdependence among the various countries of the world no longer needs to be demonstrated today.
Finally, we recall the strong and incisive statements with which the “Address to America,” published in the January 14 issue of The People of Italy, ends:
The economy of the world stands in solidarity; he who wounds it anywhere on the globe wounds himself. Customs reprisals call forth counter-reprisals; a collapsing currency puts all currencies, from the nearest to the farthest away, in immediate danger of ruin; the world needs the United States, but the United States needs Europe and the world as never before. The great bell of reality is ringing like a hammer between the two sides of the Atlantic.[xxxvii]
So far this solidarity has been implemented only in very small part and is by no means sufficient to the pressing needs of the hour. Doctrinal preconceptions, short-sighted selfishness and special interests, tendencies toward dominance, suspicious and exaggerated nationalisms, reluctance to make concessions and partial sacrifices, constitute strong obstacles to the establishment of the new world order. Therefore, it can truly be said that Western civilization is at a decisive crossroads and its fate hangs in the balance.
We, however, have full confidence that it will be saved. The same danger, the same gravity of the hour, will overcome so many resistances that would have been unshakable, will stimulate minds to find the necessary solutions and methods, and will spur [peoples’] wills to implement them with the required energy. Thus, for the first time in the world mankind, which was an amorphous mass confused and torn apart by internal conflicts, by the bitter struggle of conflicting interests, will be able to become a well-constructed and well-functioning global organism, in which all the various parts will cooperate for the general welfare.
And it will be Italy’s everlasting pride, thanks to the example it has set by its corporate system, and its precise program for reparations, debts and disarmament, that it was the first to set out on this path, pointing it out to other peoples.
This is of great and profound significance. It is the luminous vindication of the spiritual principle that proclaims the unity of life, the vindication of the ideal aspirations to the solidarity and brotherhood of peoples, forming free nations, organized into firmly constituted states, of which the noblest proponent and prophet was again an Italian: Giuseppe Mazzini.[xxxviii] That principle and those aspirations were derided by “positive” and practical men as unrealizable dreams. Now the very practical men are obliged by the necessity of things to implement them in the social and economic field! What a spiritual lesson for humanity! And what encouragement for the further tasks before us! [xxxix] For those people who have a broad and integral conception of life, economic reconstruction is not an end in itself, but constitutes the basis for a new human and spiritual flowering. Who can say what new ideal achievements, what new glories will be achieved by a humanity that is no longer torn by constant strife, but which has learned the fundamental lesson of solidarity and world cooperation? Just to present it gives tremors of joy, and powerfully incites to make it a radiant reality.
[i] Antieuropa [Anti-Europe]was a monthly magazine published in Rome, edited by Fascist intellectual Asvero Gravelli, that supported the exportation of global fascism, as it was understood by many people at that time as a middle way between liberalism (particularly British free-market economic theory) and communism. The Great Depression was taken by many as supporting evidence for this position. Modern readers should bear in mind that Roberto Assagioli wrote for this magazine at a time when the Fascist government of Italy held control of virtually all cultural life in Italy, and that his work to promote his own ideas needed to find a way to be allowed by the political powers of the time. He never endorses fascism, but quotes Mussolini, without naming him, only so far as his own lessons are supported. Assagioli never endorsed political parties or positions, yet it is evident by what he writes here that he believed that a breakthrough in relations between nations was possible when he wrote this. —Ed.
[ii] Interpolations by this editor are indicated by [brackets]. —Ed.
[iii] First proposed in 1836 in an essay by English philosopher John Stuart Mill. —Ed.
[iv] The head of the Italian government in 1932 was Benito Mussolini, who had effectively declared himself dictator in 1925. —Ed.
[v] In this speech, Mussolini asserted that European reconstruction after the First World War required an adjustment of the peace treaties, the terms of which, “driven by revenge, resentment or fear,” had “pushed entire peoples to the brink of material disaster and moral desperation.” —Ed.
[vi] Hermann Keyserling, America Set Free, London, Jonathan Cape, 1930. —Ed.
