Decline in Media, American Culture

The New York Post   reported last week that employment in the media declined by 15,000 in 2018.  Much of the reason, according to the Post, is substitution of social networking advertising for traditional media advertising.  Technology available through Facebook and Instagram enables advertisers to directly go to consumers rather than rely on media to serve as intermediaries.  The decline in the economic stability of the media comes at a time when its credibility is questioned by conservatives and even by the president. Yet, news organizations hope to convince consumers that they offer unbiased news so that consumers will subscribe.

Perhaps there are opportunities for new forms of news.  I subscribe to two online newspapers, but I read them infequently.  I more often rely on subscription newsletters like Jim Rickards's Strategic Intelligence   and David Stockman's Deep State Unclassified  as well as specialized investment sites like Morningstar  and Kitco.

A Lockean or conservative alternative to the leading newswire services might energize individual conservatives to start their own newsletters and blogs.  The advantage the socialist-and-pro-Fed press has is its funding base, which enables it to obtain breaking news. A news service that is made available at low cost to conservatives might help break the left's monopoly on news and information.



I have been listening to the audio version of Tucker Carlson's Ship of Fools: How a Selfish Ruling Class Is Bringing America to the Brink of Revolution. As I've previously reported, the book is well written.  I disagree with Carlson's take on economics, but his account of American culture upset me. Carlson seems to be making a case for New Deal-Roosevelt "liberalism" (I prefer the term "social democracy") to become the new conservatism, which is a mistake.  Many of today's core problems, such as income inequality, are the direct result of Progressivism and of New Deal centralization and subsidization of special interests. Also, immigration restrictions, which are central to Carlson's narrative, are not the solution, although I increasingly see immigration as a cultural threat, albeit one that could be eliminated by an education system that, unlike the current one, emphasizes a shared American culture.  

At the same time, Carlson eloquently tears apart militarists Max Boot and Bill Crystal, and his caricature of Chelsea Clinton, dumbed-down child of white privilege,  is hilarious.   His depiction of American elite ideology as a version of left-wing extremism mixed with militarism and some liberalism (as in immigration) suggests a convergence of Democratic and Republican elite ideology, and the elite's selfish indifference to the harm its money printing and confused economic policies have caused is why Trump won.  Unfortunately, while I like Trump, while I admire his courage in the face of media attacks, while I admire his contempt for both the media and policy elites, his emphasis on protectionism and immigration restrictions won’t change much, and protectionism will make things worse if not corrected down the road. 

Carlson's book scores many points when it comes to American culture, which is in disarray.  Unwed mothers have become a critical voting block, and the policies that they advocate will be corrosive to economic growth and progress.   On a social and cultural level,  I'm now convinced that immigration poses a serious threat to American culture and American freedom. The attacks on boys and men, the intolerance of feminist extremists, the absurd environmentalist religion—none of this is news, but put it all together, and it seems that the country is in serious moral trouble.

At the same time, Carlson's premise is ultimately elitist.  He concludes that elites need to do a better job of caring for the average American. In a free country without a Fed, big government, or the other Progressive paraphernalia of Progressivism and the New Deal, Americans would be able to care for themselves, as they did in the 19th century. 

Reinvigorating the Contract Clause

George Leef has a great piece in Forbes this week on the effect of erosion of the contract clause on individual liberty. George discusses a case that will soon come before the Supreme Court, Sveen v. Melin, in which a husband who had divorced his wife but wanted to keep her as his life insurance beneficiary died. The state of Minnesota had declared that spousal beneficiary designations are to be revoked upon divorce, so the state has deprived his wife and their children of insurance money. The capriciousness of state and federal law undermines the ability to do business. The current judicial rule given to courts is vague and expansive, and since the New Deal courts have served as a rubber stamp to every dictatorial decision big-government advocates favor. Although I gag every time I think about President Trump's tariff decision, this kind of case is a reason to continue to support the Republican Party. It's hard, though.

The Racism of John R. Commons--And What It Says about Columbus Day

Two guys on Facebook , Jeremy Horpedahl of the University of Central Arkansas and Phillip W. Magness of Berry College, sent me material that documents the racism of John R. Commons. Commons was the chief founder of institutional economics in the United States.

