This post is by Tony Wikrent.
I do not remember the New Deal, even though it’s probably what has had the greatest impact on my political memory. I’m 63 now, so I wasn’t even alive during the First Great Depression and the presidency of Franklin Roosevelt. For me, memory of the New Deal was transmitted by those who had lived it and embodied it: My foremost, formative experience of government was John Kennedy beckoning the nation to put men on the moon.
In Chicago, the Democratic Party took pride in getting things done. The construction of O’hare Field was completed while I was a toddler, as well as the Kennedy expressway connecting ORD to the Loop downtown. Construction of a new home for the University of Illinois at Chicago began in 1963; the 244 acre campus opened two years later. Today, UIC is the largest university in the Chicago area, with more than 33,000 students enrolled in 16 colleges. As a kid, I got to watch construction crews working to extend the CTA subway line down the middle of the Kennedy to O’Hare.
John Kennedy said, “The American, by nature, is optimistic. He is experimental, an inventor and a builder, who builds best when called upon to build greatly.”
Unlike conservatives and libertarians, I have always had faith that government can be an active force for good.
But over two thirds of my fellow citizens are younger than I. They have not had the same experiences. They have not, I fear, the same long-term optimism, which I think may have been the greatest achievement of the New Deal. In the world I grew up in:
- Interest rates were strictly regulated
- The average holding period in the stock market was eight years.
- There was no retail means for investing in foreign economies.
- The only futures contracts in existence were based on physical commodities.
- Foreign exchange trading was only for individuals actually traveling overseas, paying the US military and for base leases, and companies importing and exporting.
- the Cayman Islands were basically unknown: there were no tens of billions of dollars of dirty money scrambling around the globe for a place to hide.
In other words, well over 200 million of the 327 million Americans alive today have no idea what a well regulated financial and monetary system looks like.
Besides that problem, there is the problem that the rich have assiduously funded and built a massive apparatus for promoting conservatism and libertarianism. I no longer have patience for people who think there can be bipartisan governance. Conservatives and libertarians claim that they are the defenders of the original intent of the Constitution, but they have created and promoted a false narrative of American economic history, a fraudulent fabric of historical misinterpretation, and outright lies about the origins and Constitutional basis of the US economy. One legal scholar wrote in Dissent in May 2011:
…if one looks carefully at the murky methodology and dubious practices of new originalism, it is clear that its historical foundations are even shakier than that of old originalism. The new theory is little more than an intellectual shell game in which contemporary political preferences are shuffled around and made to appear part of the Constitution’s original meaning….
Following new originalist methodology would not lead to a restoration of the original meaning of the Constitution, but it would give us an Anti-Federalist Constitution that never existed. This is an odd result, given that the Constitution was largely written by Federalists and ratified by state conventions dominated by Federalist majorities, not Anti-Federalist minorities…
In the wacky world of new originalism, dissent becomes assent, minorities become majorities, and the interpretive method of the Anti-Federalist losers supplants the methods of the Federalist winners.
These lies, misinterpretations, and false histories have been peddled and promoted by a conservative and libertarian apparatus that has been lavishly funded by the richest and most reactionary family and business fortunes in America: Adelson, Coors, Koch, Mercer, Singer, Smith-Richardson, and so on. The resulting distortions and contortions of American politics have been massive. The effects are better captured by rephrasing the process of creating movement conservatism as “feeding red meat to the base.”
Look at the issue of gun control. For a full century after its founding in 1871 by former Union Amy officers, the National Rifle Association had focused on shooting, hunting and conservation. (How NRA’s true believers converted a marksmanship group into a mighty gun lobby, Washington Post, January 12, 2013 ) But in May 1977, after NRA leadership had decided to retreat from politics and move the NRA headquarters from Washington DC to Colorado, conservative activists from the Second Amendment Foundation and the Citizens Committee for the Right to Keep and Bear Arms seized control of the NRA at its annual meeting. This is now known as the “Revolt at Cincinnati.” These groups were funded by Adolph Coors Foundation, the Koch brothers, and Richard Mellon Scaife and included on their boards Richard DeVos, Peter Grace, and Jesse Helms. Millions of dollars were disbursed to “scholars” and “journalists” who were loose with facts to create and promote a new misinterpretation of the Second Amendment.
In April 1991, former Chief Justice Warren Burger, a conservative appointed by Nixon, told a PBS interviewer that the idea that the Second Amendment protected an individual right to bear arms was “one of the greatest pieces of fraud—I repeat the word ‘fraud’—on the American public by special interest groups that I have ever seen in my lifetime.”
On economics, the conservative and libertarian movements have largely succeeded in getting almost everyone to believe that the US economy was founded on the ideas of Adam Smith. Which, if you read a bit of history, is pretty mind boggling, since Smith was an apologist for the British empire, and was actually paid to teach at the British East India Company management school at Haileybury.
The US economy was built on the ideas of first Treasury Secretary, Alexander Hamilton, who was also George Washington’s closest and most trusted adviser. In his major reports to Congress, Hamilton explicitly rejected Smith’s ideas. In fact, there were a handful of questions on national economic policy during Washington’s two Presidential terms that were hotly debated between Federalists, led by Hamilton, and Anti-Federalists, led by Secretary of State Thomas Jefferson. Every single one of these questions was decided by Washington embracing the policies and arguments of Hamilton.
Liberals and the left have allowed the right to falsely claim the mantle of defenders of the Constitution by dismissing the American Revolution and the adoption of the Constitution as merely a group of white male elites on one side of the Atlantic grabbing power from a different group of white male elites on the other side.
But the creation of the United States was exceptional. The launching of the American experiment in self-government was a culmination of the political and scientific Enlightenment. Key here is the Constitutional commitment to promote the General Welfare. This marks the United States as a sharp break from all previous governments, which were run by monarchs, oligarchs, and aristocrats to only benefit themselves.
What is a republic, and what are the proper economic policies of a republic? The right can never answer this question truthfully without jeopardizing its most cherished beliefs about the primacy, legitimacy, and efficacy of capitalism.
It has been observed by many that the current leadership of the Democratic Party rose to power under the shadow of the Reagan Revolution, and are accustomed to ceding public legitimacy to Republicans. As a new decade begins, I have hope, because there is a new generation of Democrats who argue that the legitimacy ceded to the opposition was never deserved in the first place.
I have hope because in this new generation of Democrats, there are some who are asking the same questions I have about what a republic is supposed to be, and its economic policies.
Rep. Alexandria Ocasio Cortez — whose brief tenure in Congress has already rocked the establishment on both sides of the aisle — is being advised by Cornell law professor, Robert Hockett, who has written on the question; eg, “Materializing Citizenship: Finance in a Producers’ Republic” (2014, Cornell Law Faculty Publications).
…the United States actually has a distinguished tradition of what I am calling “productive republican” finance. It is a tradition pursuant to which productive assets were deliberately spread broadly among diligent citizens ready to better the lives of themselves, their families, and ultimately their communities through thoughtful, hard work.