[vii] Assagioli used the word meaning “sharks” here, but in English “profiteers” is a more familiar term meaning those who profit from war or from the misfortune of others. —Tr.
[viii] Published in the December 1928 issue of Harper’s Magazine. —Author’s Note. Adams (1878-1949) wrote about American history and coined the phrase “the American Dream.” —Ed.
[ix] The historical and economic data from which this finding was drawn can be found in Paolo Thaon di Revel’s excellent article, “The Agricultural and Industrial Business Cycles,” in Gerarchia, October 1931.—Author’s Note
[x] La mia vita e la mia opera, [ My Life and Work] p. 175. —Author’s Note. The text here is taken from the English original. Ford’s autobiography, published in 1922, by Doubleday, is perhaps less an autobiography than an exposition of a unique philosophy and lessons in business and economics. —Ed.
[xi] Latin, literally “for the use by the Dauphin,” and meaning “expurgated” or “censored for the use by young audiences.” Assagioli refers to people of “casual” spirituality who ignore what they find objectionable in a teaching.” —Ed.
[xii] Edison’s many inventions and companies brought him great sums of money, most of which he gave away or reinvested in his next projects. He was moderately wealthy at his death, but most of the net profits of his 1000 patented inventions were reaped by others. —Ed.
[xiii] Thaon di Revel (1859-1948) was an Italian admiral and later a politician, and President of the Italian Senate in 1943-44 after the fall of the fascist regime. —Ed.
[xiv] What is suggested is that a conservative investor will expect to gain by the “fundamental” value of a security, based upon the strength of the enterprise in the marketplace; whereas speculators are more like gamblers who try to profit from market price fluctuations regardless of whether the investment is actually sound or not. —Ed.
[xv] This is a rather confused description of what is called “short-selling,” that I have corrected somewhat. It works this way: a person will commit to sell a security at a future date at a fixed price without previously having bought it. The seller intends to buy the security later, before the date he has committed to sell. If the market price is falling, he can buy the security at a lower price than he has committed to sell it, thus making a profit when he actually sells it. If short-selling becomes widespread, it can drive an entire market down because dealers and speculators get a vested interest in falling prices. If “short-sellers” cannot buy the security at a good price by the time they have committed to sell, they can lose a great deal, and may cause catastrophic losses. [Note: this editor worked briefly as a securities dealer in his youth.] —Ed.
[xvi] Note: The British pound, American dollar, Italian lira, and French franc were formerly on a “gold standard,” meaning they were convertible into gold, until 1931, 1933, 1934, and 1936, respectively. However exchange rates continued to fluctuate, as they still do today. —Ed.
[xvii] On December 21, 1927, Italy made a substantial revaluation of its currency, the lira, by “pegging” it to the British pound and the American dollar at a fixed rate of exchange. The Italian currency had been declining in value since Mussolini took power in 1922. —Ed.
[xviii] Gino Arias (1879-1940) was a Florentine economist and historian, was a prominent economic theorist of the fascist regime, who in his Course in Corporate Political Economy and other books developed the ideas of “corporate economics” that defined modern fascism, and who ironically was exiled from Italy later because of his Jewish origins. —Ed.
[xix] Pasquale Jannaccone (1872-1959) was an Italian economist and politician. He taught political economy and economic policy at three Italian universities and co-founded the Italian Society of Economists. —Ed.
[xx] Perhaps Assagioli uses this term, “the sterile competitions of luxury,” to refer to gambling of one kind or another. —Ed.
[xxi] The New York Times reported the next day that Mussolini had blamed his country’s ills on the depression in America. It reported that Mussolini had said that the Italian economic situation was satisfactory until “the American market crash exploded with the suddenness of a bomb.” —Ed.
[xxii] A fundamental tenet of fascist doctrine was government intervention in economic activity, and by 1939 more enterprises were controlled by the government in Italy than in any country except the Soviet Union. Interestingly, since that time some degree of government intervention in economies has become the global norm rather than the exception.—Ed.
