Inventing the American Economy Timothy Shenk Submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in the Graduate School of Arts and Sciences COLUMBIA UNIVERSITY 2016 © 2016 Timothy Shenk All rights reserved ABSTRACT Inventing the American Economy Timothy Shenk The economy is perhaps the central topic of political debate in the world today. Yet familiarity has obscured the concept’s novelty. Far from being a natural feature of social life, the economy has a history—in crucial respects, a surprisingly recent one. Inventing the American Economy considers the place of the United States in this history, exploring the intellectual, economic, and political shifts that allowed the economy to become an object of governance and a way of understanding the divisions of collective life. Offering a coherent narrative of a history that has been addressed in more scattershot form elsewhere, centering it on the experience of the United States, and pushing the chronology into the second half of the twentieth century, this dissertation analyzes the recasting of politics brought about in the twentieth century by the rise of the social sciences, above all economics. Weaving together studies of the economists who made this transformation thinkable, the institutions that supported their work, and the novel styles of governance that became possible as a result, Inventing the American Economy examines the process by which an academic conceit became a cultural fact. Table of Contents Acknowledgements ii Dedication v Introduction 1 Chapter 1: Economics Before the Economy 35 Chapter 2: Charting the Economic Seas 83 Chapter 3: The Politics of the Economy 154 Chapter 4: The Birth of Fiscal Policy 237 Chapter 5: The Enemy Within 312 Conclusion 396 Bibliography 425 i Acknowledgements All dissertations, I suspect, are products of gift economies. This one certainly is. Funding from Columbia University, the Jacob K. Javits Fellowship Program, and a Mellon/ACLS Dissertation Completion Fellowship gave me the time and resources to complete this work. Eric Foner has shown me what it means to be a historian since my freshman year at Columbia. More years have passed since that date than I care to recall, but he has remained a peerless teacher throughout, and an exemplary supervisor for this dissertation. Luckily for me, he was supported by an outstanding dissertation committee. Betsy Blackmar’s rigorous standards pushed me to be a better historian, and her stray suggestion that I take a look at Wesley Mitchell sent me down a path I’m still following today. Sam Moyn’s incisive comments and capacious thinking encouraged me to formulate an argument that was both ambitious and precise. Adam Tooze provided a template for this work with his first book, and a model for serious intellectual engagement that I have benefitted from incalculably since I stumbled into his classroom in the spring of 2008. Two years later, I encountered a surprising argument about the late emergence of the idea of the economy in an article by Timothy Mitchell. Once I started thinking about the subject, it was hard to think about anything else. Tim’s arrival at Columbia was the best piece of luck I had in graduate school—except, perhaps, for the support he has shown this dissertation from our earliest conversation. And that is just the beginning. At Columbia, Alan Brinkley, Meg Jacobs, Karl Jacoby, Matthew Jones, Ira Katznelson, Mark Mazower Malgorzota Mazurek, Mae Ngai, Susan Pedersen, Anders Stephanson, Carl Wennerlind all took time out of the busy ii schedules that are part of a faculty member’s life at a major research university to help me work through different aspects of this project. Outside Columbia, so did Roger Backhouse, Howard Brick, Jennifer Burns, Bruce Caldwell, Crauford Goodwin, Manu Goswami, David Grewal, Chris Jones, Jon Levy, Jim Livingston, Julia Ott, Sherene Seikaly, Guy Ortolano, Steven Pincus, Quinn Slobodian, Jedediah Purdy, and Tom Stapleford. I am especially grateful to Angus Burgin and Daniel Immerwahr, who I could have told you in 2006 were destined for big things. My fellow grad students at Columbia were some of my most careful readers, and, failing that, were at least willing to talk shop over a beer. For all that and more, I owe special thanks to Andre Deckrow, Suzanne Kahn, John Kuhn, Jessica Lee, Tom Meaney, Nick Mulder, Ollie Murphey, Keith Orejel, Allison Powers, Casey Primel, Nick Serpe, Asheesh Siddique, Simon Stevens, Simon Taylor, and Stephen Wertheim. Alexander Arnold, Tim Barker, Rudi Batzell, Susanna Berger, Eli Cook, William Derringer, Stefan Eich, Benjamin Feldman, Ted Fertik, Katrina Forrester, Daniel Hirschman, Jeremy Kessler, Dan Luban, Mira Siegelberg, Charles Pedersen, Gabe Winant, and honorary grad students Jim Newell and Brendan Ballou allowed me to extend this intellectual community beyond Morningside Heights. Sarah Leonard and David Marcus let me test drive some of my