Historically, the tradition is rooted in two complementary sources: First, an implicitly opportunity-egalitarian, “productive yeoman” colonial culture and subsequent national self-image, stemming in large measure from the Civic Republican and Classical Liberal ideological origins of the American republic; and second, an attendant suspicion of large aggregations of financial capital… The practical and legal consequences of this vision, where American banking and finance are concerned, were pronounced. Banking institutions were, by regulation, deliberately kept small and inherently local…
Looking for more material by Hockett, I discovered that in January 2019, the History Department at Harvard University joined with Harvard Law School to host a two-day conference on Money as a Democratic Medium, explicitly exploring money as a political creation, and considering how to bring the creation and distribution of money under more democratic control. There were dozens of speakers, but three in particular seemed to me to be, like Hockett, striving to revive the ideas of republicanism and civic virtue to restore political sovereignty over a market economy run amok.
Mehrsa Baradaran of the University of Georgia Law School (she is now at the University of California – Irvine), is author of the seminal work The Color of Money: Black Banks and the Racial Wealth Gap (Harvard University Press, 2019). In her presentation, Baradaran provides an overview of how the creation and distribution of credit and money were carefully controlled to deny equal opportunity to minority citizens.
Baradaran is on the board of the Public Banking Institute, which succeeded just two months ago in getting California’s legislature to begin the groundwork for a state controlled public bank in our republic’s largest state. How many of you have heard this bit of news? I suppose it is not something the corporate-controlled news media is very pleased about. When the populist Non-Partisan League gained control of North Dakota in 1916, one of the major issues was the creation of a state bank. The legislators who had pledged support to the NPL (it didn’t matter to the NPL which party you supported; it was support for NPL policies that mattered) established the State Bank of North Dakota as a state-owned, state-run financial institution in 1919. When the New York Times deigned to notice what the NPL was doing, its article included the shriek of “Bolshevism on the prairie.”
Joseph R. Blasi teaches at the Rutgers School of Management and Labor Relations. He is co-author of the 2014 book The Citizen’s Share: Reducing Inequality in the 21st Century. The book details the Founders’ original vision of widespread ownership of the nation’s wealth, avoiding the extremes of poor and rich found in the monarchical nations of Europe.
Jeffrey Sklansky is associate professor of history at the University of Illinois at Chicago. He is the author of The Soul’s Economy: Market Society and Selfhood in American Thought, 1820-1920, and Sovereign of the Market: The Money Question in Early America. His presentation to the conference focused on some American history that has been ignored, but is vital to resurrecting a republican approach to political economy. Sklansky outlined the history of the Sub-Treasury plan for financing farmers, developed by Charles Macune of the populist Farmers Alliances in the 1880s and proposed by the populist People’s Party in the late 1880s. The Sub-Treasury plan is an example of structuring the banking system through the use of government agencies, and keeping predatory private financiers and bankers at arm’s length.
Here is a link to the video which includes the presentations by Hockett, Blasi, and Sklansky.
Sen. Elizabeth Warren is being advised by Vanderbilt Law professor Ganesh Sitaraman, author of the 2017 book, The Crisis of the Middle-class Constitution: Why Economic Inequality Threatens Our Republic. I judge Sitaraman’s book to be a badly needed corrective to the false narratives of economic history peddled by the right. Sitaraman examines the history of early republics and democracies the the Founders examined as they carefully structured the new national government. I delighted in Sitaraman’s discussion of the political histories of Athens, Rome, and Florence.
Starting in 462 B.C., the plebeians began to demand that Rome’s laws be codified and made publicly available. “When the laws are written down, weak and rich men get equal justice,” Euripides had written. “The weaker, when abused, can respond to the prosperous in kind, and the small man with justice on his side defeats the strong.”
Sitaraman argues that all governments face the problem of maintaining peace between the poor, who are many, and the rich, who are few. “Aristotle, Polybius, Cicero, Machiavelli, and other political thinkers all paid considerable attention to how constitutional structure would intersect with economic inequality,” Sitaraman writes. “They worried that economic inequality would lead to political inequality, and with it, oppression, and ultimately revolution.” History showed that the rich usually rose to control a government, and sooner or later used that control to begin fleecing the rest of the population. Eventually, after depredations by the rich became too much to bear, some means had to be developed to provide political power to the poor. In Rome, the position of the Tribune of the people was created, with the plebeians pledged to avenge the Tribunes if the nobility harmed or killed them. Political thinkers found that the “primary answer was to develop mixed forms of government that built economic classes directly into the structure of government. Each class would thus have a stake in government and a check on the other.”
Sitaraman calls these class warfare constitutions.
At the creation of the United States, Sitaraman argues, the Founders did not create a class warfare constitution because there were no extremes of rich and poor. There was no titled nobility, no landed nobility, and no truly massive fortunes as there were in Europe. Nor was there poverty that was so grinding and so brutal that it amounted to subsistence living. (One of the weaknesses of Sitaraman’s book is that he too easily overlooks the economic reality of the social structure in the slave-holding south.) In the US, Sitaraman argues, the Constitution’s framers kept in mind the lessons of John Locke, who prescribed individual rights to life, liberty, and private property, and Machiavelli, who emphasized the need for citizens to be virtuous–that is, be willing to set aside their selfish personal interests when they conflicted with the general welfare. But the framers recognized that there were shortcomings with both Locke and Machiavelli. So, the framers also turned to English republican theorist James Harrington and his 1656 book, The Commonwealth of Oceana, which Lord Protector Oliver Cromwell at first had attempted to censor and suppress.
Harrington’s basic idea is that, for a republic to work, there has to be a relatively equal distribution of wealth and income. There has to be what we call today a middle class. The framers believed with the lack of rich and poor extremes in the US at its beginning, they could create what Sitaraman calls a middle class constitution instead of a class warfare constitution.
And it basically worked, though there were recurring crises in which economic and political power became so skewed to the top, that basic reforms had to be introduced, such as popular election of Senators, the income tax, and anti-trust law.
Not to mention a Civil War had to be fought to vanquish the rich slave-holding, neo-feudal oligarchs of the south.
Economists have called the period from the end of the Second World War to the 1970s, the golden age of capitalism. The era’s most notable feature, one that distinguishes it from the past few decades, is that workers’ incomes generally advanced in line with productivity. This parity was brought to an end by two oil price shocks, stagflation, and world monetary collapse. Thomas Piketty, in his landmark 2013 book Capital in the 21st Century, argues that this was an unusual period in economic history because the balance of economic and political power was tilted against the rich: The legitimacy of the rich’s preferred ideology of economic organization, free market capitalism, had been shattered by two world wars and the first Great Depression. This had allowed political power to be realigned to favor labor, and a more equitable distribution of economic rewards.