Commons can be fairly called the creator or conceptualizer of the current American industrial relations system and the innovator of much of the New Deal.

Hence, if we are to tear down statutes of Columbus, Jefferson, and Lee because they were racists, so should be consider tearing down the New Deal, which also was the product of racists, conceptualized by racists, and put into place by racists.  Commons, for instance, designed the first workmen's compensation law, in Wisconsin, and discussed social insurance reforms and unionization.

Just how racist was John R. Commons? 

In his "Racial Composition of the American People: The Negro" Commons writes of the western coast of Africa:

The torrid heat and the excessive humidity...produce a race indolent, improvident, and contented...Sexual purity is unknown...Formerly cannibalism prevailed, but it has now been largely stamped out by European governments...The people are unstable, indifferent to suffering, and  easily aroused to ferocity by the sight of blood or under great fear...They exhibit in Africa certain qualities  which are associated with their descendants in this country, namely, aversion to silence and solitude, love of rhythm, excitability, and lack of reserve.  All travelers speak of their impulsiveness, strong sexual passion, and lack of will power.

Donald Trump is fairly criticized for calling African countries "crappy," but what are we to make of an American New Deal, social insurance and welfare system designed by people who made similar remarks?

Commons adds:

slavery tended to transform the savage by eliminating those those who were self-willed, ambitious, and possessed of individual initiative...Other races of immigrants, by contact with our institutions, have been civilized--the Negro has been only domesticated...The very qualities of intelligence and manliness which are essential for citizenship in a democracy were systematically expunged from the Negro race through two hundred years of slavery.

Commons goes on to call "the war of emancipation" one of "dogmatism" and "partizanship" [sic] because equality and inalienable rights took the place of education and slow evolution of moral character. 

He adds: "Self-government means intelligence, self-control, and capacity for cooperation.  If these are lacking, the ballot only makes way for the 'boss,' the corruptionist, and the oligarchy under the cloak of democracy."

In discussing how African Americans can be educated in order to be "prepared" for "citizenship" Commons claims that African Americans lack the ability to be trained to use steam cleaners or to paint ceilings.

He says that the majority of African American mechanics are "careless, slovenly, and ill trained." As well, he adds:

the improvidence of the Negro is notorious. His neglect of his horse, his mule, his machinery, his eagerness to spend his earnings on finery, his reckless purchase of watermelons...these and other incidents of improvidence expalin the constant dependence of the Negro upon his employer and his creditot.

When African Americans did become wealthy due to property ownership, Commons attributes this to "unearned increment" rather than intelligent investing.  He adds, "Negro bosses and foremen are more despotic than white bosses." As well, "the Negro trade unionist has not as yet shown the organizing capacity of other races,"  and "when the Negro demands the same wages as white men, his industrial inferiority leads the employer to take white men in his place."

In response to the list of ways that African Americans were supposedly inferior to whites, Commons proposes "an honest educational test" for voting "enforced on both whites and blacks."

In a closing fit of racism, Commons attributes higher death rates among African Americans to moral rather than environmental and social causes.

In New York City, Mayor de Blasio and his left-wing supporters  have proposed to tear down statues of Columbus and Theodore Roosevelt. Why shouldn't the New Deal, a legal system designed by a racist, should be treated the same way?

Massive Tax Cuts Will Cure The Economy

The best stimulus is allowing people to keep and spend their own money. During the depression of the 1930s, the Democrats raised taxes. This, along with the range of blithering boondoggles known as the "Faint Squeal" (er, I mean the "New Deal") led to what should have been a 1-5 year depression turning into an eleven year depression. The 1920 depression was one year. In the 1890s there were two briefer depressions, and there was one in 1907.

The difference between the 1930s and the earlier depressions was (1) the election of Herbert Hoover and Franklin D. Roosevelt, big government progressives who both used activist government approaches. As well, part of the strategy of the Faint Squeal was to raise income taxes. In 1936 the Fed tightened, exacerbating the slowdown caused by income taxes.

