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• V: Planning
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Regulation and the Warfare State

Jonathan R.T. Hughes

• Northwestern University

“Progressives and the Impact of World War I.” In The Governmental Habit: Economic Controls from Colonial Times to the Present. New York: Basic Books, 1977, pp. 133–145.

The growth of the planned economy is not a recent innovation in America. The roots of nonmarket controls of economic decisions stretch back in our remote past. We have, as it were, become addicted to the government. While those who have turned to the government have aided and abetted its growth, we cannot say that what exists constitutes a system intentionally created by willful men. On the contrary, it is a mishmash of different governmental responses to perceived group needs.

Professor Hughes chronicles the growth of federal intervention in the control of the economy from colonial times to the present. In this section he examines the effects of the twentieth century's wars on the growth of government's role in economic activity.

His thesis is that “the wars of our century made such expansions of federal power possible.” The “psychological influence of successful war efforts,” augmented the acceptability of increased centralization of power in the federal executive and accelerated trends already present. In the process, commitment to the free market diminished. Increasingly Americans turned in peacetime to the solution that had seemed to work so well in wartime: centralized governmental decision making and nonmarket controls to solve problems. By the time Nixon imposed price controls in 1971, “the leaders of the American economy could accept direct controls with barely a whimper.”

The socially disintegrating effects of modern war on American freedom parallel ancient warfare's undermining of the Roman Republic. The direct legacy of war is obvious. Less obvious is the increased acceptance of federal nonmarket controls. The Progressives' domestic interventions set the stage “psychologically and structurally” for the war interventions, which then multiplied post-war governmental controls.

“National emergency became the catch-all justification for extensions of federal power into the private economy.” The most famous war-time entry of government into the private economy was the World War I takeover of the railroads. The trickery and secrecy behind Wilson's maneuver and seizure presaged the Gulf of Tonkin Resolution. Moreover, apparently innocuous and “temporary emergency” measures enacted in wartime, provided government with powers which they extended into peacetime. Wilsonian wartime control of food production was legalized in the Lever Food-Control Act. It was under this act that Attorney General Palmer conducted post-war persecution of “foreign radicals.”

American society could not return to pre-1914 arrangements. The whole social system of peace, free trade, and individual liberty had been crippled. Many of the domestic intrusions remained, if only in dormant stage, to be resurrected in the 1930s economic crisis and the next war. Tragically, the growth of government paved the way for successive wars and wartime interventions, whose effects are still with us.