"Let's Do What Works and Call it Capitalism"

This page displays excerpts of Dan Riker's as yet unpublished book on progressivism,

  Let's Do What Works and Call it Capitalism.





LET'S DO WHAT WORKS AND CALL IT CAPITALISM:

Pragmatic Progressive Solutions to America’s

Political and Economic Problem


By Dan Riker 

Portland, OR
2014


 © 2011-2014 Daniel C. Riker






Introduction


For most of us who grew up in the 1950s and 60s life seemed full of hope and opportunities. We matured during the greatest economic boom in the nation's history, when 60 per cent of the population were propelled from the despair of the Depression to middle class prosperity. Jobs were plentiful. Living costs were modest. Most families were supported by one income, and more young people went to college than ever before. The final legal shackles on black people ended with the various civil rights laws of the 1960s. For the first time the “American Dream” was truly available to all of the nation's citizens.
While the term, “The American Dream,” was a creation of James Truslow Adams in his 1931 Epic of America,[1] the concept is as old as the nation. The New World appeared to offer unlimited opportunities for economic gain, as well as greater personal and religious freedom, not available in the established worlds of England and Europe. Many of the early pioneers who survived enormous dangers and physical rigors achieved those goals. Over the next 300 years millions more followed with the same ambitions, and many achieved great success.
A recent study showed that before the Revolution, virtually all Americans, including slaves, had higher standards of living than similar people anywhere else in the world. America was already known as the land of opportunity. Alexis de Tocqueville, in his classic observations of America in the 1830s, Democracy in America,[2] made numerous references to the American personality, based on the national concept of equality, that constantly sought self-improvement, the perfection of life, and achievement of ever increasing material success.
Even in the depths of the Great Depression in the 1930s, the fact that the upbeat Epic of America became a bestseller shows Americans believed that life would get better, and tens of millions of them made sure of it when the opportunities presented themselves after World War II. We of the “Baby Boom” generation, the children of the “Greatest Generation,” benefited enormously from this spirit. Except for the overhanging fear that our lives might end suddenly in a nuclear blast, we were optimistic that we would lead lives even more successful than our parents, and many of us did. It seemed guaranteed to us and our progeny, but it wasn't.
Now, 50 years later, many Americans no longer believe in the American Dream. We are in a vicious downward slide. Now millions of young people face the prospect that not only will they have worse lives than their parents, it will be even harder for their children.
Middle class incomes have stagnated since 1980, but the Gross Domestic Product, adjusted for inflation, has nearly tripled. Virtually all of the increase in wealth went to the top 10 per cent of our income groups, and most to the top 1 per cent. The number of billionaires grew by about 20 times.  During the same time we lost millions of middle class jobs and the housing crisis wiped out much of the net worth of millions of homeowners. We now have the greatest disparity of wealth and income in our history. The last time the disparity was about as bad as it is now, the Great Depression followed.
If the “American Dream,” the foundation ideal of this nation that every citizen has a fair opportunity to achieve a better life, is dead, then it will be only a matter of time before the American democracy also will die. Without the promise of the opportunity for economic security that the American Dream offers, there will be no political security. Failure of the American democracy would be an event of unimaginable magnitude. Almost certainly it would result in a dark age of far greater horrors for the vast majority of mankind than the one that followed the collapse of Rome 1,600 years ago. And, as then, no one, nowhere, no matter how rich, or how powerful, would be safe.
And despite this enormous risk, our government is paralyzed. Despite the recession and the continuing economic malaise, very little is being done by the government to correct the situation. In fact, since the modest stimulus enacted in President Obama's first year in office, the bank bailouts, and the aid to General Motors and Chrysler, there have been budget cutbacks and reductions in employment by the federal government, as well as by many state governments,  actions that history has proven are exactly the wrong things for governments to do in a recession.
America has fallen behind other industrialized nations in almost all areas of modern civilization: education, the cost of health care, lifespan, financial security, infrastructure, and, increasingly, future opportunities. We no longer want to build big things. We no longer are reaching for the stars. We don't want to pay for anything. We are losing control of our future to those who do not operate in the best interests of the nation. This is a radical departure from our history, and our character, and it is enormously dangerous. We who experienced the “American Dream” should do something about this while we still can. That's why I wrote this book.
My idea for this book first came from reading “Indignez-Vous![3] by Stephane Hessel, in The Nation. Hessel was one of France's great heroes of the World War II Resistance and recovery after the war. In what was a run-away best seller in France, Hessel exhorted his nation to rise up against recent efforts to cut budgets and roll back the gains in social welfare, education, and human freedom that came as a result of the Allied victory in World War II. The French responded by voting the conservative party out of power.
The Hessel essay made me realize that while I was very upset about the condition of our country, and I had done a great deal of thinking about it, I had not done anything substantive about it. Like so many people of my generation, I had devoted most of my time to my career and to my family. I grew up a “liberal” Republican but have been a registered Democrat for most of my adult life, although not always a very loyal one. Except for a brief experience in government and politics, and some community volunteer work, I stayed away from politics. And while I was not paying attention, our country was hijacked, and along with it, the futures of our children and grandchildren. So I have done the one thing I can do about it: I have written about it, I hope what I have written will help others change the course of current events. Like the French, we could start by electing public officials truly committed to acting on behalf of all the people, and fixing our problems. I think I know how that can be done and that is the substance of this book.
I don't have the distinguished and heroic past that Hessel does, but with a good education and a lifetime of challenging experiences I have a wide range of knowledge and insight. I came from a lower middle class, educated, family with branches that go back to the founding of the country. I was born in Ann Arbor, Michigan, and, while growing up, I lived in Bremerton and Seattle, Washington, El Paso and Ft. Worth, Texas, Springfield, Ohio, and Angola (near Buffalo) New York.  I needed scholarships and loans to attend and graduate from The Johns Hopkins University in Baltimore, where I concentrated in history as an undergraduate and for a short time studied political science in graduate school. I later received a J.D. Degree with Honors, from the University of Baltimore School of Law. Even though I was admitted to the Bar in Maryland, I never practiced law. In 2012, my late wife, Janis, and I moved from Maryland to Portland, Oregon.
I spent the first 15 years of my career in journalism, with United Press International in Baltimore and Washington, D.C., except for a hiatus during which I first was assistant public relations director at Johns Hopkins and then assistant press secretary to the Governor of Maryland. Among many things, I covered the civil rights movement and racial violence of the 1960s, the political rise and fall of Spiro Agnew, and the movement against the Vietnam War. I worked in the UPI Washington bureau during the height of President Nixon's Watergate scandal when we went through its greatest crisis in our national government since the Civil War. 
The next third of my career was in telecommunications, first as an executive with the pioneering long distance competitor, MCI Communications, Inc., the company chiefly responsible for the breakup of AT&T, and then as CEO of Pocket Communications, Inc, a wireless telephone company. I also provided some assistance to other companies with fund-raising, business and strategic planning. Among my various duties with MCI, I developed the company's first billion-dollar capital construction budget, devised their first national fiber optic network plan, and managed their subsidiary cellular business. My business plan for Pocket Communications predicted the enormous growth of wireless communications that subsequently occurred. I raised nearly $1 billion in debt and equity from contracts with major equipment manufacturers in North America, Europe and Japan and from investors in Asia, Europe and the United States. I also employed the services of a number of major Wall Street banks, including J.P. Morgan, Goldman Sachs and Bear Stearns.
My third career was in bookselling, which included the operation of two retail stores and an on-line business that gave me considerable experience with the Internet. We financed an expansion of our business with a loan through the Small Business Administration.
From selling books of others, I turned to writing my own. I have published two novels, A Light Not of This World, a futuristic thriller about a nuclear attack on the U.S. by terrorists, and Seneca Point, a mystery featuring a former CIA agent turned private detective. I have completed a third novel, The Blue Girl Murders, a historical mystery set in Baltimore in 1966, partly based on my own experiences, but I postponed efforts to get it published after reading the Hessel essay. That essay diverted me to trying to find out why the 2008 financial crisis occurred, what had caused the massive economic and political problems we are experiencing, and what might be done to solve them. This book is the result of that investigation.
I had some big questions. Could any government actions restore the middle class and the equilibrium in the wealth and income that existed 30 years ago? Could the political divisions in the nation be bridged enough for any positive actions to occur? Was it possible that the rich already have gained so much power that they can prevent any government actions they don't like? And, maybe, are they not already doing that? Have the rich already gained so much control of our economy and our government that nothing can be done to restore the middle class, short of revolution?
A recent book, considered by a prominent World Bank economist to be the most important work of economics in many years, says that is the case, and that it generally has been the case since Ancient Rome except for what the author calls the “Golden Years,” the period between 1945 and 1975, a period that he believes never will be repeated.
In Capital in the Twenty-First Century,[4] published in France late in 2013 and in English in March, 2014, French economist Thomas Piketty presents a new theory of modern capitalism that argues that since the late 1970s the relationships of the economic returns on capital vs labor have returned to what essentially had always existed until disrupted by World War I, the Great Depression and World War II. Except for the 30-year period following the end of World War II,  returns on capital always have exceeded returns on labor. In other words, more money was made from rents, investments and inheritances than from work. And over time this phenomenon led to high concentrations of wealth in tiny minorities of the populations.
Piketty is one of the world's experts on income and wealth distribution. He and Emmanuel Saez, of the University of California at Berkeley, jointly have been issuing studies of income and wealth disparities for a number of years, which have become the standards for the subject area. Piketty contends that we have shifted into a period where the rich not only are getting richer, but that the conditions exist for them to continue to get richer for an indefinite time into the future, without any real hope that the middle class will recover.

Using very effectively literary examples from Jane Austen and Honoré de Balzac, Piketty shows that in capital-rich societies with high returns on capital as was Europe then, it often made no sense to work but to concentrate rather on finding a rich spouse or otherwise inheriting property. The trade-off between a brilliant career, based on study and work, and a much more lavish lifestyle that could be afforded if one married a heiress is presented with unmatched clarity and brutality to the young Rastignac by the world-savvy Vautrin in Balzac's Le pere Goriot. This trade-off, called the Rstignac dilemma by Piketty (does it pay to work hard when one can inherit much more by marrying well?) is all well known to the readers of English and French literatures of the 19th Century....It is back to this … that developed capitalist economies are trending to – argues Piketty.[5]

