Popular consent was the second cause for the failure of incomes policies. During the 1970s, North Atlantic governments exhorted their publics to participate in incomes policies on the grounds of “growth,” but continuing inflation revealed the weakness of this purpose as a cause in itself capable of securing popular consent to planning. If macroeconomic stability required falling real wages or controls on employer profits, what good was it? A general expansion, in which all lines of industry are stimulated by an undirected expansion of spending, proved impossible without inflation. Particular public goals, such as affordable housing, increased income for disadvantaged groups, a growing renewable energy sector, or greater social equality, compete for resources with other private goals, such as luxury housing, corporate profits, or fossil fuel company operations. Some sanctions must come into play to consciously allocate resources toward a capacity profile geared toward the desired composition of full-employment demand.
War, NBER founder Wesley Mitchell wrote, alters economic calculation. Rather than figuring goods in terms of money to direct production by the profit motive, managers must figure money in terms of goods to plan necessary financing for the social project. Prices are controlled, the government enters the market as a purchaser and as a distributor, frequently distributing on a non-price basis. Resources must be allocated to wherever they can expand the necessary composition of final goods required by the program. Unless some particular composition of output is defined, government efforts to break any particular set of capacity bottlenecks in the course of a general expansion will only reveal other points of resistance up and down the supply chain. “The factor that sets the effective limit to accomplishments shifts from month to month, still more from year to year, and from country to country,” Mitchell wrote.
What those committed to the principle of incomes policy discovered during the last crisis of capitalism was that the objective of national planning had to be spelled out to the public in terms more specific than “economic growth” if private participation was to be ensured. For such a strategy to have any chance of success, the bottleneck-breaking authorities must have some sense of the desired composition of final spending which their efforts are intended to satisfy. In a representative government, only elected leaders can provide a moral sanction for such national planning. “What was the collective purpose that could weld individuals together and whose expression could be the object of politics?” the historian Richard Adelstein asked of the Progressive-era legal reforms. “What… was the public analogue to corporate profits?”1 The question has confronted peacetime government ever since. In the United States, only the armaments program of World War II, and the particular composition of procurement contracts and materials required to meet them, has supplied such a collective purpose. It has had no parallel in America’s national history.