[xxiii] Many nations enacted high tariffs on international trade with the intention of protecting domestic industries. —Ed.
[xxiv] The “gold standard,” according to which each national currency was convertible to a fixed amount of gold, was the basis for the international monetary system for industrialized countries until 1971, although with several interruptions such as during the Great Depression. After world War I many European economies were shattered, whereas the United States economy boomed. The U.S. was the largest economy in the world with the largest gold reserves by 1929. —Ed.
[xxv] After the end of World War I, the victors assigned all blame for the war on Germany and demanded reparations payments that amounted to the modern equivalent of $500 billion. Germany, which by 1913 was the largest economy in Europe, had lost 15% of its working population during the war. The allies attempted to write off the debt in 1931 but the U.S. Congress refused to agree and the German economy suffered. Hitler canceled the debt in 1933, but it was reimposed after World War II. The German war debt was not actually paid off until 2010. —Ed.
[xxvi] taken from the original essay by Emerson, “Wealth,” p. 558 in Complete Writings of Ralph Waldo Emerson, New York, W.H. Wise & Co, 1929. —Ed.
[xxvii] The 13th-14th century; Francis died in 1226, Dante in 1321, and the painter Giotto in 1337.
[xxviii] The term “liberal” was at the time often used to denote unregulated “free market” capitalism. —Ed.
[xxix] Istituto di Credito Mobiliare was established in 1931 and played an important role in supporting the Italian economy in the years after the economic crash of 1929. It collected private savings and used them to finance industrial activity. —Ed.
[xxx] Corporate statism is a political culture which asserts that “corporate groups” should be the basis of society and the state. This philosophy was implemented in Austria and Italy before World war II and in Portugal, Austria, South Korea and Japan since that time. The common version involves the ruling government party acting as mediator between workers, capitalists, and other private interests by incorporating them into government. —Ed.
[xxxi] The supposed aim of such policies is economic independence or self-sufficiency. —Ed.
[xxxii] The Peruzzi family were bankers of Florence, among the leading families of the city before the rise to prominence of the Medici. In the 14th century during the hundred years’ war between England and France, they, along with their partners, the Bardi family, lent King Edward III of England a total of 1,500,000 gold florins, which he failed to repay, contributing to the collapse and bankruptcy of both families’ banks.—Ed.
[xxxiii] Text from the original English in Emerson, op. cit. p. 551. —Tr,
[xxxiv] Germany’s war debt had been reduced in 1928, but the Great Depression ensured that the new plan failed, and the German economy began disintegrating again. In 1931 American President Herbert Hoover put a year-long moratorium on German reparation payments. —Ed.
[xxxv] Dino Grandi (1895-1988) was Italian Secretary of Foreign Affairs [S.E. – Segretario agli Affari Esteri] when this article was written. —Ed.
[xxxvi] English language published version from “Papers Relating to the Foreign Relations of the United States, 1931, Volume II” at https://history.state.gov/historicaldocuments/frus1931v02/d672
[xxxvii] Popolo d’Italia [The People of Italy] was an Italian daily newspaper founded by Benito Mussolini in 1914. While he held political power Mussolini often wrote anonymously for the paper, and this quotation may have originated with him. —Ed.
[xxxviii] Giuseppe Mazzini (1805-1872) was an Italian journalist, politician and activist who spearheaded the movement for Italian unification. He helped define the modern European movement for popular democracy. —Ed.
[xxxix] Following this great hope, which got full support in Italy and in much of Europe, in 1932 Allied delegates attempted to write off all of the rest of Germany’s reparations, to stabilize the world economy, but the U.S. Congress refused to consent. In 1932 over 10% of Germans were unemployed and many sank into poverty. The next year Hitler was elected in Germany and the world then hurtled toward war. This very phenomenon, of peace and progress being blocked by parties who cannot see or understand what has been presented in this essay, has been repeated many time since then, but Assagioli’s final statement in the following paragraph still rings strong and true. He was much encouraged by the formation of the United Nations after the Second World War, hoping that this organization would work to realize the aspirations expressed in this essay. —Ed.
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