Thursday, July 24, 2008

Ronald Radosh's and Murray N. Rothbard's New History of Leviathan

Ronald Radosh and Murray N. Rothbard, editors A New History of Leviathan. New York: EP Dutton and Co. Inc., 1972. 265 pages. Out of print. Available used from for $49.99-55.00.

In 1972, the softcover New History of Leviathan originally sold for $3.95, but today it sells for as much as $55.00 used. It would have made a good investment as it has done at least as well as the Dow Jones Industrial Average. Although it is out of print, it is a classic of the libertarian/New Left revisionist history of Progressivism. The book includes several left-wing authors, including William Appleman Williams and editor Ronald Radosh as well as Rothbard, who of course was the founder of the Cato Institute and the Libertarian Party. I met Rothbard twice, once at a California State Libertarian convention in Sacramento in 1980 while I was an MBA student at UCLA and once at a conference at a hotel on Central Park South sometime around 1988 when I was a doctoral student at Columbia Business School. A little after that I was book review editor of the Columbia Journal of World Business and asked Rothbard to review a book, which he consented to do. That must have been around 1988 or 1989. Rothbard died in 1995. Although I was active in the Free Libertarian Party in the late 1970s, Rothbard had resigned a little before I arrived because of an argument with my friend Howard S. Katz.

Reading this book for the first time 36 years after its publication was a valuable experience. All of the articles in the book are first rate. The chapters that intrigued me most given my interest in public sector management was William Appleman Williams's introduction, Martin J. Sklar's chapter on Woodrow Wilson, Rothbard's chapters on "War Collectivism in World War I" and "Herbert Hoover and the Myth of Laissez-Faire". James Gilbert's chapter on James Burnham is also very interesting. The statist argument had reached a crescendo in the 1970s when this book was written. Although statism is still the dominant American ideology, the establishment's confidence is not what it once was, in part thanks to this book.

The theme of the book is that the Progressives were largely pro-business; that Herbert Hoover was a big-government Progressive who anticipated virtually every one of the components of Franklin D. Roosevelt's New Deal; that the New Deal was not much of a shift from the pro-business interventionist policies of Progressivism; and that the New Deal was a pro-business policy maneuver that may have helped the poor to a small degree but was primarily a means to support business interests.

William Appleman Williams begins with a decisive introduction. He claims that "the true architects of elitist democracy...were the Jacksonian Democrats" (p. 2). This of course differs from Louis Hartz, who views the Whigs as elitist. There is no simple resolution to this difference. It is true that the Jacksonian Democracy was in favor of universal suffrage for white males, but it is also true that the Whigs were far more tolerant both of African Americans and of Native Americans. The Whigs opposed the forced march of the Cherokee Indians (Supreme Court Chief Justice John Marshall held it was illegal), but the march was a Jacksonian policy. Almost all of the abolitionists were Whigs. On the other hand, the Whigs were economic elitists who favored statism and the wealthy. If anything, the Whigs were in many ways predecessors of the Progressives and the New Deal in that they favored big government, public works and a central bank. On the other hand, the Jacksonians were working class racists who believed in the principle of equality for white males and were economic democrats.

In the next paragraph, Williams rips into the "New Leviathan" (pp. 2-3):

"What we now have is a conscious, willful and managed elitism with very little representation, responsiveness or democracy..."

Sklar on Wilson

In Martin J. Sklar's chapter on Woodrow Wilson, he argues that it is a historical misconception that there were two distinct compartments to Wilson's mentality, the moralistic and the realistic. The Puritan ethic in which Wilson was trained (p. 8) does not distinguish between the real political world and the spiritual world. Moreover, Wilson was heavily influenced by Burke and Bagehot. In turn, this conservative influence was consistent with institutionalist theory (p. 11), and Wilson believed that the individual entrepreneur was in a state of decline. But Wilson did not want to fight individualist decline and he approved of large-scale industry. The economic facts of life had changed (p. 14) due to industrialization, the closing of the frontier and the replacement of the individual entrepreneur by large-scale industry in Wilson's view. He believed that the law needed to be updated to oversee the trusts in specific ways, such as requiring reasonable competition (p. 19). By 1908 Wilson did not advocate laissez-faire economics, and his acceptance of the Federal Trade Commission to oversee trusts was consistent with his belief in government regulation and the rule of reason doctrine enunciated in the Standard Oil and American Tobacco cases as well as his belief that corporations should be regulated by a rule of law as opposed to arbitrary rule by elected officials.

Wilson was not an opponent of big business; he believed that there needed to be realistic legal standards to govern big business. He believed (p. 25) that international expansion of markets was necessary to replace the frontier in order to enable US corporations to grow. Thus, Wilson argued for "'development' of agrarian areas" (p. 27) internationally since exports were essential. He also believed (p. 26) in government support for the merchant marine, a belief that Harding was to replicate. Sklar quotes a Wilson speech on p. 27: "Our domestic markets no longer suffice. We need foreign markets..." "Wilson stressed three major reforms to meet the new necessities of the time--the downward revision of the tariff, the development of a strong merchant marine, and laws permitting foreign branch banking tied to a commercial-acceptance system," that is the Federal Reserve Bank.

Wilson's appointees to the Department of Commerce (William C. Redfield), the Federal Trade Commission (Edward N. Hurley and George L. Rublee) and various ambassadors to China, Great Britain were all advocates of corporate expansion into foreign markets. The claim that Wilson was an anti-big business "democrat" is unfounded. Wilson was a booster of corporate interests, not an opponent.

As evidence Sklar discusses the May 1914 First National Foreign Trade Convention. Secretary of Commerce Redfield and Edward Hurley, Vice Chairman of the Federal Trade Commission worked with various corporate lobbying organizations at the convention. Secretary of State William Jennings Bryan was also present. Willard Straight, the head of an international trade organizations, the American Asiatic Association, cited Wilson's tariff revision, the "Underwood Tariff" as an important step (p. 32) and added that "the opportunity provided by the reserve act for the extension of foreign banking and investment left business 'in a better position than at any time in our undertake the development of export trade...'" Sklar quotes PHW Ross, president of the National Marine League to the effect that the public must realize:

"that government assistance to American shipping and the American export trade is not only a business but a patriotic policy, pertaining to national defense as well as to our industrial welfare."

Sklar argues that business executives believed that large corporations "were most suited to successful export trade" because of low unit costs, ability to obtain credit and related economies of scale. "A domestic policy, therefore, designed to atomize large corporations could only prove self-defeating" (p. 41). Wilson agreed with this and adopted policies to support big business.

At the trade convention, Secretary of State William Jennings Bryan "cited the tariff and the reserve act as measures taken by the Administration for the promotion of foreign trade and "the large corporate spokesmen among the delegates analyzed the two laws in precisely the same way." Sklar quotes John E. Gardin, vice-president of the National City Bank of New York (p. 46):

"'...The administration...certainly has given us two things of which we might be proud: one, the reduction of the tariff...opening up the markets of the world--if we want to sell we have got to buy; and the other is the Federal Reserve Law, which relieves us from bondage...' of an outmoded banking law."

Sklar emphasizes that small business opposed the Underwood Tariff, which chiefly eliminated duties on products produced by small business (p. 47). "In effect, the Underwood Tariff strengthened the position of the larger corporations as against the smaller" (p. 48).

Sklar writes:

"The Federal Reserve Act may be terms of a movement of large finance and corporate-industrial interests, extending back to and before the National Monetary Commission, for branch banking, a commercial-acceptance market for the facilitation of foreign trade and investment, and a reserve system that would protect the gold stock from foreign and domestic runs; a movement that, by expanding the credit structure would reduce industrial corporations' dependence upon the money markets for investment capital and insulate industrial operations from stock-market fluctuations and speculators; a movement that Wilson approved and responded to favorably without himself being in any way responsible for its initiation."

Thus, the Progressive reform movements (p. 50-5) "were led by large corporate interests and political and intellectual leaders affirming the large corporate-industrial capitalist system and convinced of the necessity of institutionalized reforms, legal and otherwise, to accommodate the nation's law and habits and the people's thinking to the new corporate business structure...Wilson emerged as a foremost ideological and political leader of a social movement affirming corporate-industrial capitalism."

Murray N. Rothbard's "War Collectivism in World War I"

Rothbard argues that World War I's "war collectivism" under Wilson served as the inspiration for state corporate capitalism ever since. "War collectivism showed the big business interests of the Western world that it was possible to shift radically from the previous, largely free-market capitalism to a new order marked by strong government and extensive and pervasive government intervention and planning, for the purpose of providing a network of subsidies and monopolistic privileges to business and especially to large business interests" (p. 66).

Much of the war collectivism involved government working with big business to establish cartels which enabled restriction of production and artificially inflated prices. "In many ways, the new order was a striking reversion to mercantilism...The original mercantilism had been brutally frank in its class rule...Instead the new dispensation cloaked the new form of rule in the guise of promotion of the overall national interest, of the welfare of the workers through the representation of labor, and of the common good of all citizens" (p. 67).