Baradaran points out that the US middle class was largely created after World War II by government fiat: the GI Bill, which gave widespread access to college, and massive financing for new businesses begun by returning servicemen, and the Federal Home Loan Bank Board, which made 30 year home mortgages the crucial bedrock of middle class wealth accumulation.
For his part, Sitaraman focuses on what the post-war period did politically to Americans’ consciousness of their Constitution as a middle class constitution.
It should not be surprising that it was only after World War II that American’s fear of aristocracy waned. The founding generation had revolted against a feudal aristocracy… Their grandchildren… lived in a time when feudal aristocrats still governed much of the Western world. The immigrants of the late nineteenth and early twentieth century fled those very states for a new republic defined by equality and opportunity rather than class hierarchy. By the middle of the twentieth century, the alternative to republican government was no longer aristocracy but authoritarianism. Fascism and then communism, not aristocracy or oligarchy, became the central fear.
Hockett, Blasi, Sklansky, Baradaran, and Sitaraman are all proposing remedies for the economic inequality of our time that require an activist national government interfering in the free market to begin countering the power and advantages the rich have heaped up since Ronald Reagan brought into ascendance the ideas, ideologies, and polices of the conservative and libertarian movements. The historical record, and the economic results, show clearly that these movements are only tools and weapons in the hands of rich, reactionary elites. Their success so far has destroyed the political and economic balance of our republic, and created a looming series of Constitutional crises.
There is a new generation of Democratic Party leaders, beginning to succeed in pushing aside the failed leadership of the past few decades. They have already proposed a grand vision of the future, the Green New Deal, that is worthy of the American spirit that responded to John Kennedy’s call to build greatly.
And their advisers are building the intellectual foundations for a sweeping and thorough repudiation of modern conservative and libertarian thought. This repudiation will be based on the actual ideas and ideals that created the American republic, and which set in motion the American experiment in republican-democratic self-government.
And all this gives me new hope in the new decade.
ven
Interesting points – I’m less hopeful, given the recent UK experience of entrenched institutional interests coordinating a campaign to maintain the status quo. Its not going to be easy to change the public consciousness on these issues, especially when the party of the left has the majority of its hierarchy either funded by the elite and / or with a revolving door into a well-paid corporate role.
An adjacently relevant insight from Michael Hudson on the intertwining role of balance of payments and oil in US militarism over the last 50 years.
https://www.counterpunch.org/2020/01/06/america-escalates-its-democratic-oil-war-in-the-near-east/
DMC
In short, re-instate Glass-Steagall now!
Hugh
Sanders is basically a New Deal Democrat. He should run as one. The New Deal still resonates.
I agree government has an important role in how the economy functions and how it develops. Most of the big developments in our economy have come out of government funded research. Our economy and society must be much fairer than they are. They should provide for the many, not just the few.
Still not a fan of Hamilton. The Constitution was written by the haves to divvy up power among themselves, keep any particular group of the haves from dominating the others, and of course keep power out of the hands of the rest of us. I see the Constitution as irredeemably tainted by both class and slavery. The second amendment’s “A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed” reflected the Framers’ dislike for and fear of a professional permanent army. They favored instead state militias in place of a permanent army, and they saw the purpose of such militias to protect the country as a whole and in the South to guard against slave rebellions and protect the institution of slavery itself.
Not a fan a Buttigieg either, but his recent statement that the Framers did not understand the evil of slavery was met by a gotcha by Ted Cruz quoting John Adams: “Negro Slavery is an evil of Colossal magnitude and I am utterly averse to the admission of Slavery into the Missouri Territories.” But what Ted Cruz didn’t point out was that Adams had accepted slavery, evil or not, as the price of the Constitution. My take is that the Framers did understand the evil of slavery and went ahead anyway.
bruce wilder
I suppose I am similarly situated: an admirer of the New Deal.
Also, distressed that the primary reaction to the political failures of our time — well, the primary response actually seems to be to double-down, so maybe I am writing here about a secondary response — is libertarian. So many people I otherwise respect seem to think that the logical thing to do is to oppose the state.
No, no — we can not do what needs to be done as individuals acting as individuals. We need to act collectively, as communities.
The New Deal had a model for this. It rejected totalitarianism. But, it also acknowledged diverse, opposed interests and embraced making the never-ending negotiation among them a political and economic engine.
bruce wilder
In fairness, the best “anarchists” favor cooperative action. This the New Deal embraced.
Willy
Finding a healthy, prosperous balance between personal responsibility and social responsibility has been with us since cave clan days. But only in modern times are crazies able to persuade so many that attempts at social responsibility leads to evil.
The New Deal was the best we had, at the time. We’ve gotta find better ways to counter the crazies, though hitting bottom usually works.
Tony Wikrent
Hugh – I think to understand what Hamilton accomplished, you have to accept that slavery is not the precursor to capitalism, it is a throwback to feudalism. Up until Hamilton, the wealth of a nation was measured by its holdings of land, slaves and serfs to work the land, and precious metals. One of the first bodies of economic thought comes from the physiocrats of France, who argue that all wealth is derived from the agricultural production of the land – the bounty of nature. That is what Jefferson believed.
Hamilton points out the real wealth of a nation is the ability of its people to transform natural resources into useful goods. You can have a bunch of sheep, and you can butcher them for meat, but their value is much greater if you learn how to shear the sheep from wool, and turn that wool into yarn, and turn the yarn into cloth, and the cloth into clothes. Hamilton recognizes that owning a lot of land does not make you rich, until you figure out how to take the resources of that land, and transform them into useful material and objects. And that requires the productive power of labor. Moreover, Hamilton argues that the productive power of labor can be increased by the creation and application of machinery. This shatters feudal economics and its fixation on owning land.
Hamilton does the same thing for precious metals and money. Who controlled the world’s money at the time? Who controlled the world’s gold and silver? It was not the new American republic. The money of the world at the time was controlled by the European powers.
Hamilton realizes that money can be anything, so long as the people using the money accept it as money. This is key to understanding what Hamilton accomplishes by reorganizing the nearly worthless Revolutionary War debt of the states and the Congress, and transforming it into valuable paper that could be used the same as money.
Hamilton shattered the stranglehold of this feudal economics. He designed a financial system for attracting concentrations of wealth, and transforming them into a form of money that could more readily be used as capital to create new wealth.
Also note that feudal economics is essentially zero-sum. If the source of all wealth is land and slaves, then the only way to increase wealth is to get more land and more slaves. Under feudal economics, a nation’s stock of wealth was based on its land and the slaves and serfs who worked it, and whatever mass of precious metals and debentures it had amassed. Growth of national wealth could only be achieved by 1) seizing other lands and peoples and imposing colonial status on them. or 2) gaining an advantage, usually unfair, over other countries in international trade. Hamilton shatters this zero-sum characteristic of feudal economics by setting in motion an economy in which new wealth is created through the development of new science and technology, which take the form of advances in machinery, which increased the productive power of labor. Under Hamilton’s economics, national wealth becomes primarily based on the scientific and technological achievements of a nation’s people, and the consequent improvements in their ability to use machinery to increase the productive power of labor.
