Friday, January 11, 2008

John M. Dobson's Politics in the Gilded Age

John M. Dobson. Politics in the Gilded Age: A New Perspective on Reform. New York: Prager Publishers. 1972. 200 pp.

Professor John M. Dobson retired from Iowa State University in 1999 and published Politics in the Gilded Age when I was a college sophomore in 1972. This is a good, timeless book. I read it because it sheds light on important issues: how past generations have pressured the established political parties; what strategies they have used; and how the American public has reacted to political corruption.

The politics of the gilded age was in some ways more naive than today, but in some ways it was more sophisticated. The reform-minded Republicans, who were well educated, affluent and often former abolitionists, believed that the corruption associated with the political machines would be ended through establishment of a civil service system. This belief turned out to have been naive. They believed that since the political machines depended on spoils, a civil service system would limit spoils and so end the machines. The civil service was adopted via the Pendleton Act, and even though the Presidents of the gilded age, notably Chester Alan Arthur, were part of the corrupt local machines (Arthur had been head of New York's customs house, among the most corrupt federal jobs) the Pendleton Act was implemented in good faith.

But the civil service did not end the political machines and it did not end the corruption. This was an early instance of reformers' believing that more government would end corrupt government, but it was not to be the last. This idea has been carried forward by today's progressive-liberals, who also have faith in the idea that lobbying, political favors, corrupt government contracts and the like can be ended through bigger programs.

In other ways, though, the politics of the gilded age were more sophisticated than today's. The chief issues that faced America were protectionism and the monetary system. These are still important issues, but today they are debated and discussed in a less sophisticated manner than in the 1880s. Unlike today, there were proponents of hard money in both the Republican and Democratic Parties. The Democrats who favored the gold standard included business-oriented conservatives known as the Bourbon Democrats. But the Republicans were also divided until the 1896election. Grover Cleveland, a Bourbon Democrat, supported the gold standard. It was in the 1896 election that William Jennings Bryan adopted the position of the Populist Party (ending the Populist Party's insurgency) and praised the use of silver for money, equivalent to the inflationist Keynesian ideology of today that both Democrats and Republicans favor.

Because of Bryan's candidacy, gold standard advocates moved from the Democratic to the Republican Party, and the Republican Party remained the hard money party until the 1960s. In 1971, President Richard Nixon adopted the Keynesian/Populist position, driving the hard money position to the fringes of American politics. This was reinforced by President Ronald Reagan, who was as inflationist as William Jennings Bryan. Hence, the insurgent Populist Party, which was a minor third party with wide public appeal, probably had more influence than any of the other major players in 1884.

Because the Federal Reserve Bank took control of the money supply away from politicians, the surviving Independent Republicans or Mugwumps from 1884 supported the establishment of the Federal Reserve Bank in 1913. As with the civil service, the Mugwumps were naive about the importance of innovative government programs like the Fed. They thought that setting up a body separate from the politicians would make the creation of money independent from political pressure.

Dobson does not emphasize the crucial debates of that period about hard money versus soft and protectionism versus free trade, but he mentions enough to paint a rough picture. The Republicans favored protectionism because high prices are in business's interest, and the Democrats favored free trade because low prices are in everybody else's interest. Some business-oriented Democrats also supported free trade. At the same time, the Republicans were able to convince some wage earners that protectionism was in their interest because higher prices might mean higher wages.

Dobson divides his interesting narrative into two parts. In the first, he describes how the highly structured Democratic and Republican Parties (that have continued until today) came about in the late nineteenth century. In the second, he describes how the Mugwumps fought the established Republicans, helping to give the 1884 Presidential election to Grover Cleveland and stopping the election of James Blaine.

Although Blaine may not have been particularly corrupt, the Mugwumps identified Blaine with corruption. The Mugwumps' failure to end corruption through their activism and through the establishment of the Civil Service led the early twentieth century to progressive-liberalism. Progressive-liberalism was a further response to political corruption.


The radical Republicans of the post-Lincoln era aimed to retaliate against the South and impeached President Andrew Johnson. They were dominant for the twenty years following the Civil War, in part because of what was called the Bloody Shirt, their use of the memory of the Civil War to win elections. The Republicans of this era included Charles Sumner, Thaddeus Stevens, Benjamin Butler and Roscoe Conkling (p.23). The Republicans' early big-government laws during the Civil War, such as the Homestead Act, appealed to landless farmers, and the Republicans also appealed to the recently freed slaves in the South.