Cutting taxes to the bone would cause an increase in consumer demand. But it would be demand for what people want to spend money on, not for what they want to finance. It is the tax and spend policies of Democrats, Republicans and Keynesian economists that have caused the intermittent economic fluctuations since the Fed was founded in 1913.

Cut taxes, stimulate the economy. Socialism = economic stagnation.

Herbert Clark Hoover on Twentieth Century Human Resource Management

In most standard treatments of twentieth century history such as Louis Hartz's Liberal Tradition in America Herbert Hoover is painted as a conservative advocate of laissez-faire who caused the Great Depression through indifference and inaction. He is contrasted with Franklin Roosevelt who is painted as a true social democrat and harbinger of socialist progress. In New History of Leviathan Murray Rothbard does a good job of debunking this nonsensical mythology. Hoover was very much a Progressive in the early twentieth century sense, and his policies anticipated much of the substance of the New Deal. One of the sources that Rothbard cites is the reprinting of a speech that Hoover gave in November 1920 to the Federated American Enginnering Societies in the American Federationist, the journal of the American Federation of Labor (January 1921 issue, volume XXVIII, pp. 35-40).

What is remarkable about Hoover's speech is not just his warmth toward organized labor and his fulsome expression of favor toward regulation of industry and collective bargaining but also the degree to which he anticipated flexible labor relationships that characterized late twentieth century Japanese and US factories. Hoover advocates competency-based pay, cooperation between labor and management guided by collective bargaining, employee involvement in problem solving, flexible work hours to adjust for business downturns, hours of labor that vary with trades and government restructuring of labor markets to facilitate job search among seasonal workers. This last concept was being touted as innovative by labor economists of the 1990s, seventy years after Hoover discussed it. Along with the flexible work practices, Hoover advocated collective bargaining and regulation of industry. He was not an advocate of laissez-faire. One must wonder about the historians who would claim so given easily available evidence such as this speech. Allow me to quote from part of the speech:

"Among the greatest of the problems before our country -and in fact before the world- are those growing out of industrial development....The congestion of population is producing subnormal conditions of life. The intermittency of employment due to bad coordination of industry...The aggregation of great wealth with its power of economic domination, present social, economic ills which we are constantly struggling to remedy...Our mass of regulation of public utilities and of many other types of industry...is a monument to our efforts to limit economic domination...A profound development in our economic system apart from control of capital and service during the last score of years has been the great growth and consolidation of voluntary local and national associations. These associations represent great economic groups of common purpose...And to me, one question of the successful development of our economic system rests upon whether we develop the aspects of these great national associations towards coordination with each other in the solution of national economic problems or whether they grow into groups for more violent conflict...There are certain areas of conflict of interest but there is between these groups a far greater area for common interest...

"...In the question of industrial conflict resulting in lockout and strike one mitigating measure has been agreed upon in principle by all sections of the community. That is collective bargaining...

"There lies at the heart of all these questions the great human conception that this is a community working for the benefit of its human members, not for the benefit of its machines or to aggrandize individuals..."

Among the steps that Hoover advocated to encourage community of interests were hours of labor varying with trades; improvement of labor exchanges; flexible hours to adjust for business downturns; competency- or pay-for-knowledge-based wages with wage structures graded for skill; cooperation between labor and management; employee involvement in problem solving; and the use of the closed shop to encourage greater worker efficiency. The Japanese have done much along the lines of the last point with their "enterprise unions", but Hoover was not saying "company unions" or "representation plans". He used the phrase "closed shop", an approach that was illegalized under the Taft Hartley Act as granting excessive power to labor.

It is also of special interest that Hoover emphasized the role of factions or special interest groups. His hope that they would cooperate never really materialized, although as Rothbard shows during World War I and as Radosh shows during the early period of the New Deal, fascist-like regulation of the economy through governmentally-mandated cartels were attempted.

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 Amazon.com 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 history...to 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 interpreted...in 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 market...in 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 .

