Page 2 of
3 THE SHAPE OF
US POPULISM, Part 1 A rich free-market legacy - for
some By Henry C K
Liu
system that discriminated against the
weak and the poor through banking monopolies that
practiced unequal and unfair distribution of
credit, transportation policies that discriminated
against small dependent users, particularly with
high freight rates that farmers must pay to bring
their produce to market, and the unlimited
predatory powers of big money trusts and giant
market monopolies. The overall populist aim was to
limit the growing uneven market power of the
combination of big finance and big business.
To achieve this aim, populists realized
that common citizens must regain control of the
political process to reverse the pervasive
influence of big business on government and to restore
popular democracy. Both
Democrats and Whigs in US political history
championed republican principles, but the two
parties held conflicting assumptions about the
nature of government authority, the correct path
to economic development, and true meaning of
individual rights. These conflicting assumptions
form the ideological struggle behind the sectional
conflict that eventually led to the Civil War.
The emphasis on popular democracy by
historical populism, with its programs of
monetary, financial and political reforms, was
resisted by big finance and big business as
counterintuitive to the natural needs of modern
economic systems and the national security
requirement of modern states, let alone the
aspiration of a young nation to become a major
world power and eventually a superpower.
Yet this utilitarian argument is not
supported by historical facts. Economic growth
during the Industrial Revolution, and even in
today’s sophisticated and complex milieu in the
midst of a communication revolution, is driven not
by large corporate dinosaurs, but mainly by new
small business entrepreneurship through what
Austrian economist Joseph Schumpeter (1883-1950)
identified as "creative destruction". Alan
Greenspan tirelessly applied the concept of
"creative destruction" to explain the rise of US
market capitalism through internal renewal and the
growth in productivity in recent decades.
Yet the concept of "creative destruction"
was originally presented by Russian collectivist
anarchist Mikhail Alexandrovich Bakunin (1814-76)
based on the ideas of Georg Wilhelm Friedrich
Hegel (1770-1831) and Karl Marx (1818-1883), whose
Communist Manifesto was written with
Friedrich Engels (1820-95) in response to the
democratic revolutions of 1848.
The case
of Microsoft is a perfect modern-day example of a
small, home-grown maverick entrepreneur that
exploited the growing power of the personal
computer through standardization of stand-alone
operating system software to outpace IBM, the
early giant of the computer age. But in record
time Microsoft morphed into a gigantic monster
more lethal to technological progress than the
monopolistic industrial giants it managed to cut
down to size.
An earlier case is Thomas
Edison, a self-educated man with little formal
scientific education, who gave birth to the modern
energy sector not by discovering electricity but
by inventing and obtaining a patent for an
inexpensive filament for the vacuum light bulb.
The Edison Electric Company soon grew into a
rapacious monopoly that a century later was broken
up by anti-trust legislation into General Electric
and Con Edison.
The study of deafness by
Alexander Bell, a Scottish immigrant doctor, led
him to invent the telephone that became the
monopolistic mammoth AT&T, also known as Ma
Bell. John D Rockefeller began as a small business
accountant and went on to assemble the
monopolistic Standard Oil Trust by unfair trade
practices. Industrial and financial giants have a
long history of creating wealth not from original
innovation but by subsequent predatory acquisition
of successful smaller competing enterprises.
Further, anti-populist sociologists
sponsored by big business argue that with
urbanization being a key prerequisite for economic
development, the populist ideal of small-town life
based on decentralized socio-political
organization and local control had been
problematic in the age of industrial expansion. By
extension, this problem continues into the age of
economic and financial globalization that requires
suppression of national sovereignty and economic
nationalism to facilitate the unimpaired
cross-border movement of funds and goods, albeit
not of workers.
Yet new advances in
communication and data management have made such
centralist arguments invalid. Large, complex
organizations can now be devised through
computerized communication without destroying the
individuality of numerous component parts. Mass
production of unique one-of-a-kind products is now
routinely possible. Decentralized networks of
assembly are increasingly practiced for complex
products such as aircraft.
For example,
the Internet, by providing access to instant
communication among countless individuals detached
from physical propinquity, has diluted the
controlling power of big mass media organizations.
The irony is that the privileged and powerful
elite have effectively sought refuge from populist
threats through the devious exploitation of the
constitutional principle of minority rights which
originally had been framed for protection of the
weak and powerless. The term "minority" was
originally intended to denote the less powerful,
not merely the smaller number.
Jacksonian populism The election
of 62-year-old populist Andrew Jackson in 1828 as
president over incumbent establishmentarian
candidate John Quincy Adam (in office 1825-29),
son of Federalist president John Adam (in office
1797-1801), the second holder of the nation’s
highest office after George Washington (in office
1780-97), marked the revolutionary victory of
government by and for the common people, even if,
notwithstanding unfounded conservative fear, not
quite yet of the people.
The late Arthur
Schlesinger Jr (1917-2007), who had been
catapulted into instant fame at age 28 by winning
the 1945 Pulitzer Prize for his Age of
Jackson, and went on to a long, illustrious
career as official historiographer of the Kennedy
administration, describes that period in US
history as one of shifting from sectional conflict
to class conflict created by the triumph of the
industrial revolution over the agricultural
economy. Schlesinger turned history backward to
cast Jackson as a reformer in the mold of Franklin
D. Roosevelt.
The Jackson-FDR-Kennedy
tradition In a 2006 interview on Public
Television, Schlesinger accused Democratic
president Bill Clinton (in office 1993-2001) of
breaking with the Jackson-FDR-Kennedy liberal
tradition of interventionist government to rein in
the excesses of market capitalism by adopting
neo-liberalism, siding with the Republican ideal
of small non-interventionist government.