The left’s typical critique of Hamilton – that he merely created a new government that perpetuated the wealth and privilege of already existing elites – is simply wrong, and entirely misunderstands what Hamilton did. There is a simple historical experiment we can look at: compare the fate of USA elites at the end of the 18th century with the fate of England’s elites
Where today are the fabulously wealthy families of the descendants of Franklin, Washington, Adams, Hamilton, Jefferson, Madison, etc.? There are none, so far as I know. Look then in contrast at the continued wealth, privilege, and rank in Britain of the families of Windsor, Grosvenor, Schroder, Barclay, Cavendish, Somerset, Seymour, and others, all of which go back three centuries or more.
In short, Hamilton did not intend to preserve existing wealth. He intended to marshal existing wealth and use it to finance the creation of new wealth
The key to understanding Hamilton is his 1791 Report to Congress on the Subject of Manufactures, most especially “Section II: As to an extension of the use of Machinery”, where he writes, “The employment of Machinery forms an item of great importance in the general mass of national industry. ‘Tis an artificial force brought in aid of the natural force of man; and, to all the purposes of labour, is an increase of hands…”
Not only that: Hamilton emphasized the importance of having active government interests and investment in new and important economic enterprise. In his December 1791 Report to Congress on the Subject of Manufactures, Hamilton wrote:
“Experience teaches, that men are often so much governed by what they are accustomed to see and practice, that the simplest and most obvious improvements, in the [most] ordinary occupations, are adopted with hesitation, reluctance and by slow gradations … To produce the desirable changes, as early as may be expedient, may therefore require the incitement and patronage of government… The apprehension of failing in new attempts is perhaps a more serious impediment…it is of importance that the confidence of cautious sagacious capitalists…should be excited… it is essential, that they should be made to see in any project, which is new, and for that reason alone, if, for no other, precarious, the prospect of such a degree of countenance and support from government, as may be capable of overcoming the obstacles, inseparable from first experiments.”
The left usually misses this crucial point of what Hamilton designed. Rather than the Marxist model of the means of production determining the political and social superstructures, what actually happens under Hamilton’s system is government support for new science and technology creates new means of production. This is the REAL history of USA economic development. There are a few scholars who understand this, such as Maria Mazzucato, whose book The Entrepreneurial State, details how every single technology used in cell phones began as a government research program. Every single one. This is the people, acting collectively through the agency of government, creating new modes and means of production, the exact opposite of what marxists say happens.
bruce wilder
The constitution John Adams wrote prohibited slavery in its opening paragraphs, or at least so the Massachusetts supreme court ruled in 1784.
Hugh
Hamilton’s taxing and money schemes which favored big Eastern producers over new smaller Western ones resulted in the Whiskey Rebellion
https://www.history.com/topics/early-us/whiskey-rebellion
So no, Hamilton didn’t always favor the new over the old. And Bruce is referencing Article I of the Massachusetts state constitution of 1780, three years before the end of the American Revolution and 8 years before the ratification of the US Constitution: “Article I. All men are born free and equal, and have certain natural, essential, and unalienable rights; among which may be reckoned the right of enjoying and defending their lives and liberties; that of acquiring, possessing, and protecting property; in fine, that of seeking and obtaining their safety and happiness.” But then Adams accepted the evils of slavery in the US Constitution.
Ché Pasa
The New Deal was a modest effort at best. It was certainly not radical. It was designed to alleviate some of the suffering of some of the American people during the Great Depression by providing work and a small, temporary income for some people in distress and by propping up (some) farmers, industries, businesses and banks. It did not help or support ‘everyone,’ and it was not designed to. But it did help some in ways that hadn’t been done before by the federal government, and it set a pattern for government assistance during good times and bad that is still largely followed despite all the political hullabaloo over it.
Of course the primary objective was to prevent a revolution from the Left (back when there was a real Left in American politics and life.)
It was widely perceived as effective and the public works created during the New Deal are still admired and in some cases revered.
As many have pointed out, however, the New Deal did not solve the Great Depression; WWII did that.
Lyndon Johnson’s attempt to implement FDR’s Second Bill of Rights while the Vietnam War raged disastrously and African Americans and students raged in the streets pretty much put paid to the idealized memories of the New Deal. The opponents of FDR and the New Deal said, “See, this is what you get when ‘those people’ are enabled.”
So it’s been a political matter of backtracking and reactionary reversion ever since. Endless support for the banks and Wall Street, less and less support for people in distress. Endless subsidies for those who don’t need them, less and less for everyone else. Dismantling or disabling public education. Incarceration of more and more men of color (women too, but not nearly to the extent of men). More and more resources devoted to ‘wars’ against the enemies du jour, less and less to public infrastructure.
I didn’t live during FDR’s New Deal but my parents did. They supported it, but they told me they didn’t feel they were personally suffering during the Depression. What they saw and what they believed the New Deal was addressing were the many millions who were suffering and the absolute need to prop up a failing economic system to prevent a revolution. They believed the US would not have survived without the New Deal, that Hoover’s approach to the Depression, while ‘charitable’, did not and could not address the systemic problems that brought on the Depression.
Two of my aunts worked in DC for the WPA and both my parents served in the military during WWII. For them, duty was the operative concept. This sense of duty has largely been lost. The ideal of collective action for general betterment is almost absent. The belief in progress toward a better future? All but kaput.
Instead, we’re living in Apocalyptic times with no sense of common purpose or public interest. It’s very much everyone for themselves.
“New hope,” Tony? Really?
Hugh
The New Deal did get the country out of depression by 1936, but then FDR abandoned much of it because it was “too expensive” and so the country went back into depression until the vastly more expensive run up and entrance into WWII took the country definitely out of depression.
Ten Bears
The New Deal was mostly throwing the rubes a bone, mollifying the mob without taking to big of a bite out of the Robber Barons’ pocket-books. Not to say it was a bad deal, just could have been better.
bruce wilder
But then Adams accepted the evils of slavery in the US Constitution.
John Adams did not shoot Thomas Jefferson down like a dog in the street for the latter’s slave-holding either.
Beyond that observation, I do not see much meaningful content in Hugh’s repeated assertion.
John Adams had no significant role in writing or ratifying the U.S. Constitution of 1787. Pretty much everyone living in the country at the time (and since) “accepted” the Constitution in the sense attributed here to Adams.
That Constitution failed to prohibit slavery or to authorize federal prohibition, beyond a ban on international trade from 1808. But, that Constitution did not institute slavery. There was a conflict of political opinion and the Constitution did not resolve that conflict.
450.org
Meet the new hope — same as the old hope. Hope springs infernal.