Conservatism, Surgical Radicalism and the Four Party System

The current popular political debate occurs between two kinds of conservatives. The first, called liberals or progressives, argues that the current framework of American democracy, created during the Progressive era and New Deal and now roughly 100 years old, ought to remain in place. In their view introduction of additional institutions, plans and programs like national health insurance along the lines of earlier ones is needed, but today's framework is a good one.

The second kind of conservatives, popularly so called, are not comfortable with the New Deal project---Social Security, government regulation of industry, and large-scale federal social welfare programs, but do not want to repeal these programs either. They follow Edmund Burke, who argued against radical in favor of gradual change. Burke felt that gradual transformation of institutions while protecting liberty was a better path than the French revolution's authoritarianism, political correctness and executions. Rather, he preferred the American revolution's restraint.

Today's conservatives retain Burke's dislike for radical change. But the institutions that exist in America today were radically imposed during the first half of the twentieth century. They did not evolve logically from the market economy of the nineteenth and they did not reflect economic exigencies of the the early 20th century. Rather, they reflected the imposition of a political vision of specific rent-seeking special interest groups and agenda-drive political radicals.

Burke wrote in Britain in the late eighteenth century when barbaric institutions had gradually evolved into more democratic and liberal forms in Britain and to a lesser degree in Europe. Burke did not write about what to do to unravel the harm that the French revolution had caused. Rather, he wrote about how Britain and other liberal nations might best cope with change. This is not the problem that faces America today. An excessive application of Burke is inappropriate. America has had some radical change imposed while partially retaining liberal institutions. Conservatives who wish to create a new liberalism need to be surgical radicals. They need to undo New Deal radicalism's derangement of older versions of liberalism. The derangement has taken a number of shapes, to include social security, urban renewal, welfare, the Federal Reserve Bank, excessive application of eminent domain, and excessive regulation of business. Such radically instituted habits ought to be undone conservatively but radically.

Progressivism and the New Deal were radical upheavals. They rewrote American institutions that were not very old. A radical conservatism is one that is pragmatic, and asks that if radically imposed institutions fail that they be undone. This is a surgical radicalism that devises new liberal institutions where Progressivism and New Deal social democracy have failed.

Conservatives who wish to retain Progressive institutions, who are loyal to the old Federal Reserve Bank and its old-fashioned economic planning, high levels of government spending and support for business are Progressives. Conservatives who wish to retain New Deal institutions like Social Security and the National Labor Relations Act are social democratic liberals.

Perhaps Americans should think in terms of a four-party rather than a two-party system. Perhaps there should be a surgically radical conservative party; a Progressive-conservative Rockefeller-Republican Party; a New Deal Party; and a social democratic radical party. Of these, the surgically conservative radical party would be the most radical, liberal and progressive.

Herbert Hoover as the Pardigmatic Progressive-liberal

Most people who have not read a biography of Herbert Hoover do not know that he was among the most assertive of the Progressives, and in many ways his ideas set the tone for much of progressive-liberalism in the eight decades that have ensued since his election to president. When he ran for president in 1928 almost all progressives supported him, including social worker Jane Addams, Ida Tarbell, Herbert Croly, Walter Lippmann, Franklin Roosevelt (before Hoover declared himself a Republican), and many progressive magazine and newspaper editors of the time. Hoover's ideas were quintessentially progressive: an elitist, he proclaimed his belief in democracy. He believed that firms should be motivated by social responsibility and individual interest. He argued for voluntary national planning and that progress depends on the establishment of trade associations that establish voluntary ethical codes. He believed strongly in efficiency and the importance of cooperation and associations. He advocated expansion of public works. He believed in tariffs and protectionism. Hoover's biographer Joan Hoff Wilson notes (p. 69)*:

"Where the classical economists like Adam Smith had argued for uncontrolled competition between independent economic units guided only by the invisible hand of supply and demand, he talked about voluntary national economic planning arising from cooperation between business interests and government. The aim was to eliminate waste through greater production efficiency, lowering prices, raising wages and controlling business cycles. Instead of negative government action in time of depression, he advocated the expansion of public works, avoidance of wage cuts, increased rather than decreased production--measures which would expand rather than contract purchasing power....'We are passing' he told the United States Chamber of Commerce in 1924, 'from a period of extreme individualistic action into a period of associational activities.'"

