Saturday, November 24, 2007

Richard Hofstadter's Age of Reform

Richard Hofstadter. Age of Reform. New York: Vintage Books, 1955.

I just had the privilege to read Richard Hofstadter's 1955 Age of Reform, which won the 1956 Pulitzer Prize for history. Hofstadter's book, more than 50 years old, resonates today. This book is a true classic for the general reader, although in a few passages he commits the mid-century vice of assuming that Keynesian macro-economics is science.

One of Hoftstadter's points is that the 19th century American farmer was not the idyllic tiller of the soil that we idealize but rather an incipient businessman whose chief interest was real estate speculation. In contrast to European farmers, for whom land was at a premium and labor was cheap, American farmers faced high labor costs and cheap land that was increasing rapidly in value. They did use capital intensive methods and did have to borrow to purchase the machinery. But, according to Hofstadter, real estate speculation was more important in the 19th century. The eastern farmers would sell their land to new immigrants and move westward, investing in larger farms for which they were anticipating even greater price appreciation.

The process that Hofstadter described in 1955 is very much like today's real estate craze. The agrarian populist movement favored inflation, much as today's sub prime investors likely do (if the education of today's sub prime borrowers has cognitively enabled them to consider the issue), but contrary to what I learned in elementary and high school, the greenback and free silver movements were driven by land speculators, not by people whose interest was working farms and were concerned with machinery investment. The overlap between American farmers and their support for inflation in the late 19th century (via the Populists whom William Jennings Bryan's candidacy preempted in 1896) was driven by land speculation more so than by machinery investment.

To understand the Progressives, you need to understand the Mugwumps, who were a generation earlier, and the Populists, who were a less educated late 19th century movement that also preceded the Progressives. The Populists advocated inflation, anti-Semitism, opposed immigration, hated the British, opposed the gold standard and opposed industrialization and big business of the 19th century. In contrast to the Populists, the Mugwumps were late 19th century professionals and were a small, well-educated group that refused to vote for James Blaine, the Republican presidential candidate in 1884, whom they considered corrupt. They refused to vote for Blaine, and because New York was a closely contested state, some believe that they swung the election to Grover Cleveland, a Democrat. They got the name "Mugwumps" after young Algonquin Indian Chieftains. Although the term originated as one of derision, they adopted it themselves. Some argued that they were called Mugwumps because their mugs were on one side of the fence and their "wumps" were on the other. The Mugwumps favored laissez faire and I believe in many cases hard money (as Cleveland in the Jacksonian or Bourbon Democratic tradition did too) and were similar to today's libertarians. I couldn't help thinking that my interest in NOTA ("none of the above") has similar implications to the Mugwumps in '84. Unfortunately, though, today both candidates have adopted the Populist/Keynesian monetary nostrum.

One of the points that Hofstadter makes is that the Populists, the Mugwumps and their successors, the Progressives, were largely reacting to the growth of big business. (I am just starting to read Herbert Croly's Progressive Democracy and Croly, one of the founders of the New Republic Magazine, makes this point on page one.)

In several brilliantly insightful passages Hofstadter discusses how 19th century Americans believed that the purpose of the economy was to reward good ethics, and that the growth of big business contradicted this belief. Big business did not require or encourage the ethical fabric that local business did, and the progressives were concerned that the American economy no longer provided an education in morality, but instead that the economy had begun to encourage corruption. They also felt that the political boss system of the large cities paralleled and was symbiotic with the growth in industrial power. They felt that to balance the power of big business, they had to establish government counterbalances that would regulate business, hence the Sherman Anti-trust Act, the Interstate Commerce Act and the Federal Reserve Bank.

As well, there had been a spike in inflation in the late 1890s and early 1900s because of gold discoveries globally (America was still on a gold standard). Inflation went up to two percent or so, roughly half of what it has been for the last 28 years under the post-Carter Fed. However, that two percent inflation rate infuriated the public and led to support for the Fed. Ironically, the Fed has caused two or three times greater inflation (especially if you add the rise in the cost of home purchasing that the Bureau of Labor Statistics has slyly excluded from the Consumer Price Index since 1980). The cure (the Fed) was worse than the disease (the two percent inflation due to global gold discoveries).

Unfortunately for America, Schumpeter's concept of creative destruction, Austrian economics and the ideas of Milton Friedman were developed after the Progressive era. The ideas of free market economics are subtle, much more so than the antiquated and awkward ideas of the liberal left, and it seemed impossible to the Progressives of the late 19th and early twentieth century that the large concentrated industries were vulnerable to global competition. Indeed, the Mugwumps had advocated free trade as the solution to excessive business power and corruption, and the Progressives could not believe that global competition might reduce business power because the believed in deliberation and rationality, and the notion that competition, creative destruction and innovation would limit ineffective and inefficient big company practices seemed incredible to them, as it seems incredible to today's naive progressive-liberals.