From the beginning, business was "enthusiastic about the extensive planning and economic mobilization that the war would entail." Some of the interest groups involved included the Chamber of Commerce and the Committee on Industrial Preparedness, a public-private organization, the governmental Council of National Defense replaced. The Council was dominated by corporate executives such as Walter S. Gifford, chief statistician of AT&T, Daniel Willard of the B&O Railroad, Bernard M. Baruch, Julius Rosenwald, president of Sears Roebuck and Samuel Gompers, head of the AFL-CIO. Herbert Hoover, then a retired mining entrepreneur, was appointed head of the Food Administration (p. 72). Subsequently, Frank A Scott, a Cleveland manufacturer, was appointed head of a spin off War Industries Board. "The functions of the WIB soon became the coordinating of purchase, the allocation of commodities and the fixing of prices and priorities." Bernard M. Baruch took over the WIB in March 1918. The War Industries Board became the central planning agency of the Wilson administration. The WIB had sixty "commodities sections" that dealt with industrial representatives in "over three hundred 'war service committees'" (p. 77).

Big business leaders dominated the War Industries Board (p. 74). These included Alexander Legge of International Harvester, George N. Peek, formerly of Deere & Co., Robert S. Lovett of the Union Pacific Railroad and J. Leonard Replogle, former president of American Vanadium Co.

Rothbard quotes Grosvenor Clarkson (p. 74):

"Individualistic American industrialists were aghast when they realized that industry had been drafted, much as manpower had been...Business willed its own domination, forged its bonds and policed its own subjection. There were bitter and stormy protests here and there, especially from those industries that were curtailed or suspended...But the rents in the garment of authority were amply filled by the docile and cooperative spirit of industry. The occasional obstructor fled from the mandates of the Board only to find himself ostracized by his fellows in industry."

The Conservation Division (p. 75) set out to "rationalize, standardize and cartelize industry in a way that would, hopefully, continue permanently after the end of the war." Rothbard also quotes Margaret L. Coit's biography of Bernard Baruch, Mr. Baruch,to the effect that the Wartime Board enforced compulsory standardization:

"Wartime conservation had reduced styles, varieties, and colors of clothing. It had standardized sizes...It had outlawed 250 different types of plow models in the US to say nothing of 755 types of drills...mass production and mass distribution had become the law of the land...This then would be the goal of the next quarter of the 20th century: "To Standardize American Industry": to make of wartime necessity a matter of peacetime advantage."

Thus, World War I provided a teaching ground for a government-and-big-business controlled economy. "The result of all this new-found harmony within each industry was to substitute cooperation for competition." (p. 78). The Food Control Act of 1917 fixed the price of wheat at a minimum of two dollars a bushel when it had been as low as one dollar within the previous year. Hoover established the "Grain Corporation" which bought wheat from farmers at inflated prices and then resold the wheat to millers, guaranteeing the millers that they would buy back any unsold wheat or flour. If a miller refused to cooperate with the cartelization of the industry, their license would be revoked. Bakers were required to mix other ingredients in with the flour to cheapen the final product.

With respect to the railroads, they were (p.88) "seized and operated directly by the federal government". The railroads formed the Railroad War Board soon after the war began. "Once again, the government-promoted monopoly was an inspiration to many who were looking ahead to the peacetime economy." So, President Wilson guaranteed to the railroads high profits based on the peak years of 1916/17 (p. 90) and in turn offered to run the railroads for the management.

Moreover, much of the activity of the WIB involved price-fixing. This is ironic because the Progressive era up to World War I was dominated by fear of monopoly and unreasonable restraints of trade. In World War I, the government, with the approval of the same Progressives, came out and legally mandated unreasonable restraints of trade. Oddly, through the 1960s historians continued to claim that Progressives like Wilson and Roosevelt were anti-business. Rothbard writes (p. 79):

"Typical of the price-fixing operation was the situation in the cotton textile industry. Chairman Brookings reported in April 1918 that the cotton goods committee had decided to 'get together in a friendly way' to try to stabilize the market...(p. 80) The general enthusiasm of the business world, and especially big business, for the system of war collectivism can now be explained. The enthusiasm was a product of the resulting stabilization of prices, the ironing out of market fluctuations and the fact that prices were almost always set by mutual consent of government and the representatives of each industry."

Thus Judge Elbert Gary, CEO of United States Steel, was put in charge of price setting for the steel industry. Iron Age wrote that:

"it has apparently taken the most gigantic war in all history to give the idea of cooperation any such place in the general economic program as the country's steel manufacturers sought to give it in their own industry nearly ten years ago."

The big steelmakers had urged government price fixing. In industries that were less interested in cooperation with government the WIB was less successful. As for the steel industry (p. 82):

"Under this regime, the steel industry achieved the highest level of profits in its history, averaging twenty-five percent per year".

The story with Herbert Hoover's (Louis Hartz, recall, claims that Hoover was an advocate of laissez-faire) Food Administration was similar but (p. 83) the Food Administration relied on licensing instead of price fixing. "Instead of direct control over food, the FA was given the absolute power to issue licenses for any and all divisions of the food industry...Every dealer, every manufacturer, distributor and warehouser of food commodities was required by Hoover to maintain its federal license." Hoover used mass propaganda to encourage the public to enforce his decrees. The Food Administration used a cost plus approach to setting profits. Although "the program was touted to the public as a means of keeping profits and food prices down" "the goal was also and more importantly to cartelize...prices in general were to be set at a level to guarantee a reasonable profit to everyone...the goal was not lower prices, but uniform, stabilized, noncompetitive prices for all."

Early in the war, wheat prices went up from one dollar to three dollars in a matter of months, then (p. 85) President Wilson fixed the minimum price of wheat at $2.26 in mid-1918. A system of artificial purchases by a federally established Grain Corporation led to guarantees of "fair prices". Federal mandates requiring reduced quality of final baked goods institutionalized the price inflation (p. 86).

The railroads were cartelized under Secretary of the Treasury William Gibbs McAdoo, an entrepreneur, financier and railroad executive. Railroad regulation was colored by a battle between the industrial firms that ship via the railroads and the railroads themselves (p. 91). The shippers attacked McAdoo but failed to overturn him and the railroad executives:

"As in the case of the War Industries Board, the railroad executives used their coercive governmental powers to deal a crippling blow to diversity and competition, on behalf of monopoly, in the name of 'efficiency' and standardizaton. Again, over the opposition of the shippers, the railroad administration ordered the compulsory standardization of locomotive and equipment design, eliminated duplicate passenger service and coal transportation, shut down off-line traffic offices and ordered the cessation of competitive solicitation of freight by the railroads. All of these edicts reduced railroad service to the hapless shippers." (pp. 92-3).

"The granting of absolute power to the railroad-dominated Railroad Administration was cemented by the Federal Control Act of March 1918 which ex post facto legalized the illegal federal takeover" (p. 92).

Rothbard argues that the war collectivisation was not "episodic" (p. 92) but rather was "inspirational". "The wartime economy especially galvanized such business leaders as Beranrd Baruch and Herbert Hoover, who would promote the cooperative 'associaton' of business trade groups as Secretary of Commerce during the 1920s, an associationism that paved the way for the cooperative statism of Franklin Roosevelt's Agricultural Adjustment Act and National Recovery Act" (p. 3). According to Rothbard, war collectivization served as a model to intellectuals, and Baruch and Hoover continued to aim to replicate the model. In the spring of 1930"Baruch proposed a peacetime reincarnation of the WIB" (p. 95). In the same year Gerard Swope, president of General Electric, presented "an elaborate plan for a corporate state that essentially revived the system of wartime planning. Moreover, "as soon as the war was over, Hoover set out to 'reconstruct America' along the lines of peacetime cooperation" (p. 96). Hoover urged national planning and cooperation. "The Federal Reserve system was to allocate capital to essential industries and therebyh to eliminate the competitive wastes of the free his term as Secretary of Commerce during the 1920s, Hoover assiduously encouraged the cartelization of industry through trade associations." Moreover, academics were delighted: "Never before had so many intellectuals and academicians swarmed into government to help regulate and mobilize the economic system. The intellectuals served as advisers, technicians, framers of legislation and administrators of bureaus." "Virtually the entire New Deal apparatus--including the bringing to Washington of a host of liberal intellectuals and planners--owed its inspiration to the war collectivism of World War I. The Reconstruction Finance Corporation, founded by Hoover in 1932 and expanded by Roosevelt's New Deal, was a revival and expansion of the old War Finance Corporation. Wartime experience also provided the inspiration for the public housing movement of the New Deal" (p. 99) "Many of the industrial War Service Committees, and their WIB Section counterparts urged the continuance of the WIB and its price fixing system" (p. 101). However, Wilson did not believe in that degree of centralized planning, and so disbanded the agencies. There is little doubt that had Teddy Roosevelt been president, the WIB would have bene permanent.