Having been discredited by the Civil War, the Democrats appealed to white southerners, workers in the north and those concerned with local issues (p. 24). The parties quickly became very similar in ideas(p. 25), and their appeal was primarily sectional. Local political activists, ward healers, were the basis of the parties' strength. People interested in becoming professional politicians joined political clubs such as New York's Tammany Hall (p. 27). The political machines gained support by providing services, and these included things like being able to tell a judge to give a not guilty verdict on behalf of a political contributor. Government workers gave kickbacks from their salaries to support the machines as well. Patronage was even more important then than it is now, although Dobson argues that it was not essential to the functioning of the machines (p. 33), which was what the Mugwumps thought.

US Senators were elected by state legislatures in that period, so Senators were intimately involved with state politics. Dobson writes (p. 33) that "the Senate resembled a sort of federation of state bosses."

The federal government spent less after than during the Civil War than, and the sum of states' spending exceeded federal spending. In 1880 the federal government collected $360 million in tariffs, but the entire federal budget was only $260 million, half of which went to Civil War veterans, while the states spent $300 million (p. 35). The federal government had a $100 million surplus.

The public tended to be loyal to a single party (p. 38). However, each party had divergent beliefs internally. There was more divergence within the parties than between them. Samuel J. Tilden, the New York governor who ran for president in 1876, was an advocate of the gold standard, while Thomas Hendricks of Indiana, the Democrats' 1876 vice-presidential nominee, favored greenbacks, which would be the same as the pro-inflation stance that leading politicians have adopted today.

The post-Civil War period experienced an inflationary boom because of the of the greenbacks that financed the War. In the monetary sense, the post Civil War period was like a milder version of the post-World War II period, the ReInflateoCrat period, which has been associated with a mild inflationary boom. Also similar to the post-World War II period, the Civil War had expanded government.

In 1872, Senator Carl Schurz (R-Mo), a German immigrant, led an anti-Grant crusade (p. 41) within the Republican Party, which led to the formation of the Liberal Republican movement, which became a separate party for a while. The Democrats backed the Liberal-Republicans in 1872 because they were so weak in the immediate post-Civil War era.

The pro-Grant forces within the Republican Party were known as Stalwarts, and the anti-Grant forces within the Republican Party were later known as Half-Breeds. The Half Breeds were in favor of what Dobson calls (p. 64) "Northern moral attitudes". The Liberal Republicans formed a separate party that nominated Horace Greeley, once editor of the New York Tribune. However, the Liberal Republicans and Greeley were ineffective, a trait that Dobson argues the Mugwumps shared.

In 1873, the greenback boom led to a depression, and the Democrats won Congress for the first time since the Civil War. There were intermittent recessions through the late 19th century as the effects of the greenbacks wore off. (Then, in the 1890s, the Populists' free silver movement took root.) However, the deflation of the late 19th century was accompanied by rising real wages, a feat the that the ReInflateoCrats of the late twentieth century have been unable to duplicate. Unlike the 19th century, in the late twentieth century the American public has been too poorly educated to understand that its dollar buys two thirds less than it did 30 years ago.

In 1876, Governor Samuel J. Tilden (D-NY), who had ousted Boss Tweed and was known as an anti-corrupton governor, ran for president. The Stalwarts wanted Grant to run again, but the Half-Breeds favored James G. Blaine, a former Speaker of the House (p. 47). As a compromise, the Republicans nominated Rutherford B. Hayes. The vote was very close, and was decided by an electoral commission. In return for agreeing to a partisan commission's findings and agreeing to let Hayes become president, the Democrats asked that all northern troops be withdrawn from the South (p. 48).

Dobson argues that President Hayes was "mixed" on civil service reform, in part because he appointed Carl Schurz as Secretary of the Interior and allowed Schurz to establish a merit-based system for the Department of Interior. He also appointed Theodore Roosevelt, Sr. (President Roosevelt's father) to be head of the New York Customs House (p. 63), firing Chester A. Arthur and Alonzo B. Cornell, who had been the corrupt heads. Senator Roscoe Conkling (R-NY) complained angrily, and the Senate vetoed the new appointments. However, President Hayes put through the Roosevelt appointment when the Senate was out of session.

