Representing Economic Fluctuations

Through the 1920s, and especially after the market crash of October 1929, a new type of society entered the consciousness of Western nation-states and their publics: a society whose industrial activity appeared to naturally cycle between economic booms, crises, and depressions. The analysis of economic fluctuations, or business cycles, arose in the i ndustrialized countries at the beginning of the twentieth century amongst expert scholars and statisticians. It promised a new terrain of policy administration aimed at optimizing the outcomes of private economic calculations with the deliberate intent of stabilizing the social relations of advanced industrial capitalism, which were increasingly contested in the cauldron of the interwar period in Western Europe and North America. While previous studies have pinpointed the economy as a new field of governmental practice in the twentieth century (Procacci 1991; Walters 2000; Castel 2003; Donzelot 1984; Mitchell 2002, 2006), this literature continues to focus primarily on state management of “the social” and therefore neglects political technologies aimed at optimizing the social by acting directly on the economy.1

This literature in “governmentality” often points out the way in which the state intervened in the market in order to ensure the welfare of workers and citizens, through devices such as social insurance, the regulation of product standards, and workplace safety. As industrial modernization in Western Europe and North America accelerated towards the end of the nineteenth century, a growing number of people became dependent upon the industrial system and access to wage labour for their well-being, thus also making them more vulnerable to sudden contractions of industrial activity. This state intervention broke with the liberal orthodoxy of laissez-faire that had prevailed through much of the nineteenth century. Howard Brick (2006) points out that in the United States and Germany, it was commonly accepted at the beginning of the twentieth century that these changes were ushering in a new type of society, different from the free-market capitalism of the nineteenth century. In Europe, the promotion of social insurance (Donzelot 1988), the regulation of poverty (Procacci 1991), and unemployment (Walters 2000), among other measures, attested to the growing dependence of a population’s health, safety, and productivity on the smooth operation of trade and business. Writing about the situation in France in the late nineteenth and early twentieth centuries, Donzelot (1988) and Castel (2003) underscore the extent to which the conflicting interests of different social classes propelled actors located within French statist institutions to innovate new practices of government upon new fields of intelligibility, composed by new concepts such as solidarity, the social, and the unemployed. In each country of

Western Europe and North America, the elaboration of new state practices oriented towards the regulation of economic activity—with the aim of improving the “life of the population”—took different but similar forms.

Yet comparatively less has been written within this literature about one of the key objects that made modern economic government possible: the development of a concept of business cycles, or trade fluctuations as they were often called. While there has been work to historicize statistics in economics (cf. Desrosieres 2003a, 2003b), the post-structural turn in the social sciences which has done so much to destabilize some of the key objects and concepts of other disciplines has yet to fully penetrate economics. Business cycles marked a new problematization of the economy in the late nineteenth and early twentieth centuries, which created new ways of visualizing economic activity and elaborated new governable spaces between the state and the market.2 Many of the statistical quantifications central to both the visibility and actionability of what we refer to today as “the economy” emerged from early business cycle theory.

While recurrent economic depressions were studied in the nineteenth century,3 for the sake of brevity, I focus on the emergence, during the first decade of the twentieth century, of this new object, the business cycle, which lent itself to so many and varied governmental programmes throughout the last century. This starting point can be justified in two ways. Firstly, the literature from this period reflexively marks itself off from earlier theories and approaches to crises and depressions for its use of quantitative data, its emphasis on fluctuations as a natural part of modern business, and its concentration on the trade or business cycle rather than merely on crises or depressions as stand-alone events. Secondly, the earlier approaches rarely sought to manage or govern the problem of business cycles, while business cycle theory, particularly in the United States, consciously sought to remediate the ebb and flow of the market. Marx, for instance, sought not to alleviate or mitigate business cycles through acts of economic engineering. Rather, he sought to eliminate them by changing the organizing principles of the labour process itself (e.g., by producing for socially determined ends rather than under conditions of capitalist competition). W.S. Jeavons, by contrast, saw business cycles resulting from sunspots and thus beyond the control of human intervention. Many of these earlier approaches persisted, notably Marxist ones, but here I mainly wish to focus on those that developed into business cycle theory, which had the greatest impact on practices of economic management.

From the 1890s onwards, it appears that recurring crises were presented as a new object and new problem for economists, ones quite removed from the classical attention to supply and demand (Jones 1900). Furthermore, many economists writing about recurring crises and depressions ceased to view them as they had in the nineteenth century, namely, as the result of exogenous factors, such as war, crop failure, or sunspots. The twentieth- century business cycle literature distinguished itself from earlier literature on crises and depressions, with many economists seeing such business cycles not as exogenous disruptions to a stable equilibrium state but instead as a normal and regular part of business in an industrial society (cf. Morgan 1990; Klein 2001). As Thorstein Veblen argued, “[t]he true, or what may be called the normal, crises, depressions, and exaltations in the business world are not the result of accidents, such as the failure of a crop. They come in the regular course of business. The depression and the exaltation are in a measure bound together” (Veblen 1965 [1904]: 183). W.C. Mitchell made the same point in his then seminal Business Cycles: “[c] rises are no longer treated as sudden catastrophes which interrupt the “normal” course of business, as episodes which can be understood without investigation of the intervening years. On the contrary, the crisis is regarded as but the most dramatic and the briefest of the three phases of a business cycle—prosperity, crisis, and depression” (W.C. Mitchell 1913: 5). This “modern” approach to the cycle was echoed in the work of George H. Hull, whose Industrial Depressions argued that earlier theories of crisis and depression failed to recognize the “disease” as a product of the industrial system itself (Hull 1911).