In December 1918 (p. 105) "the Chamber of Commerce of the United States called a meeting of the various industrial War Service Committees to convene as a 'Reconstruction Congress of American Industry. Lumber executive William M. Ritter spearheaded an "Industrial Board" supported by Secretary of Commerce William C. Redfield. It was promoted as a device to secure price reductions and so President Wilson adopted the board, but its real purpose (p. 106) was "not to reduce, but rather to stabilize prices at existing levels." Once Wilson approved it, the Board tried to establish industrial price agreements "arrived at in collaboration with the Board" (p. 106). The small steel firms disliked the Industrial Board's steel prices but the large ones supported them. The Railroad Administration and the Justice Department objected to the price fixing scheme (p. 107), and President Wilson dissolved the IB in 1919. The $2.26 wheat price continued until 1920 (p. 108). The Railroad Administration, the government operation of the railroad led to several bills proposing government reorganization of the railroad industry but the industrial shippers stopped the bill. In March 1920 the war measures ended.

Murray N. Rothbard's Herbert Hoover and the Myth of Laissez-Faire

In this chapter Rothbard argues that Herbert Hoover "was in every way the precursor of Roosevelt and the New Deal" and that Hoover was the preeminent "corporate liberal". Thus, the New Deal was not all that distinguishable from Progressivism. Hoover advocated (p. 112) "voluntary cooperation under 'central direction'" with the Federal Reserve allocating capial, federal development of dams, improvement of "waterways, a federal home-loan banking system, the promotion of unions and collective bargainig and governmental regulation of the stock market to eliminate vicious speculation."

During the Harding administration as Secretary of Commerce Hoover "organized a federal committee on unemployment, which supplied unemployment relief through branches and subbranches in every state...Hoover organized the various federal, state and miunicipal governments to increase public works and persuaded employers to spread unemployment by cutting hours for all workers."

"Throughout the 1920s Hoover supported numerous bills in Congress for public works programs" (p. 115) and subsidization of the construction industry. President Coolidge supported Hoover's "Road to Plenty" or "Hoover" plan to use public works to end depression as did the AF of L (p. 116). "Hoover had long agitated for industry to encourage and incorporate labor unionism within the framework of the emerging industrial order. Moreover, he played a crucial role in converting the labor leaders themselves to the idea of a corporate state with unions as junior partners in the system".

"Workers would be protected from the unfair competition of the sweatshop...Still more did this mean protection of the lower-cost large employers from the competition of their smaller sweatshop rivals...Hoover called for a new economic system, what was in effect a corporate state..." Hoover (pp. 118-19) "persuaded Harding to hold a conference of steel manufacturers in May 1922 after which he and Harding called upon the steel magnates to bow to the workers' demand to shift from a twelve-hour to an eight-hour day." Hoover (p. 119) was coauthor along with Donald Richberg and David E. Lilienthal, of the Railway Labor Act of 1926. "Herbert Hoover's entire program of activities as Secretary of Commerce was designed to advance the subsidization of industry" (p. 120). He "expanded the Bureau of Foreign and Domestic Commerce" five-fold (p.l21). He urged the coffee trade to band together to form a National Coffee Council (p. 121). He helped organzie a rubber cartel. He threatened legislation against American investment bankers unless they required that loans that they made abroad be used to purchase American goods. Hoover encouraged cartelization of oil (p. 122), coal (p. 123) and cotton textiles (p. 124). He played a leading role in "nationalizing the airwaves of the fledgling radio industry." During the 1920s, Hoover aimed to monopolize industry by "standardization and 'simplification'...for example of automobile wheels and tires and threads for nuts and bolts. All in all, about three thousand articles were thus 'simplified'" (p. 125). He emphasized cartelization of agriculture (p. 125) in part through lending to farm co-ops. "He was one of the earliest proponents of a Federal Farm Board, designed to raise and support farm prices" and "as a presidential candidate in 1928 he promised the farm bloc that he would promptly institute a farm price-support program" (p. 126) which he did as president via the Agricultural Marketing Act of 1929, which created a Federal Farm Board with a revolving fund of $500 million to raise and support farm prices. Rothbard notes that (p. 127) "It is one of the great ironies of historiography that the founder of every single one of the features of Franklin Roosevelt's New Deal was to become enshrined among historians and the general public as the last stalwart defender of laissez-faire."

Rothbard argues that Hoover caused the unusual length of the Great Depression through federal government intervention (p. 128). Following the stock market crash on October 24, 1929 he called a series of conferences and induced business leaders to "pledge that wage rates would not be lowered and that they would expand their investments...Industrial group after group pledged that wage rates would be maintained." Business leaders making the pledge included Henry Ford, Julius Rosenwald, Walter Teagle, Owen D. Young, Alfred P. Sloan, Jr. and Pierre du Pont (p. 129). Artificially high wages meant sustained unemployment. This interpretation differs from Milton Friedman's, who argues that Hoover insisted that interest rates be raised in 1929 to stop the stock market bubble. By 1932, businesses were forced to start reducing wages, two years into the depression (p. 130). "Even with the cuts in wages, wage rates fell by only twenty-three percent from 1929 to 1933--less than the decline of prices...Unemployment rose to 25 percent of the labor force by 1933".

Rothbard argues that Hoover's monetary stance was inflationary: "Hoover did his best, furthermore, to engineer a massive inflation of money and credit...Federal Reserve holdings rose from $300 millino in September 1929 to $1,840 million in March 1933...Ordinarily this woul dhave led to a sixfold expansion of bank reserves and an enormous inflation of the money supply. But the Hoover drive for inflation was thwarted by the forces of the economy. Federal Reserve rediscounts fell by half a billion due to sluggish business deamdn, despite a sharp drop in the Federal Reserve rediscount rate; cash in circulation increased by one and a half billion due to the public's growing distrust of the shakey an dinflated banking system; and the banks began to pile up excess reserves because of their fear of making investments amidst the sea of business failures." In response, Hoover pressured the banks. In February 1932 Hoover "established the Citizens' Reconstruction Organization under Colonel Frank Knox of Chicago dedicated to condemning hoarders and unpatriotic 'traitors'."

"Federal expenditures rose from $3.3 billion in fiscal 1929 to $4.6 billion in fiscal 1932 and 1933...meanwhile, federal budget receipts fell in half...demonstrating that Hoover was so much of a proto-Keynsian that he was willing to incur a deficit of nearly sixty percent of the budget."

"In February 1932, Hoover's Emergency Committee for Employment was instrumental in pushing through Congress Senator Wagner's Employment Stabilization Act to expand public works in a depression...He...launched the Boulder, Grand Coulee and California Central Valley dams, and after agitating for the project since 1921, Hoover signed a treaty with Canada to build a St. Lawrence Seaway, a treaty rejected by the Senate" (p. 133).

"Another massive dose of government intervention was President Hoover's Home Loan Bank System, established in the Federal Home Loan Act of July 1932." This law paralleled the Federal Reserve Bank for S&Ls. In 1932 he established the Reconstruction Finance Corporation, which provided loans to shaky firms. In 1932 the RFC made $1 billion in loans to banks and railroads. The railroads used the loans to repay bank loans. The program was extended into the Emergency Relief and Construction Act in July 1932, which doubled the RFC's capital to $2 billion and greatly widened the scope of RFC lending. Hoover opposed speculation, and he strong armed the New York Stock Exchange to refuse to give loans for short selling. His Federal Farm Board loaned $100 million to farmers to help them keep wheat off the market to boost prices (p. 137). "By November, the government's Grain Stabilization Corporationhad purchased over 65 million bushels of wheat to hold off the market, but to no avail" (p. 138).

Despite all of these governmental programs, Hoover held back (p. 134) from demands for even greater amounts of public works projects. Rothbard states that for this reason, Hoover is remembered as an advocate of laissez-faire. Moreover, while Hoover was interested in lending money to railroads and banks, he was not interested in extending relief to the poor (p. 136), although in 1932 he indeed established a federal relief program (p. 137). According to Rothbard "an impatience with the pace of America's movement toward the corporate state" spread throughout industry. "In short, a general clamor arose for an economy of fascism" based on compulsory cartels. Advocates including Gerard Swope of GE, Henry I. Harriman of the Chamber of Commerce, Charles F. Abbott of the American Institute of Steel Companies, and the AFL. "Dr. Virgil Jordan, economist for the national Industrial Conference Board, summed up the state of business opinion when he concluded, approvingly, that businessmen were ready for an economic Mussolini." (quoted on p. 143). Roosevelt, of course, pushed through the National Recovery Act, but the Supreme Court held it to be unconstitutional.