The three Republican factions that were forming at this time were the Stalwarts, the Half Breeds and the much smaller Independent Republican faction. When Alonzo B. Cornell successfully ran for governor, the Independents handed in Republican ballots (ballots were printed by partisan newspapers in those days) but scratched Cornell's name from the ballots. Thus they became known as scratchers. The Independents hated patronage and corruption on moral grounds. They were unlike the Half-Breeds, who were moralistic but interested in partaking in the corruption. Today, the Stalwarts and the Half Breeds have mostly succeeded within the parties, although voters are not so party-focused as before. But the absence of effective third parties means that although there are more independent voters, with the parties being so dominated by partisan posturing, the independent voters have little choice. This is not so much a matter of right versus left or social conservative versus social liberal. It is, rather, a matter of an absence of intellectual innovation in both parties with no alternative to today's independent voter.

James Garfield won the 1880 presidential election but was assassinated by an insane Stalwart Charles Guiteau, on June 2, 1881. Garfield was a Half-Breed but his vice-president, Chester Alan Arthur, was a Stalwart. In response to Arthur's ascension to the presidency, the Independent Republicans created the National Civil Service Reform League in 1881. In 1882 Congress passed the Pendleton Act, empowering the president to appoint a Civil Service Commission that was charged with establishing a set of rules involving competitive examinations and objective selection of job candidates. The law applied only to some federal employees. Soon after the Pendleton Act, state legislatures passed similar state laws.

Dobson quotes (p. 74) the work of Gerald McFarland, who studied the backgrounds of 400 prominent Independent Republicans in 1884. Almost all of the Independent Republicans were professionals and independents, and a substantial number were millionaires (a million dollars in 1880 was worth about $45 million today). The Republicans had been a party of abolitionists and moralists, and they were disgusted by the corruption of the party machines. The leading state for Independent Republicans was Massachusetts closely followed by New York and then Connecticut and other New England states.

The leader was George William Curtis, who was a friend of Ralph Waldo Emerson, editor of Harper's Weekly, an abolitionist, a supporter of Radical Reconstruction and opponent of the Tweed ring. Dorman B. Eaton, another Independent Republican was a Harvard Law School graduate whom President Arthur appointed to head the Civil Service Commission. Edwin Lawrence Godkin edited the New York Evening Post (now owned by Rupert Murdoch) and the Nation. The New York Times, at that time a Republican paper, also supported the Independent Republicans. As well, Teddy Roosevelt, who was only 25 in 1884 was a supporter of the Independent Republicans, although he did not break with the Republican Party in 1884 as many of them did.

In 1884, the Stalwarts supported a third term for Grant, while the Half-Breeds supported James G. Blaine (p. 87). Dobson notes of the Independent Republicans (p.88):

"The Independents' anti-Blaine campaign of 1884 illustrates the irrationality that often accompanies an emotional crusade. The reformers started out with a reasonable complaint abut the way political affairs were developing...Through their leagues and reform clubs, the Independents had developed a reputation for rational and intelligent action...They lost that and more in the 1884 campaign as they gradually turned into one-sided partisans."

Thus, the Mugwumps' reaction to James G. Blaine was probably irrational, much like much of the media buzz about politics today. They were subject to groupthink and were obsessed with preventing Blaine's election, even though his ultimate opponent, Grover Cleveland, was not demonstrably better than Blaine and owed party hacks in the Democratic Party.

The Independent Republicans backed George F. Edmunds of Vermont, and refused to compromise with the two major candidates, James Blaine and Chester Alan Arthur. When Blaine won the nomination, many of the Independents dropped out. These included many Harvard-connected activist such as President Charles Eliot. Then as now, there was considerable groupthink in the progressive camp. Although the Mugwumps preceded the progressives, you can see the intense social pressure. Those who did not drop out of the Republican Party enjoyed better subsequent careers. Examples are Theodore Roosevelt and Henry Cabot Lodge, who eventually became a Senator and remained one until he died in 1924. However, Lodge was socially ostracized by the Mugwumps. This intense social pressure to conform to a whimsical ideological position (hatred of James Blaine) and inept tactics very much presaged today's progressive-liberals' attitudes and methods. The groupthink and emotional pressure were very similar to today's liberal Borg.