450.org
So we have Hamilton to thank for the growth economy and its climate disruption apocalyptic implications. From crude wheat threshers to magical cell phones, it’s all about growth. In a world made by hand, climate disruption isn’t such a threat. Thanks Alex for setting in motion the hastened destruction of the planet.
bruce wilder
The New Deal encompassed many reforms in the institutional structures of political economy of great scope and depth. Agriculture, banking, generation of electricity, the rules of retail and wholesale trade were substantially and, I think, radically restructured. Aviation and radio and television broadcasting — nascent fields — were established on novel bases. Antitrust was given muscle and industrial unions encouraged.
It is these structural reforms that have been attacked and largely destroyed by the neoliberals, with tellingly destructive consequences.
The Great Depression was a prolonged stalement in a war over the distribution of wealth and income, but one during which many needed institutional reforms were enacted and began to take effect. The assertion that the New Deal did not end the Depression and the war spending (and forced saving) did is, of course, true in the Keynesian framework, but in the Keynesian framework all those structural reforms are considered unnecessary — let the market god take care of such details.
bruce wilder
In a world made by hand, 450.org, you are dead. And blessedly silent.
Will
You would think that the difficulty in getting ANYTHING of true substance accomplished in the modern US system would add appreciation for how much actually got done during the founding of this nation…
450.org
Same holds true for you, you pompous prick, and the planet would be healthier and more vibrant. If given the choice, I gladly would have opted not to be born if the result would have been a healthy vibrant planet versus the destruction of the very same.
450.org
Bruce, your pedantic “neoliberal” schtick is not only myopic, it’s predictable of you and rather convenient as an excuse for everything. Please try to be more creative in your analysis. Broaden your horizons. Neoliberalism, like Trump, is a symptom or feature, not the problem in and of itself. Growth is the problem. The unrelenting impulse to grow against all odds and prudence.
Bill H
The great misunderstanding is what constitutes “the common welfare” which the constitution is supposed to promote, which is simply that the government pass laws which assure a level playing field for all.
It is the basic misunderstanding between equality of opportunity and equality of results. We are no longer content that every horse starts at the same line and at the same time, carrying the same weight, we now insist that every horse arrive at the finish line simultaneously.
bruce wilder
@ Bill H
In a political economy dominated by billionaire oligarchs and mega business corporations, I am failing to see where much of anyone is insisting “that every horse arrive at the finish line simultaneously.” Who are these radical equalitarians and where have you been hiding them?
Bill H
@bruce wilder
You have not heard any one of the liberal politicians lately? Elizabeth Warren for instance, or Bernie Sanders?
DMC
“You have not heard any one of the liberal politicians lately? Elizabeth Warren for instance, or Bernie Sanders?”
They’re not talking “equality of outcome”, they’re talking “guaranteed minimum”. They’re talking “everyone finishes the race, PERIOD, as opposed to “3/4 of the horses die before finishing”.
And yes the New Deal was perceived as being radical by the people who fomented the coup attempt against FDR, that was thwarted by Smedley Butler(q.v.).
bruce wilder
I have listened to Sanders and Warren.
It may be that I hear them differently from you, because I understand the context of our economy and our times differently. And, because, as politicians are wont to do, they in their rhetorical choices try to appeal to broad assemblies of groups without offending or frightening those who might be marginally sympathetic.
As I see it, the great problems of our economic times center on an economic elite that is increasingly predatory or parasitic, as the case may be. The economy is not a race that may be won by the swift, but an increasingly dilapidated plantation where planter and overseer prosper by immiserating the peons and exhausting the soil.
I see an economy where finance takes an increasing share of income, where health care costs twice (per capita) what it does in any other developed country, where getting a college education is likely to sink anyone not able to rely on family support into debt peonage, where good jobs have been exported, and where much of the economy is rigged by extremely powerful business corporations.
Sanders, in his rhetoric, is clearer about the necessity of confronting the “billionaires” and “the corporations”, than is Warren, whose rhetoric seconds Sanders’ call for “a movement” but whose campaign organization and policy positions are friendlier to business and finance. Both are responding to perceptions of rank unfairness in the structure of the economy, Warren relying more on her reputation and experience as an expert on bankruptcy, while Sanders relies more on his lifetime as a maverick “socialist”, but I do not see either coming anywhere close to a campaign for “equality of outcome”.
I do see, I suppose, how listening to some vague generalities and mamby pamby whining about “increasing inequality” without concrete reference to the cruel exercises of power that make the merely middle-class poorer and the poor, more miserable, can mislead as to the nature of the policy problem. But, from the standpoint of a practical politician, the political problem dominates the policy problem. And, the political problem is that the rich (the 1% or even the 1/10th of 1%) have more power than the 80% (at least half of whom are unlikely to vote) and the 20% can be hard to persuade that they are better off aligning with the poor than with the rich (and with employers and business allies of the 20%).
So, practical politicians must meet their audience where they live and think and will propose incremental reforms where they are likely to seem most plausible and least frightening.
Still, I don’t think a $15/hr minimum wage is going to put anyone’s horse across the finish line within a lifetime of any CEO’s first month on the job. Whether you understand that the CEO pulling down $10 million a year in “compensation” (love that term!) is able to do so in many cases only by cheating his customers or suppliers, underinvesting in his company’s plant and capabilities, stealing his employees’ pensions, exporting jobs and running off with the money after short-term gains bought at the expense of long-term disaster or not.
KT Chong
Finally, proofs that Americans — i.e., the PEOPLE, not just the government — are in fact a very evil people. Polls of how willing Americans are willing to use nukes:
https://www.youtube.com/watch?v=mQkLVG2wlx8
nihil obstet
In 1917, twelve years before the 1929 crash, the Communists successfully revolted in Russia. After WWI, they came close in Germany. Yes, the New Deal was driven significantly by a fear of the left. Huey Long was the only politician FDR was reported to have feared. It was designed to save capitalism. Having said that, we should also note that it was magnificent, in its limitations on financial structures, its beginnings of a welfare state, its development of physical and cultural infrastructure, its attitude towards taxation (culminating in a 94% top marginal rate). If only Henry Wallace had been vice president in 1945!
Mark Pontin
@ KT Chong —
Americans have no understanding of what nuclear explosions are like. Most Americans have very little understanding of anything, thanks to their brainwashing by their mass media culture. But in Americans’ defense, almost nobody alive has any understanding of what nuclear explosions are like.
Anybody who was ever around and active in the 1945-1992 period and actually witnessed one of those things set off — including types like Andy Marshall, for heavens’ sake — were nervous about what would happen when there were politicians and generals around who hadn’t seen one of those things go off, and therefore imagined that nuclear wars were winnable.
https://breakingdefense.com/2019/03/how-is-yoda-an-appreciation-of-andy-marshall/
“He was one of a dwindling number of people who witnessed a nuclear weapon test. When asked about the experience, Marshall would emphasize the weapon’s power—the flash so brilliant it felt like being inside the Sun itself—and its horror. He felt it would be useful to have the world’s leaders witness such a test every so often, so they could better understand the folly of war.”