Ronald Radosh's "Myth of the New Deal"

Radosh argues that the New Deal functioned in a probusiness manner. He quotes Paul Conkin's The New Deal (p. 148):

"The enemies of the New Deal were wrong. They should have been friends...the meager benefits of Social Security were insignificant in comparison to the building system of security for large, established businesses...The New Deal tried to frame institutions to protect capitalism from major business cycles...instead of higher wages creating a market, at the short-term expense of profits, the government subsidized the businessman, without takin the cost out of his hide.

Radosh asks: "How could rhetoric alone convince so many that their lives had changed (by the New Deal) if, indeed, life was the same as it had always been?"

He quotes Arthur Schlesinger's pragmatist response (p. 150)that Roosevelt:

"led our nation through a crisis of confidence by convincing the American people that they had unsuspected reserves of decency, steadfastness and concern. He defeated the grand ideologists of his age by showing how experiment could overcome dogma, in peace and in war...(Social Security) meant a tremendous break with the inhibitions of the past."

Radosh argues that various historians (p. 151) have disproven Schlesinger's thesis that "Liberalism in America has been ordinarily the movement of the part of the other sections of society to restrain the power of the business community" (p. 150-1). That's an interesting quote. It was true up until 1890 or so. But the term liberal changed its meaning and started to mean interventionist as opposed to laissez-faire. That shift meant that liberalism became the philosophy of subsidy to business.

Radosh asks how is it possible that the public believed that the "dispossessed and white working class" had benefited from the New Deal when they hadn't. He looks at the National Recovery Administration, the Congress of Industrial Organizations, the origins of the Wagner or National Labor Relations Act and Social Security. The National Association of Manufacturers, which represented small business, opposed Social Security. Mainstream historians like Arthur Schlesinger held that all of business opposed social security, but the NAM was not representative of big business. "Particularly important is the backing given the Act by the Business Advisory Council, which formed a committee on Social Security headed by Gerard Swope, president of General Electric, Walter Teagle of Standard Oil..." The leadership of the Business Advisory Council was a Who's Who of big business. (pp.157-8). Congress watered down the bill because "many congressmen and senators reflected their local constituencies, which included local antilabor and small town mentality NAM business types" (p. 158).

The idea of GE's Swope and others was to institute a fascist economy led by elite business executives: "Although they would make major decisions and all groups were to be represented, decision-making would remain within the hands of the elite who ruled for the society at large." Radosh calls this "an American corporate state". This was consistent, in Radosh's views, with the fascination many social democratic (aka "liberal") Americans had for fascism. It is intriguing that the use of the term "liberal" had become so perverted by the 1970s that Radosh, adopting common usage, could say "many liberals viewed fascist economic theory as a promising alternative". The perversion of the English language in causing the term "liberal" to refer to someone who favors government coercion is parallel to the Nazis' use of the "term" "Heil" to refer to Hitler. The term "heil" suggests healing and holiness in German, much as the term "liberal" refers to freedom in its Latin root.

Radosh quotes an article by John P. Diggins from the American Historical Review entitled "Flirtation with Fascism: American Pragmatic Liberals and Mussolini's Italy": (AHR LXXI, January 1966, pp. 497-505).

"fascism appeared to be a continuous creative effort that found its affirmation in the subordination of end to means. In its attempt to strike a balance between the dogmas of capitalism and socialism, moreover, Fascism avoided doctrinal myopia. Rejecting the fetishes of both the Left and Right, it presented an admirable alternative to an ironclad ideology on the on ehand and a tenaciously shallow sentimentalism on the other."

Radosh adds: "To liberals, fascism appeared to be a system of planning that transcended classes and led to an equilibrium of contending social forces. Thus, it was 'essentially the theoretical appeals of corporatism that interested the liberals."

The New Deal adopted "planning techniques that had antecedents in the trade associations developed within industry during the Hoover years."

The draftsmen of the NRA were associated with the World War I measures that Rothbard describes. William McAdoo wrote Bernard Baruch in favor of government regulation "for the prevention of waste, overproduction and monopolistic oppression" (p. 163). Radosh emphasizes that the NRA was a pro-business law:

"The immediate consequence of the war was not a New Jerusalem of the planners but the Whiggery of Herbert Hoover as Secretary of Commerce. While the war mobiliazations did establish meaningful precedents for New Deal reforms, it was hardly the 'war socialism' some theorists thought it ought to be. Corporatism "had been accepted as part of the American scene" (p. 166). Radosh quotes Eugene Golob's point that the NRA was "the greatest effort in history to adapt the principals of medieval guild regulation to the industrial economy of a democratic nation." Laissez-faire liberals such as Senator William E. Borah attempted to stop the NRA arguing that it would lead to income and wealth inequality. In the Senate, Robert F. Wagner (D NY) argued that the NRA was the "first step toward that which the liberals of the country have been preparing for years" (p. 168). Industry executives were to prepare codes of fair competition, and the advocates of the New Deal did not mind. The conservative advocates of the NRA realized "the dire need to include social reform as an essential component of the corporate state. They understood that many liberals and even political radicals would overlook the conservative origin and effect of the NRA if reform, especially public works, was offered as part of a package deal" (p. 169). Public works were used to camouflage the major extent to which New Deal reforms benefited corporate interests.

Radosh argues thta the Wagner Act integrated labor into the corporate capitalist system and so was "conservative" in the same sense that the NRA was. Radosh argues that the National Labor Relations Act encouraged industrial unionism. "A split developed between the moderate sophisticated corporate leaders and the old-line antilabor diehards" (p. 175). Quoting G. William Domhoff's Higher Circles"

"A powerful mass of organized workers did not overwhelm a united power elite position. Rather, moderate members of the power elite, faced with a very serious Depression, massive unemployment decline wages, growing unrest and spontaneous union organizing and after much planning and discussion, chose a path that had been traced out gradually over a period of years by the National Civic Federation, the Commission on Industrial Relations and other pro-union forces within the power elite. By making certain concessions and institutionalizing their conflict with labor, they avoided the possibility of serious political opposition to the structure of the corporate system."

"As early as 1926, (Gerard) Swope had sought to convince AF of L president William Green to form a nationwide union of electrical workers organized on an industrial basis...William Green, because he had to maintain his commitment to the craft unions comprising the AF of L, rejected Swope's pleas."

Swope also supported Hugo Black's bill for a thirty hour week (p. 177) and Secretary of Labor Frances Perkins's minimum wage bill (p. 177). Swope proposed creation of a National Labor Relations Board (p. 177). Swope favored collective bargaining with industrial unions because multiple craft unions in a single plant would have been less efficient (p. 178). Radosh quotes Domhoff on Roosevelt as an:

"integral member of the upper class and its power elite. However, he was a member of that part of the power elite that had chosen a more moderate course in attempting to deal with the relationship of labor and capital...While he did not encourage unionism, his record during the thirties makes very clear, he was nonetheless unwilling to smash it in the way the NAM had hoped to do since 1902."

It is true (p. 185) that nonelite groups "were the beneficiaries of many of the new social reforms. Social Security did produce benefits despite its limitations. NRA did eliminate sweatshops and organzied labor was able to strengthen its position in society."* But (p. 186) "The New Deal reforms were not mere incremental gestures...They were of such a character tht they would be able to create a long-lasting mythology about the existence of a pluralistic American democracy, in which big labor supposedly exerts its countering influence...The populace resopnded to FDR's radical rhetoric only because it mirrored their own deeply held illusions."

The contemporary political dialogue inherents the propagandistic flavor of the New Deal and of the Progressives. Reality rarely conforms to rhetoric. The advocates of social democracy implement policies in the interest of the professional and stock jobbing classes. The proponents of small and efficient government adopt ever-larger and more wasteful government programs. It is nearly impossible for citizens to grasp the contours of government. Any set of pleasant-sounding lies will do. The media, short-term profit seeking, intellectually lazy and doctrinaire is unwilling to discuss the myriad problems and failures in government. The result is a governmental system that is increasingly deviating from the intentions, hopes and goals of the American public.

*The fallacy of thinking in terms of less than five or six decades is evident here. Although Radosh was writing nearly four decades after passage of the NLRA globalization had not yet facilitated the contemporary response to improved working conditions in the US--hiring of sweatshop labor in Asia and private sector union density is now where it was in the 1920s .

The Social Democratic Fetishization of the State and In Praise of Reaction

Louis Hartz argues that the New Deal was pragmatic. The claim that the state solves problems is one that reverberates throughout the twentieth century and into the 21st. But is that so? Whiggery has often been a reaction to government initiatives. In the 18th century the Whigs were a reaction to the establishment of the Bank of England and what they saw as the corruption of the English court and Parliament by Sir Robert Walpole. In the Federalist era in America, the Jeffersonian Republicans were a reaction to the Federalism of Alexander Hamilton. The Jacksonian Democracy, which was more Whiggish than Jackson's opponents, who changed their name from the National Republican to the Whig Party, was similarly a reaction to the Bank of the United States. In general, freedom is not a cause that rallies support until it is violated. Hence, Whiggish or libertarian movements always have the quality of reaction.