Thus, rather than being seen as merely a spasmodic process, the progression of economic development came to be seen as a flow from prosperity to crisis, and through depression back to prosperity again. These fluctuations were as haphazard, it seemed, as the weather—bad weather always eventually giving way to good if one waited long enough. Indeed, the nineteenth-century language of business cycles largely reflected this comparability with meteorology, with its focus on “business weather”.4

The idea of regular, endogenous fluctuations enabled economic thinkers to conceptualize an economy of cycles whose causes, often opaque, could be understood, measured, and increasingly controlled. In this way, the theoretical attention to trade or business cycles became an empirical and political project to construct what I call an economy of quantities. Through the use of “business barometers” (cf. Mitchell 1913), it was increasingly possible to “forecast” the “economic weather” (cf. Jones 1900) and, by so doing, minimize the effects of fluctuations of trade. The metaphors used to describe economic movements are important. Economics conceived its object as a product of natural forces, and, while business cycle theory in the early twentieth century set itself off from the view that natural forces such as sunspots or weather patterns could affect the economy, it nonetheless retained the notion that economic fluctuations were themselves a natural part of the new industrial economy (e.g., Hull 1911). The description of these movements as “cyclical” is itself a sort of naturalization of economic forces, implying a natural, regular character.

This shift in the study of business cycles owed much to statistical studies of economic fluctuations, which initially were intended to discover the causes of crises and which eventually attempted to uncover repeating patterns in recurring cycles (Klein 2001; Morgan 2001). As Beveridge had pointed out, the fluctuations of the economy could be “seen” in the bank rate, foreign trade, marriage rate, consumption of beer, numbers regarding crime and pauperism, railway receipts, bankers’ clearances, wages, and prices (Beveridge 1910: 38). This mysterious force was a sort of total social fact influencing all other facets of life. One could see the movement of the economy over time by observing the shifting values of time-series data. For Morgan (1990), this marked a move beyond merely observing the characteristics and causes of individual crises. Focus on recurring crises attempted to find similarities in the causes of depressions in order to aggregate and systematize them.

In this way, a social scientific explanation of the causes of crises became less important than predicting and moderating the flow of the cycle. In the first decade of the 1900s, barometers designed to capture economic movements were rudimentary, often referring only to one or a few variables arranged in time-series. In the 1920s, various statistical agencies had begun actively reporting time-series measurements to clients, and the US Department of Commerce, under the leadership of Herbert Hoover, actively sought to collect and disseminate data about the business cycle. Such work obviously became even more urgent after the onset of the Great Depression in the 1930s. During the 1930s, new statistical devices were brought to bear in Europe and the United States in a bid to provide rational tools to act in ways that might mitigate the length and severity of downturns.5 Macroeconomics was not a descriptive science, but a practical tool intended to help resolve the problem of cyclical economic fluctuations. Thus, the accuracy of the discipline’s assumptions, for example, whether cyclical fluctuations actually exist as autopoetic economic forces, are less important than the role this same discipline has played as a mediator of capitalist class relations that have always been aggravated by recurring economic crises.

This new problematization of crises and depressions can be seen as an extension of the growth of management sciences and engineering within private enterprises in the United States. The “managerial revolution” in American business in the 1880s and 1890s sought to construct systems that took advantage of the economies of speed and scale that new techniques of production and distribution permitted (Chandler 1977). The combinations and mergers that sought to rationalize economic production and limit competition were, in part, a response to the economic depression of the mid-1870s, and recurring depressions in the mid-1880s and mid-1890s accelerated this process. Moreover, these were attempts to apply the “visible hand” of active planning and scientific management to coordinate the flow of materials and products through the process of production. In this way, even before the flow of money and demand became a problem of economic government for the state, it had already emerged as a problem within the modern business enterprise. The configuration of a national economic space as a sort of engineering problem of economic government can be seen as a development of the scientific management elaborated within private corporations, and it is not coincidental that some of the most important contributions to business cycle theory (notably in the United States and France) came from economic application of engineering techniques. This new approach to economic fluctuations emerged in the first decade of the twentieth century, just as economic demands on the state shifted from nineteenth-century clien- telist politics of distribution to the early modern politics of regulation (McCormick 1979).

Much of the early cycle theory added statistical quantification to theoretical explanations of the periodic recurrence of crises and depressions, which gave the economy a new type of visibility and, therefore, action- ability.6 A significant amount of attention has been paid to the history of quantification and statistical measurement in economics and economic management (Desrosieres 2003a, b; Klein 2001; Morgan 1990, 2001, 2003; Porter 2001), which were evidently important to the objectification of economic phenomena, and their bundling into technologies of government, which sought to act on the numerical representations of “the economy” (Desrosieres 2008). These new data were deliberately constructed to enhance the rationality of business decisions and constitute a kind of assemblage, or agencement, that made new types of action possible.

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