Robert K. Murray. The Politics of Normalcy. New York: WW Norton, 1973. 162 pages. $18.95
Robert K. Murray is a good writer and this is a useful account of the Warren G. Harding administration. The subtitle refers to the "Harding-Coolidge Era" but the book is about the Harding administration with a brief final chapter about Coolidge. Coolidge is more vividly remembered than Harding because after Harding died in office minor scandals, the most famous of which was the Teapot Dome Scandal, were revealed and these tarnished Harding's image.
Murray suggests that Coolidge carried forward Harding's "normalcy" philosophy and so Harding was the more influentional of the two presidents. Arguably, Harding's "normalcy" philosophy has been carried forward through George Bush.
The scandals did not touch Harding; they were the product of two or three unfortunate appointments he had made. Ironically, Harding's cabinet appointments were among the better ones in history. They included Charles Evans Hughes (state), Herbert Hoover (commerce), Andrew W. Mellon (treasury) and Henry Wallace (agriculture; the father of President Roosevelt's Vice-President, Henry A. Wallace). However, there were several exceptions, namely, Harry M. Daugherty, an Ohio crony of Harding's who was later accused of corruption and resigned during the Coolidge administration (1924), although nothing was really proven about Daugherty. Another unfortunate appointment was Interior Secretary Albert Fall, who was responsible for the Teapot Dome scandal, which involved Harry Sinclair's Mammoth Oil bribing Fall for oil leases. Another was Charles R. Forbes, director of the Veterans' Bureau who had sold government supplies illegally and whom Harding had asked to resign as a result.
My key interest in reading this book was to try to grasp why Americans had supported Theodore Roosevelt, a left-wing Progressive Republican in 1904, then supported William Howard Taft, a conservative Progressive Republican in 1908, then supported Woodrow Wilson, a middle of the road Progressive Republican in 1912 and 1916, then reverted to what most people call conservatives--Harding in 1920, Coolidge in 1924 and Hoover in 1928.
Murray does not give an answer to this because the political vocabulary he uses is already steeped in post-World War II liberalism, but a bit of interpretation is all that is needed. Hoover was a Progressive and the question that needs to be interpreted is how two conservatives, Harding and Coolidge, got sandwiched between 30 years' worth of Republican and Democratic Progressives (Wilson being the one Democrat). The answer is that Harding and Coolidge were not conservative in the sense that the word is used to refer to the late 19th century Mugwumps or Barry Goldwater. The Mugwumps had much more in common with Goldwater than Goldwater did with Harding or Coolidge. Rather, Harding and Coolidge were rural Americans who retained some of the homespun feeling for individualism without having much concern with the ideas of laissez faire economics or individual liberty. It is evident from Murray's rich description of the 67th Congress that progressivism had long been established. Harding's goals as president revealed the same thing. His goals included increasing agricultural tariffs, improving the federal farm loan system, increasing farmers' representation on federal boards (p. 32), promotion of "business-government cooperation" (with Hoover turning the Department of Commerce into "a beehive of probusiness activity"), and shipbuilding subsidies (p. 64). The tariff that Congress passed in 1922, the Fordney-McCumber tariff, in Murray's words:
"was of dubious value...The tariff debates had rarely involved principle; there were no great clashes as in the past between high and low tariff advocates. It was simply a struggle between vested-interest-groups for economic advantage. As the New York Commercial described it: 'The tariff now represents the composite selfishness of the country.'"
With respect to subsidies to ship builders, on February 18, 1922 Harding proposed (p. 68):
"that a fund was to be created to aid private shippers in building new ships as well as in buying the existing wartime government fleet. Subsidies would be paid to private shippers on a sliding scale, depending on vessel speed and gross tonnage. Shippers were to be allowed a 10 percent annual profit, but any excess would be divided between the owners and the government until the amount of the subsidy was repaid. The estimated cost of the program was $30 million per year. In presenting this plan to Congress, Harding pointedly admonished:
'We have voiced our concern for the good fortunes of agriculture, and it is right that we should. We have long proclaimed our interest in manufacturing...But we have ignored our merchant marine. The World War revealed our weakness, our unpreparedness for defense in war, our unreadiness for self-reliance in peace...'"
However, the agricultural interests fought this proposal. As preposterous as the shipbuilding proposal sounds to me, the farm lobby's opposition sounds even more preposterous. The agricultural resistance led Harding to change his philosophy of government from a belief that the president should be hands off, to a belief that the president should lead Congress toward legislation (p. 70).
It is evident that nothing in Harding's legislative or administrative agenda were conservative in an activist sense. Rather, his notion of "normalcy" was to accept the social system that the left-wing and conservative Progressives had implemented and simply "stand pat". He had no conception that assertion of markets and reassertion of individual freedom might be preferable to the Hepburn Act or the Federal Reserve Bank. He was conservative in this sense: he wished to conserve the progressives' programs, adding just a wee bit more progressivism, but not too much. What he meant by "normalcy" was just a wee bit more government spending.
In pages 3-6 Murray makes clear that there were serious economic problems facing the nation in 1920. Wilson had failed to liquidate military supplies resulting in inefficiency and waste (p. 3). Roberts indicates that prices increased 104.5% between 1914 and 1920, a compounded annual inflation rate of more than 10%. (Note that the Federal Reserve Bank was founded in 1913.) On top of the inflation, the end of the war threw many Americans into unemployment. In February 1919 an estimated 3 million Americans were unemployed. Then, the cost of living fell by about 10% in March 1921, just when Harding was inaugurated (March 4). By May 1921 farm prices had fallen by two thirds and land values fell (p. 5). The unemployment rate was 20 percent. Interestingly, Roberts is describing an inflation/recession somewhat like the one that preceded the election of Ronald Reagan in 1980. In the late 1970s the inflation and increasing unemployment occurred together, but the situation wasn't that different. But Harding did not offer to remedy the inflation/unemployment cycle by correcting Fed policies. Rather, his normalcy policy was primarily political: to end the discussion of the League of Nations and to subsidize farmers with a tariff (p. 11), tighter immigration policy, a bigger navy, subsidies to the shipbuilders and an anti-lynching law. He also favored rationalization of government, a long-time progressive theme. Most of all, Harding advocated normalcy (quoted on p. 15):
"By 'normalcy' I don't mean the old order, but a regular, steady order of things. I mean normal procedure, the natural way, without excess."
Harding defined the Republican stance for much of the twentieth century. Republicans have called for normalcy, accepting the "progressive" reforms that the Democrats concoct and then responding to by saying that they are too much. The Republicans then call for "normalcy" and win another term in office. But is it normalcy to have a Federal Reserve Bank that prints $29 billion to subsidize an incompetent and corrupt investment bank like Bear Stearns? Is it normal for the US government to spend a trillion dollars a year? What is normal about that? Perhaps in Harding's day the normalcy theme rang true, but the Democrats' schemes, the Department of Education, inflation, the Fed, political correctness, the incompetent, "progressive" education system, the failed social security system, the failed policies of "urban renewal" that destroyed American cities and subsidized real estate developers are not normal. Is accepting such programs normalcy?
Saturday, May 31, 2008
The Obama Cabinet and the Teapot Dome Scandal
Rev. Jeremiah Wright and William Ayers (1968).During recent debate about Barack Obama's associates, Mr. Obama's proponents have claimed that he should not be accountable for his friends' opinions. But presidents appoint their friends to cabinet and staff posts. In 1924 it was revealed that Warren G. Harding's cabinet appointees had illegally sold medical supplies and leased oil wells to Sinclair Oil interests in the famous Teapot Dome scandal. Let us imagine President Obama's potential cabinet:
Secretary of Education: William Ayers
Secretary of Health Education and Welfare: Rev. Jeremiah Wright
Secretary of the Treasury: George Soros
Secretary of the Interior: Rev. Michael Pfleger
Attorney General: Reverend Louis Farakhan
Secretary of State: Sami al Arian
Postmaster General: Barbara Bowen (president of CUNY's faculty union)
Secretary of Defense: Bob Avakian
Given Mr. Obama's poor judgment in his choice of associates, how many Teapot Dome scandals will ensue from an Obama cabinet?
Friday, May 30, 2008
Hey Hey, Ho, Ho, Maurice Hinchey's Gotta Go!
It is time to defeat Congressman Maurice Hinchey. He has been riding high in a gerrymandered district that goes as far west as Ithaca and includes Ulster and Sullivan Counties. According to Heather Yakin in the Times Herald Record Congressman Hinchey yesterday called for a price control ("cap") on gasoline prices to be set at $2.59 a gallon. Those of us who remember the 1970s gas lines (see photo above) caused by government rationing know that Hinchey is out of his mind. As a Congressman, Hinchey himself likely would have a special deal on gasoline or just tell an aide wait in the two-hour lines. Those who need gasoline the most will not be able to get it, while the politically connected, like Congressman Hinchey, would enjoy an ample supply. Congressman Hinchey need not need be concerned if oil exploration firms do not seek new sources of oil and poor people cannot get gas because of the "cap", or if people who have access to the gasoline do not economize. Hinchey's proposal is selfish, vicious and anti-environmentalist since those who have access to the gas will squander it due to the artificially low price.
A glance at the map of the 22nd Congressional district delineates the extent to which Congressman Hinchey has benefited from unethical and anti-democratic gerrymandering by New York State's corrupt political establishment. The district includes eight counties (Broome, Delaware, Dutchess, Orange, Sullivan, Tioga, Tompkins and Ulster). Only Sullivan and Ulster are completely in Hinchey's district. The twenty-second district's absurd shape illustrates how Congressman Hinchey has enjoyed the fruits of New York State's political corruption. He has run unopposed for years.
Wednesday, May 28, 2008
Republican Antecedent to Regulatory Attacks on Commodity Speculation
The notion that regulators or public deliberation can better anticipate the valuation of commodities than can speculators is wrong for several reasons. First, there is no reason to believe that the public at large, professional economists, politicians or appointed officials are better equipped to value an asset like commodities than are private traders. The information required to do so is specific to time and place and requires the judgment and expertise appropriate to an individual with specific knowledge about commodity markets. This can only be obtained through professional experience.
Second, commodity speculators take considerable risk in investing in commodities and therefore are motivated to make the most accurate predication of future price. In contrast, politicians, appointees and the general public are unaware of the risk associated with a given price prediction. If the commodity speculator is wrong he loses his investment. If the politician is wrong, someone else goes hungry. That is, regulation of commodity prices potentially creates shortages. Such shortages can cause starvation and other forms of deprivation. The economists, experts, politicians and public advocates who clamor for regulation are not the ones who will suffer. Theirs is a special sort of greed and viciousness.
The ability of markets to assess value is unparalleled. Shortages induce increases in price. If speculators irrationally bid up prices, then public demand for the commodity will marginally decline. Depending on the responsiveness or elasticity of the commodity price, a small decline in demand potentially can have a large effect on price. It is not unusual for speculators to lose large fortunes in the commodity field. This would be associated with a price correction.
The power of markets to reassess erroneous price determinations was unknown in the days of the Progressives. Today's social democrats are likewise economically illiterate. It is not surprising that many Republicans, schooled in the Progressive tradition, are, like social democrats, eager to greedily cause shortages that harm the poor.
When Warren G. Harding won the presidency in 1921 he was the first non-progressive president in almost twenty years, since William McKinley. The public had been frustrated by an inflation that occurred following World War I and, as well, by Woodrow Wilson's obsession with the League of Nations. Progressivism was primarily a Republican, not a Democratic, movement. Not all Republicans were Progressives, but a large share of the Republican Party, perhaps half, bolted in 1912 to vote for Theodore Roosevelt, the Progressive Party candidate, enabling Wilson to win. Wilson was a progressive but of a different stripe from Roosevelt. He emphasized individualism, he opposed the minimum wage, he had long been an advocate of the gold standard, and he retained a belief in the producerist philosophy that had informed 19th century Republicans.