Piketty believes that democracies around the world are threatened by a historically unprecedented concentration of wealth and power in the hands of a relatively few number of people who are acquiring the ability to control just about everything. Indeed, early in 2014, it was estimated that the world's 80 richest individuals were worth as much as the bottom 50 per cent of the world's population.  Piketty wrote that the huge disparity of wealth between the top 1% and everyone else in the United States has reached levels that existed in France just prior to its 1789 revolution.
His solution is a worldwide annual tax on net wealth of every well-to-do person, with the percentages increasing with higher amounts of wealth, perhaps with the top rate around 5 or 6%. Based on his projections of annual returns on capital an annual tax rate at that level effectively would stop the increasing of wealth accumulation and concentration. He admits that his proposal currently is highly improbable, but he believes it, or something similar, has a chance of being adopted by some individual countries, and possibly, by the European Union.
Piketty's thesis, his conclusions and his tax proposal are bound to spark controversy for a long time to come. His book became a bestseller and generated an enormous amount of comment. Despite some minor errors, his research and data are groundbreaking, and are far more comprehensive than any similar work. He opens the question whether there is anything that can be done other than the one possible solution he offers. The obvious implication for the United States is that the “American Dream” probably is not going to be restored.
The threat to the American Dream and related issues have been the subject of considerable recent writing and discussion. The progressive broadcaster and writer, Thom Hartmann, has some good ideas for solving many of our economic problems in his book, Rebooting the American Dream.[6] A number of our best known economists, including Paul Krugman, Robert Reich, Mark Thoma, Joseph Stiglitz, Brad DeLong and Dean Baker have written extensively about our economic problems and have been quite critical of governmental policies, or lack thereof. Reich produced an excellent movie "Inequality for All," that clearly and succinctly describes the problem of economic inequality in the U.S.
However, hardly anyone takes up the really big problem: That the current gridlock in our politics, and the nearly even divide among our people, make it highly improbable that any significant governmental actions to solve our major problems will be taken in the foreseeable future. This is the biggest issue of our time and unless it is solved, Piketty's pessimistic projection of our future almost certainly is going to come true.
If it didn't already have one, Piketty created the raison d'etre for Let's Do What Works and Call it Capitalism. I did not know where I would wind up when I began seeking answers to my questions, but the deeper I dug into the background of our current problems, and compared the present to the past, the more obvious the political solution became.
Our history reveals the most practical solution to our political gridlock and the disillusionment large numbers of our people have with government. There is a means by which our economic problems can be solved. Nearly all of the government programs that been the most successful, popular and enduring were implemented in three relatively short periods since the beginning of the 20th Century when progressives had control of the national government. I believe there is a present opportunity that will become even more promising in the coming years to bring about another period of progressive government and create an atmosphere in which innovative ideas can be applied to solving our problems.
In using the term “progressive” I mean what it meant in its early years, a philosophy of government, or governance, of the proper role of government in a democracy, and how public officials carry out their responsibilities to the people. Progressive government can be a force for good when it limits its activities to doing those things that need to be done but cannot be done by the people for themselves. The duty of public officials is to all the people, not to special interests.
In my use of the term, progressivism is not a synonym for liberalism, as it often is used today. Today's progressives probably are liberal in many, if not most, of their beliefs, but not all liberals are progressives. Although a descendant of classic liberalism, true progressivism is not ideological. It is pragmatic. It is neither liberal nor conservative, nor Democrat nor Republican. It is not capitalistic, nor socialistic. It seeks to make the existing system work, and that sometimes means protecting capitalism from itself by taming its most aggressive features through legislation and regulation. Most of the early Progressives were Republicans; the later ones, Democrats. Progressives are problem-solvers and they will borrow ideas from both political parties, as well as from any other source, if the ideas present a practical solution to an important problem.
Basic pragmatic progressivism is more consistent with the American character than any other governmental philosophy, and its historic leaders have been – sometimes, for other reasons, only briefly - among the most popular leaders the nation ever has had. We can solve our major problems with another progressive period of government. I believe this can be made to happen with the right kind of leadership, programs and strategies, which I describe in this book.
This is a work of analysis and exposition, not of scholarship. The Bibliography is extensive, but not exhaustive. While I have read works of the leading historians and economists representing the major points of view, I have made no attempt to read them all.  In addition to Piketty's book, which led to some revisions and additions to an earlier draft of this book, there are five works that I found especially enlightening.
The first is the Constitution of the United States. It is a truly magnificent work. It also is frequently misunderstood, and sometimes misquoted, even by our Supreme Court. I have read dozens of Supreme Court cases that have interpreted it, and some that have misquoted it, and thus, misapplied it.[7] I also have consulted a number of books dealing with the history of its drafting and adoption. I think the Preamble to the Constitution provides the best definition that exists of both the philosophy and the goals of progressivism.
The first book that I found enormously informative was History of the Great American Fortunes[8], by Gustavus Myers, one of the turn of the 20th Century “muckrackers.” This is a rather obscure, and scarce book today, a real treasure, full of enormous detail about America's first great fortunes and how they were made, which despite the legends they fostered, was not by themselves, with just “Horatio Alger” hard work and no help from anyone else.  It originally was published in three volumes in 1909-10, but the copy I use is a one-volume, updated edition, published by The Modern Library in 1936. Myers did an enormous amount of original research. For example, when they surfaced in an auction decades after they had disappeared, he was able to examine the record books of America's first great millionaire, John Jacob Astor, which, among other things, detailed some of his bribery of public officials that helped him build his fortune.
The novel, The Jungle,[9] by Upton Sinclair, provides the most vivid view of what life was like for immigrants at the beginning of the 20th Century, and the evils that can result from totally unfettered laissez-faire capitalism, which has come back to life in the past 30 years. This novel's impact on America was enormous, directly leading to the passage of the landmark Pure Food and Drug Act in 1906, but also helping to spur the greatest support for progressive ideas in the history of the nation.
A great companion to The Jungle is Barbara Ehrenreich's Nickel and Dimed,[10] a powerful depiction of real life at the end of the 20th Century for those who work for close to the minimum wage, which is about the same in real terms as what was paid to the stockyard workers in 1906. And life for the real people in Nickel and Dimed was nearly as desperate as it was for the characters in The Jungle. Unfortunately, life today for millions of Americans working at the bottom of the pay scale is even more desperate than it was when Nickel and Dimed was published.
Finally, there is The Price of Inequality,[11] by Nobel Laureate Joseph E. Stiglitz. This is a careful, scholarly work that examines our current economic situation. It is a powerful indictment of the policies of our government for the past 30 years, and I strongly recommend it. 
There is a great deal of misunderstanding today about our economic problems, much of it due to our divisive politics that has been infected with extremist ideologies. Because almost every issue has been politicized, we have lost a great deal of the old American practical way of doing things while others now have copied it and now use it against us.
Thomas L. Friedman and  Michael Mandelbaum open their 2011 book, That Used to be Us,[12] by comparing the 32 weeks it took the Chinese to build a massive, 2.5 million square foot, convention center from scratch with the 24 weeks it took Washington's Metro system to repair two heavily-used small escalators in a Bethesda, MD subway station. Their point was that we don't do things in the U.S. the way we used to.
Thom Hartmann begins Rebooting the American Dream with the 11-point plan for developing, promoting and protecting American manufacturing that our first Secretary of the Treasury, Alexander Hamilton, developed for President George Washington. He shows how key components of that plan generally were the successful economic policies of the United States until 1980, when much of it was abandoned. However, countries like South Korea and China  adopted some of Hamilton's key strategies to help their industries compete against ours. 
It is astonishing what has happened in China with its rapidly expanding industrial development and growing middle class, so much in contrast with its Maoist Communist past. I have encountered several different versions of a story, probably apocryphal, but still instructive, about what is going on in China, and they all have the same punch line.  It goes like this:  Not too long ago a visitor to China encountered a luxury development, which he thought was incongruous and inconsistent with that nation's philosophy of the past 60-some years. He asked his guide how this could be justified in light of that philosophy, and the guide said:
“We try different ideas, and then we do the ones that work, and call it socialism.”
That is like old-fashioned American pragmatism that made our country great. If we are to solve our problems today, we have to start being practical again. We have to stop being so ideological. We have to open our minds.
What I try to do in this book is show that there are solutions to our problems if we have the will to try them, and the political power to implement them. We need to find ways to bridge the gaps that divide our people. While it would be good if we could implement new ideas without every one being judged ideologically as “liberal” or “conservative,” or Republican or Democratic, the reality today is that for any major problems to be solved, progressive Democrats have to win control of both houses of Congress and the Presidency by winning the support of a significant majority of the people.
Much has been written about the conflicts and problems in contemporary America. Millions of Americans are unhappy with the present state of affairs, but there are huge differences in opinion over what exactly are the problems. It is reminiscent of the Pete Seeger song, “Seek and You Shall Find,”[13]  in which five blind wise men try to describe an elephant after each touches a different part of the animal's body. Opinions vary widely because of different experiences and points of view. My synthesis of the problems opens the book.
There also are a multitude of opinions and ideas about how to solve our problems. My proposed solutions end the book, and they do so because no solutions are likely to occur until governments are in place that actually want to solve our problems. The space between the beginning and the end of the book deals with what kind of governments worked in the past and how that kind of government can be restored to dominance in American politics.
There is a great deal of debate today about the powers and proper role of the national and state governments. This is nothing new. The subject has been debated since the beginning of the country. However, there also today are many misunderstandings about the Constitution and the powers it creates in the federal and state governments. The second chapter tries to establish the baseline. What are the real powers of the national government and of the states?
The third chapter traces the development of the American economy in the 19th Century and its evolution into the mixed economy we have today. The next three chapters analyze the three progressive periods in modern American history when dramatic changes occurred because of an activist federal government that implemented programs that have proven to be of the greatest benefit to the vast majority of Americans. The first began in 1901 with the Presidency of Theodore Roosevelt and ended in 1920 with the election of Republican Warren Harding. The second began with Franklin Roosevelt in 1933 and effectively ended with his death in 1945. The third began with the election John Kennedy in 1960 and ended with the election of Richard Nixon in 1968.
The first section concludes with an analysis of the impact of the policies and programs of President Ronald Reagan and how they undermined the middle class and caused much of the economic crisis we face today, but also how succeeding Republican and Democratic Presidents failed to reverse these destructive policies, many of which still are with us.
The second section includes a detailed definition and discussion of progressivism and progressive leaders and analyzes the current demographic and political situations in the United States and how they affect the opportunity for another progressive era to occur. I then discuss the methods that might be used to expand support for progressive government and elect progressives to public offices across the nation.
The people have to be convinced that they can fix the country by replacing conservative Republicans, and maybe some Democrats as well, with progressives. It is going to require a massive effort over an extended period of time for this to happen. The people can fix the country through elections. The 1 per cent cannot outvote them.  The people must realize that to maintain our greatness, our economic security, our personal freedom and our environment, control of the nation must be taken back from the plutocrats. We must restore the middle class. The government does not belong to the rich. It is every citizen's government. We are responsible for it. This government, as the Preamble to the Constitution states, was established by “We, the People.”
Thus, the final section contains my proposals for a “core” national Progressive program that I believe could have broad support among the people. It is a program I believe would spur the economy into a new period of significant growth and could restore equilibrium to the distribution of wealth and income.                                                                                                                                                                                                     
 Crises create opportunities. Our economic and political crises today are the opportunities for this generation to make its mark, and for those of us passing from the scene to put an exclamation point on our lives. Let's fix America. We, the people, can do it. Let's do the things that need to be done so that we carry out our duty to our heritage and to those who will come after us. Let's win this battle against plutocracy and the concentration of wealth and power. Let's preserve our democracy and restore our middle class. Let's make our children and grandchildren proud of us, as we have been proud of the parents and grandparents who overcame the evils of despotism, poverty, and fear in the Great Depression and World War II.
Let's defeat the despotic right-wing ideology that serves only the interest of the plutocrats. Let's put an end to the circular firing squads of prejudice and ignorance. Let's make America work for everyone.
And if we achieve this, we will do just what progressive always have done, we will save the country by saving capitalism from itself. And that's why this book is titled, Let's Do What Works and Call it Capitalism.

Part I. American Democratic Capitalism Now and in the Past


Chapter 1.  The American Dream in Crisis


"The American Dream is that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, and too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.”

            - James Truslow Adams, The Epic of America,  1931[14]

“In the Gettysburg Address, President Abraham Lincoln said that America was fighting a Great Civil War so that 'Government of the people, by the people, and for the people shall not perish from this earth.' But if what has been happening continues, that dream is in peril.”