The Bourbon Democrats were (p. 122) "a loose aggregation of Southern and Northern conservatives". While the Republicans favored government intervention to support business, much as they do now, the Bourbon Democrats "wanted to limit the government's activities to the bare minimum, much as Jefferson and Jackson had. A low tariff advocate almost invariably supported the Bourbon philosophy. Influential and wealthy businessmen, particularly railroad owners and traders, who derived much of their income from foreign commerce, became Bourbons and gave the Democratic Party the financial support so essential to its political success."

Grover Cleveland reflected this libertarian orientation. However, the Bourbon Democrats were ended by William Jennings Bryan and the free silver movement of 1896. It is unfortunate that the advocates of laissez faire were thereby shunted into one party.

One of the key points that Dobson makes is that even though the Mugwumps knew little about Grover Cleveland, who came from Buffalo and had served as New York's Governor for only two years, they were obsessed with supporting him. They were truly the forerunners of today's progressive-liberals.

During the Blaine-Cleveland campaign of 1884, the Mugwumps established political action clubs throughout the Northeast (p. 140). Like today's progressive-liberals, the Mugwumps were closely linked to the media of that time. Dobson's description of the Mugwump press sounds very much like today's liberal media. Mugwumpery may be viewed as the roots of liberalism not because the Mugwumps' ideas were like the twentieth century's progressive-liberals' (they were more like today's conservatives') but rather because their approach to ad hoc adoption of a singular idea, intense social pressure to conform to politically correct doctrine and the use of the media to create social conformity to their ideology is very much the technique that the progressive-liberals adopted in the early twentieth century and continue to use today.

Thursday, January 10, 2008

John "Zippy" Callister, Doug Ross and the MSM's Three Biggest Lies

Doug Ross has an interesting blog about John "Zippy" Callister's letter to the Wall Street Journal (courtesy of Larwyn). Mr. Callister had written to the Wall Street Journal complaining that while his portfolio went up during the eight Clinton years, the S&P 500 has done little during the Bush years (actually it has done alot if, as Howard Katz and I have done, you bought in 2002 and sold last year). Mr. Callister, publicly-spirited as he is, complains that he does not care about terrorism, overseas wars, social security or income tax:

"...But, a 100 point gain in the S&P 500 means about $50,000 in my pocket... It is odd that so many people forget the stock market boom of the late 1990s."

Doug is annoyed at Zippy, and rightly so, although Zippy's argument is more revealing about the Democrats and the mainstream media than Doug suggests.

According to my broker at Smith Barney, the S&P 500 is currently at 1409. If 100 points (7% x 1409) means $50,000 to Zippy, that means his portfolio is roughly $50,000/ .07 = $714,000.

Zippy suggests that his portfolio hasn't increased since 2000, so I assume it was $714,000 in 2000. In contrast, the Census Bureau says that the median household net worth in 2000 was $55,000. The median household net worth for households in the highest income quintile was $185,000. In 2000, only 27.1% of households owned stocks and mutual fund shares at all, and these had an average value of $19,268. 29.9% of households had 401k plans with average assets of $29,900. Thus, Zippy's household wealth of $714,000 put him well above the median for the highest quintile in 2000. That Zippy favors the Democrats is revealing of the the MSM's three biggest lies:

Lie Number One: The Democrats are for wage earners, not the wealthy.
Lie Number Two: Corporate interests reflect the public interest.
Lie Number Three: The stock market goes up because of general prosperity.

MSM Lie Number One: The Democrats Favor Wage Earners, Not The Wealthy

Conservatives and libertarians often wonder why the wealthy, such as George Soros, Warren Buffett, Nancy Pelosi and Zippy, tend to prefer progressive-liberals and Democrats. The "Red" states, it has been noticed, are concentrated where there are many trust fund babies and millionaires, while the "Blue" states tend to be poorer. This is chalked up to left-wing education. But progressive-liberal dogma is consistent with the economic interests of the wealthy. The reason is that the Democrats tend to be even more inflationary than the Republicans, who are also inflationary, just not so much.