The Progressives confounded reaction to their policies with opposition to progress. Reaction to change can can be progressive if an initiative does harm. Progress means improvement toward a goal, so if change impedes improvement, reaction and removal of the change is progressive. There is no necessary conflict between reactionary and progressive ideas. American politics became overly rigid because of the equation of change and progress. Change is progressive if it improves human beings, if it does not cause harm and if society is better off because of it. Most change is complex and has unforeseen effects. The minimum wage, for instance, may cause unemployment and it may forestall the poorest segment of society from gaining work experience that in turn prevents the development of work habits and so leads to dependency and a welfare culture. This may be true even if the unemployment rate is not visibly raised following an increase in the minimum wage because employers may reduce training and other fringe benefits that are difficult to discern. On the other hand, a low minimum wage may not have these effects. If demand for labor is wage inelastic, then a small increase in the minimum wage may have little effect on employment or working conditions and cause a significant improvement in the welfare of low-wage workers. This is a question that is fairly simple to conceptualize, but there is no way to resolve it scientifically because the effects of the real wage on employment decisions are not completely measurable. There is no debate that a large increase in the minimum wage will reduce employment. In nations with high minimum wages and work standards unemployment is consistently higher than in more competitive nations. Similarly, union contracts may improve the wage level and introduce greater job security and employee "say" into the workplace, but it may also cause spillover effects under which lower employment levels in unionized plants cause higher unemployment and lower wages in non-union plants. The reverse may also be true, that the high wages that unions cause may threaten non-union employers to offer higher wages so that their employees will not unionize.

The effects of state intervention are difficult if not impossible to predict. The assessment of such effects takes many years, perhaps five decades. One would expect a pragmatic advocacy of New Deal policies to be open to such assessment.

In general, most ideas fail. Inventors find that they must fail many times before coming up with a single success. Four fifths of new product innovations in large firms fail, and the same percentage of business start ups fail. Yet, social democrats seem to feel that the programs that they advocate never fail. There was some welfare reform under the Democratic Clinton administration, but the left opposed this reform and continues to do so despite empirical evidence that it has worked. Welfare was certainly a hot button issue until Clinton initiated the reform, and it is something of an exception. Few other government programs have been revised, adjusted for quality reasons or terminated outright.

If government managers and politicians are no smarter than entrepreneurs, then we would expect four fifths of government programs to be terminated. Yet, few government programs die once initiated. Rather, they create a vested interest group that economically depends on the program (teachers, professors, government employees, health workers, police officers and the like) and the reactionary interest group radically opposes the program.

This may be viewed as a kind of fetishization. New Deal social democrats fetishize government policies and view them as sacred, much as a tribal culture views a totem as sacred. This religious fixation on government programs likely has religious roots in early America. The Whig Party, for instance, believed that social concerns commingled with economic concerns. Protestantism saw a link between social morality and economic success. Later in the nineteenth century, the Social Gospel held that there was a religious motivation for socialistic reform. The laissez-faire conservatism of late nineteenth century Republicanism that led to today's Republicans being associated with free market and conservative ideas was a deviation from the earlier association. The Federalists and the Whigs, the first two conservative parties that represented wealthy interests, were big government parties. They were also the more religious parties in comparison with the Jeffersonian Democratic Republicans and the Jacksonian Democrats. Thus, until the Civil War, big government and imposition of social morality was associated with the economic elite. It was not until American business began to mature in the late nineteenth century that the Whigs' descendants, the Republicans, began to adopt laissez-faire positions. But even these laissez-faire positions were heavily qualified. In particular, as the late nineteenth century Republicans had begun to adopt professions, they began to advocate government intervention on behalf of the professions. Thus, a new constellation of professional interests began to evolve. By education, these professionals advocated laissez-faire, and it was not for two generations that the advocates of the professions were to dispense with laissez-faire in the interest of Progressivism and then the New Deal. Of course, Progressivism and the New Deal had the incidental effect of stimulating demand for the professions and enforcing professional standards.

The social democratic fetishization of the state, then, has its roots in elitism and in a communitarian interpretation of religion associated with the early evangelicals. There is therefore considerable tension within the Republican Party. There is no necessary connection between laissez-faire economics and religion. In fact, for much of American history the evangelical Protestants believed in big government. The Democratic Party has always been the more diverse of the parties, but it has only since 1932 been the more social democratic of the parties. Thus, the Democratic Party has increasingly become the party of the professions, of academics, lawyers and physicians. The Republicans have retained the support of the evangelical Protestants, but have done so through an uneasy alliance of the remnant of the individualist liberals and with big business Progressives, i.e., Rockefeller Republicans, who in many ways have more in common with the Democratic professional interests than with the evangelicals or the individualist liberals.

How do these views correspond with those of Americans? It would seem that they capture some of the viewpoints of most Americans. However, given the range of cultural orientations, it would be difficult for the Republicans to consistently capture the portion of the country that is primarily individualist-oriented in its voting, since big business and individualist interests are in conflict. At best, only some of the time can the Republicans represent each of the three orientations in its fold, the individualist, the Progressive and the religious. It is true that religious orientation can be combined with the others, as it has, but the individualist and big business interests are almost necessarily in conflict.

Similarly, there are likely a significant percentage of Democrats who differ from the left wing perspective and who are not supportive of the economic interests of medicine, law and academia. Thus, the Democratic Party has been fairly "conservative" under the Clinton administration but more governmentally expansive under earlier administrations. Due to simple arithmetic, at the national level the two party system cannot capture the ideological diversity of the American public.

Wednesday, July 23, 2008

Louis Hartz's Liberal Tradition in America and the Locke-Step Theory of American Liberalism

Louis Hartz. The Liberal Tradition in America: A new concept of liberal community that relates American politics and political thought to the mainstream of Western history. Winner of the Woodrow Wilson Foundation Award. New York: Harcourt, Brace and World, Inc. 1955. Available from for $10.20, used and new $0.42.

Louis Hartz's Liberal Tradition in America is a brilliant, riveting and erudite study of the history of Lockean liberal ideology in America. Hartz argues that all of American history to his writing in the early 1950s was characterized by a commitment to Lockean liberalism. There are paradoxes to this argument, though, because in order to make this claim Hartz has to explain away elements of the New Deal that were not Lockean in nature and overlook elements of the Progressive era that were also illiberal. Hartz's argument is almost Freudian. Much as Freud claimed that frustrated sexual impulse is behind myriad behaviors, Hartz claims that frustrated liberal impulses are behind myriad behaviors. This single-factor theory fails to work for Freud, but it becomes silly despite the brilliance of Hartz's exegesis. Moreover, Hartz himself is contemptuous of what he several times calls Americans' "irrational liberalism", which in his view is psychologically sublimated whenever a non-Lockean policy is devised.

Hartz's writing is unusually facile and abstract and so susceptible to over-generalization. Moreover, he focuses on ideology as opposed to economic fact. This problem becomes acute in his discussion of the twentieth century. The chapters in the book that discuss the Federalist and Whig periods are the most interesting. He fails to anticipate the possibility that Progressivism was as much a Whiggish doctrine as was late 19th century Republicanism. Somehow, he sees the Republicans as having made a transition from the Whiggery of McKinley to the Progressivism of Theodore Roosevelt and then back to the Whiggery of Harding, Coolidge and Hoover (p. 261). He misconstrues Hoover, failing to grasp that Hoover was as much an advocate of New Deal-style solutions as Franklin D. Roosevelt was, an insight that Murray N. Rothbard develops in his and Ronald Radosh's New History of Leviathon.

Perhaps I am committing a present-orientation fallacy since the benefit of Rothbard's, Martin J. Sklar's, Ronald Radosh's and Gabriel Kolko's libertarian and New Left reinterpretation of Progressivism had yet to be written at the time that Hartz wrote. But there is little in the record to enable him to argue, as he does, that Hoover and Harding were "Whigs" as opposed to Wilson. But he repeatedly calls Hoover a Whig, contrasting him with FDR, yet Hoover was a more left-wing Progressive than was Wilson. Moreover, Wilson was not the most characteristic Progressive, and Theodore Roosevelt was to Wilson's left, which is why Roosevelt ran against Taft, facilitating Wilson's victory. Teddy Roosevelt's Progressivism was not as Lockean and individualist as Hartz argues that Wilson's was. Moreover, the practical economic effects of the four Progressive administrations, Roosevelt, Taft, Wilson and Hoover were different from the democratic effects that Hartz assumes. Nor need we interpret FDR's New Deal in anything other than Whiggish terms. Nor is there any real reason to claim, as Hartz does, that a secret Lockean impulse was beyond FDR's statist policies. Roosevelt abolished restrictions on the central bank, a policy very much in the Whiggish and Federalist tradition, and this was the most far-reaching policy of the New Deal.