            - Joseph Stiglitz, The Price of Inequality, 2012[15]

                 There is a real possibility that a majority of Americans born in the last 30 years will not lead lives better than those of their parents. Many no longer believe in the American Dream, the idea that each generation can do better than the previous one, and that all Americans have a reasonable opportunity to succeed. Without economic security and the reasonable opportunity for all Americans to improve their lives, the security of the nation is threatened. The worst crisis is in our national government, which, because of political gridlock, has failed to properly address the nation's economic problems.
The destruction of the middle class did not happen overnight. It just seems that way now because there is so much attention being paid to it. When it first started to happen, unless your company moved your job overseas, or you were replaced by a computer, like most of us, you probably didn't notice.
It started in the 1970s when everything went haywire. There was an oil crisis, with long lines at gasoline stations. Oil prices quintupled and thus, so did the cost of gasoline. There were scandals and incompetence in our government. A Vice President resigned because of accusations of corruption, and then a President resigned just before he was likely to be impeached. There was something new called "stagflation," - inflation and economic stagnation, including high unemployment. The Vietnam War ended ignominiously with an embarrassing exit by the U.S. followed by North Vietnamese victory. A Democratic President was unable to get along with a Democratic-controlled Congress. Muslim radicals overthrew the U.S. ally, the Shah of Iran, and seized the American embassy in Tehran and its personnel. Relations between Iran and the U.S. have been hostile ever since. Incomes rose substantially and so did house values, but inflation increased even faster wiping out the gains, and leaving many struggling to stay even. To do so many middle class families substantially increased their use of credit cards and home equity loans, and millions of women whose mothers had been housewives now entered the work force, many because they wanted careers, but many others because one average income no longer could support a family.
The problems of the 1970s caused disillusionment with the liberal ideals that had guided the nation for 50 years, and opened the door to the White House to a conservative for the first time since before the Great Depression. In 1980, the Republican Ronald Reagan blamed the government for the nation's problems and narrowly defeated Jimmy Carter's re-election bid.
Reagan probably was underestimated by his opponents and overestimated by his supporters. He had an instinct for leadership that made him appear more competent, and more in control than his recent predecessors, and more so than he probably was. He knew how to play the part as President and after all that happened in the 1970s he projected a strong and reassuring personality that made him popular. The turmoil of the 1970s soon was history, especially inflation, which the Federal Reserve - not the politicians in the White House - has kept under control ever since.
America's principal enemy, the Soviet Union, went into crisis and then disintegrated, leaving America the victor in the Cold War, effectively without firing a shot. The United States really appeared to be in the position of that “shining city on the hill,” described by Reagan when he became President.[16] However, because of many of his policies, which were continued by his successors, as well as some significant technological changes, we now know that shining city was looted.
Gone are many of the great industries that lifted our parents and grandparents into the middle class out of the nightmare of the Depression. One of the greatest symbols of 20th Century American industrial might, the city of Detroit, has lost most of its industry, two thirds of its population, and is bankrupt. Homeowners lost trillions of dollars in the value of their homes following the 2008 financial crisis, and only slightly more than half of those losses had been recovered by late in 2013.[17] For the hundreds of thousands, maybe more, forced out of their homes because of lowered income due to job losses, or retirements, the losses were permanent, and nothing has been done to rectify the situation.
Before Reagan, the national government had operated for nearly 50 years generally with the economic policies initiated by Franklin Roosevelt during the Great Depression in the 1930s, and greatly influenced by the British economist John Maynard Keynes. His core theories included the idea that consumer demand drives economies and when recessions slow demand, governments should increase spending to replace the consumer demand. Keynes also believed that expanding the supply of money in times of recession also could spur the economy.
Reagan adopted “Supply Side” economic theory, generally attributed to the economist, Milton Friedman and the University of Chicago School of Economics, but also with roots in the Social-Darwinist theories of the “Gilded Age” of the late 19th Century. This theory holds that the economy is primarily driven by the suppliers of goods and their willingness to expand production. Supply-siders support lower taxes on corporations and the wealthy to provide them with more money to invest in economic expansion. The theory is that the benefits of this economic expansion will create greater wealth, and some of this wealth will “trickle down” to the lower income groups. This has been converted into the argument contemporary Republicans have used against tax increases on the wealthy who they call the “job creators.”
Supply-siders favor less government regulation, even complete deregulation, of most businesses to make it less expensive for them to expand. Supply side economics also does not support using the money supply to spur the economy, generally favoring tighter money than Keynesian economists.
The contemporary intellectual descendants of Keynes such as Nobel Prize winners Joseph Stiglitz and Paul Krugman, among others, repeatedly have argued in the past several years that because of lowered incomes and assets, the vast majority of Americans have not had enough money to generate the demand for products necessary to significantly grow the economy.
Because of the application of Keynesian economics and progressive government philosophy - greatly influenced by liberal theories - the domestic focus of the national government from FDR to Ronald Reagan was on improving the lives and incomes of average citizens through major federal programs and regulations, in the belief that this was the best way to grow the economy. Even when Republican Dwight Eisenhower was President in the 1950s and Republican Richard Nixon in the late 1960s and early 1970s, their policies did not focus on expanding the power, or wealth, of the rich. From 1940 to 1980, a period generally of enormous prosperity, economic expansion, and general wealth creation, the nation had the lowest disparity of wealth among all segments of the population of any time measured in history.
That changed with Reagan and his economic policies, which we now know were wrong and had an enormously destructive effect on middle class Americans. But Reagan was very popular while he was President, and he almost has been beatified by Republicans ever since. Their religious-like belief in the false "trickle-down" concept continues to hamper effective federal responses to the current economic malaise of the nation. Reagan's economic policies were a significant cause of the greatest disparity in income and wealth between the wealthiest 10 per cent and everyone else in our history.
The economist, Emmanuel Saez, of the University of California at Berkeley, who is the leading American authority on wealth and income disparity, wrote in January, 2013:

The overall pattern of the top decile share over the century is U-shaped. The share of the top decile is around 45 percent from the mid-1920s to 1940. It declines substantially to just above 32.5 percent in four years during World War II and stays fairly stable around 33 percent until the 1970s. Such an abrupt decline, concentrated exactly during the war years, cannot easily be reconciled with slow technological changes and suggests instead that the shock of the war played a key and lasting role in shaping income concentration in the United States. After decades of stability in the post-war period, the top decile share has increased dramatically over the last twenty-five years and has now regained its pre-war level. Indeed, the top decile share in 2007 is equal to 49.7 percent, a level higher than any other year since 1917, and even surpasses 1928, the peak of stock market bubble in the “roaring” 1920s. In 2011, the top decile share is equal to 48.2 percent. [18]

And what has happened recently is not encouraging.

From 2009 to 2011, average real income per family grew modestly by 1.7% … but the gains were very uneven. Top 1% incomes grew by 11.2% while bottom 99% incomes shrunk by 0.4%. Hence, the top 1% captured 121% of the income gains in the first two years of the recovery.[19]

Joseph Stiglitz wrote:

 “The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent...”
“While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old ossified Europe that President George W. Bush used to deride.”[20]

Although the vast majority of Americans have not experienced any substantial increase in wealth for the past 33 years, the number of our citizens who have accumulated enormous wealth has rapidly grown. The number of billionaires on the Forbes billionaires list in 1982 was 28. It grew to 132 by 1996, and to 412 in 2011.[21]
According to a study[22] of income inequality by state from 1928 to 2011, published in February, 2014, “Between 1979 and 2007, the top 1 per cent took home well over half (53.9%) of the total increase in U.S. income. Over this period, the average income of the bottom 99 per cent of U.S. taxpayers grew by 18.9 per cent. Simultaneously the average income of the top 1 percent grew over 10 times as much – by 200.5 per cent.”
And, there was an increase in the disparity between the 1 per cent and everyone else in every state.

“This rise in income inequality represents a sharp reversal in the patterns of income growth that prevailed in the half century following the beginning of the Great Depression; the share of income held by the top 1 percent declined in every state but one between1928 and 1979.”[23]

While virtually all of the increase in wealth of the nation is going to the rich, many other people still are leading comfortable lives. But the number is declining. At the present pace, in another generation or two, the vast American middle class that exploded out of the Depression and World War II, may be nothing more than a fading memory of a golden age.
Americans generally are not jealous of the rich. We like the idea that people can get rich in our country. Many of us hope to be among them, and we don't want to eliminate the opportunity. We admire success. If anything, we admire it too much. Many self-made wealthy individuals have become folk heroes, often escaping scrutiny of the means by which they succeeded. The “robber barons”[24] of the 19th Century have been lifted into legendary status because of the enormous wealth they obtained, and the family fortunes they created, despite the fact that much of it was gained through fraud, bribery and worse.
The success of ruthless business tyrants such as Cornelius “Commodore” Vanderbilt[25] in the 19th Century, and Henry Ford in the 1920s, led a few to even propose they be candidates for President, not dissimilar to the brief promotion of Donald Trump in 2011 as a potential Republican candidate. But the only businessmen ever elected President, Herbert Hoover in 1928, and George W. Bush in 2000 and 2004, were unable to deal with the economic crises that Republican policies brought about. The skills required for political leadership are far different from those employed in business.
 We certainly don't want to eliminate the opportunity for our citizens to become rich, although perhaps we should examine a little more closely the methods employed before we make them into folk heroes. As admirable as was Steve Jobs' success with Apple, would not it be far more admirable if Apple's products were not assembled by very cheap Chinese labor, people who live in dormitories and sometimes are forced to work in the middle of the night?[26]
Even in our toughest times, we have supported free enterprise and capitalism. Communism never had much appeal to us, even during the depths of the Great Depression. So why should we worry about wealth disparity?
The enormous disparities of wealth and income are both symptoms and causes of great problems with our economy and our government. The Great Depression followed the last period of great disparities in wealth and income. The Great Recession came after the greatest increase in wealth disparity in our history. Even more important, wealth disparity is a threat to freedom, opportunity, and ultimately, national security.
 Economic security and the opportunity to improve one's life, basic concepts of the American Dream, are essential to political and personal freedom, and the stability of the nation. The unprecedented concentration of most of the wealth in the hands of a few in this nation also can concentrate governmental power in their hands. The Constitution makes it very clear that all citizens are to be equal under the law. No one is suppose to be able to buy government influence. In fact, bribery is one of two enumerated offenses in the Constitution constituting grounds for impeachment. And to prevent unequal treatment of citizens under the law – and thus by government - any formal titles of nobility or aristocracy are specific forbidden to be created either by the federal government, or by the states.
We have not created such titles under law, but, in effect, we are creating them with our economic and tax policies. A class of “super rich” now exists, primarily from a combination of inherited wealth, historically unprecedented compensation of senior banking and corporate executives and business entrepreneurs, and the enormous incomes of stars in sports and entertainment.  The use of this concentration of wealth to influence government to act even more favorably towards the interests of the wealthy has been known since the time of ancient Greece as plutocracy. It is the antithesis of democracy, and the power of plutocrats is rapidly growing today in the United States.
There is ample evidence today that certain of these “plutocrats” are using, or changing, governmental policies to make themselves even richer, at the expense of the majority of the population. This reduces the economic security of millions, limits their freedom and endangers the nation. Even though they do not seem to realize it, it ultimately endangers even most of the wealthy. Without an economically vibrant middle class, the American economy will remain stagnant, or grow very slowly, which may lead to future downturns in profitability for businesses. It also is possible that at some point the people will no longer peacefully tolerate this situation.
Billionaire plutocrats, such as the Koch Brothers, owners of the second largest privately held corporation in the U.S., have aligned with extremist religious and political groups, and funded political action committees that support extremist political candidates and numerous conservative and right-wing organizations such as the Tea Party, and think tanks like the Heritage Foundation and The Cato Institute. Their father was a founder of the extreme right-wing John Birch Society. David Koch was the Vice Presidential candidate of the Libertarian Party in 1980 when they advocated abolition of Social Security, Medicare, Medicaid, welfare and virtually all taxes. To people like these, there is no social contract. They do not feel any obligation to their fellow Americans for the largesse, tax breaks, and opportunities to become wealthy that they have received. They view government as nothing more than a tool for them to use to increase their wealth and influence.
They and numerous other wealthy individuals and corporations have driven the Republican Party into extremist positions on most issues, threatening not only the economic security of most Americans, but also basic American rights and freedoms, including the right to privacy, religious freedom, free speech, and the benefits of Social Security, Medicare and Medicaid.
Joseph Stiglitz's concern, expressed in the quotation at the beginning of this chapter, now has been echoed in great detail in Thomas Piketty's Capital in the 21st Century, discussed in the Introduction. The rapidly escalating concentration of wealth in the hands of a small minority of the people in the U.S. and almost everywhere else presents an enormous threat to democratic government and to the economic well-being of the vast majority of people. 
We already have seen the effects in states controlled by Republicans. Hundreds of bills have been passed by Republican-controlled state legislatures restricting, or nearly eliminating access to abortion, a right guaranteed by the Supreme Court in the landmark decision, Roe v. Wade.[27] Following the Supreme Court's partial dismantling in 2013 of the Voting Rights Act that had eliminated racial discrimination in voting, several states with large black populations immediately moved to restrict voting rights.
Unions, which did the most to raise the incomes of American workers to living levels, are among the principal targets of corporate plutocrats. Since Ronald Reagan became President in 1981, union membership has dropped by 50 per cent. Many Republican-controlled states are trying to limit the union rights of public employees. Not only have unions historically been responsible for obtaining living wages for the workers they represent, they also generally have been aligned with the Democratic Party, and have been a huge source of campaign funds by Democratic Party candidates. By killing the unions, Republicans not only help plutocrats drive down labor costs, they also eliminate a major source of funding of their political opponents.
Many of the people who lost their jobs that supported their middle class lifestyles now are working for much lower wages in service jobs and living in, or close to, poverty. A Federal Reserve study reported that the greatest demand for workers since the Great Recession has been  in the poverty-level minimum wage-paying service industries, and the lowest demand is for the mid-level workers who once comprised the vast majority of the middle class.[28] 
An April, 2014, report by the National Employment Law Project provided details supporting the Federal Reserve study. During the recession low-wage jobs, those paying less than $27,700 per year had both the lowest percentage of losses and the highest percentage of gains. Twenty-two percent of the total job losses were in the low-wage category, but 44 percent of new jobs were in that category. Mid-wage jobs, those paying between $27,700 and $41,600 had the lowest percentage of new jobs created, 26 percent, but the second highest rate of job losses, 37 percent. High-wage jobs, those paying more than $41,600 had the highest rate of losses, 41 percent, but a higher rate of new jobs created, 30 percent, than the mid-wage category.[29]
In addition, Right to Work laws in many states have limited the ability of unions to organize workers in the low-paying service industries, or in the mostly foreign owned auto factories that located in several Southern states.[30]
Education always has been one of the primary means to achieving the American Dream. Free public education, which became widely available late in the 19th Century, provided a primary means by which millions of immigrants were assimilated into American culture and were able to take advantage rapidly of the opportunities available. This powerful concept that has driven our nation – of a national identity incorporating people of all nationalities, races, religions and economic levels – is under assault today in many different ways. It is especially under assault at its heart – free public education. Republican-controlled state governments have been cutting education budgets, firing teachers, and diverting education funds to privately owned, profit-making charter schools, some of which are owned by their financial contributors.
Low-cost state colleges and universities, many of them initially funded by federal land grants, provided access to advanced education to millions of lower income people. Now, when education is more important than ever before, nearly all states have cut education budgets not only for secondary schools, but also for state colleges and universities.
The cost of a college degree in a public college, or university, used to be low, or non-existent. Now, in states like California, where before Ronald Reagan became Governor it was virtually free, it now costs approximately $25,000 a year. Private colleges and universities routinely cost twice as much. Most students have to borrow money to obtain a college education, which in today's high-tech economy is a virtual requirement to obtain a decent-paying job. Today the total of student loan debt, now more than $1.2 trillion, exceeds the total of credit card debt. Millions of young people face the prospect of having to borrow so much money to get an education to get a decent job that they will not have enough money left after paying on their loans to buy houses. That is not good for the economy, nor for the social fabric of the nation.
Enormous financial largesse has been made available, almost without restriction, to banks and major corporations, but the pension and health benefits of middle class public employees are being cut almost everywhere. Budgets for the education of our young people are being slashed. Food stamps and welfare for the poor have been cut. Social Security and Medicare, the most effective, and most important, social programs ever implemented, are in danger if Republicans get complete control of the federal government. And despite all the largesse, the tax breaks and credits, and other subsidies the wealthiest and most powerful banks and corporations receive, any effort to raise any tax to maintain programs that support the poor and middle classes are beaten down. The rich now want more tax cuts for themselves, and budget cuts for everyone else.
We continue to worship the American mythology, but we really no longer practice it. While we incarcerate more people than any other nation, our prison populations contain none of those responsible for the losses of trillions of dollars of national treasure that occurred because of the sub-prime mortgage crisis and other shenanigans of Wall Street. Our modern day robber barons are media stars, and have more influence on both of our political parties than any other interests.  Our national economic policies continue to favor the rich and powerful at the expense of the middle class and the poor. This is not what our founders intended. There is no right to this favored treatment in our Constitution.
The change from the Depression-era progressive-liberal government policies to the generally conservative policies initiated by Reagan, but not significantly changed by his successors, has resulted in a dysfunctional national government that is both unable and unwilling to address the nation's major problems. While we have many economic problems, the real crisis is the failure of government to act responsibly to solve our problems and to help create the conditions that will enable the American Dream to be attainable for current and future generations. There actually are elected officials – especially members of Congress – who brag about how little Congress has done since Republicans gained control. Even polls showing substantial national support for an action fail to generate action in Congress.
This is not the American mythology. It is its opposite. It is a tale of greed and horror. This is why a new progressive movement to restore American optimism, opportunity, and equality of citizenship, is essential to our economic health and, ultimately, the secure future of this democracy.