What made Hoover the prototypical Progressive-liberal was his belief (1) that rational planning guided by the state rather than markets can best solve problems and (2) that the state's role includes the positive inculcation of moral belief. In particular, Hoover pioneered the use of mass propaganda, not only as Warren G. Harding used it in campaigns, but as part of his political strategy. In 1920, Hoover became a moderate advocate of collective bargaining. Hoover believed that workplace conflict was an engineering problem. He was a supporter of scientific management, which was linked to the Progressive movement. Quoting Wilson (p. 56):

"The socioeconomic system [Hoover's ideas] represented could not accurately be described by such words as progressivism, laissez faire capitalism, communism, statism, socialism, corporatism, guildism or syndicalism. The absolute laws of progress that he believed in required a new and superior synthesis that he simply called the American system. What he had in mind was a pragmatic utopianism that defied standard economic and political classifications and was, in truth, progressive in the broadest sense--it was forward looking. Perhaps it could best be characterized as an informal brand of liberal corporatism.

"...idealism could be balanced with self-interest and technological innovation to counter the equally enervating system of state socialism or monopoly capitalism..."

(p. 59)"...Hoover hoped to change values at the grass-roots level by propagating an ideology of cooperative individualism and playing down materialism. Massive education and propaganda campaigns could transform traditional attitudes about private property and profit into a new sense of social responsibility..."

Hoover's elitism came from his background as an engineer who had achieved dramatic success in international mining. He seems to have believed that engineering principles could be applied to reforming society.

Now, what was the outcome of Hoover's presidential administration? What was the result of his elitist belief of his ability to outhink markets and to be able to reform society according to his values (which were very nice, by the way).

The result was the Great Depression. The result of the Depression was the New Deal (which Hoover opposed because he found it too statist). Thus we see the end result of Progressivism. Increasing coercion, government programs that stall progress, and inflation that supports wealthy speculators at the expense of productive workers.

Progressivism begins as an assertion of value superiority by an elite. The value superiority is moral or expresses a belief in democracy, as does Peter Levine. Government action (e.g., Wilson's establishment of the Fed in 1913) is taken to encourage the belief. Smart people (Hoover was very bright) are selected to implement the vision. But they blunder. The blunders are blamed on the people, on freedom and on markets. In turn, coercive statist violence attacks democracy and freedom further, institutionalizing Progressive-liberal neuroticism.

*Joan Hoff Wilson, Herbert Hoover, Forgotten Progressive. Prospect Heights, Ill.: Waveland Press, 1992 (Original Publication: 1975).

Progressivism Contradicts progressivism

Progressivism was the ideology of early twentieth century American government. Its argument was based on the idea that big business had developed to a point where it was too powerful not to be regulated and that in order to counteract big business's power the limited federal government of the 19th century needed to be expanded. Progressivism was mainly concerned with how to best manage big business in the public interest. The Progressives were pro-large business. They did not think, as many business executives did not think, that private ownership of monopolies was necessarily appropriate. In many respects Progressivism was similar to Marxism in that it argued that big business was a natural historical development and that an increase in state power was necessary to manage the big business. The Progressives wanted to make certain that the efficiency potential of big business would be actualized and that efficiencies from big business would be managed in ways that weer conducive to the public interest.

The pro-big business attitude of the Progressives changed during the New Deal. Part of the reason was that the New Deal did not focus on the efficiency goal. This was viewed as having been achieved. As well, the New Deal emphasized the importance of finance as opposed to manufacturng, and its policies primarily reflected the interest of large financial firms. In order to accomplish this, the New Deal had to cloak its positive supports for finance with imagery related to social democracy. The New Deal is thus associated in the minds of historians and the public with Social Security, the Fair Labor Standards Act, the National Labor Relations Act, the Securities and Exchange Act and unemployment insurance. However, the chief and most far reaching reform of the New Deal was the abolition of the gold standard and the granting to the financial community the power to create fiat currency in its own interest unimpeded by the gold standard.