Harding was not idelogical and has generally been viewed with skepticism by left wing historians as well as by the Progressives of his day. However, by 1920, after nearly two decades of Progressivism, the assumptions that politicians made were very much in the Progressive tradition. Neither Harding nor Coolidge, who succeeded Harding after his death, had any interest in repealing Progressive legislation such as the Hepburn Act, which established federal price controls on railroads, or the Federal Reserve Bank. Instead, Harding argued for "normalcy". In his riveting book The Politics of Normalcy*, Robert K. Murray describes the 67th Congress, which was Republican, as was Harding, as involving a contest between several special interests for regulatory privilege. The idea of laissez faire had already been forgotten. In its place, farm interests were clamoring for tariffs and farm supports and business interests were clamoring for tax reductions. In addition, there were regional conflicts over regulatory advantage.
One of the laws that the agricultural lobby pushed through early in the Republican Congress (irritating the business lobby, which thought they would get their special interest legislation passed first) was the passage of the Capper-Tincher bill**. The Capper-Tincher bill was passed as the Future Trading Act that:
"...more carefully regulated the grain exchanges by placing a prohibitive tax on speculative transactions involving puts and calls, bids and offers."
Although the politics of the 1920s are thought of as a reassertion of conservatism, it is important to understand that by 1921 Harding no longer thought in terms of the limited government philosophy of the late nineteenth century Mugwumps, Jackson or Jefferson. Rather, Harding's normalcy simply referred to an end to the inflation, radical emphasis on the League of Nations and war-related imbalances that occurred during the Wilson administration. It was no rejection of Progressivism.
Today, we again hear clamor for regulation of freedom of exchange in the name of economic illiteracy. Not surprisingly, the clamor comes from both parties.
*Robert K. Murray, The Politics of Normalcy: Government Theory and Practice in the Harding-Coolidge Era. New York: WW Nortn, 1973.
**Ibid., page 50
Second, commodity speculators take considerable risk in investing in commodities and therefore are motivated to make the most accurate predication of future price. In contrast, politicians, appointees and the general public are unaware of the risk associated with a given price prediction. If the commodity speculator is wrong he loses his investment. If the politician is wrong, someone else goes hungry. That is, regulation of commodity prices potentially creates shortages. Such shortages can cause starvation and other forms of deprivation. The economists, experts, politicians and public advocates who clamor for regulation are not the ones who will suffer. Theirs is a special sort of greed and viciousness.
The ability of markets to assess value is unparalleled. Shortages induce increases in price. If speculators irrationally bid up prices, then public demand for the commodity will marginally decline. Depending on the responsiveness or elasticity of the commodity price, a small decline in demand potentially can have a large effect on price. It is not unusual for speculators to lose large fortunes in the commodity field. This would be associated with a price correction.
The power of markets to reassess erroneous price determinations was unknown in the days of the Progressives. Today's social democrats are likewise economically illiterate. It is not surprising that many Republicans, schooled in the Progressive tradition, are, like social democrats, eager to greedily cause shortages that harm the poor.
When Warren G. Harding won the presidency in 1921 he was the first non-progressive president in almost twenty years, since William McKinley. The public had been frustrated by an inflation that occurred following World War I and, as well, by Woodrow Wilson's obsession with the League of Nations. Progressivism was primarily a Republican, not a Democratic, movement. Not all Republicans were Progressives, but a large share of the Republican Party, perhaps half, bolted in 1912 to vote for Theodore Roosevelt, the Progressive Party candidate, enabling Wilson to win. Wilson was a progressive but of a different stripe from Roosevelt. He emphasized individualism, he opposed the minimum wage, he had long been an advocate of the gold standard, and he retained a belief in the producerist philosophy that had informed 19th century Republicans.
Harding was not idelogical and has generally been viewed with skepticism by left wing historians as well as by the Progressives of his day. However, by 1920, after nearly two decades of Progressivism, the assumptions that politicians made were very much in the Progressive tradition. Neither Harding nor Coolidge, who succeeded Harding after his death, had any interest in repealing Progressive legislation such as the Hepburn Act, which established federal price controls on railroads, or the Federal Reserve Bank. Instead, Harding argued for "normalcy". In his riveting book The Politics of Normalcy*, Robert K. Murray describes the 67th Congress, which was Republican, as was Harding, as involving a contest between several special interests for regulatory privilege. The idea of laissez faire had already been forgotten. In its place, farm interests were clamoring for tariffs and farm supports and business interests were clamoring for tax reductions. In addition, there were regional conflicts over regulatory advantage.
One of the laws that the agricultural lobby pushed through early in the Republican Congress (irritating the business lobby, which thought they would get their special interest legislation passed first) was the passage of the Capper-Tincher bill**. The Capper-Tincher bill was passed as the Future Trading Act that:
"...more carefully regulated the grain exchanges by placing a prohibitive tax on speculative transactions involving puts and calls, bids and offers."
Although the politics of the 1920s are thought of as a reassertion of conservatism, it is important to understand that by 1921 Harding no longer thought in terms of the limited government philosophy of the late nineteenth century Mugwumps, Jackson or Jefferson. Rather, Harding's normalcy simply referred to an end to the inflation, radical emphasis on the League of Nations and war-related imbalances that occurred during the Wilson administration. It was no rejection of Progressivism.
Today, we again hear clamor for regulation of freedom of exchange in the name of economic illiteracy. Not surprisingly, the clamor comes from both parties.
*Robert K. Murray, The Politics of Normalcy: Government Theory and Practice in the Harding-Coolidge Era. New York: WW Nortn, 1973.
**Ibid., page 50
Tuesday, May 27, 2008
Post CNN World
Doug Ross @ Journal proposes a new book entitled The Post CNN World. As I have recently blogged, people who believe television news are like the people in the late 1990s who believed that the X-Files was news.
My Letter in the Chronicle of Higher Education
The Chronicle of Higher Education printed my letter concerning David Seidemann's case here:
To the Editor:
The remarks of union officials quoted in "Federal Judge Rules Against Faculty Union on Refunds of Nonmembers' Dues" (The Chronicle, April 25) are misleading. There have been considerable "soft" activities by the leadership of the faculty union at the City University of New York involving protests, demonstrations, and conferences about the war in Iraq. The leadership is paid salaries to represent the faculty, but much of the leaders' time has been spent in antiwar and other political protests.
To be fair, agency dues payments should be reduced by the proportion that salaries for the union leadership's time spent on unrelated political activities bears to the union's total budget.
The article quotes Christopher M. Callagy, a union attorney, as saying that the union's chief political efforts have been in Albany. The union leadership has many times notified faculty members about antiwar protests via CUNY's e-mail system and used union officials' time and union resources for such protests, conferences, and related activities.
Professor David E. Seidemann's case does not go far enough. Lehnert v. Ferris Faculty Association, on which Magistrate Judge Lois Bloom relies in Seidemann v. Bowen, anticipates that agency payers may be free riders because they receive the benefit of collective bargaining but would not contribute to the costs of negotiation if they did not pay dues. But the Professional Staff Congress has won no benefits for its membership. Rather, because of its adversarial approach, it has managed to diminish faculty wages and benefits relative to virtually every other New York union.
Mitchell Langbert
Associate Professor of Business, Management, and Finance
Brooklyn College
City University of New York
Brooklyn, N.Y.
To the Editor:
The remarks of union officials quoted in "Federal Judge Rules Against Faculty Union on Refunds of Nonmembers' Dues" (The Chronicle, April 25) are misleading. There have been considerable "soft" activities by the leadership of the faculty union at the City University of New York involving protests, demonstrations, and conferences about the war in Iraq. The leadership is paid salaries to represent the faculty, but much of the leaders' time has been spent in antiwar and other political protests.
To be fair, agency dues payments should be reduced by the proportion that salaries for the union leadership's time spent on unrelated political activities bears to the union's total budget.
The article quotes Christopher M. Callagy, a union attorney, as saying that the union's chief political efforts have been in Albany. The union leadership has many times notified faculty members about antiwar protests via CUNY's e-mail system and used union officials' time and union resources for such protests, conferences, and related activities.
Professor David E. Seidemann's case does not go far enough. Lehnert v. Ferris Faculty Association, on which Magistrate Judge Lois Bloom relies in Seidemann v. Bowen, anticipates that agency payers may be free riders because they receive the benefit of collective bargaining but would not contribute to the costs of negotiation if they did not pay dues. But the Professional Staff Congress has won no benefits for its membership. Rather, because of its adversarial approach, it has managed to diminish faculty wages and benefits relative to virtually every other New York union.
Mitchell Langbert
Associate Professor of Business, Management, and Finance
Brooklyn College
City University of New York
Brooklyn, N.Y.
Social System Matching and the Expertise Culture
In the twentieth century the idea of convergence was suggested to explain the trend of socialist economies to look more like capitalist ones and capitalist economies to look more like socialist ones. This idea fell on hard times in the 1980s because socialism failed and some capitalist countries deregulated. The idea of convergence is linked to the idea of optimality. The notion that there is one best way to do a job or one best way to solve a social problem was characteristic of the Progressive era. Convergence was a remnant of Progressivism.
But perhaps there is no such thing as optimality with respect to social systems. Rather, there is an infinite array of potential strategies which match citizens' needs to a better or worse degree. Optimality depends on the match between the culture in which people live and the social system. Social evolution involves the search for optimal matching. If a system is suboptimal the system which permits the greatest flexibility with respect to searching for matching arrangement may be most preferable. That is, there are likely an array of systems which match varying cultural configurations, and an approach which provide equal matching but more flexibility will be preferable to an approach which provides less flexibility.
Labor economists have argued that some workers fit some kinds of jobs, other workers fit other kinds. In the same way, some cultures may fit some kinds of social systems while others fit different kinds. Discovering a optimal match depends on how well the social system can change to fit a given region or culture.
If that is so, then the trend toward increasing federal power and centralization during the twentieth century may have been an error since centralized power is more difficult to change than decentralized power. The founding fathers in America had hit upon an excellent formula to exploit regional and cultural differences: permit variations in across state governments so that local match can be optimized. Moreover, variations permit experimentation so that the knowledge base develops much more quickly than with a centralized one.
The centralization of power in America in the past 100 years may have impeded learning through decentralization and so had a crippling effect on progress. As well, forcing regional and cultural uniformity across a large country results in lost opportunities to match sub-systems to sub-cultures. Centralization of power is authoritarian and so as the nation has grown and simultaneously centralized power deviations from optimal points for specific subgroups have become greater. In turn, this has lead to increasing stridency of public debate.
Advances in organization theory that started with James March's and Herbert Simon's 1958 book Organizations have permitted firms to think about the key problem that faces them: information. Organizing information, gathering information, undestanding it and using it is a problem that faces government as well as private firms. In the twentieth century firms decentralized and experimented with increasingly flexible organizational forms. Toyota's Taiichi Ohno took 15 years to develop the process known as lean manufacutring, which includes just in time inventory. No expert had thought of this concept. Similarly, E.I. Deming's total quality management was unknown in business schools until he convinced a number of Japanese firms to adopt it.
In contrast, progressives and social democrats have made an antiquated assumption about rationality based on the ideas of Herbert Croly and Theodore Roosevelt: that experts can discern optimal solutions. Naturally, such experts will see the possibility of convergence toward an optimality in which they believe because of sharing of ideas, peer review and the like.
The corporate world has found that preconceived strategies rarely materialize and that focused or organized chaos results in the spontaneity of creativity that also depends on interaction and supportiveness of change. Supportiveness of change is foreclosed by the expertise culture. If an expert claims an optimal answer, then alternative views are ignored. Thus, fundamental errors in social science and economics have been perpetuated, and the public's ability to debate and innovate has been forestalled by social democracy.
There are many other concepts in organizational theory, such as the learning organization, organizational differentiation and integration and differentiation can be applied to the modern state. However, instead of thinking small and decentralizing, federal power has been increasingly concentrated in poorly performing agencies like the Department of Education and the Social Security Administration.