As with his discussion of the Progressives, Hartz takes the assertions of Harding at face value. He claims that Progressive legislation was repealed, but this is hardly so. Workers' compensation laws exist today in all of the states, and most or all of them were established in the Progressive era. Harding made no effort to repeal the Progressive laws concerning the Federal Trade Commission and the railroad regulation, and he added a few boondoggles of his own, despite the conservative rhetoric that Hartz takes at face value. Likewise, the gulf between FDR's practical influence in abolishing the gold standard and reinforcing the privileges of Wall Street and his democratic rhetoric are not sufficiently recognized.

The book's weakness with respect to Progressivism and the New Deal is that Hartz fails to disentangle the ideological rhetoric of the Progressives and FDR from the practical economic realities underlying their reforms. Although Hartz makes the point several times that much of the Progressive and New Deal reform had the effect of shoring up business, he overlooks the Whiggish long term effects of both movements.

Today's political milieu is dominated by a separation of rhetoric from effect, and so Hartz's argument concerning the nineteenth century has important implications. He is willing to view the Whigs and their Republican descendants as manipulative and opportunistic in the nineteenth century, but somehow in the twentieth he takes the claims of the Progressives and the New Dealers at face value, adding a naive belief in central planning and government to the mix and the cliched claim that the New Deal was pragmatic.

Hartz claims that liberalism characterizes all of American ideological history, and then argues that FDR's New Deal proves this because even though its policies were pragmatic and not Lockean, it retained an underlying belief in Lockean liberalism that was "sublimated" (pp. 270-1):

"For when the moral cosmology of New Dealism sank beneath the surface, what appeared, of course, was that happy pragmatism which usually refused to concern itself with moral issues at all. And this, in turn, permitted the American democrat to go about solving his problems without the serious twinges of conscience which would surely have appeared had he felt that his Lockian Americanism was at stake...the New Dealers were themselves taken in by the process involved, being proud of their pragmatism and seeing no more clearly than the great Dewey himself the absolute moral base on which it rested."

The trouble is, there is a reality against which ideas need to be tested. Ideas result in policies. If the policies are not Lockean, the ideas cannot be said to be so. The claim that there is an underlying Lockean morality is not a falsifiable one.

For all his literary and philosophical brilliance, Hartz fails to define liberalism coherently. Thus, he contradicts himself on various occasions. Liberalism is first and foremost a philosophy involving freedom. The Latin liberalis means "of freedom". Freedom means that an individual is free from coercion. To the extent that any doctrine involves coercion, it is no longer liberal. Progressive policies like the income tax, the Federal Reserve Bank and railroad rate setting are not liberal and are not motivated by liberalism. Nor is the Red Scare, the Palmer raids or McCarthyism. They are reflections of special interest manipulation of the state on the one hand, and emotional, democratic impulse on the other, not liberalism.

Hartz's ideas make an interesting contrast to those of Reinhard Bendix in his Work and Authority in Industry. Bendix argued that the Protestant idea of a pre-ordained elect that is chosen for salvation carries forward to business, as Max von Weber argued in his Protestantism and the Spirit of Capitalism. In Hartz's scheme, the idea of an elite carries forward to Hamilton but not to Jefferson. Hamiltonian Federalism fails because it rejects democracy in favor of the elitist Federalist doctrine. The Whigs recreate the elitist Federalist doctrine, but fail to elect candidates until William Henry Harrison took a different tack in 1840, claiming a common upbringing. Lincoln too, really the fifth Whig (and of course first Republican) president after Harrison, Tyler, Taylor and Fillmore emphasized his log cabin upbringing. Thus the Whigs created a "Horatio Alger" ideology. All Americans can be capitalists and all can be landowners. This capitalist vision enabled the Whigs and their Republican descendants to win two ante-bellum elections and to dominate national politics after the Civil War. In contrast, Bendix emphasizes the transformation of managerial justification of power from the religious to the moral justification associated with the common sense philosophers of the early nineteenth century to the social Darwinism of the late nineteenth century.

Where Bendix (who wrote his book a few years after Hartz) and Hartz diverge is with respect to the scientific management and human relations school eras. Scientific management was very much an ideology of the Progressives, while the Human Relations School was dominant in management theory from the 1930s through the 1950s, what might be called the New Deal period. In contrast to Hartz, who accepts the New Deal at face value, Bendix argues that scientific management and the human relations schools were but continuations of the elitist ideologies of the late eighteenth and nineteenth centuries. While sociologists and historians criticize Progressive and New Deal managerial theories as elitist, they reserve such judgments from the political power holders such as TR, Wilson, Hoover and FDR.

Hartz argues that to understand American political ideology it is crucial to emphasize the lack of a feudal history in the United States. Without feudalism, there is no socialism, for the power of conservative feudal aristocrats forces their opponents to think in centralizing terms. (p. 5; 43) "One of the central characteristics of a non feudal society is that it lacks a genuine revolutionary tradition..." He adds (pp. 9-10):

" is a remarkable force: this fixed, dogmatic liberalism of a liberal way of life. It is the secret root from which have sprung may of the most puzzling of American phenomena...At bottom it is riddled with paradox. Here is a Lockian doctrine which in the West as a whole is a symbol of rationalism, yet in America the devotion to it has been so irrational that it has not even been recognized for what it is: liberalism....I believe that this is the basic ethical problem of a liberal society: not the danger of the majority which has been its conscious fear, but the danger of unanimity, which has slumbered unconsciously behind it..."

He adds (p. 12): "Do we not find here, hidden away at the base of the American mind, one of the reasons why its legalism has been so imperfect a barrier against the violent moods of its mass Lockianism?"

This question illustrates the basis for my criticisms. Locke emphasizes natural rights and liberal limitation on the state. The Palmer raids, McCarthyism and similar examples of democratic hysteria are the antithesis of Locke. Any logician worth is salt will tell you that if you say that what is not Locke is Locke, then any conclusion can be drawn. Hartz over-strains his insight. America is primarily Lockean, but it falls prey to anti-liberal, democratic patterns at times. The anti-liberal patterns such as McCarthyism are democratic, not Lockean. There is no need to claim that the Tennessee Valley Authority is liberal because of unconscious libido-like liberal impulses.

The best part of this book, and it is truly breathtaking, is in the second section on the development of the liberal idea in combination with elitism. America was the freest country in the world, much freer than it is now, before the Revolutionary War. Hence, there was no need to overturn an aristocracy (p. 39-55):

"When men have already inherited the freest society in the world, and are grateful for it, their thinking is bound to be of the soldier type. America has been a sober nation, but it has also been a comfortable one, and the two points are by no means unrelated...the revolutionaries of 1776 had inherited the freest society in the world...It gave them, in the first place, an appearance of outright conservatism. We know, of course, that most liberals of the eighteenth century, from Bentham to Quesnay, were bitter opponents of history, posing a sharp antithesis between nature and tradition. And it is an equally familiar fact that their adversaries, including Burke and Balckstone, sought to break down this antithesis by identifying natural law with the slow evolution of the past...The past had been good to the Americans, and they knew it. Instead of inspiring them to the fury of Bentham and Voltaire, it often produced a mystical sense of Providential guidance...The trouble they had with England did not alter this outlook...The result was that the traditionalism of the Americans, like a pure freak of logic, often bore amazing marks of anti historical of the secrets of the American character: a capacity to combine rock-ribbed traditionalism with high inventiveness, ancestor worship with ardent began to be held together, not by the knowledge that they were different parts of a corporate whole, but by the knowledge that they were similar participants in a uniform way of life--by that pleasing uniformity of decent competence."

Thus, the liberal norm penetrates us all (p. 56). Moreover, and this is part of the excessively Freudian part of Hartz's thinking (p. 59), "American pragmatism has always been deceptive because glacierlike, it has rested on miles of submerged conviction and the conformitarian ethos which that conviction generates has always been infuriating because it has refused to pay its critics the compliment of an argument." While I think he's right and that America is conformist and there is a Lockean impulse, it is wrong to conclude that imposition of securities regulation or internment of the Japanese during the Second World War reflect liberalism. A is not not A.

Hartz's comparative methodology (he uses France, England and Germany as comparison points) is off-the-charts brilliant. Hartz's familiarity with European and American history is impressive. He compares American and European liberalism and concludes that part of the reason socialism never appealed to Americans was that there was never any feudalism here (p.78). In America, the two basic impulses are toward democracy and toward capitalism (p. 89). In early American history, the Federalists saw the needs of the capitalist in opposition to the democracy. The democratic tradition of Jackson, which was therefore able to destroy it, formulated a philosophy which seemed to deny its faith in capitalism. But rather than allow the petit-bourgeoisie, the peasant and the worker to oppose capitalism, American Whiggery transformed the peasant into the "capitalist farmer", the worker and petit bourgeoisie into the "incipient entrepreneur" (p. 92). "For" (p. 94) "if the American democrat was unconquerable, he was so only because he shared the liberal norm. Thus what (pre-1840) Whiggery should have done, instead of opposing the American democrat was to ally itself with him..." (p. 95) "In America there was no mob: the American democrat was as liberal as the Whigs who denounced him...the quick emergence of democracy was inherent in the American liberal community."