In order to justify this profoundly redistributive policy that served the interests of large corporations, real estate holders and stockholders as well as the commercial banks and Wall Street the New Deal needed to seem anti-business. This was accomplished by insisting on unionization of large manufacturing, which created short term political resistance from Alfred Sloan and other business leaders but in the long run (seven decades) provided little or no benefit to the working class. At first, the division between manufacturers and the Roosevelt administration made Roosevelt seem a traitor to his class. However, this is not the case. The financial arrangements Roosevelt created resulted in the largest gains and the longest gains that have accrued to capitalists in the history of the world. There is no other time in recorded history when the asset markets have risen so consistently and to the degree that they have since the New Deal, and there is no other time in American history when real wages have progressed so little.

The progressives lack the perspective of the Progressives because Progressivism held that economic growth depended on a set of social relations, to include big business, stabilized markets and efficiently run companies, and that social justice would flow if big business was managed appropriately. It recognized that efficiency and productivity necessarily preceded social justice. In contrast, the New Deal did not focus on efficiency and concerns. It saw its goals as primarily redistributive. In rhetoric, business executives were reactionaries who fought its redistributional goals and big business was therefore its enemy. The New Deal assumed that the problem of production had been solved. Its followers were not able to grasp the profoundly redistributive policy that the New Deal established of redistributing from the poor to the rich because they naively assumed that the regulatory sops that were thrown to the poor constituted a major redistributional program. But the New Deal gave $100 to the rich for every $1 it gave to the poor, and in public image broadcast the $1 while cloaking the $100 in arcane Keynesian lingo that served as a cloak to 19th century Populist ideas, namely Greenbackism and free silver.

Academics were only too happy to lend credence to Keynesian rhetoric and to serve the rich. Marxism and Keynesian were two ideologies which ultimately serve to cloak the interests of the financial community and alternatively serve to so cloak the academic community's true intersest in providing succor to the wealthy.

Second, progressive rhetoric depicted big business as the enemy rather than a necessary development. Without claiming to foster business progress, progressivism becomes a form of attack on the nation's source of wealth. Small p progressives do not articulate a theory of economic growth and advocate ideas, to include protectionism, income taxation, regulation and expansion of the state that can easily be shown to harm innovation and economic development. The progressives are not troubled by their assault on progress because of their quaint insistence that the problem of production despite the development of innovative production concepts in Japan that American firms have been unable to replicate and have been protected from replicated by the progressives' inflationist and government support policies for big business.

In fact, the progressives reserve their worst venom for the few innovative businesses, such as Wal-Mart, which have contributed to economic growth. Those that have not, from Wall Street to Detroit, are viewed with favor by the progressive movement.

Gerald W. McFarland's Mugwumps, Morals and Politics, 1884-1920

Gerald W. McFarland. Mugwumps, Morals and Politics 1884-1920. Amherst, Ma: University of Massachusetts Press, 1975. 291 pages.


Gerald W. McFarland's Mugwumps, Morals and Politics 1884-1920 (Amherst, MA.: University of Massachusetts Press, 1975) is a well-researched, well-written and scholarly book. In contrast to David M. Tucker's Mugwumps: Public Moralists of the Gilded Age and John M. Dobson's Politics in the Gilded Age: A New Perspective on Reform McFarland combines a quantitative analysis with his historical narrative; focuses on the later Mugwumps (the narrative ends in 1920); and reviews a wider range of activities than Tucker, who focuses on the ideology of key Mugwumps, and Dobson, who focuses on politics. The Mugwumps were, in McFarland's book, a broader movement than in Tucker's, although Tucker's perspective is better because it clarifies the original Mugwumps' purposes.

McFarland does not consider that the Mugwumps may have been ideologues, motivated by belief in science and morality. Rather, McFarland suggests at several points that the economics of the Mugwumps was "derivative" and motivated by class interest or erroneous thinking. Not that he discounts their ideology entirely, but he does not stress it. It would seem that if the Mugwumps indeed spent a large portion of their time fighting for the gold standard, free trade and efficient government, then they held an underlying belief system to which they were emotionally committed. The gold standard is not, as McFarland seems to think, a silly, abstract idea. Thus, I prefer Tucker's purpose-driven or teleological perspective to McFarland's. But McFarland's book is excellent nonetheless.