But perhaps there is no such thing as optimality with respect to social systems. Rather, there is an infinite array of potential strategies which match citizens' needs to a better or worse degree. Optimality depends on the match between the culture in which people live and the social system. Social evolution involves the search for optimal matching. If a system is suboptimal the system which permits the greatest flexibility with respect to searching for matching arrangement may be most preferable. That is, there are likely an array of systems which match varying cultural configurations, and an approach which provide equal matching but more flexibility will be preferable to an approach which provides less flexibility.
Labor economists have argued that some workers fit some kinds of jobs, other workers fit other kinds. In the same way, some cultures may fit some kinds of social systems while others fit different kinds. Discovering a optimal match depends on how well the social system can change to fit a given region or culture.
If that is so, then the trend toward increasing federal power and centralization during the twentieth century may have been an error since centralized power is more difficult to change than decentralized power. The founding fathers in America had hit upon an excellent formula to exploit regional and cultural differences: permit variations in across state governments so that local match can be optimized. Moreover, variations permit experimentation so that the knowledge base develops much more quickly than with a centralized one.
The centralization of power in America in the past 100 years may have impeded learning through decentralization and so had a crippling effect on progress. As well, forcing regional and cultural uniformity across a large country results in lost opportunities to match sub-systems to sub-cultures. Centralization of power is authoritarian and so as the nation has grown and simultaneously centralized power deviations from optimal points for specific subgroups have become greater. In turn, this has lead to increasing stridency of public debate.
Advances in organization theory that started with James March's and Herbert Simon's 1958 book Organizations have permitted firms to think about the key problem that faces them: information. Organizing information, gathering information, undestanding it and using it is a problem that faces government as well as private firms. In the twentieth century firms decentralized and experimented with increasingly flexible organizational forms. Toyota's Taiichi Ohno took 15 years to develop the process known as lean manufacutring, which includes just in time inventory. No expert had thought of this concept. Similarly, E.I. Deming's total quality management was unknown in business schools until he convinced a number of Japanese firms to adopt it.
In contrast, progressives and social democrats have made an antiquated assumption about rationality based on the ideas of Herbert Croly and Theodore Roosevelt: that experts can discern optimal solutions. Naturally, such experts will see the possibility of convergence toward an optimality in which they believe because of sharing of ideas, peer review and the like.
The corporate world has found that preconceived strategies rarely materialize and that focused or organized chaos results in the spontaneity of creativity that also depends on interaction and supportiveness of change. Supportiveness of change is foreclosed by the expertise culture. If an expert claims an optimal answer, then alternative views are ignored. Thus, fundamental errors in social science and economics have been perpetuated, and the public's ability to debate and innovate has been forestalled by social democracy.
There are many other concepts in organizational theory, such as the learning organization, organizational differentiation and integration and differentiation can be applied to the modern state. However, instead of thinking small and decentralizing, federal power has been increasingly concentrated in poorly performing agencies like the Department of Education and the Social Security Administration.
Monday, May 26, 2008
Theodore Roosevelt and Social Democracy
Theodore Roosevelt is arguably the founder of the modern social democratic movement(1) in America. The movement has many philosophical roots, to include the pragmatists like William James, the Mugwumps and the Progressives, especially Herbert Croly and John Dewey, but more than anything else social democracy is a political movement. At least in part we need to understand the politicians who formulated it to understand the pattern behind it.
Roosevelt began as a post-bellum Mugwump who favored laissez faire ideology then, through his work on the Civil Service Commission in 1889, as New York City Police Commissioner in 1895, as Governor of New York in 1898, as vice president in 1900 and as president in 1901 (following President McKinley's assassination), became increasingly committed to government solutions and ultimately, during his last campaign as the Progressive or Bull Moose Party presidential candidate, advocated a quasi-socialist ideology. The Hepburn Act, passed in 1906 during his presidential administration, gave the power to set railroad rates to the Interstate Commerce Commission. President Roosevelt would have extended this power to federal determination of prices charged by all large corporations had he been able to do this politically.
During his career, Roosevelt advocated a large share of the policies later adopted during the New Deal, to include laws concerning minimum wages (which Democrat Woodrow Wilson opposed), child labor, social security and most of all the regulation of the trusts, by which he meant big business. Roosevelt also advocated extension of the private pension system and federal arbitration of labor disputes. He was the most pro-union president until Franklin D. Roosevelt. He was sometimes critical of unions in practice but was the first president to support them in principle.
The two themes throughout Roosevelt's career are first the belief that rationality is preferable to corruption and that government can be made to function rationally through bureaucratic reform. He extends this emphasis from reform of government through Civil Service to reform of the economy through government regulation of bad trusts. Roosevelt was certainly well intentioned but he does not base his belief system on empirical evidence about economic behavior. Rather, the development of his ideology seems to involve extrapolation from the narrow problem of government operations to the behavioral problems of the economy.
The second theme, beyond rationality, is moralism. Roosevelt's ideas likely link the American Christian tradition which was important to the abolitionists, to the Mugwumps, and was present in much of the late nineteenth century political protest that Wiebe discusses. Roosevelt does not seem to have been a particularly religious man and he was a staunch advocate of religious tolerance and respect. Nor was he likely heavily influenced by the Social Gospel Christianity of Washington Gladden. Nevertheless, the moralism that runs through his thought is very much in the abolitionist tradition.
In an address to the Liberal Club of Buffalo, New York on January 26, 1893(2) Roosevelt argues for a moral, practical and socially active citizenry:
"The first duty of an American citizen, then, is that he shall work in politics; his second duty is that he shall do that work in a practical manner; and his third is that it shall be done in accord with the highest principles of honor and justice...But in advising you to be practical and to work hard, I must not for one moment be understood as advising you to abandon one iota of your self-respect and devotion to principle. It is a bad sign for the country to see one class of our citizens sneer at practical politicians and another at Sunday-school politics. No man can do both effective and decent work in public life unless he is a practical politician on the one hand, and a sturdy believer in Sunday-school politics on the other.
In an 1890 article in The Century(3) Roosevelt compares the corruption of the spoils system that had existed from the 1830s through the early twentieth century with the Civil Service or "merit" system (p. 249):
"The upholders of the merit system, on the other hand, maintain that offices should be held for the benefit of the whole public, and not for the benefit of that particular section of the public which enters into politics as a lucrative though rather dirty game; they believe that the multitude of small government positions, of which the duties are wholly unconnected with political questions, should be filled by candidates selected, not for political reasons but solely with reference for their special fitness for the duty they seek to perform...
"...It is therefore perfectly plain that the remedy lies in changing the system...The offices must be taken out of reach of all politicians, good or bad, by some permanent system of law..."
Likewise, he argued that expert commissions should make recommendations to Congress (4, 264):
"...what is needed in each case is ample provision for a commission of the highest possible grade, composed of men who thoroughly know the subject, and who possess every attribute required for the performance of the great and difficult task of framing in outline the legislation that the country, as distinguished from special interests, really needs. These men, from the very nature of the case, will be wholly free from the local pressure of special interests, so keenly felt by every man who is dependent upon the vote of a particular district every two yours for his continuance in public life. Such a...commission could get at the facts...by expert inquiry, and not by the acceptance of interested testimony.
"...As soon as business becomes at all complex...it can only be performed by delegating to experts the duty of dealing with all that can properly be delegated. It is only by such delegation that it is possible to secure the proper consideration of the exceedingly important business which cannot properly be delegated..."
It was with respect to the anti-trust issue, which was salient during the Progressive era, that Roosevelt's statism came to full flower. In his autobiography(5, 86):
"...these doctrines of the old laissez faire economists, of the believers in unlimited competition, unlimited individualism, were in the actual state of affairs false and mischievous...government must now interfere to protect labor, to subordinate the big corporation to public welfare and to shackle cunning and fraud..."
In a speech to the Progressive Party convention of 1912 quoted in the New York Times Roosevelt said (6, p. 108):
"To treat the anti-trust law as an adequate, or as by itself a wise, measure of relief and betterment is a sign not of progress, but of Toryism and reaction...The only effective way in which to regulate the trusts is through the exercise of the collective power of our people as a whole through the governmental agencies established by the Constitution for this very purpose..."
He extended this idea of rationalization through governmental regulation and experts from Civil Service, to the trusts, to the broader economy and to social weflare legislation. Thus in a March 15, 1907 letter to the Interstate Commerce concerning the Hepburn Act, which regulated railroads, Roosevelt wrote(7,258):
"Exactly as the developments in the insurance investigations a year ago showed the necessity of a far more rigid governmental control of insurance companies, so your investigations have proved the necessity of a far more rigid governmental control of railroad companies..."
As well, he argued for more "thoroughgoing regulation" in his speech to Congress in 1906 (8):
"The present Congress has taken long strides in the direction of securing proper supervision and control by the National government over corporations engaged in interstate business--and the enormous majority of corporations of any size are engaged in interstate business. The passage of the railway-rate bill, and only to a less degree the passage of the pure-food bill and the provision for increasing and rendering more effective national control over the beef-packing industry, mark an important advance in the proper direction...
"...It must not be supposed, however, that with the passage of these laws it will be possible to stop progress along the line of increasing the power of the National Government over the use of capital in interstate commerce...The best way to avert the very undesirable move for the government ownership of railways is to secure by the government on behalf of the people as a while such adequate control and regulation of the greater interstate common carriers as will do away with the evils which give rise to the agitation against them. So the proper antidote to the dangerous and wicked agitation against the men of wealth as such is to secure by proper legislation and executive action the abolition of the grave abuses which actually do obtain in connection with the business use of wealth under our present system--or rather no system--of failure to exercise any adequate control at all...the deadening and degrading effect of pure socialism, and especially of its extreme form, communism, and the destruction of individual character which they would bring about are in part achieved by the wholly unregulated competition which results in a single individual or corporation rising at the expense of all others until his or its rise effectually checks all competition and reduces former competitors to a position of utter inferiority and subordination."
Roosevelt's emphasis on rationalizing the economy to make it moral led naturally to his advocacy of the graduated income tax, the inheritance tax and a wide range of social welfare measures such as social security, a child labor law and the minimum wage. In his annual message to Congress in 1906(9) he stated:
"(T)here is every reason why, when next our system of taxation is revised, the National Government should impose a graduated inheritance tax, and if possible, a graduated income tax...I feel that in the near future, our national legislators should enact a law providing for a graduated inheritance tax...As the law stands it is undoubtedly difficult to devise a national income tax which shall be constitutional. But whether it is absolutely impossible is another question; and if possible it is certainly desirable."
This line of reasoning also led to his support for labor unions, although it was not uncritical support (10, p. 166):
"The workman saw, and all citizens who gave earnest thought to the matter saw, that the labor problem was not only an economic, but also a moral, a human problem....those artificial individuals called corporations become so vewry big that the ordinary individual is utterly dwarfed beside them and cannot deal with them on terms of equality. It therefore becomes necessary for these ordinary individuals to combine in their turn, first in order to act in their collective capacity through that biggest of all combinations called the government, and second, top act, also in their own self-defense, through private combinations, such as farmers' associations and trade-unions."
Thus, Roosevelt alternatively advocated federal arbitration of labor disputes and collective bargaining (11, 172)
"There must, therefore, be collective action. This need of collective action is in part supplied by the unions, which although they have on certain points been guilty of grave shortcomings, have nevertheless on the whole rendered inestimable service to the working man. In addition, there must be collective action through the government, the agent of all of us."
He also favored laws limiting the number of hours of employment of railroad employees (176), favored the 8 hour day for all workers (176), the abolition of child labor (p. 177), the minimum wage (179), workers compensation (183), and a public works administration (p.188) to provide work to anyone who is unemployed.
It is debatable whether some of these governmental steps would have occurred voluntarily without the need for state action by Roosevelt and Wilson. For instance, the eight hour day exists even for employees who are exempt from the Fair Labor Standards Act that Franklin Roosevelt passed. This is not because of legislation but rather because society became wealthier between 1908 and 1950 and so could afford shorter hours. Likewise, it is less necessary for children to work today because people are wealthier than they were in Roosevelt's day. In countries where poverty is the rule, a law against child labor would likely be ineffective.