But the American democrat was liberal and the Whigs' fear of him "coincided with the American democrats' fear of himself, for he no more than they, understood the liberal world that brought him to power and hence could not see any better than they could that in such a world the majority would not want to annihilate the individualist way of life." Thus, Jacksonian democracy did not resist the establishment of the Supreme Court, the Constitution and the law as a limit on democratic power. But while the Federalists and Whigs denounced the American democrat, the people were as liberal as they were (p. 106). Whiggery could only control the democratic American "by uniting with him in a capitalist movement" (p. 108). In the "age of Harrison" the Whigs "transformed" "the egalitarian thunder of the Democrats" (p. 111) by combining Hamiltonian capitalism with Jeffersonian equality. "The result was to electrify the democratic individual with a passion for great achievement and to produce a personality type that was neither Hamiltonian nor Jeffersonian but a strange mixture of them both: the hero of Horatio Alger...A new social outlook took shape, dynamic, restless, competitive, and because it united the two great traditions of the American liberal community, its impact ultimately became enormous" (p. 112). Hartz quotes Tocqueville: "what astonishes me in the United states is not so much the marvelous grandeur of some undertakings as the innumerable multitude of small ones" (p. 115). Farmer and factory worker were absorbed into the capitalist ethos (p. 119). Thus, the American character is rooted in small entrepreneurship. Americans have "a certain smallness of entrepreneurial preoccupation which has never been glamorous in Western thought." (p. 116).

However, there is tension between the democrats' attribution of the growth of big business on the state (pp. 137-8):

"The clash between capitalist hunger and anti capitalist principle reached its climax, of course, on the banking question. Charles A. Dana, a disciple of the easy credit schemes of Proudhon, lamented that American democracy wages a 'relentless war' on the banks of discount and circulation'...But the war was more relentless in theory than in practice...The hard money dreams of Taylor and Jackson were shattered by rising entrepreneurs, Western farmers and private bankers who favored the assault on Biddle not in order to limit credit but rather to expand it at the hands of local banks. This type of pressure had been exerted even against the First Bank of the United States under Jefferson. By the time of Jackson, America's acquisitive democracy,--its millions of go getting Americans as Hammond puts it--overwhelmed the concept of credit control. The speculative boom of the thirties is an excellent commentary on the get-rich-quick compulsion of the American democrat."

The outcome is that Whigs become like Democrats and Democrats like Whigs. "Locke dominates American political thought as no thinker anywhere dominates the political thought of a nation" (p.140).

In chapters six and seven Hartz discusses how the southern slave interests such as Calhoun and Fitzhugh attempted to subvert Locke and assert feudalist, conservative or even socialistic theories in defense of slavery. The key point in this interesting discussion is that Lockean liberalism destroyed their ideologies (p. 199):

"Here surely is the final irony in the fate of the South's feudal Enlightenment. It was not even buried by an elitist liberalism; it was buried by a democratic liberalism. It was not even put to rest by a man as sympathetic as Hamilton; it was put to rest by Andrew Carnegie and Horatio Alger, the children of Lincoln's achievement. If political theorists turn in their graves, Fitzhugh has turned many times, but could anything have bothered him so much as the sight of Jed the Newsboy walking unconsciously over his corpse?"

He begins chapter eight (entitled "The New Whiggery: Democratic Capitalism", p. 203):

"Unfurling the golden banner of Horatio Alger, American Whiggery marched into the Promised Land after the Civil War and did not really leave it until the crash of 1929."

"Two moods then run through the new Whig doctrine: one rational, the other irrational; one liberal, the other Americanistic. The difference bewtween them is the difference between William Graham Sumner and the American Legion." American
"Whigs" responded to the threats of Progressive and socialism. American Whiggery (p. 215):

"had itself been largely resopnsible for the tradition of economic policy it now proceeded to bury and destroy. It had been the American democrat, with Jefferson, who in theory at least had opposed it and had developed the closest thing to a laissez faire dogma that the country had produced. The principle at work here was obvious enough: big captalism was able now, with the major exception of the tariff, to dispense with the Hamiltonian promotionalism on which it had relied in the days of its weakness, especially since the corporate technique had become established and important. And so, if in the age of Jackson the American Whigs looked like the Corn Law monopolists of England, in the age of Carnegie they were prepared to look like the John Brights who had assailed those monopolists. One can trace this process of spiritual conversion and dramatic flip-flop with a brilliant clarity within the American states where on the eve of the Civil War the Hamiltonian interests who had originally demanded many public inestments, especially in banking and transportation, proceeded to deride them, producing precedent after precedent for the laissez-faire constitutional law so famous in the later time.

"What made the matter even more complicated, however, was that when Whiggery shifed from Carey to Carnegie it proceeded to use the ancient arguments of the American democrat himself, thus gravely confounding this figure. He, of course, in assailing state action, had opposed monopoly, which meant particularly the corporate charter. Indeed, lacking any real understanding of social oppression, he had defined all nonpolitical tyranny in terms of inequitable political decisions. Now, with the corporate charter universally accepted, due in part to his own ultimate drive for general incorporation, and with a huge trust growth being built upon it, he found himself confronted in his effort to solve a real social problem with the very symbols he had used...Who was the real disciple of Jefferson, the man who wanted the Anti-Trust Act or the man who opposed it?"

Hartz goes on to argue that the Progressives (p. 229):

"advanced a version of the national Alger theme itself, based on trust busting and boss busting, which sounded as if he were smashing the national idols, but which actually meant that he was bowing before them on a different plane. Wilson, crusading Wilson, reveals even more vividly than Al Smith the pathetic enslavement of the Progressive tradition to the Americanism that Whiggery had uncovered...the Algerism of the Progressives was no more due in the last analysis to the boom of the time than was the Algerism of Whiggery...but after the crash of 1929 it would not disappear but would go underground to serve as the secret moral cosmos on the basis of which New Deal pragmatism moved."

Hartz is irritated that the Progressives were not more socialistic. They emphasized trusts because (p. 232) "If the trust were at the heart of all evil, then Locke could be kept intact simply by smashing it..." and (p.236) "The Progressives failed because, being children of the American absolutism, they could not get outside of it and so without fully seeing that Locke was involved everywhere, they built their analysis around a titanic struggle between "conservative" and "radical" which had little relevance to Western politics as a whole."

The Progressive movement's democratic impulse was, in Hartz's view, Lockean. I do not see the connection because Locke argues for natural rights and against unlimited democracy, and Herbert Croly and the Progressives argued against natural rights and for unlimited democracy. The Progressives were the democrats whom Hamilton feared, but they used the argument of democracy on behalf of underlying Hamiltonian ends: the furtherance of big business interests. Rothbard, Sklar and Radosh discuss this and I will review their book in my next blog. I don't think that Hartz is right in his claim (p. 241, bottom) that "wealth was inexorably being concentrated".

Chapter Ten concerns "The New Deal". Hartz labors under the erroneous belief of the pre-Friedman and Rothbard era that the Depression was an outcome of capitalism rather than of government and/or Federal Reserve Bank intervention. He begins by claimng that "If the Great Depression of the 'thirties suggested anything, it was that the failure of socialism in America stemmed from the ideologic power of the national irrational liberalism rather than from economic circumstance." Actually, the reverse is true. The irrational, socialistic response of the New Deal to failure of the Fed and President Herbert Hoover's interventionist, New Deal style policy program caused the Depression, and the irrational policies of the Roosevelt administration intensified it in a kind of hyper-irrational, anti-pragmatism. The divergence of narratives here suggests that American history has not been so Locke-step as Hartz claims. Moreover, Hartz's argument of the consistency of liberalism falls apart. He writes (p. 260):

"The experimental mood of Roosevelt, in which Locke goes underground while problems are solved often in a non-Lockean way, wins out persistently. And who will deny that this, even more than the isolation of socialism, is a tribute to the irrational liberal faith of America? Eaating your cake and having it too is very rare in politics."

The problem is that America did not eat its cake. The New Deal started an illiberal pattern which has not been reversed and has spawned an increasingly intensifying government by special interest group brokerage and wealth transfers. The premise of the New Deal involved several layers of deception, not the least of which was the claim that Roosevelt's experimentation was helpful to the petit bourgeoisie and the poor, which it hardly was. There was a period of about 40 years during which wages increased somewhat more quickly on average than they did prior to 1932. But since 1971 the cumulative effect of the abolition of the gold standard and the New Deal policies have resulted in declining real wages and a dissolution of the American community into two warring camps, the advocates of intensification of the New Deal pattern in a socialistic direction, and those who continue to believe in the Lockean consensus. American elites have in large part dispensed with democratic liberalism. Whiggery has become dominant, but it is Whiggery cloaked in Progressive (Republican) rhetoric concerning efficiency and in New Deal or socialistic rhetoric concerning equity, income inequality and redistribution. Neither party has any interest in democracy, in Locke or in liberalism. Republican elites advocate perpetuation of the easy credit scheme in order to further wealth redistribution to Wall Street clientele, while Democratic elites, who are also in favor of loose monetary policy for the same reason, carry forward the monetary regime in social democratic robes.