McFarland's logic can be equally applied to the Progressives, who followed the Mugwumps by a generation. The leading Progressives were upper class and some were former Mugwumps. Many were professionals. Many were business executives. For instance, the Roosevelts were from a wealthy background. The Progressives' ideas were certainly derivative, in part based on 17th century Mercantilism and in part based on Bismarck's welfare state, which itself was derivative of feudalism. The former Mugwumps, such as Theodore Roosevelt, Simeon Baldwin (who adopted a modest Progressive program into his gubernatorial administration) and Louis Brandeis, who transformed themselves into regular Republicans and then Progressives benefited from their beliefs professionally much more than did most of the Mugwumps. Progressivism advocated the creation of commissions, professional jobs, regulations and the like that served the narrow interests not only of professionals, but of big business as well.

Some of the Mugwumps began to gradually transform into Progressives by the 1890s. McFarland finds that 40% of the Mugwumps never adopted Progressivism, 27% adopted one or more Progressive ideas (many of which were extensions of Mugwumpery involving improving government) and only 33% became outright Progressives. Some of the Mugwumps, such as Josiah Quincy, mayor of Boston, adopted socialist ideas. Perhaps not coincidentally, Quincy was one of the few Mugwumps associated with corruption and political spoilsmanship.

When progressive ideas confronted the Mugwumps, their professional interests likely conflicted with their classical liberal ideology. In other words, the spoils from Progressivism were probably greater than the spoils from classical liberalism. Outside of the emphasis on professionalization (which includes establishing the professions in which many of them worked as well as rationalizing government) the classical liberal ideology never served their eonomic interests, so if the Mugwumps were purely an economic interest group they might as well have dropped classical liberalism in the first place and become another interest group pleading for favors from the Stalwarts or Halfbreeds (supporters and opponents of President Grant). This is a problem for the view that classical liberalism served the Mugwumps' economic interests.

The economic philosophy that best served upper class investors and real estate holders was Populism, but this point seems to escape McFarland, or at least he deemphasizes it. Similarly, although Wilson adopted the Federal Reserve Bank in 1913 and the Federal Trade Commission, an anti-trust measure, in 1914, neither of these were viewed as radically progressive. Many Mugwumps supported the Fed because they believed that removing control of money from the political process would rationalize it. They could not anticipate widespread acceptance of Populism via Keynesian economics in the 1930s and Roosevelt's ending of the gold standard in the 1930s.

But Wilson became much more progressive when he realized that he needed to win over the progressive wing of the Democratic and Republican Party for the 1916 election. Thus, political opportunism as much as anything can explain Progressivism's successes, for example Wilson's adoption of it. Opportunism applies less to Mugwumpery than to Progressivism, for the Mugwumps had little to gain from bolting or from supporting classical liberalism. Few were factory owners and many were investors. Opposition to labor unions would have been much less important to them than support for the gold standard (the gold standard hurt speculators because it resulted in deflation). Yet, they supported the gold standard, which was not beneficial to them economically.

What destroyed Mugwump individualist-liberalism was the wresting of scientific blief from classical liberalism that occurred in universities. Richard T. Ely's establishment of the American Economics Association in the 1890s seriously damaged the individualist-liberal Mugwump movement. They could no longer say that "science" supported their moral views. Although von Mises offered an alternative perspective beginning in the 1920s as did Hayek in the 1940s and Friedman in the 1960s, mainstream academics have emphasized market failure since the 1890s. This made it much more difficult for Mugwumps and later conservatives and libertarians to defend their views.

McFarland's quantitative descriptions of the Mugwumps are useful, although they would have been improved had they been hypothesis or theory driven. The findings that the Mugwumps were almost entirely college graduates (in an era when only two percent of the public graduated from college); that they were not the super-rich millionaires like Jay Gould associated with the regular Republicans (and that a smaller percentage of Mugwumps were millionaires than were the regular Republicans who attended fundraisers); that the Mugwumps came from well-to-do ancestries; and that they were mostly professionals involved in nascent professions attempting to establish themselves (professors, librarians) are interesting but not powerful (i.e., they do not enable us to reject Tucker's null hypothesis that they were morally and ideologically driven).