Roosevelt's thinking is uninformed by advances in economics that were made later in the twentieth century by the Austrian and Chicago Schools of economics. His assumption that state action is necessary to rectify the ills he saw as police commissioner and governor of New York may have been mistaken.
(1)By social democratic I mean the political movement whose proponents now call liberalism and progressivism. The terms liberalism and progressivism are misleading for several reasons. Social democracy is a more accurate term. Social democracy holds that government offers more rational solutions than voluntary human choice and emphasizes political processes and the use of state violence in solving social problems rather than markets and voluntary exchange.
(2)"The Duties of American Citizenship". In William H. Harbaugh, The Writings of Theodore Roosevelt. Indianapolis, Ind.: The Bobbs Merrill Company, 1967, p.3
(3)"The Merit System versus the Patronage System", The Century XXXIX (February 1890), 628-33, reprinted in Ibid., p. 248
(4)"A Remedy for Some Forms of Selfish Legislation", The Outlook, August 6, 1910, reprinted in Op.Cit., p. 264
(6)"The Inadequacy of the Sherman Anti-Trust Law" from Roosevelt's address to the Progressive Party National Convention in Chicago, August 6, 1912. New York Times August 7, 1912, pp 8-9. Reprinted in Op.Cit., p. 108.
(5)"Resurrection of the Sherman Anti-Trust Law" from Roosevelt's Autobiography, pp. 423-32, Op.Cit., p. 83.
(7) "Letter to the Interstate Commerce Commission, March 15, 1907" reprinted in Op.Cit., p. 257.
(8)"For More Thorough-Going Regulation". From the Annual Message to Congress, 1906, reprinted in Op.Cit., p. 92.
(9)"A More Equitable Tax Structure", Op.Cit.
(10) From Roosevelt's Autobiography, p. 461-72, Op. Cit., p. 162.
(11)"Nationalism and the Working Man", The Outlook, XCVII (February 4, 1911), 253-56. Op. Cit., p 172.
Roosevelt began as a post-bellum Mugwump who favored laissez faire ideology then, through his work on the Civil Service Commission in 1889, as New York City Police Commissioner in 1895, as Governor of New York in 1898, as vice president in 1900 and as president in 1901 (following President McKinley's assassination), became increasingly committed to government solutions and ultimately, during his last campaign as the Progressive or Bull Moose Party presidential candidate, advocated a quasi-socialist ideology. The Hepburn Act, passed in 1906 during his presidential administration, gave the power to set railroad rates to the Interstate Commerce Commission. President Roosevelt would have extended this power to federal determination of prices charged by all large corporations had he been able to do this politically.
During his career, Roosevelt advocated a large share of the policies later adopted during the New Deal, to include laws concerning minimum wages (which Democrat Woodrow Wilson opposed), child labor, social security and most of all the regulation of the trusts, by which he meant big business. Roosevelt also advocated extension of the private pension system and federal arbitration of labor disputes. He was the most pro-union president until Franklin D. Roosevelt. He was sometimes critical of unions in practice but was the first president to support them in principle.
The two themes throughout Roosevelt's career are first the belief that rationality is preferable to corruption and that government can be made to function rationally through bureaucratic reform. He extends this emphasis from reform of government through Civil Service to reform of the economy through government regulation of bad trusts. Roosevelt was certainly well intentioned but he does not base his belief system on empirical evidence about economic behavior. Rather, the development of his ideology seems to involve extrapolation from the narrow problem of government operations to the behavioral problems of the economy.
The second theme, beyond rationality, is moralism. Roosevelt's ideas likely link the American Christian tradition which was important to the abolitionists, to the Mugwumps, and was present in much of the late nineteenth century political protest that Wiebe discusses. Roosevelt does not seem to have been a particularly religious man and he was a staunch advocate of religious tolerance and respect. Nor was he likely heavily influenced by the Social Gospel Christianity of Washington Gladden. Nevertheless, the moralism that runs through his thought is very much in the abolitionist tradition.
In an address to the Liberal Club of Buffalo, New York on January 26, 1893(2) Roosevelt argues for a moral, practical and socially active citizenry:
"The first duty of an American citizen, then, is that he shall work in politics; his second duty is that he shall do that work in a practical manner; and his third is that it shall be done in accord with the highest principles of honor and justice...But in advising you to be practical and to work hard, I must not for one moment be understood as advising you to abandon one iota of your self-respect and devotion to principle. It is a bad sign for the country to see one class of our citizens sneer at practical politicians and another at Sunday-school politics. No man can do both effective and decent work in public life unless he is a practical politician on the one hand, and a sturdy believer in Sunday-school politics on the other.
In an 1890 article in The Century(3) Roosevelt compares the corruption of the spoils system that had existed from the 1830s through the early twentieth century with the Civil Service or "merit" system (p. 249):
"The upholders of the merit system, on the other hand, maintain that offices should be held for the benefit of the whole public, and not for the benefit of that particular section of the public which enters into politics as a lucrative though rather dirty game; they believe that the multitude of small government positions, of which the duties are wholly unconnected with political questions, should be filled by candidates selected, not for political reasons but solely with reference for their special fitness for the duty they seek to perform...
"...It is therefore perfectly plain that the remedy lies in changing the system...The offices must be taken out of reach of all politicians, good or bad, by some permanent system of law..."
Likewise, he argued that expert commissions should make recommendations to Congress (4, 264):
"...what is needed in each case is ample provision for a commission of the highest possible grade, composed of men who thoroughly know the subject, and who possess every attribute required for the performance of the great and difficult task of framing in outline the legislation that the country, as distinguished from special interests, really needs. These men, from the very nature of the case, will be wholly free from the local pressure of special interests, so keenly felt by every man who is dependent upon the vote of a particular district every two yours for his continuance in public life. Such a...commission could get at the facts...by expert inquiry, and not by the acceptance of interested testimony.
"...As soon as business becomes at all complex...it can only be performed by delegating to experts the duty of dealing with all that can properly be delegated. It is only by such delegation that it is possible to secure the proper consideration of the exceedingly important business which cannot properly be delegated..."
It was with respect to the anti-trust issue, which was salient during the Progressive era, that Roosevelt's statism came to full flower. In his autobiography(5, 86):
"...these doctrines of the old laissez faire economists, of the believers in unlimited competition, unlimited individualism, were in the actual state of affairs false and mischievous...government must now interfere to protect labor, to subordinate the big corporation to public welfare and to shackle cunning and fraud..."
In a speech to the Progressive Party convention of 1912 quoted in the New York Times Roosevelt said (6, p. 108):
"To treat the anti-trust law as an adequate, or as by itself a wise, measure of relief and betterment is a sign not of progress, but of Toryism and reaction...The only effective way in which to regulate the trusts is through the exercise of the collective power of our people as a whole through the governmental agencies established by the Constitution for this very purpose..."
He extended this idea of rationalization through governmental regulation and experts from Civil Service, to the trusts, to the broader economy and to social weflare legislation. Thus in a March 15, 1907 letter to the Interstate Commerce concerning the Hepburn Act, which regulated railroads, Roosevelt wrote(7,258):
"Exactly as the developments in the insurance investigations a year ago showed the necessity of a far more rigid governmental control of insurance companies, so your investigations have proved the necessity of a far more rigid governmental control of railroad companies..."
As well, he argued for more "thoroughgoing regulation" in his speech to Congress in 1906 (8):
"The present Congress has taken long strides in the direction of securing proper supervision and control by the National government over corporations engaged in interstate business--and the enormous majority of corporations of any size are engaged in interstate business. The passage of the railway-rate bill, and only to a less degree the passage of the pure-food bill and the provision for increasing and rendering more effective national control over the beef-packing industry, mark an important advance in the proper direction...
"...It must not be supposed, however, that with the passage of these laws it will be possible to stop progress along the line of increasing the power of the National Government over the use of capital in interstate commerce...The best way to avert the very undesirable move for the government ownership of railways is to secure by the government on behalf of the people as a while such adequate control and regulation of the greater interstate common carriers as will do away with the evils which give rise to the agitation against them. So the proper antidote to the dangerous and wicked agitation against the men of wealth as such is to secure by proper legislation and executive action the abolition of the grave abuses which actually do obtain in connection with the business use of wealth under our present system--or rather no system--of failure to exercise any adequate control at all...the deadening and degrading effect of pure socialism, and especially of its extreme form, communism, and the destruction of individual character which they would bring about are in part achieved by the wholly unregulated competition which results in a single individual or corporation rising at the expense of all others until his or its rise effectually checks all competition and reduces former competitors to a position of utter inferiority and subordination."
Roosevelt's emphasis on rationalizing the economy to make it moral led naturally to his advocacy of the graduated income tax, the inheritance tax and a wide range of social welfare measures such as social security, a child labor law and the minimum wage. In his annual message to Congress in 1906(9) he stated:
"(T)here is every reason why, when next our system of taxation is revised, the National Government should impose a graduated inheritance tax, and if possible, a graduated income tax...I feel that in the near future, our national legislators should enact a law providing for a graduated inheritance tax...As the law stands it is undoubtedly difficult to devise a national income tax which shall be constitutional. But whether it is absolutely impossible is another question; and if possible it is certainly desirable."
This line of reasoning also led to his support for labor unions, although it was not uncritical support (10, p. 166):
"The workman saw, and all citizens who gave earnest thought to the matter saw, that the labor problem was not only an economic, but also a moral, a human problem....those artificial individuals called corporations become so vewry big that the ordinary individual is utterly dwarfed beside them and cannot deal with them on terms of equality. It therefore becomes necessary for these ordinary individuals to combine in their turn, first in order to act in their collective capacity through that biggest of all combinations called the government, and second, top act, also in their own self-defense, through private combinations, such as farmers' associations and trade-unions."
Thus, Roosevelt alternatively advocated federal arbitration of labor disputes and collective bargaining (11, 172)
"There must, therefore, be collective action. This need of collective action is in part supplied by the unions, which although they have on certain points been guilty of grave shortcomings, have nevertheless on the whole rendered inestimable service to the working man. In addition, there must be collective action through the government, the agent of all of us."
He also favored laws limiting the number of hours of employment of railroad employees (176), favored the 8 hour day for all workers (176), the abolition of child labor (p. 177), the minimum wage (179), workers compensation (183), and a public works administration (p.188) to provide work to anyone who is unemployed.
It is debatable whether some of these governmental steps would have occurred voluntarily without the need for state action by Roosevelt and Wilson. For instance, the eight hour day exists even for employees who are exempt from the Fair Labor Standards Act that Franklin Roosevelt passed. This is not because of legislation but rather because society became wealthier between 1908 and 1950 and so could afford shorter hours. Likewise, it is less necessary for children to work today because people are wealthier than they were in Roosevelt's day. In countries where poverty is the rule, a law against child labor would likely be ineffective.
Roosevelt's thinking is uninformed by advances in economics that were made later in the twentieth century by the Austrian and Chicago Schools of economics. His assumption that state action is necessary to rectify the ills he saw as police commissioner and governor of New York may have been mistaken.
(1)By social democratic I mean the political movement whose proponents now call liberalism and progressivism. The terms liberalism and progressivism are misleading for several reasons. Social democracy is a more accurate term. Social democracy holds that government offers more rational solutions than voluntary human choice and emphasizes political processes and the use of state violence in solving social problems rather than markets and voluntary exchange.
(2)"The Duties of American Citizenship". In William H. Harbaugh, The Writings of Theodore Roosevelt. Indianapolis, Ind.: The Bobbs Merrill Company, 1967, p.3
(3)"The Merit System versus the Patronage System", The Century XXXIX (February 1890), 628-33, reprinted in Ibid., p. 248
(4)"A Remedy for Some Forms of Selfish Legislation", The Outlook, August 6, 1910, reprinted in Op.Cit., p. 264
(6)"The Inadequacy of the Sherman Anti-Trust Law" from Roosevelt's address to the Progressive Party National Convention in Chicago, August 6, 1912. New York Times August 7, 1912, pp 8-9. Reprinted in Op.Cit., p. 108.