Mark Pontin
The Manhattan Project — also a product of the Franklin Roosevelt New Deal administration, incidentally. (Or not.)
ricardo2000
Reply to 450.org: ‘From crude wheat threshers to magical cell phones, it’s all about growth. In a world made by hand, climate disruption isn’t such a threat. Thanks Alex for setting in motion the hastened destruction of the planet.’
Given the hate 450.org spews I refuse to believe that this person has any allegiance with modern environmentalism, despite the facile reference to CO2 levels below 450 ppm.
A ‘world made by hand’ is a naive hope, because they confuse growth and progress. It is tech under control, with clear thoughtful understanding of the costs, benefits and risks, that progresses lower classes. The example that published laws are harder to manipulate in favour of the rich is undeniable. This observation makes clear the danger of modern identity databases, Facebook, Google, Twitter, customer loyalty cards, as they are collected secretly, and employed to benefit the few through manipulation of the many. Uncontrolled, secret tech inevitably becomes tools for sociopaths to slash through society. Conversely, the great public databases such as PubMed (Index Medicus then Medline), Chemical Abstracts, Beilstein database, Wikipedia, Agricola, Web of Science, Oxford English dictionary, biographical, and geographical reference sources, AllMusic.com, Lyrics databases; the list is endless.
I do agree with the author’s argument that modern CONservatives have been manipulating public opinion through lies and fraud to support oligarch rule. I think it no accident that 1% resurgence has led us to the point where vast populations are desperately poor and endangered as we are considered mere ‘consumers’, not citizens. It is no accident that the middle and lower classes have received nothing for their efforts since the Volcker Recession in 1980. The economy stagnates while the 1% continue to suck all available cash out of the economy, instead of letting it circulate and create valuable public resources. Useful employment, health care, child education, good food, fabulous culture, a clean, restorative environment, low crime rates, equality and equity, and a happy society are within our hands grasp.
To imagine this requires a ‘hand-made world’ is to demand endless serfdom. It will require a world made by knowledge, or no progress at all.
John Stuart Mill: “I did not mean that Conservatives are generally stupid; I meant, that stupid persons are generally conservative. I believe that to be so obvious and undeniable a fact that I hardly think any hon. Gentleman will question it.”
George Orwell, “Political language is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind.”
Abraham Lincoln, “If destruction be our lot, we must ourselves be its authors.”
Supreme Court Justice Louis Brandeis, 1933: “We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.”
DMC
My father was a US Marine in WW2 and was part of the army of occupation in Japan at the end of the War and he said “the spookiest thing he’d ever seen was the ‘shadows that do not fade’ on the outskirts of Hiroshima”. These are the outlines of people vaporized during the explosions. It went a ways to convincing him that some sort of World Federalism was the answer to a world in which nuclear weapons are a thing.
Hugh
Adams’ connection to the new Constitution was so tangential that he was only the country’s second President. And let’s remember only about 10% of the adult population in the country had the franchise to vote on its adoption. Slaves, women, and many adult males without property did not have a vote. The Constitution’s We the People did not include 90% of adults.
As I said, the system of checks and balances was about placing limits on competing factions of the wealthy. It checked the power of the vast majority (of us) without any corresponding balance. If you do not see class and the defense of property, even when that property consisted in the ownership of other human beings, you deliberately aren’t looking at the real Constitution, but the mythological one we grew up with. States are historical oddities and we continue to be burdened by unrepresentative, undemocratic institutions like the Senate (where the majority of the country lives in just 9 states and is represented by 18 Senators and where a Senate majority of 52 Senators from 26 states represent just 17.5% of the population) and by an electoral college (which distorts political campaigns and increasingly delivers the candidate who failed to win the popular vote). These aren’t accidents. This was built in. Indeed the original was far worse and multiply reformed through amendment since. And yet the current version remains severely defective.
Changing subjects only a little, opportunity is code for “You had your chance, now go die in a ditch.” Politicians when they use the word are saying they aren’t going to do anything, but the result however unequal is your fault. Equality of opportunity is a lie so transparent I am surprised anyone can talk about it with a straight face. Look around your neighborhood, your city, state, country. Where have you ever seen it? Similarly, equality of results is put out like it’s SOCIALISM against the laws of nature, blah, blah, blah. But it is a function of society that we its members guarantee to each other precisely some equality of results because none of us would exist at all, very long, or very well without the rest of us.
Tom
It’s on. Iran has launched attacks using Iranian Armed Forces on US troops in Iraq and confirming it on live TV.
450.org
I’m not demanding a world made by hand. My point is, if we had never progressed beyond that and maybe instead focused on socially evolving versus technologically evolving, the living planet would be in much better shape today, meaning it would still be healthy and vibrant.
Yes, of course, it’s a pipe dream to believe human will ever voluntarily return to that in a more socially evolved way. Mass production enabled by technology is what has fostered the rapacious destruction of the planet. Making things by hand was/is a slow, deliberate process. If it was coupled with a land ethic per Aldo Leopold as part of a social evolution, humanity could have taken a much different path. But humanity didn’t and here we are and more than likely the gig is up for most of humanity if not all of it.
Spewing hate? You’re too funny. Criticism of insanity is now considered spewing hate, I guess.. Alrighty then, whatever you say chief.
450.org
Modern environmentalism? That sounds like a nice term but what is it exactly? Is it similar to old-fashioned environmentalism whatever that is? Why the “modern” qualifier. I would think environmentalism needs no further qualification.
Frankly, I see no evidence of this “modern environmentalism” of which you speak. The Green New Deal? Give me a break. We cannot invest our way out of climate disruption, meaning we can’t grow our way out of it. Any environmental movement that doesn’t address the lubricant of growth, Wall Street, is no legitimate movement at all.
realitychecker
Seems to me that is is always the rule-breakers that screw up any good ideology. And they usually use lies and deception to do so.
Why don’t we punish them appropriately for the societal damage they do, and maybe then we can get good testing of which approaches actually work best when the rules and principles are actually adhered to?
I could probably adapt to life under capitalism OR socialism if the rules and principles enunciated were in fact honored in practice. Severe negative reinforcement is required to get that result, though. Will we evr wake up?
On another front, any who decry growth per se have a problem with the Creator, because all species of live things grow as much as possible. It’s just that they are more limited in their ability to transform the fundamentals of their life environments; that is all that differentiates us.
Anthony K Wikrent
It appears I need to be a bit more exact in my writing. Perhaps mentioning the New Deal was misleading for some people. Reviving the ideas or even the policies of the New Deal is NOT what gives me hope.
What gives me hope is that there is some serious academic work being done on republicanism, and what the political economy of a republic should be. What stands out in this work is that concentrations of economic wealth are being unambiguously identified as not just a negative problem, but as a dangerous one as well. This academic work is making it much, much easier to eventually point at the results of conservative and neoliberal economic policies of the past half century, and condemn them as gravely injurious to the General Welfare because they aid and abet the rise of oligarchy.
It will also make it possible to argue that the Republican Party is grossly undeserving of the name.