Schlesinger, a quintessential liberal,
acknowledged in the interview that the two
failures of US liberal capitalism have been
unmitigated racial inequality and persistent
disparity of income. This criticism was very much
on target, albeit that the liberal formula of
meliorism had been patently ineffective in
correcting these two failures after more than a
century of reform.
Schlesinger earlier had
accused Noam Chomsky, brilliant linguist and
highly respected icon of the intellectual left and
activist opponent of the Vietnam War, of
"betraying the intellectual tradition", to which
Chomsky responded in a 1992 BBC interview by John
Pilger by agreeing with undisguised pride, adding
that "the intellectual tradition is one of
servility to power and if I didn't betray it I'd
be ashamed of myself."
Chomsky added that
the members of "the liberal intelligentsia of
America are in bed with the US government in some
of its more vicious policies around, as they
applied around the world." He characterized the
liberal intelligentsia of the Kennedy era as "a
secular priesthood".
In a February 28,
2007 obituary on Schlesinger written by Douglas
Martin, Gore Vidal, a rebellious member of the
Democratic aristocracy, was reported to have
characterized Schlesinger’s A Thousand Days
on the JFK presidency "a political novel". Vidal's
mother, Nina Gore, married Hugh D Auchincloss Jr,
later stepfather of Jacqueline Bouvier Kennedy. A
fifth cousin of Vidal is Jimmy Carter and a cousin
is Al Gore.
Back in the 1824 election,
although Jackson received more popular and
electoral votes than Adam, neither received a
majority in the Electoral College, leaving the
final choice of Adam as a minority president being
made by the House of Representatives. Four years
later, the voice of the people was finally heard
with Jackson receiving a plurality in popular vote
and a definitive majority of 178 to 83 in
electoral votes over incumbent Adam, who lost
because of his unresponsive attitude to the rising
spirit of popular democracy. It was a replay of
the elder Adam’s defeat in 1800 after serving only
one term by Thomas Jefferson (in office 1801-09),
the father of American popular democracy.
With his background as a leading member of
the frontier upper class, Jackson's personal
exposure and innate honesty left him convinced
that privileged big business routinely enjoyed the
upper hand over the average individual citizen.
His main political view was expressed in his
farewell address:
Government should be administered
for the planter, the farmer, the mechanic and
the laborer who form the great body of the
people of the United States. These classes all
know that their success depends upon their own
industry and economy, and that they must not
expect to become suddenly rich by the fruits of
their toils. Yet they are in constant danger of
losing their fair influence as a result of the
power which the moneyed interest derived from a
paper currency which they are able to control
and from the multitude of corporations with
exclusive privileges which they have succeeded
in obtaining in the different
states.
Populist battle over
banking In the election of 1832, Jackson
won a second term by defeating Henry Clay, the
vocal spokesman for US economic nationalism.
Clay's "American System" called for high
protective tariff up to 25% to help budding
domestic industries, the establishment of a
national bank to resist domination by foreign
capital and government assistance to private
enterprise in the development of a national
transportation and communication infrastructure.
The main issue in the 1832 campaign was whether
the charter of the Second Bank of the United
States should be renewed for another 20 years.
The First Bank of the United States had
been established by Congress in 1791 as a national
bank at the recommendation of Alexander Hamilton,
legitimized by the Supreme Court on the doctrine
of "implied power" of the Federal government. The
Bank had been opposed by Jefferson on
constitutional and ideological grounds. Jefferson
felt the Bank would give excessive power over the
national economy to a small group of private
investors who would make unconscionably large
profits. He preferred small state banks with
moderate inflationary tendency to help small
farmers shackled with cyclical debts. He waged his
opposition on constitutional grounds that the
chartering of it was not specifically authorized
by the constitution. But the argument was
overruled by the Supreme Court.
In 1811,
Congress voted to abandon the First Bank and its
charter but the Second Bank was chartered four
years later in 1816 to handle sovereign debts from
the War of 1812. By 1832, the Second Bank had
operated successfully as a national bank to
support the development of the US economy for 16
years, providing finance for an economic boom,
particularly in agriculture brought about by the
devastation of Europe caused by the Napoleonic
Wars.
The Second Bank provided easy credit
to finance farm land speculation, tripling land
prices in a decade. Land sales in 1819 alone
totaled over 55 million acres, feeding a
speculative bubble froth with fraud. The financial
gains of the boom went mostly to speculators
rather than farmers. In the summer of 1818, the
Bank started to call in loans to reduce risk its
exposure and caused the Panic of 1819 that drove
many farmers bankrupt from excessive debt.
Although the Bank's latest charter
extension would not expire until 1836, Clay
advised the Second Bank to request renewal in the
spring of 1832. Clay needed the Second Bank to
support his American System of economic
nationalism, but he underestimated the
unpopularity of the Second Bank throughout the
West as a result of the financial crisis of 1819.
By preventing the state banks from issuing notes
and making loans freely and independently, the
Bank limited the supply of money in the Western
states and thereby kept their population
permanently in debt to Eastern moneyed interests.
But unlike the inflationist farmers,
Jackson was not only critical of the concept of a
national bank but of the role all banks played in
exploiting the financially weak. Jackson believed
sound money backed by gold and silver was the only
friend of the people as private banks always abuse
their power to issue money to encourage and profit
from speculation, producing periods of inflation
followed inevitably by periods of financial crisis
and deflationary depression that would ruin honest
citizens trapped by inescapable debt. In their
distrust of banks, Jacksonians found validation in
ample, visible field evidence, but their resultant
faith in specie currency ran against the need of a
growing economy for a more elastic currency than
could be provided by the comparative static supply
of precious metals.
More to the point,
Jackson held a populist belief that the concept of
a national bank was a threat to popular democracy.
His view
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