Chapter 2.  The Constitutional Authority for Progressive Government


We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

- The Preamble to the Constitution of the United States, 1787[31]

In this book I am advocating a movement to restore progressive government, with an activist government serving the interests of all the people by vigorously attacking the nation's economic problems, and spurring a rejuvenation of the American dream. Such vigorous actions by the national government are completely consistent with the powers granted the national government under the Constitution. The Preamble provides the essence of Progressive governmental philosophy.
 The people of the United States of America formed a compact in 1787 that still governs Americans today. It is not a compact among the states. It is a compact among the people, and it bound them and their "posterity," all Americans, for as long as the Constitution governs the United States.
Despite Supreme Court interpretations, and intense study by others of the meanings of the words of the Constitution, there continue to be disagreements over those meanings, and there continue to be historical studies of the intent of the Founders. However, the extent of the power of the Constitution and the national government could not be stated more explicitly than it is in the second paragraph of Article VI:  “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof...shall be the supreme Law of the Land; and the Judges of every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.”
The Constitution controls all government in the United States, and the laws passed by the Congress created by the Constitution bind all states, and everyone in the nation. The concepts of nullification and secession have no written support in the Constitution, and the Supreme Court has ruled that such concepts cannot be implied from the Constitution.[32]
The men who crafted the Constitution were the best educated and most knowledgeable in the nation at the time. Many were lawyers. They understood the meaning and use of words. They were familiar with both the classic and contemporary political philosophers. They were pragmatists who had few illusions about the weaknesses of human beings and the dangers of despotism.
The primary purpose of writing a new constitution was to strengthen the national government, which had proven to be too weak under the Articles of Confederation. But the delegates also wanted to insure that a stronger central government remained under the control of the people and did not become despotic. There were conflicting views among the delegates on how to accomplish that. The genius of the Constitution, and of its authors, lies in the ways they compromised their views to produce a practical and powerful document that has stood the test of time.
The Constitution provides for a powerful central government with executive, judicial, monetary, regulatory, military and coercive powers that had not existed under the Articles of Confederation, when the federal government was run by a Congress that had very little power, and whose actions had to be approved unanimously by the states.in throughout American government. All the governments of the United States, federal, state and local are derived from and controlled by the Constitution of the United States. Developed by a small group of men in 1787, the Constitution stands today as both the greatest governmental document in history, and the most resilient.
The Constitution was so brilliantly constructed that it has survived virtually intact, with very few amendments. However, some of its phrases and words have been challenging to interpret, especially over time. The Founders knew they could not anticipate every possible future development that might raise constitutional issues. They did not view their work as Biblical in its origin, or immutable in its applications. That is why they provided for amendments, and they expected many more than have actually occurred.
Probably the primary reason more amendments were not adopted, was that, under Chief Justice John Marshall the Supreme Court established itself as the final interpreter of the Constitution, short of amendment by the people. Appeals to the Court generally replaced the tedious, time-consuming and politically-difficult process of amending the Constitution. While not foreseen by the Founders, but certainly consistent with their intent to limit the possible tyranny of government or the popular will, the Court became a powerful check on the other two branches of the government. At times it also has been a powerful instrument for the protection of minority rights against what de Tocqueville called the “tyranny of the majority.”[33]
This role of the Court as the final interpreter of the Constitution has never gained 100 per cent acceptance either by the people, or by other governmental branches and their officials. One reason is that the Constitution does not clearly give the Court this power. Another is that the Court often has not been politically impartial. Its members are appointed by the President and must be confirmed by the Senate. While it hasn't always worked out as expected, it generally has been the case that when Republicans have appointed justices, those justices have been conservatives, and when Democrats have appointed justices they have been more liberal. And since justices are appointed for life, it usually is a matter of chance when vacancies occur. But if one party dominates the national government for a period of time, as the Democrats did from 1933 to 1969, or the Republicans did from 1980 to 2008, the Court during, and for a period of time afterward, is likely to reflect the philosophy of that dominant party.
The Court occasionally has made some very controversial decisions that it later decided were wrong, and overruled. It once ruled that the Fugitive Slave Act was constitutional and that blacks, even freed blacks, had no right to be free. It once ruled that “separate but equal” was constitutional. It ruled twice that federal laws regulating the working hours of children were unconstitutional. Later courts took quite contrary positions.. The possibility that a controversial decision may be overruled keeps hope alive among critics, who may work for years to find a case that can be used to gain an overruling of the original case. Even today, public officials frequently act in violation of Court decisions, either through legislation, such as various laws adopted by many states restricting abortion more than permitted by the Supreme Court decision in Roe v. Wade, or by the actions of federal intelligence and security agencies.[34]
One of those powers that continuously gets reviewed is the power of the federal government to regulate commerce. It has been the basis for considerable expansion of the role of the federal government throughout history.  But it was limited in the Supreme Court decision on the Affordable Care Act. In a decision written by Chief Justice John Roberts and concurred in by the Court's four “liberal” justices, the Court ruled that the requirement in the Act to buy insurance, or face a penalty, was constitutional as a tax. However, in the same opinion, the Chief Justice, with the support of the four “conservative” justices wrote that the Commerce Clause did not give Congress the power to force people into commerce “because they elected to refrain from commercial activity.”[35] Congress cannot compel citizens to buy health insurance, but can penalize them if they do not.
Because the expenditures on health care today are nearly 20 per cent of the GDP, and because everyone uses health care of some kind, I, and many others, do not agree with the Chief Justice's interpretation of the Commerce Clause in this case. But, for the time being, the Commerce Clause cannot be the basis of federal legislation compelling citizens to buy health insurance. This was but one of several cases decided by the conservative majority of the current Court that have restricted the federal government's powers under the Commerce Clause.
However, this decision of the Court would seem to permit the expansion of Medicare to cover all Americans as national health insurance. The Medicare withholding, like Social Security withholding, is considered a tax, and thus is Constitutional.
While there are express grants of power to the federal government, such as the power to regulate commerce, the “necessary and proper” clause, in the opinion of Alexander Hamilton, to be discussed shortly, and later, of the Supreme Court, broadly expands those powers to nearly any power needed for the government to carry out its expressed powers.
A primary source of the argument for limited powers of the federal government and “states' rights,” is the 10th Amendment, which provides that “powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Even though neither this Amendment, nor any other provision of the Constitution conveys the right, some of the Founders, including Jefferson and Madison, as well as Southern leaders such as John Calhoun, believed states could nullify acts of Congress.  This right still is occasionally argued even though the Civil War should have settled the question, and, as previously noted, the Supreme Court ruled that neither secession nor nullification has any constitutional basis.
There is little doubt that the 10th Amendment was intended to preserve some state powers, and their role in the federal system. While considering the ratification of the Constitution, all thirteen states proposed some version of what became the 10th Amendment. Only eleven years had passed since the states were separate colonies, operating quite independently of one another. Having fought to get free of English authoritarianism, they were wary of giving up too much power to any other government. This was a particularly sensitive issue in the South because of slavery. A number of northern states wanted slavery abolished. Southern states would not have joined with the northern states in creating the United States if slavery had been abolished, or if they believed the federal government could abolish it without their consent.
In my opinion, not enough attention has been given to the exact wording of the 10th Amendment, in particular, the last clause: “or to the people.” In fact, the Supreme Court, as recently as in its voting rights decision in 2013, misstated the words of the 10th Amendment, and not for the first time.[36] To repeat, the authors of the Constitution were experts in the use of language, and in the construction of legal documents. The use of the word “people” here modifies the entire amendment. The use of the word “people” in the Constitution, from the “We the People” of the Preamble on, means all the citizens of the United States separate from whatever identity they may have with individual states.
The Constitution is a compact among the people of the United States, not between the federal government and the state governments, or among the state governments. Ratification of the Constitution was required to be done by state conventions, not by state legislatures.  The authors of the Constitution clearly intended that the citizens of the United States bind themselves, their descendants, and their states, together, forever, in the compact, the Constitution. This appears to have been recognized by a number of Southern states when they seceded from the Union. In a number of cases, the act of secession was done through conventions of citizens, “the people,” not by the state legislatures.
The Constitution provides for the states to maintain some rights and responsibilities, but none that can trump those of the federal government. The Constitution clearly states that it, and federal laws adopted under it, are the supreme law of the nation. The Constitution provides for no means of changing it except by amendment; no means of dissolution of the union; no right for any state to withdraw from the union; no right for any state to wage war against any other state; no right for any state to engage in foreign affairs; no right to determine, or grant, citizenship; no separate citizenship of states; no right to restrict the rights of citizens to vote. 
Under the Constitution as it stands today, the “people” are the citizens of the entire United States, either born in the U.S.A., or naturalized under rules established by Congress, not the states. Thus, Constitutional challenges can be raised immediately about some of the voter suppression actions recently taken, or contemplated, by Republican-controlled states.
I believe that last phrase of the 10th Amendment means that the reserved power is shared between the states and the people, that it does not create a body of absolute “states' rights.” While it does mean that states have the power to act where the federal government has not, and when such acts will not conflict with federal laws or responsibilities, it also means that the people have the right to take action under similar circumstances. Since the people, the citizens, elect the Congress and the President of the United States, I think this clause gives broad power to the people to act through their elected Congressional representatives, not just through their states.  In other words, it permits the people, acting through their elected representatives, to decide that the federal government should have a power not expressed, or implied, in the Constitution.
While the people, acting through their congressional representatives, may grant the federal government new powers, those new powers cannot conflict with other provisions of the Constitution. For example, Congress could not constitutionally pass a law that restricted freedom of speech, or forbade the President to veto any of its bills. An act of Congress, however popular with the people, still can be unconstitutional. However, I do not believe the 10th Amendment can be the grounds of such a decision. An act's unconstitutionality must arise from its conflict with other provisions of the Constitution.