Reviving republicanism – that’s what gives me hope.
Anthony K Wikrent
Hugh – I think very highly of Matt Stoller, and he holds the same views of Hamilton as you do. So, I looked more deeply into the accusations against Hamilton, and engaged Stoller by email.
What I found is that the charge that Hamilton was elitist, and engaged in deliberate armed repression of the Whiskey rebellion in order to enrich himself, is a smear that was begun by the network of Lew Rockwell, founder of the Ludwig von Mises Institute, and who describes himself as “anarcho-capitalist.” (I guess Hamilton wasn’t capitalist enough for Rockwell and his group, unlike people like you, who think Hamilton embodied the worst of capitalism.)
Here, for example, is William Hogeland – author of the November 2007 anti-Hamilton article in the Boston Review that most people who hate Hamilton often cite – writing on lewrockwell.com in May 2006:
“Hamilton, in other words, was a liberal. An activist of executive power, already running the most bloated executive department, he famously believed in powerful government as older brother to the market, and he was willing — at times eager — to subordinate individual rights to managing the economy for what he perceived as national good.”
https://www.lewrockwell.com/2006/05/william-hogeland/libertarians-socialists-and-the-whiskeyrebellion/
Subordinate individual rights to manage the economy for the national good? Umm, like not allowing Wall Street to do front running? Is that a violation of individual rights? Or what if we just went ahead and outlawed credit default swaps? Wouldn’t that be a violation of the property rights of the derivatives brokers and traders who create, sell, and trade credit default swaps?
Subordinate individual rights to manage the economy for the national good? Yep – guilty as charged, and damn proud of it.
May I also remind you that Rockwell’s group also harbors Thomas DiLorenzo, the “scholar” who, because of their old Whig policies of national Hamiltonian development, has described Henry Clay and Abraham Lincoln as USA’s first “national socialists.” Yeah, Lincoln was a Nazi. These are the guys who argue Hamilton was an elitist crook.
And there are a few things about people who bash Hamilton that I think are almost comic, when you think about it a bit. Oh, those poor people in western Pennsylvania upset that they had to pay tax on their whiskey. Just like those poor people who think the income tax is illegal and joined Clive and Ammon Bundy in their respective seizures of federal facilities. Surely, if you take the side of the Whiskey Rebellion, who can also see the justice of the what Clive and Ammon Bundy and their followers were trying to do!
And, Hamilton as an elitist! He must have thought all those rebellious people were “deplorables.”
“Hamilton’s taxing and money schemes which favored big Eastern producers over new smaller Western” Interesting, especially given the history of how Pittsburgh became a center of iron production and steam engine making with the encouragement of Hamiltonian policies reinstituted by Madison after he nearly lost the war of 1812. Because it certainly is true that the development of Pittsburgh industry was under the control of “big Eastern producers” like Oliver Evans of Philadelphia, who sent his son to Pittsburgh to build and operate the first machine shop in the west, and begin building steam engines.
Hugh
I don’t remember saying that Hamilton tried to enrich himself. He did favor the established Eastern interests over the developing Western economy which rather undercuts your development argument. Parenthetically, Hamilton died in a duel in 1804 eight years before the War of 1812. The issue behind the Whiskey Rebellion (and we need to understand the importance of whiskey in early American life) was that the Westerners weren’t just paying taxes. They were paying higher taxes than their Eastern counterparts. They also were required to pay these taxes in cash. Access to money was a recurrent source of grievance in the West, wherever the West happened to be from the beginning through the 1800s into the 1900s. William Jennings Bryan gave his Cross of Gold speech at the 1896 Democratic National Convention. So in addition to paying higher taxes, Western distillers would have needed to borrow some of the money to pay their taxes at interest from banks (if there were any) and this money itself would have derived from and been at the mercy of Eastern banks. And all this on top of their development costs.
450.org
The creator? Seriously? Which creator are we talking about? The white European one with the long white beard?
If humans are clever enough to overcome natural restraints, at least temporarily on the cosmic scale, and grow to their dark hearts’ content surely they’re clever enough to create and maintain their own restraints in order not to despoil the natural complexity that spawned human. And yet human has failed to restrain itself despite its so-called higher intelligence. If there is a creator, it’s responsible for that basic failing and yet most religions place the blame on humans and never the deity or deities for making this basic failing a feature of humanity.
nihil obstet
Part of the disagreement over Hamilton appears to be the issue of industrialization, which was carried out in hierarchical organizations, and a view of independent autonomous farmers/landowners. The hierarchical organizations were going to assign more wealth and power to those at the top. The burning issue today is how to run an economy that works for most of us, and that involves being able to carry out complex projects without concentrating power in the hands of the few.
realitychecker
I was being ‘ironical’ in referring to a Creator; some can’t appreciate irony. Maybe because that would require a decent sense of logic.
As in, where would the design feature come from that would build into any species the innate ability to voluntarily limit their own acknowledged excesses? The fact that adaptations facilitating growth could be devised makes practical present-moment sense, but long-range planning to CURB growth does not necessarily follow. Or exist in any species that I am aware of.
Woulda been obvious to one who was more a thinker than a typer/propagandist.
When you create the next Universe, perhaps you can improve on the basic design philosophy of living things. Good luck.
450.org
The fact you capitalized “creator” belies the verity of the claims you make in your last comment, realitychequer. There’s no need to capitalize that which doesn’t exist except in the antiquated imaginations of delusional men/women.
Anthony K Wikrent
There were some big compromises made in framing the U.S. Constitution: the Great Compromise of a Senate with two members from each state; the slave state compromise of counting slaves as 3/5 of a person for purpose of representation; and the compromise on not ending the slave trade immediately.
Ganesh Sitaraman, the Vanderbilt Law professor who is advising Sen. Elizabeth Warren, argues in his 2017 book, The Crisis of the Middle-class Constitution: Why Economic Inequality Threatens Our Republic, that there is also an economic compromise, which cannot be understood within only the context of today’s economic issues. This economic compromise, Sitaraman writes “is hidden from view if we think the original charter was constructed to serve the interests of the wealthy elites. It is hidden from view if we think of the founders as high-minded philosophers. And it is also hidden from view if we look for evidence of the compromise only in the secret debates in Philadelphia.”
The framers of the Constitution not only needed to design an effective national government, they also had to solve the key economic problem that had destroyed public faith in the Articles of Confederation. The problem was that the national government needed revenue to be able to function, but under the Articles did not have the powers needed to raise revenues. Congress could only ask the states for “requisitions” but efforts by the states to comply had met with ever more serious revolts and insurgencies. Sitaraman points to the requisition of 1785 in particular, and the popular backlash it provoked, as the catalyst for the calling of the Constitutional Convention.