Tuesday, July 22, 2008

The Media's Obamanable Performance and a Business Plan

While exercising in the health club today someone had turned on CNN (when the person left the gym I changed the station to Fox ASAP). Since I avoid the media in general and when I do I mostly watch Fox, I was surprised at CNN's overt bias in Mr. Obama's favor. Jack Cafferty made a two minute speech alleging that Mr. McCain is too old and senile. Perhaps it is Mr. Cafferty who is too old and senile. Worse, there was no counter argument or balancing view to Cafferty's hyperbole. At the same time, the coverage of Obama omitted criticism and was monotonously flattering. When I turned to Fox, I heard a discussion of media bias but the accusations in McCain's favor were balanced by a Democrat who blamed McCain for the media's lack of interest in him. Thus, Fox is somewhat balanced but the other stations are for Obama.

This election may stack up to be a referendum on the mass media. The McCain campaign has produced two ads, and it is asking Web viewers to vote on which one it should air. You can see them here. The first video shows parrot-brained,Polly-Want-An-Obama broadcasters such as Chris Matthews repeating how great Obama is to the tune of "It's Just Too Good to Be True, I Can't Take My Eyes Off of You". The second one repeats the parroting with less music. The majority of viewers think that the first video is better.

This election may be a referendum on the mainstream media. That is a good reason alone to back McCain even though you may be frustrated with the Republicans. A McCain victory will be a blow to the M-S-M, which has been suffering from declining readership and ratings. In turn, a McCain victory would cause the market value of the media outlets to decline. This will make a stock market takeover bid of one of the second tier cable stations easier.

I wonder if it might be possible for a libertarian or conservative to buy out CNBC or MSNBC. These stations contribute little to the national policy debate and have dismal ratings. Fox offers an alternative to the hackneyed, social democratic bias of the M-S-M stations, but it is in some ways a limited alternative. A libertarian-conservative news network might turn out to be profitable. A bit of sex appeal thrown in with conservative views would enable such a station to overtake CNN, crippling the left's cultural hegemony in the media area.

Here is a business plan: a proposal to take over CNBC and turn it into a libertarian conservative news station. Perhaps Rupert Murdoch, one of the Koch brothers or someone else with the resources might be interested in doing this.

Monday, July 21, 2008

The Professional Staff Congress and Revolutionary Unionism

The temperate, prudent, courageous, just and of course virtuous Sharad Karkhanis has written an excellent issue of Patriot Returns. Karkhanis named his newsletter after our Patriot missles, which shot down Iraqi Scuds in 1991. With a circulation of 13,000, Karkhanis's newsletter aims to shoot down the Scuds of the perverse CUNY faculty union, the Professional Staff Congress (PSC) and hopefully blow the PSC leadership back to Cuba, although I doubt that even Castro or his brother would want them. Maybe North Korea's Kim Jong-il would welcome them since they seem to aim to give the CUNY faculty a North Korean-style wage-and-benefit package, but even he might find them tiresome.

In the early twentieth century there were alternative models of unionism being proposed. The mainstream AF of L, created by Samuel Gompers and Adolph Strasser, advocated a form of unionism that labor scholar Robert F. Hoxie called business unionism. Business unionism does not question the underlying assumptions of the capitalist economy and resorts to political gamesmanship only in order to "reward friends and punish enemies". Its emphasis is improving wages, benefits and working conditions, not changing the world. Gompers expressed the pro-capitalist essence of business unionism when someone asked him: "What does labor want?" Gompers responded: "More". Like any profit-maximizing capitalist, and any red-blooded American, business unionists aim to advance themselves economically. In contrast, models of unionism that were prevalent during the early twentieth century included the Industrial Workers of the World (the Wobblies) and the communist unionism of the Socialist Labor Party's Daniel de Leon's Socialist Trade and Labor Alliance and others. American workers rejected what labor scholar Hoxie called revolutionary unionism in favor of business unionism. The gulf between the "New" Left and the business unionists reached a crescendo during the Vietnam War in 1965 when AFL-CIO president George Meany announced his support for the Vietnam War.

Inverting the historical pattern, the PSC leadership has rejected business unionism in favor of revolutionary unionism. Its repeated calls for demonstrations; the anti-Iraqi War protests several years ago; the endless radical rhetoric that has alienated New York's political establishment (social democratic thought it be); and the utter contempt with which the PSC's leadership treats economic and workplace issues all suggest that the PSC does not operate as a mainstream union. The low contract numbers that Karkhanis decries result from the PSC's leadership's strategic choice to favor revolution over selfish gain, or even selfish keeping your head above water and avoiding the bankruptcy judge.

Perhaps the the PSC leadership does not need to worry about electric, heating, gasoline and food bills. Perhaps like Professor Ros, they live in high rent apartments on six figure incomes. Perhaps they can afford to contribute $5,000 to the Obama campaign.

If so, isn't it time to get back to reality and rocket this crew back to Cuba via one of Karkhanis's Patriots?

Raquel Okyay on Oil

Raquel Okyay points out that close to 70% of voters agree with Senator McCain:

"that the ban on offshore drilling should be lifted to ease the price of oil. Leading Democrats are still trying to prevent oil companies from offshore drilling, even with the high poll numbers against them."

Okyay points out:

"We want drilling because it makes sense to exploit our own resources instead of paying for oil elsewhere. There is a way to accomplish this goal without losing sight that renewable energy is the way of the future. Pelosi apparently has other things on her mind when determining whether offshore..."

The oil debate is an example of how America's commitment to socialism has crippled it economically. There ought not to be public debate concerning how to best obtain energy. The reason that we do not use alternative energy is that state and federal policy has inhibited the building of wind mills and has made risky investments difficult to make through regulation, inflation, taxes and other penalties to inventors. America becomes increasingly poorer as our Congressional Neros fiddle in Washington, dabbling in oil investing and exploration, subjects about which they know little. It is time to de-regulate the energy markets and stop penalizing inventors by taxing and harassing them when they succeed.

Sunday, July 20, 2008

Barack Obama, the Teapot Dome and America's Parrot-Brained Media

Is Barack Obama going to be our next Warren G. Harding, the president whose cabinet was implicated in several corruption scandals, most famously the Teapot Dome scandal? Pamela Geller of Atlas Shrugs (hat tip Larwyn) has been analyzing Obama's campaign contributions and finds an extraordinarily long list of foreign contributors, including one, Jeanne McCurdy, who has made multiple contributions on a single day. Pamela writes:

"There are numerous individuals who are "bundling" contributions, some are smaller from the same person on same day, not to mention lots "unemployed or student". Further, there's a ton of foreign service and State Department admissions.
lots and lots of multiple entries.

"lots of foreign service, diplomat entries.

"lots of military analyst types.

"lots way over any $200 non-reporting caps.

Other overseas contributors are making multiple small donations ostensibly in their own names over a period of a few days, some under maximum donation allowances, but others aggregating in excess of the maximums when all added up..."

Read it all here.

Is the media asking questions about the rather odd goings on such as Obama's cover-up of his birth certificate and unusual patterns in campaign contributions? Is the media questioning why Morgan Stanley and Goldman Sachs employees are overwhelmingly in favor of Mr. Obama? Is it merely because investment bankers favor change--or do they prefer $100 bills? Is the media asking questions, or is it functioning as a parrot-brained cheering squad for Mr. Obama, failing to ask even the most elementary questions that a competent mass media would ask?

Louis Hartz on Jefferson's Error

"(W)hat Jefferson was doing when he assailed the industrial worker was overlooking the magical alchemy of American life which was responsible for the very small liberal farmers that he loved. That alchemy, in addition to transforming passive peasants into dynamic liberal farmers, was going to transform bitter proletarians into incipient entrepreneurs. Jefferson emphasized the concrete fact of ownership of property which to be sure was not a characteristic of the industrial worker. But this was a kind of Marxian mistake, emphasizing economics at the price of thought, for the French peasant also owned property and he was far from being the enlightened liberal yeoman that Jefferson relied so heavily upon. The fact is, the liberalism of the American farmer was largely a psychological matter, a product of the spirit of Locke implanted in a new and nonfeudal world; and this spirit, freed as it was of the concept of class and the tyranny of ancient tradition, could infect the factory as well as it infected the land...Indeed, the irony of Jefferson's fear of an urban 'mob' is that he himself became its philosophic idol when it began to develop, and not merely in a general egalitarian sense: in the sense also of his theory of agrarian independence. The labor literature would not give up the old idea of yeoman free-holding..."

Louis Hartz, The Liberal Tradition in America. New York: Harcourt, Brace and World, 1955, pp. 122-3.