Yet, the MSM repeats the claim that inflationary, high-tax, high-regulation policies favor the average American rather than the wealthy, "Red State" trust fund babies whom such policies do favor. Zippy is merely the bull in the china shop who reveals to us that selfish impulses do matter. The Republicans' policies help the average working man while the Democrats, who claim to be for the poor, help Zippy.

MSM Lie Number Two: The Stock Market Reflects The General Prosperity

Advocates of mainstream finance theories argue that markets are rational. This has a clinical sound to it. However, even if true, rational markets do not require rationally run corporations. In fact, most big businesses aren't run rationally. They require subsidies at public expense. Even if large businesses were run efficiently without the need for government welfare, their interests would not coincide with the general public's for several reasons. Laws that protect business from competition serve corporate interests but do not serve the public interest. Since the 1850s, business has lobbied, often effectively, for protectionism, regulation to rationalize markets, easy credit, lucrative government contracts and the like. Public waste is private profit. Stockholders of firms that benefit from wasteful government contracts, protectionism, regulation and subsidies become wealthier as the public becomes poorer. Joint gains are only possible in a market economy. Yet, the MSM repeatedly claims that stock market increases are good for the general public. This is not the case in a mixed economy where government subsidies are common. They are certainly good for Zippy, who is wealthier than average and who benefits from secular stock market increases. They are also good for government contractors. But they are not good for the average person.

MSM Lie Number Three: The Stock Market Goes Up Because of General Prosperity

This is perhaps the most pernicious lie because it encourages the public to harm itself. The chief driver of the stock market is interest rates. Interest rates are chiefly influenced by the Federal Reserve Bank. The Federal Reserve Bank can raise interest rates by contracting the money supply and can reduce interest rates by increasing the money supply, i.e., printing money. The advocates of printing money were known as Populists in the 19th century. In the twentieth century they realized that if they pretended to be scientists their self-serving claims would be more convincing. Thus, they packaged their argument for increasing the money supply in the garb of "science", calling themselves "macro-economists". The "macro-economics" that they advocate is in substance the same as the arguments of the 19th century Populists, who advocated greenbacks and free silver. The macro-economists claim that they can adjust the money supply at different stages of the economic cycle, but the Fed doesn't do this. Although the Fed has never done this, the "scientists" do not revise their opinions, and when they gain power they do the same thing that the Fed has always done, namely, they support the stock and real estate markets at the expense of the general public. The money supply has gone in one consistent direction since the Fed was founded--UP. The US money supply is 16 times greater today than when the Fed was founded in 1913.

Stock and real estate markets inflate along with the money supply because of low interest rates. But increasing the money supply has another effect, namely, because the number of dollars in circulation is increased at a faster rate than the value of output increases (a painfully difficult fact for progressive-liberal advocates of the large-corporations-are-rational philosophy) there are general price increases, i.e., inflation in food, energy, labor and other prices. Prices have indeed gone up by 3.5% on average since 1979. A dollar in 1979 is worth 38 cents today. The mother of three must pay more for milk and her children might be hungry, but Zippy and his fellow Democrats gets to pocket the increase, and he is happy.

In the past six years the price of gold has gone from $250/oz. to nearly $900/oz. Thus, although the Republicans may not have been as good at inflating the stock market as the Democrats, they have been much better at inflating commodity prices. Of course, neither party is different from the other because they are both following the same inflationary policy. They are the ReInflateoCrat Party (the In stands for Bloomberg Independent). Howard S. Katz argues that there is a commodity "pendulum" which causes first declines in commodity prices and increasing stock market prices then increases in commodity prices. Katz argues that we are only at the beginning of the pendulum swing favoring commodity prices and that we still have a decade or even two to go. This will be true whether Democrats or Republicans win.

In other words, the stock market increases of the Clinton years are desirable only to trust fund babies, the wealthy, Democrats and Zippy. They are not beneficial to the average American.

What is perhaps most telling about Zippy's letter is his simple-minded selfishness, a characteristic of today's wealthy that did not characterize the wealthy of the late 19th century. I attribute this to progressive-liberal education and the general triumph of progressive-liberalism, which is a philosophy of pretended altruism coupled with the devastation of the average American through taxation and other violent state policies that progressive-liberals gleefully depict as altruistic when they are mostly self-serving.