(5)"Resurrection of the Sherman Anti-Trust Law" from Roosevelt's Autobiography, pp. 423-32, Op.Cit., p. 83.
(7) "Letter to the Interstate Commerce Commission, March 15, 1907" reprinted in Op.Cit., p. 257.
(8)"For More Thorough-Going Regulation". From the Annual Message to Congress, 1906, reprinted in Op.Cit., p. 92.
(9)"A More Equitable Tax Structure", Op.Cit.
(10) From Roosevelt's Autobiography, p. 461-72, Op. Cit., p. 162.
(11)"Nationalism and the Working Man", The Outlook, XCVII (February 4, 1911), 253-56. Op. Cit., p 172.
Read Books
I watch the nightly television news primarily for entertainment. Since the entertainment on television these days is bad and Hollywood's offerings are worse, television news is probably the best entertainment available. The trouble is that in watching it I fear I might start to uncosciously believe the fiction, much like some viewers in the late 1990s believed that the X-Files was a news show.
This afternoon, as I was pumping gas at the Sunoco station on NY Route 28 in Boiceville, NY, I conversed with a gentleman from New Jersey on a Memorial Weekend trip. As we were pumping gas, I commented on the high prices (nearing $5 per gallon for super). He said to me that he doesn't believe the claim that oil and food prices are high because of "traders" or speculators. I gave him an earful about the Fed and inflation. But as I thought about it, I realized that this guy, probably above average in some ways but very much a guy you might meet in a gas station, had heard some media lies and rejected them. Instead, I gave him the news. He will have done better by thinking about what I told him in this chance meeting in the Boiceville gas station than the propaganda on conventional news shows.
This afternoon, as I was pumping gas at the Sunoco station on NY Route 28 in Boiceville, NY, I conversed with a gentleman from New Jersey on a Memorial Weekend trip. As we were pumping gas, I commented on the high prices (nearing $5 per gallon for super). He said to me that he doesn't believe the claim that oil and food prices are high because of "traders" or speculators. I gave him an earful about the Fed and inflation. But as I thought about it, I realized that this guy, probably above average in some ways but very much a guy you might meet in a gas station, had heard some media lies and rejected them. Instead, I gave him the news. He will have done better by thinking about what I told him in this chance meeting in the Boiceville gas station than the propaganda on conventional news shows.
The Search for Order
Robert H. Wiebe. The Search for Order 1877-1920. New York: Hill and Wang, 1967. 333 pages. (Newer edition available from Amazon.com for $12.60, used from $3.00).
Perhaps the most scintillating paragraph in Robert Wiebe's Search for Order is on pages 279-80. Inadvertently, Wiebe suggests a rationale for Franklin D. Roosevelt's New Deal in the context of Democratic Party strategy circa 1920. Although Wilson won in 1916:
"Two developments nullified his advantage. Beneath a facade of victories, the organization of the Democratic party had improved only slightly during the previous decade. After capitalizing upon the Republican divisions around 1912, Democrats had been unable either to integrate their party or to secure its finances. Even the election of 1916 had depended upon transitory factors: an immediate return on New Freedom legislation, an impression of friendliness to progressive latecomers, and an image of peace. Without an enduring base such as Republicans enjoyed, the Democrats could hold their majority only by an uninterrupted flow of benefits distributed with the utmost skill. War disrupted the makeshift pattern of success, and a rapid deterioration followed. The loss of both houses of Congress in 1918 presaged an approaching disaster."
The institutionalization of redistribution of wealth via New Deal ideology beginning 12 years later, in 1932, led to a 50-60 year Democratic ascendancy that paralleled the Republican ascendancy from 1860-1932.
Robert H. Wiebe is a masterful historian who combines intellectual, political and business history in this wonderfully written book. This book serves as a good backdrop to Nancy Cohen's recent Reconstruction of American Liberalism 1864-1914 which I previously reviewed. While Cohen emphasizes the Mugwumps and academic antecedents to Progressivism, Wiebe emphasizes Populist and Social Gospel influences.
Progressivism was in large part, as Cohen argues, an assertion of professional interests in fields like law, medicine and academia. It is this thread of professional interest that links the Mugwumps, Progressives, New Deal Democrats and post-World War II liberals. As well, big business appealed to government to protect it from competitive forces in the late 19th century, and this state-government alliance can be traced through American statism's various transformations. This insight flatly contradicts the popular conception of the New Deal as antipathetic to the feelings of business executives. Indeed, Alfred Sloan and other leading executives of the 1930s fought aspects of the New Deal. However, this was necessary for Roosevelt to implement the radically pro-business inflationary program that he established in 1932 and that has in recent decades resulted in the flattening of real wages and inflation of asset values.
In his final chapter entitled "Doorway to the Twenties" Wiebe notes that following World War I:
"A bureaucratic orientation now defined a basic part of the nation's discourse. The values of continuity and regularity, functionality and rationality, administration and management set the form of problems and outlined their alternative solutions. A few recognized the fact and accepted it. 'There will be no withdrawal from these experiments' (Republican) Elihu Root announced in 1916, referring specifically to the regulatory commissions. 'We shall go on; we shall expand them, whether we approve theoretically or not; because such agencies furnish protection..."
Wiebe notes that the new bureaucracies were ineffective in fighting the 1918influenza epidemic (pp.296-8):
"Although medical science could not meet the emergency, millions of educated Americans dutifully awaited the doctor's word, donning the same masks and cleansing the same foods in a remarkable display of coordinated faith..."
In other words, while Progressivism failed to produce outcomes that worked in improving social welfare, it did succeed in establishing a high degree of social control and in subsidizing big business:
"In particular, national progressivism had been predicated upon the existence of the modern corporation and its myriad relationships with the rest of American society. Chronologically, psychologically, this network had come first."
And, of course, big business welcomed the governmental subsidies:
"Somewhat more slowly, private leaders had come to believe that they also could not function without the assistance of the government, increasingly the national government. Only the government could ensure the stability and continuity essential to their welfare. Its expert services, its legal authority and its scope had become indispensable components of any intelligent plan for order. And what they sought could no longer be accomplished by seizing and bribing. The nineteenth-century formula of direct control--taking an office for yourself or your agent, buying a favor or an official--now had very little relevance to the primary goals of society's most influential men, whether in business, agriculture, labor or the professions. They required long-range, predictable cooperation through administrative devices that would bend with a changing world. Nor were they thinking about a mere neutralization of the government, the automatic reaction many had given to the fist flurries of reform. They wanted a powerful government, but one whose authority stood at their disposal; a strong, responsive government through which they could manage their own affairs in their own way..."
(p. 298)"...Government bureaucrats looked to the private groups in their bailiwick as a natural constituency, men with whom they must develop good relations and from whom they expected regular support. These groups reciprocated, looking in turn to the bureaus for essential services and acting as their lobbies--just as long as the effective power of decision remained in private hands...In the twentieth (century), the national government parcelled an increasing amount of its power to private groups; and these then exercised it through the national government itself. Progressive legislation sketched the outlines for that new system."
This transformation was assisted by World War I.
Wiebe begins this masterful book with a discussion of the depression of the 1870s:
"...it was a strange depression. The longest in the nation's history, in human terms it proved one of the mildest. The same falling prices that deterred investors facilitated commerce..."
America in the 1870s was still largely rural. Island communities "moved by the rhythms of agriculture", and (p. 4) "If there was an American philosophy in the seventies it was a corrupted version of Scottish common-sense doctrines, taking as given every man's ability to know that God had ordained modesty in woman, rectitude in men, and thrift, sobriety and hard work in both...small-town America took its stand against 'the credit system, the fashion system,and every other system tending to prodigality and bankruptcy.." The railroads disrupted this agricultural, rural world by heightening expectations and increasing income inequality. The Granger laws, passed mainly in the Midwest, were an attempt to address resentment toward wealthy railroad owners by setting rates and regulating business conduct.
Railroads such as the Atchison, Topeka and Santa Fe, the Great Northern, the Southern Pacific and Northern Pacific united the nation and created a unitary market but (p.12) "America in the late 19th century was a society without a core."
The expansion of markets was not matched by expansion of business expertise. In banking, for instance (p. 21):
"A few institutions in the major cities experienced a phenomenal growth during the eighties in part from the demand for commercial banking facilities...Yet the apparent leaders, like their industrial counterparts, presided over vast mechanisms that had developed beyond their control...With intuitive methods for gauging the business cycle and rule-of-thumb measures for evaluating credit risks, they relied on stabs of shrewdness, not long-range wisdom, in conducting their affairs. Bankers at all levels strained to comprehend an increasingly complex, impersonal operation."
The difficulties business had in competing led to (p. 23):
"The classic sequence from tooth-and-claw competition to gentlemen's agreements to pools to trusts to holding companies...new techniques for cooperation rather than supplanting the old joined them to form a more intricate mosaic of business practice...the more complex the consolidation, the greater the internal confusion it tended to bring."
Wiebe writes (p. 25) that finance became an important field around 1890 and that JP Morgan guided many other financiers through the late 19th century: "Led by JP Morgan, whose imaginative policies in railroad cooperation had already won him fame during the eighties, a handful of financiers, almost all of them private investment bankers, took charge of the new surplus....Morgan enjoyed such respect that a caravan of domestic followers gladly marched to his beat."
As well, "the continuous need for credit as a matter of course made industrial executives vulnerable to bankers' direction...companies were showing interest in the benefits of an enforced peace." Nevertheless, in the 1890s 40% of the American railroad mileage had gone into receivership (p. 26). The investment banking community took over the railroads, reorganized them, and appointed managers who looked to Wall Street "for strategic guidance".
The expansion of markets led, according to Wiebe, to the end of the "island community" (p. 44). The growth of big business and the apparent concentration of wealth led scholar Richard T. Ely and evangelical minister Josiah Strong to argue for a social role for religion. Henry Demarest Lloyd attacked Standard Oil and moved into more radical causes, calling himself "a socialist-anarchist-communist-individualist-collectivist-co-operative-aristocratic-democrat". Lloyd's rhetoric sounded suspiciously like Herbert Croly's, 20 years later (p. 64) : " The new religion--man the redeemer...this divinity of democracy--the creative will of the people which is to be substituted for the old God." And Henry George argued for a 'single tax'. There was a sense of crisis, that "great corporations were stifling opportunity". There was a strong desire for self determination and community autonomy. There were, asserts Wiebe, Christian capitalists as well as Christian socialists. Edward Bellamy's Looking Backward was a Utopian novel, set in the year 2000, when society would be rationally designed and peace and goodwill would reign. Investment banks were abolished in Bellamy's world, and everyone would retire in middle age. All industry was to be run by the state. Everyone lives in small communities held together by fraternal cooperation.
The rural feeling of the threat of big business coupled with the fear of immigration and labor violence and strikes led to populism and the Populist or People's Party (p. 84):
"All of the community movements assumed that a natural, local society required the destruction of unnatural, national powers. As the Populist platform suggested, government would again become a function of men's everyday lives only after a direct democracy had dissolved a distant, corrupt government; technology would serve the communities only after nationalization had removed an oligarchy of railroad, telegraph, and telephone companies; power would belong to the people only after a silver currency, a decentralized postal savings system and subtreasury notes had replaced Wall Street and the national banks.."
By the early 1890s the Populist Party had captured 15% of the popular vote. Its downfall was its support for Democratic Party candidate William Jennings Bryan in 1896. When his free silver candidacy lost, the Populist Party lost credibility. In 1896 the Republicans became the party of sound money, of gold, and the Democrats became the party of silver, of inflation. A few Democrats, among them Woodrow Wilson, broke off from the Democratic Party in 1896 and fielded their own Gold Democratic candidate. Corporate America felt threatened by Bryan (they did not conceive of the advantages inflation offered them until after Lord Keynes wrote in the 1930s).