“For rebellious ordinary Americans, the issue was not that they were irresponsible, that they thought debts unimportant, or that they did not want to pay. The problem was that they genuinely could not pay given the economic distress of the time, that the government’s harsh economic policies were making things worse, and that they didn’t think their payments were being put to good use. The tax and debt policies put pressure on the driving force of the economy: the people’s work. Debtors were forced to sell their tools and livestock to pay their debts, leaving them unable to “save their estates” and continue as “useful members of the community,” as one New Jersey writer put it in 1785… Farmers became increasingly discouraged; any attempt to extricate themselves from their debt seemed impossible. Worse yet, in the event that they could pay their taxes in gold and silver, it would go to bondholders and creditors, who had made speculative investments at rock-bottom prices. Ordinary people thought it unfair that speculators be rewarded, and they recognized that any payment was unlikely to help the economy because the bondholders and creditors were continually sending gold and silver to Britain in return for manufactured goods.”
One effect on public opinion — overlooked by those who argue that the Constitution was designed to to be anti-democratic — was that many people began to yearn for the creation of a monarchy to establish an effective government and “save the state from sinking into the lowest abiss of Misery,” as one citizen wrote the time. This turn in public opinion toward possible acceptance of monarchy deeply distressed and disturbed most of the men who had actually fought in the Revolutionary War, particularly the officers.
Sitaraman continues:
“The compromise that addresses the economic problems of both farmers and merchants, debtors and creditors, ordinary people and elites, is buried deep in Article I of the Constitution.
“Article I, section 10 of the Constitution prohibits the states from engaging in a number of activities, including two that were of critical economic importance during the 1780s: “impairing the obligation of contracts” (which states did to protect debtors) and “lay[ing] any imposts or duties on imports or exports” (which states did to raise revenues). Article I, section 8 of the Constitution is the other side of prohibiting state imposts: it empowers Congress to create “duties, imposts and excises.” Usually these clauses are not read together. Constitutional lawyers analyze the first clause — the contracts clause — along with the Constitution’s provisions on protecting property. They normally group the impost, or tariff, clauses with the commerce clause. This conventional grouping betrays modern concerns… But thinking about these provisions from the perspective of the economic debates of the 1780s suggests another way to interpret these clauses. The contracts clause prevents states from passing laws that undermine contracts, such as pro-debtor laws that require creditors to take less for their investments. This provision clearly supports creditors vis-a-vis debtors and is one piece of evidence for the Beardian analysis of the Constitution…. The impost or tariff clauses are a way for the federal government to generate revenue — something it could not do sufficiently well during the Confederation… If the new Congress had the tariff power, the revenue model for the country would shift significantly. Coastal merchants engaged in international trade and wealthier people who bought imported goods would bear the lion’s share of the national government’s revenue burden… States could then alleviate the tax burden they had imposed on ordinary people, who were still being crushed by the post-Revolutionary War economic depression. Ordinary people would now have the ability to engage in economic activity without the fear that any money they earned would go to taxes or creditors.
“Taken together, the two provisions were an effort to solve the problems of both the creditor and bondholder elites and the ordinary people who were most heavily hit by the economic crisis. In fact, this is just what happened. Almost immediately after Congress first reached a quorum, in April 1789, James Madison introduced the tariff bill into the House of Representatives. “A national revenue must be obtained,” Madison said. “[B]ut the system must be such a one, that . . . shall not be oppressive to our constituents.” The bill became the second piece of legislation passed by the First Congress. President Washington signed it into law, appropriately, if not poetically, on July 4, 1789.] The new government, one historian has noted, “obtained almost all of its revenue from tariffs levied in the port towns, so farmers almost never had to try to come up with scarce gold and silver to pay federal taxes.” The states followed suit in alleviating the tax burden on their citizens. In Massachusetts and North Carolina, the poll tax was reduced by 90 percent, and in North Carolina land taxes were cut by just under 80 percent. A study of eleven states between 1785 and 1795 shows that on a per capita basis taxes dropped by 75-90 percent, just as the federal import tariff increased.”
Now, here is where it gets really interesting, given the political and economic situation we are in, a full half century after Ronald Reagan made the Republican Party obsessed with tax cuts. (Last year, in fact, was the first year in USA history in which billionaires paid a smaller percentage in taxes than average income filers, thanks to Trump’s tax cut.) At the beginning of the new government, who ended up picking up the slack, and paying more in taxes ? The rich!
Almost all the new national government’s revenue came from tariffs based on imported goods. And who could afford to buy imported goods? The wealthy. As Thomas Jefferson wrote to Thaddeus Kosciusko in April 1811: “The rich alone use imported articles, and on these alone the whole taxes of the General Government are levied. … Our revenues liberated by the discharge of the public debt, and its surplus applied to canals, roads, schools, etc., the farmer will see his government supported, his children educated, and the face of his country made a paradise by the contributions of the rich alone, without his being called on to spend a cent from his earnings.”
Sitaraman quotes from some letters of the time to show that Americans understood how the new Constitution had made it possible to shift the tax burden onto those who could bear it.
” “A Farmer” in Connecticut explained how the provision would have the effect of redistributing the tax burden toward purchasers of luxury imports: “So long as taxes continue to be laid on us directly, according to the list, we farmers must inevitably sweat under the pressure of them. It is grievous to be borne, but I fear we must bear it until we can agree to throw some part of it upon the merchants, by way of an impost…. The weight of our taxes cannot be shifted from our polls and our farms to foreign luxuries and the unnecessary goods of the merchants without vesting in Congress the power of laying imposts, duties, and excises.”
Sitaraman argues that if the tariff clause and the contracts clause prohibiting state imposts are reinterpreted as the great economic compromise of the Constitution, some of the results of the votes on its ratification, which have long puzzled historians, suddenly make sense.
“Why was it that some of the most pro-debtor, pro-paper money areas of the country sent pro-ratification delegates to the ratification conventions? For example, in New Hampshire, almost half of the towns that were pro-paper-money during the Confederation era elected pro-Constitution delegates to the ratification convention. The answer is that the economic compromise solved one of their primary fears. Why was it that three of the first five states to ratify the Constitution — Delaware, New Jersey, and Connecticut — had almost no debate and scarcely token opposition to the Constitution? The answer is the tariff provisions. None of these states had a major port, and so none could issue state import tariffs on foreign goods to raise meaningful revenues. As a result, they had been forced into imposing more burdensome taxes on their populations. The Constitution let them shift their share of the national government’s revenue from direct taxes on their citizens to tariffs paid by those in New York or Philadelphia. By placing greater burdens on urban merchants than on rural farmers, the Constitution’s economic compromise established, in effect, a progressive revenue base that could save the equal commonwealth.”
Sitaraman’s thesis is that the US Constitution was founded on the expectation that there would not be the huge inequalities in wealth and income that were typical in Europe at the time. Thus, the framers designed a Constitution in which the “middle class” would dominate politics and policy making, avoiding a government used by the rich to fleece the poor, or a government used by the poor to “level” the wealth of the rich. There simply should not be extremes of wealth and income in a republic. But we have allowed them to develop in the past half century.