Sunday, January 6, 2008

Ron Paul in Exile--A Generation in Disgrace

Newsmax reports that Fox will exclude Ron Paul from the New Hampshire debate. I watch Fox News for television news except when in my health club, surrounded by progressive-liberals from nearby Woodstock, NY. Then I watch Turner Classic Movies. In addition to watching Fox, though, I support Ron Paul despite his views on Iraq. I support Paul because he is the only Republican candidate who believes in shrinking government and ending inflation. He is not the only Republican candidate who says that he will shrink government. Most of them do.

But the Republicans gained control in 1980 and have had control of the White House for 19 of the past 27 years. They have had control of the House of Representatives from 1995 to 2006 and of the Senate from 1995 to 2001 and from 2003 to 2006. During that time, government spending has mushroomed and the departments of education and energy have been going strong. Which of the thousands of worthless government programs have the Republicans eliminated in the last ten years? I'm listening. I've heard the list is short. Very short. So short that it just went by, and I still haven't heard it.

As well, there has been a cornucopia of free credit, meaning counterfeit money, emanating from the Federal Reserve Bank since 1980. The exact amount is unclear because the M-3 statistic that includes foreign money has been eliminated. However, the past twenty-seven years has seen a 3.5% inflation rate if you exclude, as the Department of Labor did in the early 1980s, inflation in the value of home purchases. My friend has had to move from Queens because she cannot afford to purchase an apartment or house near New York City. Today, mostly millionaires live in Manhattan, once the nation's cultural center, but no longer because it is populated by non-English speaking peoples whose currency is sound. Creative cultural types have moved to North Carolina. Only the beneficiaries of the paper money bonanza can affored to live in Manhattan.

What is most astonishing about the crippling monetary expansion that has gone on during the past 27 years is that the public does not care. No cares that prices have gone up, that a dollar in 1979 is worth 38 cents today (excluding home purchases). No one seems to be aware that America cannot continue to be a great power with a currency that stands to be depreciated by 500% if chief dollar holders sell.

The effects of inflation in the past 27 years have been devastating, yet no one seems to mind. Certainly not the broadcasters on CNN, CBS, ABC or for that matter, Fox. We are a nation that, under Republican leadership, has given up our national purpose and independence for a flat screen TV and a cellular telephone. This generation of Americans is a disgrace.

Given America's suicidal pattern, where conservatives' main concern is immigration at a time when our money supply is owned by foreign governments, there has been only one candidate willing to question ReInflateoCrat (the "In" stands for Bloomberg Independent) monetary extremism, and that is Ron Paul. That Fox has excluded him from the debates suggests that there will be little serious debate of any kind in 2008.

John M. Dobson's "The Origins and Structures of the Major Political Parties"

From John M. Dobson, Politics in the Gilded Age: A New Perspective on Reform. New York: Praeger Publishers, 1972, p. 37

"The leadership of both national parties during the last third of the nineteenth century consisted of alliances of bosses and local leaders. The parties lacked the central focus that had characterized Jefferson's Republicans and Jackson's Democrats. The most influential party leaders were those who devoted their attention to state politics rather than the Presidency. The series of lackluster Presidential contenders the Republicans nominated after 1872 did not represent an over-all weakness in the party so much as the strength of the regional bosses. Whether the party's Presidential campaign ended in victory or defeat, it did not radically alter the soundly functioning Republican machines throughout the nation.

"A partisan's attitudes on certain issues did more to define his political position than did his party designation. How, then did the parties manage to retain their members? No single leader attracted followers on a national basis, and, as Chapter 2 will show, after a time no single issue aligned the parties either. The persistence of the parties, then depended upon widespread and overpowering loyalty to an abstraction. Ironically, this loyalty appeared to be growing stronger at a time when the parties were becoming more and more similar in their stands. Many of the short-lived third parties formed to support a particular principle announced their position in their names--e.g., the Greenback, Free-Silver and Prohibition parties. None of these could abandon the basic principle for which it had been named, but the deliberately obscure Democratic and Republican titles could stand for little or nothing."