Along with a number of other authors in this field, Wiebe points out that the late nineteenth century saw a "revolution in values" (chapter nine) in that the expansion of markets shifted Americans' perceptions of wealth. In the day of the "island economies" of small town America, the relationship between morals and economic was perceived to have been that godliness and ethics led to economic prosperity. But in the expanded marketplace of big business, the relationship between morality and economic activity seemed to have been severed (p. 133):
"Now a perverted world was enabling men to perpetrate monstrous hoaxes in the name of the old morality. It had been natural enough to account for business success and nature in terms of individual virtue and vice; it was quite another matter to permit the corporations ill gotten profits because the Supreme Court adjudged them 'persons' within the meaning of the Fourteenth Amendment...No just God had given Rockefeller his money, whatever the man said. Yet for those who had customarily thought of wealth as a token of grace, re-arguing the case brought only frustration...From the seventies through the First World War, the nature of social change dominated their inquiries...With few exceptions the individual, who absorbed earlier and later generations, received only perfunctory attention."
In the 1870s and 1880s, economists believed in the wages fund theory and many combined it with social Darwinism. Some advocates of social Darwinism, such as Andrew Carnegie, argued for philanthropy. Wiebe, a product of mid-twentieth century statism, is somewhat sarcastic and condescending about the ideas of Sumner and David A. Wells, which are more viable and elastic than those of Keynes.
One response, the Social Gospel of Reverend Washington Gladden in his book Applied Christianity, was to argue for a boycott of monopolies and for employers to love employees. Another response was utopianism. In Looking Backward Bellamy argued for "the principle of fraternal co-operation...the only true science of wealth production" and a "people's economy supervised by an immaterial government". As well, Henry Demarest Lloyd argued for "cooperation to replace competition, nationalization under under an invisible government, a classless society living by the Golden rule." As a practical matter, Bellamy stated that he favored the nationalization of industry.
The utopianism of Bellamy and Gladden led to a combination of philosophical idealism and biology. Franklin H. Giddings and Brand Whitlock used biological metaphors to describe society and cities. They emphasized progress in stages. In 1883 Lester F. Ward (p. 141) argued that society had evolved in four stages.The academic Richard T. Ely argued that society would evolve through seven stages "to reach its destiny in industrial integration, essentially a Christian cooperative commonwealth." Wiebe states that following Comte, the most popular number of stages was three.
In the end, argues Wiebe, a bureaucratic mentality prevailed. The bureaucratic approach emphasized "recognizable, everyday problems" (p. 147) and eliminated biological analogies, relying instead on mechanical metaphors. This approach emphasized "scientific method", relying on statistics and a belief that "society was a vast tissue of reciprocal activity" (p. 147). Rather than discuss human psychology and focused instead on behavior (p. 149):
"Now education implied the guidance of behavior in harmony with social processes."
According to Wiebe (p.149),
"the bureaucratic orientation did not reach its peak of success until the nineteen twenties...By degrees the philosophy of urban political reform had moved from simple moral principles guaranteed by the proper forms of government to complex procedural principles advanced by the proper administration of government...A similar transformation occurred in social work. The original settlement workers had entered the slums and served the poor as moral acts. Over time...they became immersed in the endless, interrelated problems of a whole city's life."
Wiebe adds Arthur Bentley's bureaucratic analysis of government, The Process of Government, Frederick W. Taylor's scientific management and John Dewey's combination of pragmatism with a bureaucratic "theory that made individuals the plastic stuff of society."
It is evident from Wiebe's description of Dewey that modern "liberalism" (more accurately termed social democracy) is a betrayal of Dewey's ideas, particularly of his pragmatism:
"Throughout his writings ran a limitless faith in the scientific method as the means for freeing people of all ages to learn through exploration and through social experience."
But Dewey's ideas, while elegant, failed to anticipate the dominant impulse of interest groups and their extraction of rents from the state. The idea that social democratic institutions have led to rationality is laughable. Yet, instead of remaining loyal to the pragmatic impulse of William James, which would require a reassessment of failed ideology, today's social democrats ("liberals" or "progressives") continue to chant a rote commitment to failed ideas.
There is certainly a link between the bureaucratic ideas of Taylor and the classical liberalism of William Graham Sumner (p. 156):
"In a certain sense, bureaucratic thought reverted to the visions of the original classical theory, substituting an internally derived dynamic--a social process-for the externally justified balance of a John Fiske or a William Graham Sumner. Both theories, at least, sought to create unity out of diversity...the acknowledgment of society's inevitable pluralism raised difficulties that would plague bureaucratic through for years to come."
Advocates of Progressivism (which is the early twentieth century manifestation of Wiebe's bureaucratic approach) such as Walter Lippmann and Walter Weyl saw consumerism as the ultimate outcome of the bureaucratic society (p. 158).
Progressivism led to a" a strikingly different conception of government" which involved the replacement of economic with political criteria (p. 160):
"Trained, professional servants would staff a government broadly and continuously involved in society's operations. In order to meet problems as they arose, these officials should hold multiple mandates, ones that perforce would blur the conventional distinctions among executive, legislature and judiciary. Above them stood the public men, a unique and indispensible leader. Although learned enough to comprehend the details of a modern, specialized government, he was much more than an expert among experts. His vision encompassed the entire nation...Corps of servants received his general directives and translated them into their particular areas ...As the nation's leader, the public man would be an educator-extraordinary...In time, after a 'long tutelage in public affairs', the electorate would come to participate directly in certain aspects of government through the initiative, referendum and recall...The theory was immediately and persistently attacked as undemocratic...In fact the theory was not as boldly authoritarian as it sometimes appeared...The latitude he enjoyed in administration existed only because no one could predict the course of a fluid society...the theory purported to describe government by science not by men...As all citizens became rational, they would naturally arrive at the same general answers. Experts, of course, would always know more in their particualar fields, and the public man would always see the whole more clearly; but national rationality would assure consensus on the big issues, the matters of principle."
Wiebe articuately describes the essence of Progressivism. In chapter 7, "Progressivism arrives", he describes the roots of Progressivism in estern urban centers and some midwestern and southern agrarian states. The Progressives believed that a "patchwork government could no longer manager the range of urban problems" (p. 167). Mainstream business interests supported Progressivism (p. 167) "well-to-do merchants, manufacturers and bankers who sought more dependable and rewarding relations with government were moving to the vanguard of urban reform." This was accomplished in establishing utility regulation (p. 168), the secret ballot, the shortened ballot, and increasing the number of appointed governmental posts and the introduction of government budgeting. Their establishment of settlement houses led to an interest in child labor laws. Wiebe emphasizes (p. 169) the Progressives' fixation on improvement of government administration. They envisioned flexible, authority staffed by qualified experts in areas like housing regulation, early childhood education, conservation and public health. The Progressives emphasized efficiency.
In attempting to implement their ideas they linked themselves to businessmen and political bosses (p. 174).
Wiebe makes an important point (p. 174):
"It was the expert who benefited most from the new framework of politics...The more complex the competition for power, the more organizational leaders relied on experts to decipher and to prescribe...Only the professional administrator, the doctor, the social worker, the achitect, the economist could show the way...professors like Frank Goodnow, Leo Rowe and Edmund James were telling the National Municipal League what urban reforms it really wanted"
At the same time, businessmen began to institute systematizedpolitical contributions and lobbying slightly before 1900 as a concomitant of Progressivism:
"The political implications of the desire for continuity turned big businessmen into political innovators, and campaigning was one of the first areas affected. Particularly after 1896, such magnates as John McCall of New York Life Insurance, Henry H. Rogers of Standard Oil and Edward Harriman began both to contribute kmore consistently and to grant funds for a party rather than a man."
The contradiction inherent in Progressive reform, namely, its claim to rationality while at the same time encouraging a larger scale, more rationalized corruption, were apparent from the beginning.
The Search for Order is a fine historical work and anyone who reads it will be richer.
Perhaps the most scintillating paragraph in Robert Wiebe's Search for Order is on pages 279-80. Inadvertently, Wiebe suggests a rationale for Franklin D. Roosevelt's New Deal in the context of Democratic Party strategy circa 1920. Although Wilson won in 1916:
"Two developments nullified his advantage. Beneath a facade of victories, the organization of the Democratic party had improved only slightly during the previous decade. After capitalizing upon the Republican divisions around 1912, Democrats had been unable either to integrate their party or to secure its finances. Even the election of 1916 had depended upon transitory factors: an immediate return on New Freedom legislation, an impression of friendliness to progressive latecomers, and an image of peace. Without an enduring base such as Republicans enjoyed, the Democrats could hold their majority only by an uninterrupted flow of benefits distributed with the utmost skill. War disrupted the makeshift pattern of success, and a rapid deterioration followed. The loss of both houses of Congress in 1918 presaged an approaching disaster."
The institutionalization of redistribution of wealth via New Deal ideology beginning 12 years later, in 1932, led to a 50-60 year Democratic ascendancy that paralleled the Republican ascendancy from 1860-1932.
Robert H. Wiebe is a masterful historian who combines intellectual, political and business history in this wonderfully written book. This book serves as a good backdrop to Nancy Cohen's recent Reconstruction of American Liberalism 1864-1914 which I previously reviewed. While Cohen emphasizes the Mugwumps and academic antecedents to Progressivism, Wiebe emphasizes Populist and Social Gospel influences.
Progressivism was in large part, as Cohen argues, an assertion of professional interests in fields like law, medicine and academia. It is this thread of professional interest that links the Mugwumps, Progressives, New Deal Democrats and post-World War II liberals. As well, big business appealed to government to protect it from competitive forces in the late 19th century, and this state-government alliance can be traced through American statism's various transformations. This insight flatly contradicts the popular conception of the New Deal as antipathetic to the feelings of business executives. Indeed, Alfred Sloan and other leading executives of the 1930s fought aspects of the New Deal. However, this was necessary for Roosevelt to implement the radically pro-business inflationary program that he established in 1932 and that has in recent decades resulted in the flattening of real wages and inflation of asset values.
In his final chapter entitled "Doorway to the Twenties" Wiebe notes that following World War I:
"A bureaucratic orientation now defined a basic part of the nation's discourse. The values of continuity and regularity, functionality and rationality, administration and management set the form of problems and outlined their alternative solutions. A few recognized the fact and accepted it. 'There will be no withdrawal from these experiments' (Republican) Elihu Root announced in 1916, referring specifically to the regulatory commissions. 'We shall go on; we shall expand them, whether we approve theoretically or not; because such agencies furnish protection..."
Wiebe notes that the new bureaucracies were ineffective in fighting the 1918influenza epidemic (pp.296-8):
"Although medical science could not meet the emergency, millions of educated Americans dutifully awaited the doctor's word, donning the same masks and cleansing the same foods in a remarkable display of coordinated faith..."
In other words, while Progressivism failed to produce outcomes that worked in improving social welfare, it did succeed in establishing a high degree of social control and in subsidizing big business:
"In particular, national progressivism had been predicated upon the existence of the modern corporation and its myriad relationships with the rest of American society. Chronologically, psychologically, this network had come first."
And, of course, big business welcomed the governmental subsidies:
"Somewhat more slowly, private leaders had come to believe that they also could not function without the assistance of the government, increasingly the national government. Only the government could ensure the stability and continuity essential to their welfare. Its expert services, its legal authority and its scope had become indispensable components of any intelligent plan for order. And what they sought could no longer be accomplished by seizing and bribing. The nineteenth-century formula of direct control--taking an office for yourself or your agent, buying a favor or an official--now had very little relevance to the primary goals of society's most influential men, whether in business, agriculture, labor or the professions. They required long-range, predictable cooperation through administrative devices that would bend with a changing world. Nor were they thinking about a mere neutralization of the government, the automatic reaction many had given to the fist flurries of reform. They wanted a powerful government, but one whose authority stood at their disposal; a strong, responsive government through which they could manage their own affairs in their own way..."
