The “Middle Way” of John R. Commons: Pursuing Reasonable Value in the Age of Unreason

Abstract:

John R. Commons sought to orient the U.S. economy in the direction of reasonable value as a way to “save capitalism by making it good.” In particular, he offered two paths to that “middle way” between the socio‐political extremes of fascism and communism: judicial sovereignty and collective democracy. This policy note considers a variety of present‐day challenges to pursuit of those paths; some possible ways forward are also suggested.

Keywords::

• reasonable value
• middle way
• judicial sovereignty
• collective democracy
• John R. Commons

JEL Classification Codes::

• B31
• B52
• K10
• P16

Notes

1 Commons, widely regarded as a founder of institutional economics and a pioneer in the study of labor, began his career in 1890; although he “retired” from the University of Wisconsin in 1932, Commons continued to teach for a number of years, and wrote about economics and the economy until his death in 1945. For an excellent recent biography of Commons, see John Dennis Chasse (2017).

2 In the mid‐1990s, newspaper columnist and political analyst James Pinkerton (1994) made a similar observation when writing about Newt Gingrich: “Gingrich [whose staff freely describes him as a Leninist] is no Bolshevik, but he plots and prepares like one.”

3 For a similar view on the Republican Party, see Jacob Hacker and Paul Pierson (2020).

4 That concentration and control of power by the financial sector is what Commons called “banker capitalism.” To a large degree, the seat of such power was (and still is) the city of New York, not Washington, DC. But the Federal Reserve coordinated banker capitalism with authority granted by Congress, so the system was (and still is) a New York‐Washington nexus, which Commons (1934b, 895) called “an economic government of bankers more powerful than the political government.” Moreover, Commons observed that the “alliance of banking and industry is complete” because “great industrial corporations are represented on the boards of directors of the twelve reserve bank boards” (Commons 1934b, 890–891).

5 For additional discussions of authoritarian elements in the American experience, ranging from presidential wartime authority to suppression of investigative research, see Commons (1934b, 883–884 and 1934a, 165–181).

6 Writing in 1934, Commons (1934b, 897–902) suggested that the credibility of democratic legislatures was already on shaky ground in many countries; that many intellectuals were losing faith in democracy; that liberals across the world were being “gradually or violently squeezed out;” and that even supporters of democracy like him were not entirely sure that representative government was competent to manage a modern economy.

7 On the problem of public‐sector predation, a situation in which government officials do not recognize the public interest and instead manage the public sector to serve private interests, see James Galbraith (2008). Also, one could add campaign finance reform to the broad agenda outlined above, including a constitutional amendment to overturn the Supreme Court's Citizens United ruling, which prohibits restrictions on corporate spending for political campaigns. Although Commons usually focused on judicial sovereignty, constitutional amendment is, of course, always available as a way to keep the Court in check.

8 In Institutional Economics, Commons (1934b, 900) writes: “Only when legislatures can be made representative of economic interests through their own freely elected leaders, can it be expected that they will have the experience and ability to hold in check the high‐salaried executives and political machines of American banker capitalism.”

9 On the matter of truth, Commons was influenced by the pragmatic philosophy of Charles S. Peirce, who wrote: “The opinion which is fated to be ultimately agreed to by all who investigate is what we mean by truth” (quoted in Commons 1934b, 152).

10 For evidence of growing interest in proportional representation, discussion of what it might look like in practice, and suggestions on how to prevent the deep conflicts that concerned Commons, see Greenblatt (2017); Drutman (2017); and Amy (n.d.).

11 For a discussion of the Wisconsin commission that Commons fashioned to address workplace safety, see Commons (1913, 395–424).

12 Since this policy note is being completed after the death of Supreme Court Justice Ruth Bader Ginsburg but before the 2020 presidential election, it seems a discussion of saving judicial sovereignty is incomplete without some comment on whether Joe Biden and the Democratic Party should increase the number of judges on the Court in the event that they have the opportunity in 2021. My view is that adding a seat (or two, if retaining an odd number of judges is deemed essential) would be appropriate in light of the Senate's unprecedented and indefensible refusal to grant Judge Merrick Garland a hearing in 2016, which has skewed the Court and thus warrants a remedy. Nevertheless, the political fallout would likely only deepen the partisan divide and intensify the combativeness of U.S. politics. The nation's respect for judicial sovereignty stands to be harmed either way.

13 Commons's (1950, 256–257) vision of collective democracy extended even to the Federal Reserve, which he thought should be guided by “a powerful advisory committee” with a wide range of economic stakeholders.

14 For some practical reform proposals, see Kochan (2020); Marvit (2019); and Harris and Krueger (2015). Also see Rosenberg (2020), which discusses California's move in this direction by means of a “gig economy” law that took effect at the start of 2020.

15 An example of such a Supreme Court decision is Janus v. AFSCME (decided in 2018), which prohibits state and local government unions from collecting representation fees from non‐union members of a bargaining unit, despite each union's legal obligation to represent all workers in the unit.

16 Employee representation in the form of government‐mandated works councils, which are found in some parts of Europe, could also be established by federal law.

17 See, for example, Cohen‐Rosenthal and Burton (1993); Fleron, Stanger, and Patton (2000); Preuss and Frost (2003); Barrett and O’Dowd (2005); Cutcher‐Gershenfeld, Sleigh, and Pil (2006); Dabney (2015); and Beck (2018).

18 For Commons's discussion of “rough methods” (and misrepresentation) and the alternative of “investigative methods” (and prevention of problems), see Commons (1921).

19 Unions also bolster judicial sovereignty by strengthening representative democracy, see Chasse (2018).

20 According to Harter (2020), “Instead of trying to persuade agencies, companies decided to buy their bosses.” He also argues that collaborative governance found itself out of step with the tone that Newt Gingrich set as Speaker of the House.

21 Of course, Commons (1913, 404–407) also stressed that collaborative governance requires a highly professional and nonpartisan staff that can conduct independent research. Lindsey and Teles (2017, 159–164) make the same argument and offer some recommendations to that end.

22 Such legislation includes the National Labor Relations Act of 1935, the Administrative Dispute Resolution Act of 1990, and the Negotiated Rulemaking Act of 1990. The first is discussed in Cutcher‐Gershenfeld, Sleigh, and Pil (2006); the others are discussed in Harter (2009).

Additional information

Notes on contributors

Charles J. Whalen

Charles J. Whalen is a research fellow at the Baldy Center for Law and Social Policy, University at Buffalo. He thanks Sarah Klammer, David Jacobs, and Linda Whalen for comments.