An action that has been declared unconstitutional by the Supreme Court can be made constitutional only by amendment, or by a later reversal by the Supreme Court. The requirements for adopting constitutional amendments are tough, and as a result, amendments seldom occur. That it can be done means that, in the end, the people have the final say, and are ultimately responsible for their own fate, and the fate of the nation.
Despite the limitations on state's rights that I have just discussed, the Supreme Court, under its recent control by conservative justices, has sown mischief by reviving concepts of state sovereignty that had been essentially disposed of by the Supreme Courts of the middle part of the 20th Century. Decisions such as the Affordable Care Act decision have narrowed the breadth of the Commerce Clause given to the federal government by earlier courts. There clearly is strong sentiment among conservatives in general for a revival of states' rights as part of the increasing ideological divide in the country.
States traditionally have had sovereignty - effectively exclusive responsibility -  in many areas such as most areas of law enforcement, education, family law, corporate law, and other areas traditionally considered outside of federal jurisdiction. However, any state law can be deemed by the Supreme Court to violate the Constitution. For example, actions by police in their handling of suspects have been severely constricted by numerous Supreme Court decisions. Most importantly, the Supreme Court has reserved for itself the primary right to interpret the Constitution. It has ruled that no state court can interpret the Constitution in any way opposite the way it has been interpreted by the Supreme Court. Thus, states may have "sovereignty" but only so long as they do not violate the Constitution. And thus, that "sovereignty" is limited. The Constitution is the supreme law of the land.
While the Constitution does not specify, or even mention, any economic system, it protects property and contract rights, two basic elements of capitalism and free enterprise, and it gives the power to regulate the economy – commerce - to the federal government.
Article 1 Section 8, grants Congress the power to “regulate commerce with foreign Nations, and among the several states, and with the Indian Tribes,” and Article 1, Section 10, forbids the impairment of the obligation of contracts. Article 1 Section 8 also grants Congress two of the greatest economic powers, the power to tax and the power to coin and regulate money, neither of which the national government had under the Articles of Confederation. It seems fairly clear that the authors of the Constitution intended the federal government to be in charge of the economy. That was believed, also, by Alexander Hamilton, a participant in the Constitutional Convention, and a co-author of The Federalist.
The 5th Amendment protects the property rights of citizens. “No person shall be … deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” The 14th Amendment applied the due process clause of the 5th Amendment to the states.
In addition, we inherited the common law rights to own, buy, peaceably enjoy, and sell property from English common law, which was adopted by every state except Louisiana, which adopted the Code Napoleon that also contains protections of property rights. English common law – the accumulation of judicial decisions over hundreds of years – is extraordinarily protective of private property rights. Almost every first year law student spends a good deal of time reading old English cases wrestling with the thorny issues of property rights, including the problems of straying bees.
The primacy of property rights, and the conflicts between property and other rights, have been at the center of many of the nation's most important issues, from slavery, to the right to join a union, to environmental protection. In the early years of the nation the ownership of property conveyed the right to vote. When only those who owned property could vote, those elected to public office represented the propertied interests, and, for the most part, they acted on behalf of those interests. It wasn't until 1847 that the last property ownership requirements to vote were eliminated in every state.[37]
Most of the nation's first great fortunes, some of which have survived to the present time, were based on the ownership of property, whether the plantations in the South, the enormous estates of New York and the Mid-Atlantic states that survived the Revolution, or the land of the rapidly growing major cities, particularly New York and Chicago. Men of property had influence and money, and with little regard for the law, they used both to bribe local and state officials to obtain more property, bank charters, railroad ownership, and various other privileges, including preferential tax treatment and no prosecution for their many crimes.[38]
While the Constitution mandates equality for all citizens under the law, it does not prohibit some citizens from accumulating far more property and wealth than others. But neither does it convey any special rights to some citizens to accumulate more wealth and/or property than others. And becoming rich does not give any citizen any rights that other citizens do not have. No citizen may legally buy favors from government. Accepting a bribe is classified with treason as one of the two enumerated crimes for which government officials may be impeached. That the prohibition of bribery has not been uniformly enforced does not diminish the intent of the founders, who clearly had concerns about the corrupting influence of money.
While the Constitution provides protection for the basic building blocks of free enterprise, and does not dictate, or even mention, any particular economic system, any economic system clearly has to be consistent with the Constitution's requirement of a republican form of government, a representative democracy. That may well rule out communism or fascism, both of which are undemocratic, and definitely not republican.
Democratic socialism of the form that exists in a number of European nations would be completely consistent with the Constitution. The fact that many Americans do not appear to understand the differences between socialism and communism may account for some of the antipathy towards socialism. During the financial crisis of 2008-2009, the federal government engaged in what might be described as socialistic methods. These included President Bush's bank bailouts and effective takeover of AIG that prevented the banking system from collapsing, and President Obama's bailouts of General Motors and Chrysler that saved two of the nation's three auto makers, along with tens of thousands of jobs.
Under the Constitution, government cannot interfere with private contracts, nor take private property without due process, but government is not forbidden from having an active role in the nation's economy. And while from the beginning of the nation there were debates about the proper role of government, federal and state governments played major roles in the economy and growth of the country.
The role of the federal government in the national economy was argued at the beginning of the country, and that debate continues to this day. In 1790, Treasury Secretary Alexander Hamilton proposed, and persuaded Congress to approve, the creation of a national bank, modeled to some extent on the Bank of England.[39]
The National Bank was to be the depository for the revenues of the national government, and would provide the government with a means of finance. Hamilton also saw it as the means by which the national government could encourage the growth of commerce and industry.[40] It was to be privately owned, except that the national government would purchase 20 per cent of its stock with money borrowed from the bank. So, in a way, the national government's first entry into finance and economics was part capitalism and part socialism.
Thomas Jefferson, John Adams and James Madison opposed the bank as unconstitutional because there was no specific authorization in the Constitution for the federal government to create a bank. They also were hostile to the idea of a national bank. Adams favored state banks. Jefferson was hostile to industry and to corporations. He wanted the nation to remain primarily agrarian. All three submitted written memos of opposition to President George Washington, who also expressed concerns about the proposal.  Washington asked Hamilton to respond to their memos of opposition.
On the day Washington had to decide whether to sign, or veto the act, Hamilton delivered his response, which ranks as one of strongest arguments ever made for an expansive interpretation of the “necessary and proper” clause of the Constitution, and the implied powers of the federal government.
Hamilton argued that the federal government had the implied power to create a bank because it had the express power to regulate commerce. He said that any express power carried with it, out of necessity, all legitimate implied powers necessary to exercise that power.11[41] He went even further, turning the entire opposition argument upside down. He argued that rather than having limited powers, that in the areas of federal responsibility, the “necessary and proper” clause essentially gave the national government the power to do almost anything not specifically prohibited, or illegal.
I think it is worth considering his argument in some detail. It is particularly applicable to many current issues involving the power of the federal government in health care, financial regulation, and stimulation of the economy. While not significantly inconsistent with Chief Justice Roberts' opinion in the Affordable Care Act decision, Hamilton's positions seem to favor a more expansive federal government. With health care representing nearly 20% of our total economy, Hamilton's reasoning seems to support a position opposite the one that Roberts took concerning the Commerce Clause.

Hamilton wrote that he believed that:

...this general principle is inherent in the very definition of Government and essential to every step of the progress to be made by that of the United States, namely--that every power vested in a Government is in its nature sovereign, and includes by force of the term, a right to employ all the means requisite, and fairly applicable to the attainment of the ends of such power; and which are not precluded by restrictions and exceptions specified in the constitution, or not immoral, or not contrary to the essential ends of political society...

The only question must be, in this as in every other case, whether the means to be employed, or in this instance the corporation to be erected, has a natural relation to any of the acknowledged objects or lawful ends of the government. Thus a corporation may not be erected by congress, for superintending the police of the city of Philadelphia because they are not authorized to regulate the police of that city; but one may be erected in relation to the collection of taxes, or to the trade with foreign countries, or to the trade between the States, or with the Indian Tribes, because it is the province of the federal government to regulate those objects and because it is incident to a general sovereign or legislative power to regulate a thing, to employ all the means which relate to its regulation to the best and greatest advantage..

Hamilton made his argument stronger by directly attacking Jefferson's and Madison's positions on the “necessary and proper” clause. His argument particularly was directed at Madison, who had argued for a liberal interpretation during the Constitutional Convention but now, in the case of the proposed bank, argued for a strict interpretation.

The whole turn of the clause containing it indicates, that it was the intent of the convention, by that clause to give a liberal latitude to the exercise of the specified powers. The expressions have peculiar comprehensiveness. They are, "to make all laws, necessary and proper for carrying into execution the foregoing powers and all other powers vested by the constitution in the government of the United States, or in any department or officer thereof." To understand the word as the Secretary of State does, would be to depart from its obvious and popular sense, and to give it a restrictive operation; an idea never before entertained...

The degree in which a measure is necessary, can never be a test of the legal right to adopt it. That must be a matter of opinion; and can only be a test of expediency. The relation between the measure and the end, between the nature of the mean employed towards the execution of a power and the object of that power, must be the criterion of constitutionality not the more or less of necessity or utility...

He then set forth an argument for a strong and activist federal government:

This rule does not depend on the particular form of a government or on the particular demarcation of the boundaries of its powers, but on the nature and objects of government itself. The means by which national exigencies are to be provided for, national inconveniences obviated, national prosperity promoted, are of such infinite variety, extent and complexity that there must, of necessity be great latitude of discretion in the selection and application of those means. Hence consequently, the necessity and propriety of exercising the authorities intrusted to a government on principles of liberal construction...

And his concluding argument was the clincher:

It leaves therefore a criterion of what is constitutional, and of what is not so. This criterion is the end, to which the measure relates as a mean. If the end be clearly comprehended within any of the specified powers, and if the measure have an obvious relation to that end, and is not forbidden by any particular provision of the constitution--it may safely be deemed to come within the compass of the national authority.