(p. 298)"...Government bureaucrats looked to the private groups in their bailiwick as a natural constituency, men with whom they must develop good relations and from whom they expected regular support. These groups reciprocated, looking in turn to the bureaus for essential services and acting as their lobbies--just as long as the effective power of decision remained in private hands...In the twentieth (century), the national government parcelled an increasing amount of its power to private groups; and these then exercised it through the national government itself. Progressive legislation sketched the outlines for that new system."
This transformation was assisted by World War I.
Wiebe begins this masterful book with a discussion of the depression of the 1870s:
"...it was a strange depression. The longest in the nation's history, in human terms it proved one of the mildest. The same falling prices that deterred investors facilitated commerce..."
America in the 1870s was still largely rural. Island communities "moved by the rhythms of agriculture", and (p. 4) "If there was an American philosophy in the seventies it was a corrupted version of Scottish common-sense doctrines, taking as given every man's ability to know that God had ordained modesty in woman, rectitude in men, and thrift, sobriety and hard work in both...small-town America took its stand against 'the credit system, the fashion system,and every other system tending to prodigality and bankruptcy.." The railroads disrupted this agricultural, rural world by heightening expectations and increasing income inequality. The Granger laws, passed mainly in the Midwest, were an attempt to address resentment toward wealthy railroad owners by setting rates and regulating business conduct.
Railroads such as the Atchison, Topeka and Santa Fe, the Great Northern, the Southern Pacific and Northern Pacific united the nation and created a unitary market but (p.12) "America in the late 19th century was a society without a core."
The expansion of markets was not matched by expansion of business expertise. In banking, for instance (p. 21):
"A few institutions in the major cities experienced a phenomenal growth during the eighties in part from the demand for commercial banking facilities...Yet the apparent leaders, like their industrial counterparts, presided over vast mechanisms that had developed beyond their control...With intuitive methods for gauging the business cycle and rule-of-thumb measures for evaluating credit risks, they relied on stabs of shrewdness, not long-range wisdom, in conducting their affairs. Bankers at all levels strained to comprehend an increasingly complex, impersonal operation."
The difficulties business had in competing led to (p. 23):
"The classic sequence from tooth-and-claw competition to gentlemen's agreements to pools to trusts to holding companies...new techniques for cooperation rather than supplanting the old joined them to form a more intricate mosaic of business practice...the more complex the consolidation, the greater the internal confusion it tended to bring."
Wiebe writes (p. 25) that finance became an important field around 1890 and that JP Morgan guided many other financiers through the late 19th century: "Led by JP Morgan, whose imaginative policies in railroad cooperation had already won him fame during the eighties, a handful of financiers, almost all of them private investment bankers, took charge of the new surplus....Morgan enjoyed such respect that a caravan of domestic followers gladly marched to his beat."
As well, "the continuous need for credit as a matter of course made industrial executives vulnerable to bankers' direction...companies were showing interest in the benefits of an enforced peace." Nevertheless, in the 1890s 40% of the American railroad mileage had gone into receivership (p. 26). The investment banking community took over the railroads, reorganized them, and appointed managers who looked to Wall Street "for strategic guidance".
The expansion of markets led, according to Wiebe, to the end of the "island community" (p. 44). The growth of big business and the apparent concentration of wealth led scholar Richard T. Ely and evangelical minister Josiah Strong to argue for a social role for religion. Henry Demarest Lloyd attacked Standard Oil and moved into more radical causes, calling himself "a socialist-anarchist-communist-individualist-collectivist-co-operative-aristocratic-democrat". Lloyd's rhetoric sounded suspiciously like Herbert Croly's, 20 years later (p. 64) : " The new religion--man the redeemer...this divinity of democracy--the creative will of the people which is to be substituted for the old God." And Henry George argued for a 'single tax'. There was a sense of crisis, that "great corporations were stifling opportunity". There was a strong desire for self determination and community autonomy. There were, asserts Wiebe, Christian capitalists as well as Christian socialists. Edward Bellamy's Looking Backward was a Utopian novel, set in the year 2000, when society would be rationally designed and peace and goodwill would reign. Investment banks were abolished in Bellamy's world, and everyone would retire in middle age. All industry was to be run by the state. Everyone lives in small communities held together by fraternal cooperation.
The rural feeling of the threat of big business coupled with the fear of immigration and labor violence and strikes led to populism and the Populist or People's Party (p. 84):
"All of the community movements assumed that a natural, local society required the destruction of unnatural, national powers. As the Populist platform suggested, government would again become a function of men's everyday lives only after a direct democracy had dissolved a distant, corrupt government; technology would serve the communities only after nationalization had removed an oligarchy of railroad, telegraph, and telephone companies; power would belong to the people only after a silver currency, a decentralized postal savings system and subtreasury notes had replaced Wall Street and the national banks.."
By the early 1890s the Populist Party had captured 15% of the popular vote. Its downfall was its support for Democratic Party candidate William Jennings Bryan in 1896. When his free silver candidacy lost, the Populist Party lost credibility. In 1896 the Republicans became the party of sound money, of gold, and the Democrats became the party of silver, of inflation. A few Democrats, among them Woodrow Wilson, broke off from the Democratic Party in 1896 and fielded their own Gold Democratic candidate. Corporate America felt threatened by Bryan (they did not conceive of the advantages inflation offered them until after Lord Keynes wrote in the 1930s).
Along with a number of other authors in this field, Wiebe points out that the late nineteenth century saw a "revolution in values" (chapter nine) in that the expansion of markets shifted Americans' perceptions of wealth. In the day of the "island economies" of small town America, the relationship between morals and economic was perceived to have been that godliness and ethics led to economic prosperity. But in the expanded marketplace of big business, the relationship between morality and economic activity seemed to have been severed (p. 133):
"Now a perverted world was enabling men to perpetrate monstrous hoaxes in the name of the old morality. It had been natural enough to account for business success and nature in terms of individual virtue and vice; it was quite another matter to permit the corporations ill gotten profits because the Supreme Court adjudged them 'persons' within the meaning of the Fourteenth Amendment...No just God had given Rockefeller his money, whatever the man said. Yet for those who had customarily thought of wealth as a token of grace, re-arguing the case brought only frustration...From the seventies through the First World War, the nature of social change dominated their inquiries...With few exceptions the individual, who absorbed earlier and later generations, received only perfunctory attention."
In the 1870s and 1880s, economists believed in the wages fund theory and many combined it with social Darwinism. Some advocates of social Darwinism, such as Andrew Carnegie, argued for philanthropy. Wiebe, a product of mid-twentieth century statism, is somewhat sarcastic and condescending about the ideas of Sumner and David A. Wells, which are more viable and elastic than those of Keynes.
One response, the Social Gospel of Reverend Washington Gladden in his book Applied Christianity, was to argue for a boycott of monopolies and for employers to love employees. Another response was utopianism. In Looking Backward Bellamy argued for "the principle of fraternal co-operation...the only true science of wealth production" and a "people's economy supervised by an immaterial government". As well, Henry Demarest Lloyd argued for "cooperation to replace competition, nationalization under under an invisible government, a classless society living by the Golden rule." As a practical matter, Bellamy stated that he favored the nationalization of industry.
The utopianism of Bellamy and Gladden led to a combination of philosophical idealism and biology. Franklin H. Giddings and Brand Whitlock used biological metaphors to describe society and cities. They emphasized progress in stages. In 1883 Lester F. Ward (p. 141) argued that society had evolved in four stages.The academic Richard T. Ely argued that society would evolve through seven stages "to reach its destiny in industrial integration, essentially a Christian cooperative commonwealth." Wiebe states that following Comte, the most popular number of stages was three.
In the end, argues Wiebe, a bureaucratic mentality prevailed. The bureaucratic approach emphasized "recognizable, everyday problems" (p. 147) and eliminated biological analogies, relying instead on mechanical metaphors. This approach emphasized "scientific method", relying on statistics and a belief that "society was a vast tissue of reciprocal activity" (p. 147). Rather than discuss human psychology and focused instead on behavior (p. 149):
"Now education implied the guidance of behavior in harmony with social processes."
According to Wiebe (p.149),
"the bureaucratic orientation did not reach its peak of success until the nineteen twenties...By degrees the philosophy of urban political reform had moved from simple moral principles guaranteed by the proper forms of government to complex procedural principles advanced by the proper administration of government...A similar transformation occurred in social work. The original settlement workers had entered the slums and served the poor as moral acts. Over time...they became immersed in the endless, interrelated problems of a whole city's life."
Wiebe adds Arthur Bentley's bureaucratic analysis of government, The Process of Government, Frederick W. Taylor's scientific management and John Dewey's combination of pragmatism with a bureaucratic "theory that made individuals the plastic stuff of society."
It is evident from Wiebe's description of Dewey that modern "liberalism" (more accurately termed social democracy) is a betrayal of Dewey's ideas, particularly of his pragmatism:
"Throughout his writings ran a limitless faith in the scientific method as the means for freeing people of all ages to learn through exploration and through social experience."
But Dewey's ideas, while elegant, failed to anticipate the dominant impulse of interest groups and their extraction of rents from the state. The idea that social democratic institutions have led to rationality is laughable. Yet, instead of remaining loyal to the pragmatic impulse of William James, which would require a reassessment of failed ideology, today's social democrats ("liberals" or "progressives") continue to chant a rote commitment to failed ideas.
There is certainly a link between the bureaucratic ideas of Taylor and the classical liberalism of William Graham Sumner (p. 156):
"In a certain sense, bureaucratic thought reverted to the visions of the original classical theory, substituting an internally derived dynamic--a social process-for the externally justified balance of a John Fiske or a William Graham Sumner. Both theories, at least, sought to create unity out of diversity...the acknowledgment of society's inevitable pluralism raised difficulties that would plague bureaucratic through for years to come."
Advocates of Progressivism (which is the early twentieth century manifestation of Wiebe's bureaucratic approach) such as Walter Lippmann and Walter Weyl saw consumerism as the ultimate outcome of the bureaucratic society (p. 158).
Progressivism led to a" a strikingly different conception of government" which involved the replacement of economic with political criteria (p. 160):
"Trained, professional servants would staff a government broadly and continuously involved in society's operations. In order to meet problems as they arose, these officials should hold multiple mandates, ones that perforce would blur the conventional distinctions among executive, legislature and judiciary. Above them stood the public men, a unique and indispensible leader. Although learned enough to comprehend the details of a modern, specialized government, he was much more than an expert among experts. His vision encompassed the entire nation...Corps of servants received his general directives and translated them into their particular areas ...As the nation's leader, the public man would be an educator-extraordinary...In time, after a 'long tutelage in public affairs', the electorate would come to participate directly in certain aspects of government through the initiative, referendum and recall...The theory was immediately and persistently attacked as undemocratic...In fact the theory was not as boldly authoritarian as it sometimes appeared...The latitude he enjoyed in administration existed only because no one could predict the course of a fluid society...the theory purported to describe government by science not by men...As all citizens became rational, they would naturally arrive at the same general answers. Experts, of course, would always know more in their particualar fields, and the public man would always see the whole more clearly; but national rationality would assure consensus on the big issues, the matters of principle."
Wiebe articuately describes the essence of Progressivism. In chapter 7, "Progressivism arrives", he describes the roots of Progressivism in estern urban centers and some midwestern and southern agrarian states. The Progressives believed that a "patchwork government could no longer manager the range of urban problems" (p. 167). Mainstream business interests supported Progressivism (p. 167) "well-to-do merchants, manufacturers and bankers who sought more dependable and rewarding relations with government were moving to the vanguard of urban reform." This was accomplished in establishing utility regulation (p. 168), the secret ballot, the shortened ballot, and increasing the number of appointed governmental posts and the introduction of government budgeting. Their establishment of settlement houses led to an interest in child labor laws. Wiebe emphasizes (p. 169) the Progressives' fixation on improvement of government administration. They envisioned flexible, authority staffed by qualified experts in areas like housing regulation, early childhood education, conservation and public health. The Progressives emphasized efficiency.
In attempting to implement their ideas they linked themselves to businessmen and political bosses (p. 174).