It seems that the transformation of a third of the Mugwumps from classical liberals to Progressives is linked to their gradual recognition that to win power they needed to one-up the political machines in the cities, which had traditionally provided jobs and benefits to immigrants and the poor. The way to do this, some Mugwumps began to realize in the 1890s, was to provide benefits to the working class that superseded the machines' paternalistic and spoils-based approach. Progressivism was thus a way to wrest power from the political machines by replacing locally-based paternalism with nationally based paternalism. Thus, the New Deal was the logical extension of progressivism, not because of ideology, but from the standpoint of obtaining power and utilizing programs to win power.

The machines began to realize that the Progressives' strategy worked, and responded by tentatively adopting the Progressives' reform ideas. Charles (Silent Charlie) Murphy, the boss of Tammany Hall from the 1890s to the 1920s began to support reform-oriented candidates as early as 1903. Ultimately, Murphy supported Al Smith for Governor of New York, and it was Smith who conceptualized the framework that became the New Deal. Smith was a Tammany Hall man. Franklin D. Roosevelt succeeded Smith as governor of New York, and when he was president in the 1930s adopted Smith's program on the national level.

Thus, progressivism was the nationalization of political bossism. Roosevelt never addressed urban corruption, which would have been a chief Mugwump concern. Tammany Hall was destroyed by the fusion (Republican) mayoralty of Fiorello Laguardia, but it is not clear that this completely eliminated corruption. Progressive and New Deal administrators like Robert Moses, who admittedly was more effective than prior generations' administrations, "got things done" at a very high cost to poor New Yorkers. The progressives' and New Deal liberals' control of New York from the Laguardia administration through John Lindsay resulted in the city's near bankruptcy (saved by Felix Rohatyn and some financial maneuvering), a result that did not attend the political bossism of the nineteenth century.

A useful point that McFarland makes is on p. 113 in his discussion of Robert Treat Paine, a philanthropist and attorney from Boston:

"Paine was a Social Gospel Episcopalian--not a reform type that would dominate liberal circles after the New Deal, perhaps, but a type that played a major role in the incipient social progressivism of the 1890s."

Likewise, McFarland notes (p. 103-4):

"One of the foremost spokesmen for social progressivism was R. Fulton Cutting, a Mugwump who served as chairman of the Citizens' Union...Cutting was descended from Robert Livingston and Robert Fulton and had inherited a large fortune through his family connections...

"In a speech...Cutting denounced past reform movements for savoring 'more of Oligarchy than Democracy'. Patronizing appeals for civic morality had met with limited success, he believed, because reformers made no effort to make city government important to the average voter...As a advocate of Social Gospel Christianity, Cutting predicted that the twentieth century would produce a broad trend toward expanded government social and economic programs: "There is a swelling tide of human brotherhood that seeks to expose itself through Democratic institutions and the religion of the Twentieth Century is destined to employe Government as one of its principal instrumentalities for the solution of social issues."

Cutting said so in 1901. What is revealing in the cases of Paine and Cutting is that (1) they were upper class; (2) they were devout Protestants of the Social Gospel type; (3) they had seen the Mugwumps' reform ideas frequently defeated by corrupt political machines that provided benefits to immigrants and the poor; (4)they believed that they found a way to implement both their Christian beliefs and their interest in reform.

As with any effective ideology, the Paine/Cutting view combined a strategy for obtaining power with a belief that the strategy is morally right. More than 100 years later, Mike Huckabee continues to reflect this perspective, which reflected the views of a segment the Republican Party in 1901.

Those who believe in individualist-liberal ideas, the economics of Mill and Smith, and see progressive-liberalism as a reactionary, poverty-generating system that harms citizens and reflects anything but love, need to make the case that classical liberalism is humane and helps the poor while government does not. As well, the reform of universities to regain a place for classical liberal ideas is crucial. The mass media lacks the theoretical grounding to provide a foundation for a successful reversal of progressive-liberal domination.