The very rational Washington did not bother to go back to the opponents. The weight of the logic of Hamilton's arguments could not be counter-balanced.  Washington signed the bill creating the bank into law. Hamilton's memo was relied on by Chief Justice John Marshall in th landmark case, McCullough v. Maryland,12[42] in which the Supreme Court ruled that Congress had the power, under the “necessary and proper” clause to create a national bank.
The opponents of the bank probably had the last laugh. At its beginning, the bank was the subject of stock market speculation and price manipulation, which Hamilton controlled by having a large quantity of its stock purchased, stabilizing its price. It was the first intervention in a banking crisis by the federal government.
The bank outlived Hamilton, who was killed by Aaron Burr in a duel in 1804, and it did not develop as Hamilton envisioned. Instead, it became a tool of some early robber barons, New York's John Jacob Astor and Philadelphia's Stephen Girard, who corruptly grew their fortunes by using the bank's power to suppress competition and to acquire property. Its charter came up for renewal in 1811, when Madison, one of its original opponents, was President, and he did not renew it.  Girard bought the building and used it for his own Girard Bank. It still stands in Philadelphia and is a National Historic Landmark.
In 1816, after the devastation of the War of 1812 left the country nearly bankrupt, the Second National Bank, modeled after the First, was chartered to try to provide the country with stable financing. Within three years that bank and many others caused the nation's first real estate bubble by financing wild speculation in unsettled lands. When the bubble burst the country experienced its first major financial panic. Eastern banks foreclosed on huge amounts of property throughout the country, but particularly in the developing areas of the frontier. Tremendous resentment of banks, particularly eastern banks, resulted, and therein were the seeds planted for the future populism movement.
After Andrew Jackson blocked the renewal of the bank's charter in 1832 - which will be discussed in a little more detail in the next chapter - no significant support existed for another national bank.
The Whig Party, which reached its height of power and influence in the 1840s, favored a federal bank but was unable to muster the votes in Congress. And the two Whigs elected President, William Henry Harrison and Zachary Taylor, died soon after taking office. The collapse of the Whig Party in the 1850s ended efforts to re-establish a federal role in banking until the Federal Reserve was created in 1913, as a result of the financial panic of 1907.
Hamilton's arguments for the implied power of the federal government, his interpretation of the “necessary of proper” clause, and his position that the federal government could do almost anything in furtherance of its expressed powers, outlasted all the issues and scandals of the national banks. A series of subsequent Supreme Court decisions generally endorsed Hamilton's interpretation of the Constitution. But, as witnessed in the Supreme Court's decision on the Affordable Care Act, the issue has never been settled, and it probably will continue to be with us for as long as the republic lasts.
The origin of America's political parties, and the arguments about the limits of federal power that continue to this time, can be traced to the debate about the first national bank. The lines were drawn when Congress voted on the bill. All the congressmen from the South voted against it, and all from the North voted for it.

Chapter 3.  A Brief History of the Development of American Capitalism

Part A. The Beginnings of American Capitalism & The Age of Jackson


"Capitalism, as an economic system, resting on the organisation of legally free wage-earners, for the purpose of pecuniary profit, by the owner of capital or his agents, and setting its stamp on every aspect of society, is a modern phenomenon...
… for it involved a code of economic conduct and a system of human relations which were sharply at variance with venerable conventions, with the accepted scheme of social ethics, and with the law, both of the church and of most European states."

                - R.H. Tawney, Foreword, The Protestant Ethic and the Spirit of Capitalism[43]

I consider, then, the power to annul a law of the United States, assumed by one State, incompatible with the existence of the Union, contradicted expressly by the letter of the Constitution, unauthorized by its spirit, inconsistent with every principle on which It was founded, and destructive of the great object for which it was formed....
            ...To say that any State may at pleasure secede from the Union, is to say that the United States are not a nation.

- President Andrew Jackson, 1832[44]


            In spite of the inequities, cruelties, and the history of corruption that capitalism possesses, no other economic system is compatible with our culture, history and politics, or acceptable to the American people. Programs designed to restore the middle class have to be compatible with American capitalism, a hybrid economic system that has evolved over time.
How did this capitalistic system develop? There is no mention in the Constitution of any economic system. The term, “capitalism” did not exist in the 18th Century. There were no conflicts over the “ideology” of commerce because there were no competing ideas. What did exist was a system of free enterprise, of small merchants and traders, craftsmen and small scale manufacturing, mills, iron smelting, some mining and others. England controlled most of the significant manufacturing in its Empire. It practiced "mercantilism," underwhich it imported raw materials from its colonies and exported finished products to them. The steady, positive, trade balance this system generated was a major source of the increasing wealth of portions of the British upper class, including the royal family, as well as the industrial and merchant classes. England was so protective of its advantage in this system that it outlawed certain types of manufacturing in its colonies, one of the underlying causes of the eventual rebellion by the Americans.
The first Industrial Revolution developed in the late 18th and early 19th Centuries as steam and water power enabled the establishment of much larger manufacturing facilities employing many more workers, as well as new forms of transportation and communications. The railroads and the telegraph companies became the first modern industrial corporations. It wasn't until the middle of the 19th Century that the name "capitalism" was attached to this new economic system. The word, “capitalism” first appeared in English in William Makepeace Thackeray's 1854 novel, The Newcomes. Karl Marx, in Das Kapital, and other writings, gave the term greater definition.
Weber wrote that the distinguishing characteristic of modern capitalism was that it made the earning and accumulation of money an end in itself, not just as a way of supporting one's life and family, and it provided the means to do so. Virtually every one of the creators of the great American fortunes in the 19th Century was obsessed with the making of money, at the expense of everything else in life. Most were miserable misers, the living examples of characters out of Dickens novels, like Ebenezer Scrooge. Myers relates that when John Jacob Astor, who had built the first great fortune of more than $150 million, was on his death bed in 1848, he still was reading his account books and fretting about an unpaid rent of a few dollars from a poor widow.[45]
Weber described how traditional small factory and handcrafting enterprises that had successfully supported the owners and the workers and their families for generations were turned upside down by the new capitalist business managers of the 19th Century. These new managers brought in automation and sought to make their enterprises far more profitable for the owners, but not for the workers. The nature of work for most people changed in the second half of the 19th Century with the development interchangeable parts and machinery that automated many manufacturing processes.
Small to medium-sized woolen factories, tanneries, shoemakers, and metal fabricators, powered by water or steam, rapidly developed after the War oif 1812, almost entirely in the region from Baltimore north, and heavily concentrated in New England. The most modern factory in the United States in the early 19th Century was one operated for, and by, the U.S. Army, the Springfield Armory in Massachusetts, where methods developed by military officers for the manufacture of weapons became the model for the modern American manufacturing plant.[46]
Jeffersonian philosophy opposed the use of the funds of the federal government for "internal improvements," primarily roads and bridges. The most significant economic activity by any American government in the early years of the 19th Century was the construction of the Erie Canal. The 360-mile canal was built with public funds by the state of New York between 1817 and 1825. At the time, it was the largest public works project in modern history.  It connected the Great Lakes, and the Midwest grain and meat suppliers with the east coast, and was singularly responsible for making New York City the nation's largest city, and for the creation of considerable wealth. However, no private interests benefited from the tolls collected on the canal. Some publicly owned canals also were built by Pennsylvania, Maryland and Ohio.
The economy of the United States in the early 1800s operated under a system that came into being after the Revolution, but was similar in many ways to what existed prior to the war. What was new is that the eastern banks controlled commerce through their control of the money supply because the only medium of exchange that existed other than coins ("specie") minted by the government were demand notes issued by banks in return for a deposit, usually specie or another bank note. The issuing bank guaranteed the notes, which usually could be redeemed for specie. However, in general practice the notes circulated as money, transferring from one holder to another.  However, if the bank failed, and many did, the note became worthless, but those who held it and transferred could be held liable for its value. For example, if bank notes were used to purchase land, and the bank that issued them failed, the land could be repossessed from the buyer. Because of a situation like this, Andrew Jackson lost his home when he was a young man, and he never trusted banks again.
By the 1820s, the dominant bank was the Philadelphia-based Bank of the United States, which was partially owned by the federal government but operated by a Board of Directors controlled by private investors. The BUS essentially controlled the paper money supply by regulating the amounts of bank notes in circulation through its many branches and its relationships with other banks. The eastern "establishment" thus controlled the economy and as well as the government.
Until 1828, only two Presidents had been elected who did not come from Virginia, and they were both named Adams and were from Massachusetts, John in 1796, and his son, John Quincy in 1824. The struggle between the Federalists and the Anti-Federalists had dissolved during the Jefferson Presidency and his philosophy of small government, and a rural culture prevailed. James Monroe, the last of the "Founders" to serve as President, was re-elected in 1820 without opposition.
In 1824, there were four candidates and it was the first election featuring real political party politics. The Democratic Party candidate was Andrew Jackson, a Tennessee lawyer, judge, land speculator, slave-owner and military leader, who was famous for leading American forces to victory over the British at New Orleans in the War of 1812, for his Indian-fighting, for his killing of a number of men in duels, as well as carrying some bullets in his body from them, and for forcing the Spanish to relinquish Florida to the United States. He won the most popular and electoral votes, but not a majority of either.  John Quincy Adams, with the help from Henry Clay, who was a life-long enemy of Jackson and one of the other two candidates, was elected by a vote of the House of Representatives.
The 1824 election is the first election for which there are any reliable numbers available of the popular vote, and because in most states only white men who owned property could vote, the total vote was only about 355,000 out of a population of more than 10 million. However, property qualifications were not required in the rapidly growing new states in the west, and by 1828 many eastern states had repealed property qualifications for voting. In the 1828 election, when Jackson won, the voter turnout was more than 1.1 million.
No President's standing and importance has been more disputed among historians than Jackson's. Among the multitude of biographies of him, three won Pulitzer Prizes, and another won a National Book Award, making biographies of him the biggest award winners among Presidential biographies. There still is no consensus, but recent works have been more favorable than those of a generation ago, at least partly due to discoveries of troves of papers of his and of his family members that have provided more information about the secretive Jackson than was available to earlier biographers.
Once considered among the greatest of American Presidents, Jackson's standing declined precipitously in the second half of the 20th Century. A highly critical essay in 1948 by Richard Hofstadter in The American Political Tradition[47] - a required college and high school text for many years -  counteracted the esteem with which he was treated by Arthur Schlesinger, Jr. in his 1945 Pulitzer Prize-winning classic, The Age of Jackson. Hofstader also was very critical of Theodore Roosevelt. In a new Preface to the 1967 edition, Hofstader recanted some of his harsh treatment of Roosevelt, but not his treatment of Jackson.
Jackson's reputation declined further with increased sensitivity about the treatment of Native Americans and slaves because he was chiefly responsible for the removal of nearly all the American Indians in the Southeast to west of the Mississippi, and was the owner of many slaves.  There is even a popular children's book devoted to "Trail of Tears," when thousands of Cherokees lost their lives in a forced winter march from Georgia to Oklahoma, with Jackson, who was the author of the relocation plan, held to blame, even though "The Trail of Tears"  happened after he left office and violated his intention to treat the Indians humanely.
Relocation of Indians from several southern states to west of the Mississippi had been going on for several years under a practice Jackson was instrumental in developing. However, a crisis developed in Georgia with the Cherokee, who occupied a large portion of the western part of the state under a treaty with the federal government. The Cherokee were more advanced in many respects than other Indian tribes - and in some ways more than the whites. They had rebuffed all efforts to buy their land, but whites continued to encroach on it, especially after gold was discovered in one area. Georgia decided to force the Cherokee to relocate essentially by making an offer they couldn't refuse. They would be evicted by military force, if necessary, completely in violation of the treaty. The Indians appealed to the Supreme Court and won, but Georgia refused to accept the Court's decision.
That was the decision that Jackson was alleged to have responded to by saying "John Marshall has made his decision, now let him enforce it." But it was Horace Greeley some years later who apparently invented that saying and ascribed it to Jackson.
In any case, that was the point. The highest court of the nation ruled that Georgia was violating a federal treaty. Under the Constitution the President has the duty to enforce the law. If the Court's decision was to be enforced, Jackson had to do it. But his problem was that while this was going on, South Carolina was threatening to secede if Jackson enforced the federal tariff that the state said was hurting their cotton export business. The South Carolina Legislature nullified the tariff and made it a crime for anyone to try to collect it in the state. The state also was preparing its militia to resist any federal effort to enforce the tariff with military action. As Jackson began to prepare for a military confrontation,