Wiebe makes an important point (p. 174):
"It was the expert who benefited most from the new framework of politics...The more complex the competition for power, the more organizational leaders relied on experts to decipher and to prescribe...Only the professional administrator, the doctor, the social worker, the achitect, the economist could show the way...professors like Frank Goodnow, Leo Rowe and Edmund James were telling the National Municipal League what urban reforms it really wanted"
At the same time, businessmen began to institute systematizedpolitical contributions and lobbying slightly before 1900 as a concomitant of Progressivism:
"The political implications of the desire for continuity turned big businessmen into political innovators, and campaigning was one of the first areas affected. Particularly after 1896, such magnates as John McCall of New York Life Insurance, Henry H. Rogers of Standard Oil and Edward Harriman began both to contribute kmore consistently and to grant funds for a party rather than a man."
The contradiction inherent in Progressive reform, namely, its claim to rationality while at the same time encouraging a larger scale, more rationalized corruption, were apparent from the beginning.
The Search for Order is a fine historical work and anyone who reads it will be richer.
Sunday, May 25, 2008
American Workers Are Worse Off--But Why the Baloney?
The table below lists government data on savings rates, the prime interest rate, inflation and real wages since 1972. It is evident from the real wage data in the last column, which states average hourly earnings in 1982 dollars for all private sector US employees, that wages have fallen over the past 35 years from $9.07 per hour in 1972 (in 1982 dollars) to $8.27. This is an unprecedented decline in US workers' welfare. As can be seen in the table as well, in any year since 1972 inflation has not fallen below 1.0 percent. In six of ten years in the 1980s inflation exceeded 4.0 percent. In five of ten years in the 1990s inflation equaled or exceeded 3.0 percent. In three of eight years in the 2000s inflation exceeded 3.0 percent.
In recent weeks there have been several articles in the New York Sun and Newsweek that argue that Americans' lives have grown more prosperous. No serious data is offered to support this claim. Robert J. Samuelson's Newsweek article offers the following: there are more two-car families; more Americans have cable television; and more students go to college.
However, greater consumption evidences little if indebtedness has increased along with the consumption. More Americans likely have two cars because more women are forced to work because their husbands' salaries are dismal. The second car soaks up a good part of the second income. This is not evidence of prosperity. House prices, which the Bureau of Labor Statistics excluded from the Consumer Price Index in the early 1980s, have escalated until this year and have posed an enormous burden on two-income families. In the book Two Income Trap: Why Middle Class Mothers and Fathers Are Going Broke Elizabeth Warren and Amelia Warren Tyagi show that the economic burden of house payments coupled with two wage earners has been the single greatest source of personal bankruptcy. The reason for the inflated house prices is the same as the flat real wages: inflation that Keynesian economic policies have caused.
Samuelson claims that there is greater risk for workers than before so that workers' sense that they are worse off is but a psychological illusion. It is true that workers face more risk than before 1972. But in most contexts higher returns accompany higher risk, while the American economy has produced both higher risk and lower wages for workers. There is only one meaningful measure of workers' welfare, and that is their real hourly wage adjusted for benefits and risk. But benefits have declined as have real hourly wages and, according to Samuelson, risk has increased. In his attempt to put a positive spin on workers' sad fate Samuelson makes things sound worse.
Why is there so much nonsensical news coverage claiming that Americans are better off when a casual glance at real wage data shows that Americans are in fact worse off? This is not rocket science. Real hourly wages were $9.07 in 1972 and $8.27 in 2007. Americans are worse off, and they have been so since 1972 when Richard M. Nixon declared "We are all Keynesians now".
I ask: why do news media like Newsweek, normally eager to criticize the Bush administration, stack baloney when it comes to Fed policy and inflation? One answer has occurred to me: the media are owned by conglomerates that take on a large amount of debt. Inflationary Fed policies keep interest rates low and so subsidize the debt burden of the same media corporations whose units, like Newsweek, report on the news. As well, low interest rates inflate the stock market, helping media stocks to remain unnaturally high so that executives earn high bonuses. My guess is that the volume of pro-Fed propaganda will increase in media outlets whose owners have greater indebtedness. In other words, my hypothesis is that there is an inverse correlation between support for the current economic situation by newspapers, television stations and magazines and the debt to asset ratio of the corporate parents of the media conglomerates that own them.
Perhaps we should view the opinions of the MSM to have the same value as the dollar. As the dollar declines, our faith in the MSM can decline along with it. In the end, we can haul wheel barrows of Newsweek Magazines along with worthless $100 bills.
Personal Saving as a Percentage of Disposable Personal Income
Year....Saving Rate(1)..Prime Rate(2).CPI(3).Real Hr. Wages(4)
1972........8.9................5.25....................3.2..........9.07
1973.......10.5................6.00....................6.2..........8.85
1974.......10.6................9.75...................11.0..........8.55
1975.......10.6...............10.50....................9.1..........8.44
1976........9.4................7.25....................5.8..........8.63
1977........8.7................6.25....................6.5..........8.68
1978........8.9................7.75....................7.6..........8.65
1979........8.9...............11.75...................11.3..........8.23
1980.......10.0...............15.25...................13.5..........7.94
1981.......10.9...............21.50...................10.3..........7.84
1982.......11.2...............15.75....................6.2..........7.92
1983........9.0...............11.50....................3.2..........7.97
1984.......10.8...............11.00....................4.3..........7.95
1985........9.0...............10.75....................3.6..........7.91
1986........8.2................9.50....................1.9..........7.97
1987........7.0................7.50....................3.6..........7.86
1988........7.3................8.75....................4.1..........7.80
1989........7.1...............10.50....................4.8..........7.74
1990........7.0...............10.50....................5.4..........7.57
1991........7.3...............10.00....................4.2..........7.57
1992........7.7................6.50....................3.0..........7.53
1993........5.8................6.00....................3.0..........7.54
1994........4.8................6.00....................2.6..........7.54
1995........4.6................8.50....................2.8..........7.57
1996........4.0................8.50....................3.0..........7.59
1997........3.6................8.25....................2.3..........7.79
1998........4.3................8.50....................1.6..........7.95
1999........2.4................7.75....................2.2..........8.02
2000........2.3................9.50....................3.4..........8.08
2001........1.8................9.50....................2.8..........8.24
2002........2.4................4.75....................1.6..........8.29
2003........2.1................4.25....................2.3..........8.29
2004........2.1................4.00....................2.7..........8.21
2005........0.5................5.25....................3.4..........8.18
2006........0.4................7.25....................3.2..........8.33
2007........0.4................8.25....................2.8..........8.27
(1) Source: http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=58&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Year&FirstYear=1971&LastYear=2008&3Place=N&Update=Update&JavaBox=no
(2) Source: http://mortgage-x.com/general/indexes/prime.asp
(3) Source: Department of Labor, BLS, CPI increases
(4) Source, Department of Labor, BLS, Average Hourly Earnings http://data.bls.gov/PDQ/servlet/SurveyOutputServlet
In recent weeks there have been several articles in the New York Sun and Newsweek that argue that Americans' lives have grown more prosperous. No serious data is offered to support this claim. Robert J. Samuelson's Newsweek article offers the following: there are more two-car families; more Americans have cable television; and more students go to college.
However, greater consumption evidences little if indebtedness has increased along with the consumption. More Americans likely have two cars because more women are forced to work because their husbands' salaries are dismal. The second car soaks up a good part of the second income. This is not evidence of prosperity. House prices, which the Bureau of Labor Statistics excluded from the Consumer Price Index in the early 1980s, have escalated until this year and have posed an enormous burden on two-income families. In the book Two Income Trap: Why Middle Class Mothers and Fathers Are Going Broke Elizabeth Warren and Amelia Warren Tyagi show that the economic burden of house payments coupled with two wage earners has been the single greatest source of personal bankruptcy. The reason for the inflated house prices is the same as the flat real wages: inflation that Keynesian economic policies have caused.
Samuelson claims that there is greater risk for workers than before so that workers' sense that they are worse off is but a psychological illusion. It is true that workers face more risk than before 1972. But in most contexts higher returns accompany higher risk, while the American economy has produced both higher risk and lower wages for workers. There is only one meaningful measure of workers' welfare, and that is their real hourly wage adjusted for benefits and risk. But benefits have declined as have real hourly wages and, according to Samuelson, risk has increased. In his attempt to put a positive spin on workers' sad fate Samuelson makes things sound worse.
Why is there so much nonsensical news coverage claiming that Americans are better off when a casual glance at real wage data shows that Americans are in fact worse off? This is not rocket science. Real hourly wages were $9.07 in 1972 and $8.27 in 2007. Americans are worse off, and they have been so since 1972 when Richard M. Nixon declared "We are all Keynesians now".
I ask: why do news media like Newsweek, normally eager to criticize the Bush administration, stack baloney when it comes to Fed policy and inflation? One answer has occurred to me: the media are owned by conglomerates that take on a large amount of debt. Inflationary Fed policies keep interest rates low and so subsidize the debt burden of the same media corporations whose units, like Newsweek, report on the news. As well, low interest rates inflate the stock market, helping media stocks to remain unnaturally high so that executives earn high bonuses. My guess is that the volume of pro-Fed propaganda will increase in media outlets whose owners have greater indebtedness. In other words, my hypothesis is that there is an inverse correlation between support for the current economic situation by newspapers, television stations and magazines and the debt to asset ratio of the corporate parents of the media conglomerates that own them.
Perhaps we should view the opinions of the MSM to have the same value as the dollar. As the dollar declines, our faith in the MSM can decline along with it. In the end, we can haul wheel barrows of Newsweek Magazines along with worthless $100 bills.
Personal Saving as a Percentage of Disposable Personal Income
Year....Saving Rate(1)..Prime Rate(2).CPI(3).Real Hr. Wages(4)
1972........8.9................5.25....................3.2..........9.07
1973.......10.5................6.00....................6.2..........8.85
1974.......10.6................9.75...................11.0..........8.55
1975.......10.6...............10.50....................9.1..........8.44
1976........9.4................7.25....................5.8..........8.63
1977........8.7................6.25....................6.5..........8.68
1978........8.9................7.75....................7.6..........8.65
1979........8.9...............11.75...................11.3..........8.23
1980.......10.0...............15.25...................13.5..........7.94
1981.......10.9...............21.50...................10.3..........7.84
1982.......11.2...............15.75....................6.2..........7.92
1983........9.0...............11.50....................3.2..........7.97
1984.......10.8...............11.00....................4.3..........7.95
1985........9.0...............10.75....................3.6..........7.91
1986........8.2................9.50....................1.9..........7.97
1987........7.0................7.50....................3.6..........7.86
1988........7.3................8.75....................4.1..........7.80
1989........7.1...............10.50....................4.8..........7.74
1990........7.0...............10.50....................5.4..........7.57
1991........7.3...............10.00....................4.2..........7.57
1992........7.7................6.50....................3.0..........7.53
1993........5.8................6.00....................3.0..........7.54
1994........4.8................6.00....................2.6..........7.54
1995........4.6................8.50....................2.8..........7.57
1996........4.0................8.50....................3.0..........7.59
1997........3.6................8.25....................2.3..........7.79
1998........4.3................8.50....................1.6..........7.95
1999........2.4................7.75....................2.2..........8.02
2000........2.3................9.50....................3.4..........8.08
2001........1.8................9.50....................2.8..........8.24
2002........2.4................4.75....................1.6..........8.29
2003........2.1................4.25....................2.3..........8.29
2004........2.1................4.00....................2.7..........8.21
2005........0.5................5.25....................3.4..........8.18
2006........0.4................7.25....................3.2..........8.33
2007........0.4................8.25....................2.8..........8.27
(1) Source: http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=58&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Year&FirstYear=1971&LastYear=2008&3Place=N&Update=Update&JavaBox=no
(2) Source: http://mortgage-x.com/general/indexes/prime.asp
(3) Source: Department of Labor, BLS, CPI increases
(4) Source, Department of Labor, BLS, Average Hourly Earnings http://data.bls.gov/PDQ/servlet/SurveyOutputServlet
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