arguments in Dissent. John Palatella did the same in the Nation, a privilege that, along with his brilliant editing, transformed this project. So have thousands of e-mails (literally) and countless conversations with Jamie Martin—my closest intellectual companion, and an even better friend. Academic conferences provided me with an opportunity to present portions of this dissertation in a more formal setting. Thanks to organizers at New York University; the iii University of California, Santa Barbara; the History of Economic Society; the Center for the History of Political Economy Workshop at Duke University; Princeton’s seminar on Readings in Capitalism and History; the Society for U.S. Intellectual History Conference; the Social Rights After the Welfare State Workshop; the Modes of Economic Governance Research Group at the Wissenschaftszentrum Berlin für Sozialforschung and the Dahlem Humanities Center of Freie Universität Berlin; Yale’s Workshop on the Invention of the Economy; the Intellectual and Cultural History Workshop at Columbia; and the Graduate Workshop at the Harvard Center for History and Economics. Students in my Origins of the Economy seminar deserve particular thanks for subjecting themselves to my earliest attempt to think through this argument. My students had a choice in the matter; my family did not, which means I owe them even more. To Doraikannu and Leelavathi Regunathan; Sandip, Monica, Kiran, and Kayla Agarwala; Carolyn and Emma Shenk—I promise I’ll come up with something better to talk about now. My parents, Meg Hawco and George Shenk, Jr, knew from early on that graduate school was in my future, and they encouraged me to follow that strange ambition. As for my wife, Renu Regunathan-Shenk, dedicating this to her doesn’t begin to cover my debts. But it’s a start. iv Dedication For Renu, for everything. v Introduction In the autumn of 2008, Alexis Feliciano, a nine-year-old girl from Brooklyn, decided to give President-elect Barack Obama some advice. “One thing you could fix,” she suggested, “is the economy.” Alexis wasn’t the only pre-teen with the economy on her mind.1 From New Jersey, eight-year-old Hanna wrote, “I watch the news with my parents at dinner and my parents make noises when the economy is mentioned.”2 Eleven- year-old Henri, a self-described “Obama fanatic,” leveled with his idol: “The economy, it is bad.”3 Almost a century earlier, not far from where Alexis Feliciano would some day grow up, one of America’s leading economists struggled to explain the meaning of a concept these children regarded as a natural part of their world. Wesley Mitchell is forgotten today, but in 1916 he was just entering the prime of a career that would see him become a counselor to presidents and inspiration to figures ranging from partisans of the market like Friedrich Hayek to socialist planners in the Soviet Union. A specialist in the nascent field of business cycle theory, Mitchell had done graduate work in Germany, where he encountered a term he now attempted to explain to undergraduates enrolled in his economics seminar at Columbia University. The troublesome word was Volkswirtschaft. Mitchell noted that “national economy” was the most direct translation, but he was not sure it captured the meaning. “Commonwealth,” he suggested, might be a better fit. Volkswirtschaft, Mitchell told his 1 Jory John, ed., Thanks and Have Fun Running the Country: Kids’ Letters to President Obama (San Francisco: McSweeney’s Books, 2009) 7. 2 Bill Adler and Bill Adler, Jr., eds., Kids’ Letters to President Obama (New York: Ballantine Books, 2009), 112. 3 John, ed., Thanks and Have Fun Running the Country, 78. 1 students, blended two different subjects: “economic activity” and the “social organization of human life.” National economy was not just a matter of buying and selling goods. It was about relationships among the “the fundamental features of social life”—about race, law, land, culture, psyche, and so much more. Whatever this strange thing called “national economy” was, its existence could not be taken for granted.4 Mitchell’s foray in translation gave him so much difficulty because Americans, like most people across the world, did not yet use the concept of “the economy” to make sense of their collective life. Though we often describe figures of this era, and much earlier, as preoccupied with the economy, the phrase did not enjoy anything like its current prominence until well into the twentieth century. Political leaders have long sought to encourage prosperity, but the identification of that broad ideal with a growing economy is a much more recent development. Large-scale surveys like the Google Ngram Viewer suggest what close readings of sources demonstrate. Americans of Mitchell’s generation relied on a variety of concepts to interpret the world, but the economy was not one of them.5 4 Wesley Clair Mitchell “Historical School, Value and Distribution, L.