"One serious complication that troubled him was the situation in Georgia. The state was prepared to defy the Supreme Court’s decision in the Worcester case over Cherokee Indian rights, and if Jackson enforced the court’s decision, Georgia was certain to join South Carolina in support of nullification. Bloody conflict would surely ensue."[48]

There was little political support in Congress for action against Georgia. There also was no popular support for the Indians. Some of the Cherokees capitulated and agreed to a purchase offer from the federal government. The rest were effectively coerced because no one would come to their defense. The actual relocation did not come for several years, but the crisis with Georgia was averted and Jackson then could focus on South Carolina.
Jackson was a believer in States' Rights, but he was a much stronger believer in the Union and he made it plain when he threatened to occupy South Carolina with federal troops if the state seceded. He issued a Proclamation to the people of South Carolina in which in considerable detail he explained his position on nullification and secession. He was the first President to openly say that secession was unconstitutional and an act of treason. And he said that the Constitution imposed the duty on him to enforce the law and to punish traitors and that he would do it with force if he had to.  He reineforced some federal forts in South Carolina and in the Charleston harbor. He ordered the assembling of stockpiles of weapons and he ordered General Winfield Scott, to move troops towards South Carolina.
Part of his Proclamation opens this chapter. The entire Proclamation is one of the best arguments ever made for the unity of the nation and against any state's right to nullify any federal act, or secede from the Union. Abraham Lincoln relied on parts of it for his response to the secession of Southern states in 1861. Jackson said, in part:

The people of the United States formed the Constitution, acting through the State legislatures, in making the compact, to meet and discuss its provisions, and acting in separate conventions when they ratified those provisions; but the terms used in its construction show it to be a government in which the people of all the States collectively are represented. We are ONE PEOPLE in the choice of the President and Vice President. Here the States have no other agency than to direct the mode in which the vote shall be given. The candidates having the majority of all the votes are chosen. The electors of a majority of States may have given their votes for one candidate, and yet another may be chosen. The people, then, and not the States, are represented in the executive branch....

The Constitution of the United States, then, forms a government, not a league, and whether it be formed by compact between the States, or in any other manner, its character is the same. It is a government in which all the people are represented, which operates directly on the people individually, not upon the States; they retained all the power they did not grant. But each State having expressly parted with so many powers as to constitute jointly with the other States a single nation, cannot from that period possess any right to secede, because such secession does not break a league, but destroys the unity of a nation, and any injury to that unity is not only a breach which would result from the contravention of a compact, but it is an offense against the whole Union. To say that any State may at pleasure secede from the Union, is to say that the United States are not a nation...

The States severally have not retained their entire sovereignty. It has been shown that in becoming parts of a nation, not members of a league, they surrendered many of their essential parts of sovereignty. The right to make treaties, declare war, levy taxes, exercise exclusive judicial and legislative powers, were all functions of sovereign power. The States, then, for all these important purposes, were no longer sovereign. The allegiance of their citizens was transferred in the first instance to the government of the United States; they became American citizens, and owed obedience to the Constitution of the United States, and to laws made in conformity with the powers vested in Congress. This last position has not been, and cannot be, denied. How then, can that State be said to be sovereign and independent whose citizens owe obedience to laws not made by it, and whose magistrates are sworn to disregard those laws, when they come in conflict with those passed by another? What shows conclusively that the States cannot be said to have reserved an undivided sovereignty, is that they expressly ceded the right to punish treason-not treason against their separate power, but treason against the United States. Treason is an offense against sovereignty, and sovereignty must reside with the power to punish it. But the reserved rights of the States are not less sacred because they have for their common interest made the general government the depository of these powers. The unity of our political character (as has been shown for another purpose) commenced with its very existence. Under the royal government we had no separate character; our opposition to its oppression began as UNITED COLONIES. We were the UNITED STATES under the Confederation, and the name was perpetuated and the Union rendered more perfect by the federal Constitution. In none of these stages did we consider ourselves in any other light than as forming one nation...

 The laws of the United States must be executed. I have no discretionary power on the subject-my duty is emphatically pronounced in the Constitution. Those who told you that you might peaceably prevent their execution, deceived you-they could not have been deceived themselves. They know that a forcible opposition could alone prevent the execution of the laws, and they know that such opposition must be repelled. Their object is disunion, but be not deceived by names; disunion, by armed force, is TREASON.

Robert V. Remini, whose three volume biography of Jackson[49] is the most definitive modern work on Jackson, summed up Jackson's response to South Carolina and anyone else who believed in the right of secession, or the weakening of the Union:

Thus, by his words and deeds, Jackson continued to recast attitudes and perceptions of this nation and its operation. Republicanism was giving way to democracy, and Andrew Jackson was an important instrument in that change. Republicanism, with its emphasis on liberty, preached the need for strong states as a counterweight to the central government , but by the mid-1830s that philosophy could not accommodate the dynamics of an emerging industrial society. Protecting freedom in the modern world required a strong national government. Besides, the way to minimize the danger to individual rights was to fashion a government elected by all the people. In short, majority rule best protected freedom— not the states, and certainly not a hobbled or enfeebled central government.[50]

Jackson's ownership of slaves was consistent with his position as a substantial landowner in a slave-holding state, and with that of other men like him, including some of the previous Presidents. He did not oppose slavery, but he did see that it was going to be a problem in the future. After preventing South Carolina from seceding from the Union over the federal tariff he said, "the tariff was only the pretext, and disunion and southern confederacy the real object. The next pretext will be the negro, or slavery question."[51],
One of the questions various historians raised about Jackson was whether he truly believed in what he did, including his advocacy of democracy and the people, or was just a political opportunist seeking material gain for himself and for his supporters. The discovery of many of his documents, and documents of family members, a few years ago at his estate, the Hermitage, sparked a surge of new biographies with information and insight that earlier biographers did not have. Notes among the documents recently found seem to indicate fairly clearly that he was genuine in his beliefs. Whether he was sincere, or not, hardly matters now. What there is no doubt about is that he was the most important and influential figure in American politics between Jefferson and Lincoln. Jackson presided over or prompted one of the most tumultuous periods in American history, the early years of the huge expansion of the population and the country, and an explosion of industry, invention, literature and philosophy, and, most of all, democracy.
What makes Jackson and his period of considerable interest today is that many of the divisions in the politics and among the people of the United States today first took form during that time. Jackson used rhetoric remarkably like that of the later populists. He reflected the growing resentment by farmers and small merchants of the eastern financial interests, the "Eastern elite," who controlled the money supply, and who frequently foreclosed on debtors at a time when debtor's prisons still existed.  The rich were getting richer at the expense of the average person, and at a time when almost everyone was trying to get rich. This was the time when the first books about getting rich became popular.
This was a priod of intense foreign interest in America, the time when Alexis de Tocqueville made his famous visit, but so did many others who also recorded their impressions.
"'No man in America is contented to be poor, or expects to continue so,' insisted another foreign traveler...in America everyone must improve himself and find a better life."[52]
 To Jackson, banks were deciding who could get rich, or richer, and who could not, and most of the time it was those already well to do who became even richer. The Bank of the United States and its system of control of the money supply and other banks caused a consolidation of wealth among the "Eastern elite," and iit made it harder for farmers and small merchants to make a go of it, and not just those in the West, but all of them throughout the country. Jackson's populist message struck a chord, which still resonates today:

It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth cannot be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratiuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of socity - the farmers, mechanics, and laborers - who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government."[53]

He broke that power of the "Eastern elite" - at least for a period of time - when he destroyed the Bank of the United States. What he did by preventing that bank's charter from being renewed in 1836 would be analogous today to the government closing down J.P. Morgan-Chase and several other megabanks. It was at least that significant - maybe more so because the banks today don't control the money supply. The collapse of the central control of the monetary system, the Bank of the United States, which was performing the function the Federal Reserve does today, had a huge impact on the economy. The first thing that happened was that local banks throughout the country were free to issue many more banknotes and when they did it caused inflation, and bubbles in land values. Then there was a crash and a long depression, the worst the country had experienced to that time. The overall effect, however, was to spread control - such as there could be - of the economy over much more of the country and into the hands of many more people. There was chaos, but there also was an explosion of growth and a huge expansion of the economy.
Among the inventions of this period that had huge impacts were the McCormick Reaper, the Colt Revolver, the Goodyear Vulcanized rubber process, the telegraph, and aneshthesia, and there was widespread adoption of canning, and the beginnings of the use of some forms of refrigeration. Between 1820 and 1860 the population tripled as a result of a huge influx of immigrants. They were drawn by the virtual unlimited opportunities of this wild, wide-open, and rambunctous nation.
Jackson expanded the powers of the Presidency because he viewed the President as the peoples' representative and the one federal official who could act on behalf of everyone. However, he did not expand the federal government. He was the last President to pay off the National Debt. He opposed "internal improvements" and even canceled a portion of the national highway that was scheduled to go through Kentucky - although that may have been because it was the home state of his arch enemy, Henry Clay. But when the federal government ran a surplus, instead of spending it on projects, he proposed to return the money to the states.
With Jacksonian democracy came the donkey symbol of the Democratic Party, a party founded and organized by Martin Van Buren, with Jackson as its leader. In 1832 the Democratic Party held its first convention to nominate candidates for President and Vice President. Prior to that time candidates were selected by party leaders, not by party members. Jackson also had the first "kitchen cabinet," advisors who met informally with him in place of a number of official cabinet members he didn't trust. He tried repeatedly to get a Constitutional Amendment approved to abolish the Electoral College and have a direct popular vote for President and Vice President. He also introduced the "spoils system," with the intent of replacing "corrupt" public officials. As it turned out he replaced less than 20 percent, but that still was a dramatic change from the past.
Jackson was the most popular President the nation had, at least until Theodore Roosevelt, who admired and copied Jackson's assertion of his role as the representative of all the people. Franklin Roosevelt's New Deal was described by some as a revival of Jacksonian principles. Roosevelt's use of the Presidency certainly followed Jackson's concept of it, but New Deal programs were far from Jackson's concepts of federal government responsibilities.

Chapter 3.  A Brief History of the Development of American Capitalism

Part B. The Second Industrial Revolution, The Gilded Age, Laissez-Faire Capitalism & Social Darwinism


“I do not believe that the power and duty of the General Government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit. The lesson should constantly be enforced that though the people support the government. Government should not support the people.”

-         President Grover Cleveland, 1893[54]

“There are two ideas of government. There are those who believe that if you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it.”