Ironically, as Gabriel Kolko has written in his book the Triumph of Conservatism instead of limiting the power of big business, the concepts of regulation that the Progressives advocated enhanced the power of big business with a few, much-publicized exceptions that satisfied public opinion, such as the Standard Oil breakup. The Fed alone has vastly extended the power and grasp of investment and commercial banking and big business through easy credit. The Fed truly represents the triumph of the interests of real estate and stock speculation, Wall Street, commercial banking and big business, while the average worker has seen stagnant real wages over the past 30 years, a stagnation that did not occur during the laissez faire late 19th century. Thus, the Progressives' reforms led to effects that were opposite from what they intended, namely, the furtherance of big business interests and the impoverishment of labor. Despite the obvious outcomes of their policies, public deliberation today is incapable of rationally dissecting causes for several reasons. First, because of the inheritance tax (the Mugwumps were mostly independently wealthy) the Republicans are largely dominated by self-interested careerists and special interests. Second, because the Democrats are wedded to the failed Populist ideas that turned out to also reflect the careerists' interests. It is no coincidence that the wealthiest Americans such as Bill Gates and Warren Buffett support the inheritance tax, because without an independent-minded elite that is not subject to corporate power (in the form of having to go to work) it is unlikely that any significant group will oppose the rapacious Populist policies of the Federal Reserve.

Hofstadter's final chapter in which he compares the New Dealers with the Progressives is also instructive. The Progressives had traditional American values and did not question the importance of individualism and freedom. In contrast, the New Dealers were influenced by social democratic ideas, collective action and the (supposed) technical benefits of large scale government organization than were the Progressives.

In the end, the ideas of both the Progressives and the New Deal led to failure. The notion that, left to its own devices, big business would be replaced only if the government were prevented from supporting it did not seem possible to these two failed ideologies. Nor, incidentally, did Hofstadter grasp this because he was imbued with 1940s and 1950s Keynesian Populism.

In the end, the Mugwumps were smarter than their children in the Progressive movement or their grand children in the New Deal movement. Although Americans instinctively understand the virtues of the Mugwump position, American education studiously avoids discussing their ideas, focusing instead on the vapid ideologies of liberal-Progressivism and the New Deal.

Tuesday, November 20, 2007

Karkhanis Blasts PSC Leadership

The Professional Staff Congress, CUNY's faculty union, has elected the "New Caucus", a group of left-wing extremists to its leadership. In his latest Patriot Returns, Sharad Karkhanis, who has been harassed with a law suit by "Sue" O'Malley, a member of the extremist group, takes the union to task. Karkhanis writes:

The concerns of Barbara Bowen and her fellow New Caucasians have never been limited to such issues as higher salaries, lower teaching loads, and better benefits, of course. These mundane matters often seem of secondary importance to larger political goals, such as ending the wars in Afghanistan and Iraq, and preventing one with Iran. Indeed, the Dear Leader was one of the featured speakers at United for Peace and Justice's October 27th march to Foley Square...

Karkhanis has a point, and once again, as always, serves a major public service through his newsletter. If New Caucus leader and union president Barbara Bowen expects to win Eliot Spitzer and his fellow Democrats over, might she not leave the attacks on the Democrats to Republicans? Bowen's combative approach has repeatedly failed. As a result, I have invited Randi Weingarten to commence a merger of her United Federation of Teachers with the Professional Staff Congress.

An Open Letter to Randi Weingarten, President of the United Federation of Techers

203 Watson Hollow Road
PO Box 130
West Shokan, New York 12494

Ms. Randi Weingarten, President
United Federation of Teachers
52 Broadway
New York, NY 10004

Dear Ms. Weingarten:

I am an associate professor at Brooklyn College, a campus of the City University of New York (CUNY). At present, the Professional Staff Congress, a NYSUT unit, represents the CUNY faculty. The Professional Staff Congress, in part for reasons of lack of bargaining power and in part for reasons of poor leadership has been unable to bargain effectively with the State and City of New York.

I wanted to inquire if the UFT would consider an unfriendly takeover of the PSC's unit based on a unit decertification/certificaton. Alternatively, would you consider contacting the leadership of the Professional Staff Congress and suggesting a friendly merger of the UFT and PSC?


Mitchell Langbert