-  William Jennings Bryan, “Cross of Gold” speech at the 1896 Democratic      National Convention in Chicago


For much of the first half of the 19th Century, securing the nation, and opening the frontiers to settlement, trade and commerce, were the major goals of the national government. There was a continuing debate over the "internal improvements" issue. Those who advocated states' rights, mostly the Southerners, were opposed to such activities, and for the most part, they were successful. And, as a result, few roads or railroads were built in the South, and partially a result of that, there were very few factories anywhere south of Baltimore.
Governments repeatedly provided property and funds to private enterprise, often as the result of extensive bribery of elected officials, especially at the state and local level. Perhaps some of the support for states' rights then – as well as today – stemmed from the fact that it was somewhat easier to bribe city councils and state legislatures than it was to bribe Congress, although that certainly happened.
Private business interests, seeing the potential of the revenue from the transport of goods on the Erie Canal thereafter sought to build and own their own canals, and then, more importantly, the railroads. They obtained grants of land from states, and from the federal government, usually at little or no cost, and often they even received government financing, without having to give up any ownership. Some state investments required a sharing of profits, but seldom was any money ever returned by the railroads to the state governments. Through most of the 19th Century bribery of state legislatures was so commonplace, and so open, that it was virtually impossible to get any bill approved in many state legislatures without bribes. In an 1868 battle over control of the Erie Railroad, Cornelius Vanderbilt and Jay Gould competed with one another over who could offer the highest bribes to members of the New York legislature. Gould went to Albany with $500,000 in cash in a sachel.[55]
A revolution in American industrial history began in the 1850s with the railroads and the telegraph companies leading the way as the first modern corporations. Industrial expansion accelerated during and after the Civil War. During the Civil War the Union Congress, influenced by considerable bribery, approved bond issues and land grants to finance the construction of the transcontinental railroad by the Central Pacific and Union Pacific railroads. The railroad, completed in 1869, connected California with the Midwest, and made protected, all-weather coast-to-coast rail travel and transport economically feasible. 
This was a classic case of state capitalism, maybe even crony capitalism, because a number of politically influential wealthy individuals benefited greatly from the government's largesse.[56] The government took no ownership interest in the railroads, but issued bonds for the railroads to sell to finance the construction. The railroads also were given enormous grants of land along the right-of-way that they were able to develop, or sell.[57] The railroads remained privately owned and entitled to the profits of their operations.
 The railroads became the vehicles of massive expansion of the American economy in the late 19th and early 20th Centuries, and the creation of some major enduring family fortunes. Those fortunes were made at the expense of the lives of thousands of their employees who were killed because owners failed to invest in safety equipment, or proper maintenance.
In the 50 years following the Civil War the United States became the world's foremost industrial power. Railroads, oil, electricity, the telegraph and telephone, steel, copper, coal, meatpacking, farm equipment, giant corporate trusts, “robber barons,” and millions of immigrants transformed the nation. The period from the Civil War to World War I is the most economically dynamic in American history as one major invention after another transformed industry and daily life.
In 1870, Britain was the world's leading manufacturer, with 32% of the world's industrial production. The United States accounted for 23% and Germany was third, at 13%. In a period of rapid expansion everywhere in the industrial world, the United States expanded faster than any other country, passing Britain in the 1880s. By 1910 the U.S. accounted for 35% of the world's industrial production, while Britain had fallen to 15%, in third place, behind Germany's 16%.[58]
While a middle class was emerging, the rich were getting most of the benefits of the industrial growth, becoming richer faster than ever before. Never before had businesses existed that could generate such enormous streams of income, and in the years before the Income Tax was approved by Constitutional Amendment, the individuals who owned these companies became fantastically rich, many creating legendary family fortunes. The Vanderbilt Biltmore Estate in North Carolina employed more employees in 1900 than did the entire U.S. Department of Agriculture.[59]
Many of the conflicts generated by industrial capitalism never have been fully resolved. They include the conflicts between management and labor, the issues related to enormous disparities of wealth, and the role of government in the economy. The enormous expansion of industry brought savage exploitation of workers that led to unions, reform and government regulation. Financial panics that caused depressions led to the first attempts to regulate banking since Jackson killed the Bank of the United States.
The land grants that Congress carved out of the West encouraged and accelerated settlement. Tens of thousands of Americans from the east, as well as tens of thousands of immigrants, rode covered wagons and passenger trains west. Soldiers pacified the Indians who objected to their lands being occupied by settlers, often in violation of treaties.
Not long after the Indians were pushed off the plains and onto reservations, American industrial interests spread across the continent. Mines were dug for gold, silver, coal, copper, iron and lead. Towns and cities rose along the rivers and railroads, with giant ranches established nearby. Livestock grown on those ranches went by railroad to Chicago's stockyards, where, in the 1880s, huge processing plants began packing meat for the nation.
By the start of the 20th Century, American industry was dominated by mining, meatpacking, textiles, lumber, steel, oil, railroads, and heavy equipment manufacturing. The auto industry was just starting. The airplane was about to be invented. It was a time of rapid technological change, driven by electricity, which enabled large-scale business operations and manufacturing, as well as communications that linked distant operations and subsidiaries. All this provided employment for hundreds of thousands of new immigrants who poured into the country. More immigrants entered the U.S. in the first decade of the 20th Century than any other decade until the 1990s.[60]
But it was not the workers, immigrants from Europe, who benefited so much from the economic explosion as it was the company owners who grew fabulously wealthy while paying starvation wages. These “robber barons” were intent on maintaining their positions of great power and wealth.  In the 1880s, the competitors in most industries formed “trusts” to control prices and maintain profitability, with the Wall Street banks, led by J.P. Morgan, providing the financing, and coordination. Following the adoption of the Sherman Anti-Trust Act in 1890, which outlawed the trusts, New Jersey enacted a “holding company” statute that permitted the trusts to reorganize themselves into holding companies, and continue their market controls and price-fixing. So little changed that these oligopoly entities continued to be referred to as trusts.
Governments were virtual agents of business interests, and at a time when there were no regulation of campaign contributions, the industrialists and mine owners spent money freely to insure the election of supportive politicians Except for a weak Interstate Commerce Commission, and the Sherman Anti-Trust Act, which was limited by Supreme Court decisions, there was no federal government regulation of industry in the 19th Century. The federal government had a very small budget, and no desire, or authority, to intervene in business affairs. Efforts at regulation at the state level usually were stymied by bribery, or other means, or simply ignored. When arguments are made today that regulation should be left to the states, it is useful to consider the situation in the country when that, in fact, was the practice.
The political situation in the United States in the last quarter of the 19th Century was a gridlock, very much as it has been recently. Even though Republicans won three of the five Presidential elections between 1876 and 1896 they did not win a majority of the popular vote in any of them. There were only four years when Republicans controlled both the White House and both houses of Congress. There were only two years when Democrats controlled Congress and the White House. Government simply was not a factor in the economy during this time.
When there was a panic in the financial markets, like the one in 1893 that led to a depression for the entire second term of President Grover Cleveland, J.P. Morgan, the head of the most powerful Wall Street bank, stabilized the banking system by putting his firm's capital into the market to prevent some banks from failing. The government had no authority, means, or will, to act. Morgan also intervened in the same way in the 1907 bank panic that resulted in a protracted recession that finally prompted the first effort to regulate the banks through the creation of the Federal Reserve System. However, the structure and powers of the Federal Reserve System were designed by bankers, meeting in secret, at a Morgan estate.[61]
It was during the second half of the 19th Century that “laissez-faire” industrial capitalism became dominant and known by that term.  Laissez-faire meant “leave business alone,” and business was left alone by the government until early in the 20th Century. The concept is popularly believed to have come from Adam Smith whose Wealth of Nations,[62] first published in 1776, greatly influenced economic thought in the 19th Century. He argued that business operated most effectively and efficiently when guided by what he called “the invisible hand” of market forces.[63] That concept was misinterpreted as advocating “laissez-faire,” essentially a complete absence of government regulation, or involvement in business, which Smith did not advocate. And the term “laissez-faire” never appears in his work. However, using Smith as the authority, “laissez-faire” was converted by various thinkers into a philosophical underpinning of capitalism and the free enterprise system, as if it were an essential element.
From second half of the 19th Century to the present, advocates have argued that laissez-faire capitalism enables the most superior individuals to apply their skills and rise to the top, for the betterment of mankind. This is the origin of “trickle-down” economics. The enormous success of the wealthy capitalists, and the enduring  fortunes that they built, became part of the mythology of their individual superiority, and the superiority of unfettered capitalism. “Laissez-faire” capitalism and “trickle down” economics so dominated the thinking of bankers, industrial barons and conservative politicians that it still is powerful among conservatives today, both in economics and in politics. A great deal of this mythology was advanced during the primary campaigns of Republican candidates for President in 2011 and 2012. In particular, Mitt Romney repeatedly criticized President Obama and the Democrats for regulations of business he claimed were preventing economic growth.
Aspects of Charles Darwin's theories were absorbed into a “Social Darwinist” ideology of how man competed in economic society. The Social Darwinists believed the naturally superior of the human species will rise to the top, to the benefit of the species. And those who do not are naturally inferior. Their successes were attributed to their natural superiority and hard work. The Horatio Alger novels, which glorified hard work, also were selling by the millions during this time. Social Darwinism also was used to justify the exploitation of workers by these “robber barons.” The fact that they achieved success by exploiting the labor of many others was further proof of their natural superiority.
The mythology was that the wealthy robber barons worked their way to success from humble beginnings, but aside from a few highly publicized examples like Andrew Carnegie, most did not.

"While some multimillionaires started in poverty, most did not. A study of the origins of 303 textile, railroad, and steel executives of the 1870s showed that 90 percent came from middle- or upper-class families. The Horatio Alger stories of "rags to riches" were true for a few men, but mostly a myth, and a useful myth for control."[64]

The mythology of the robber barons is thoroughly debunked, and today the disreputable origins of their great wealth have been exposed in detail, in the previously cited work by Gustav Myers, History of the Great American Fortunes, and by Josephson in The Robber Barons. But the mythology has survived all the facts that debunk it.[65]
During the 1870s and 80s, the concepts of Social Darwinism, free enterprise, and laissez-faire capitalism - the unregulated exploitation of land, natural resources, and workers - were combined by academics into a philosophy of American business that dominated thinking into the 20th Century, and today it still forms the basis of contemporary extreme conservative and Libertarian economic thought.[66] There were dissenters such as Theodore Roosevelt, who said he had problems with professors when he was a student at Harvard in the late 1870s because of their laissez-faire beliefs which he did not share.
William Graham Sumner, a disciple of British Social Darwinist Herbert Spencer (who originated the term “survival of the fittest”), immigrated to the U.S. and became a prominent professor at Yale, where he was said to have been the first to teach “sociology.” He published his highly influential What the Social Classes Owe to Each Other[67] in 1883. He argued in favor of a completely free market and was critical of efforts by unions and others to even out the effects of the industrial revolution. His concluding paragraph is remarkable for how similar it is to what Republican Presidential candidates Ron Paul, Mitt Romney and Rick Santorum said during their campaigns for the 2012 Republican Presidential nomination:

The yearning after equality is the offspring of envy and covetousness, and there is no possible plan for satisfying that yearning which can do aught else than rob A to give to B; consequently all such plans nourish some of the meanest vices of human nature, waste capital, and overthrow civilization. But if we can expand the chances we can count on a general and steady growth of civilization and advancement of society by and through its best members. In the prosecution of these chances we all owe to each other goodwill, mutual respect, and mutual guarantees of liberty and security. Beyond this nothing can be affirmed as a duty of one group to another in a free state.[68]

The underlying economic theory of the Social Darwinists was that the freedom that laissez-faire gave business and industry enabled it to maximize profits and expand the economy. It was, and still is, believed that the economic expansion would create more jobs, more”chances” for others. Whether others succeeded with the chances afforded them was simply a matter of hard work and ability.
The reality was dramatically different from the theory.  Industries did grow significantly. Profits soared, creating enormous streams of capital, nearly all of which went to the owners. Workers were paid as little as possible, and in many cases, less than necessary for basic living expenses, not unlike what major companies like Walmart, Target, McDonald, and many others are paying today. The government was called in to help business beat back, sometimes quite violently, efforts of unions to organize workers. So laissez-faire only went one way. Government could help business, could protect business, could finance business, but it could not regulate it. 
When left unregulated the owners had no incentive to provide safe working conditions, or any benefits to their employees. Any employee who balked at any aspect of the horrible working conditions and pitiful wages would be instantly replaced.
Andrew Carnegie's article, “The Gospel of Wealth,”[69] published in North American Review in 1889, made the complete Social Darwinist argument, adding a religious element, echoing the Puritan concept of the “Select,” conflating material success with morality.
 Carnegie argued that those who succeeded did have a duty to help the less fortunate, a "nobless oblige,” which he carried out by donating all of his fortune for the creation of libraries. While the big name robber barons usually donated money to create some institution that might memorialize their name, such contributions, except in the cases of Carnegie and Johns Hopkins, usually were but a small portion of their fortunes. Cornelius Vanderbilt's contribution towards the creation of Vanderbilt University represented approximately 1 per cent of his fortune.[70]
The profits from the huge business enterprises usually went into luxurious living for the owners, mansions, servants, parties, and luxurious world travel. Some acquired huge quantities of art and antiques. To avoid taxes while he was living, Marshall Field reported the same value of his personal property each year, but when his estate was inventoried by authorities they discovered he had an unreported fortune in furniture, antiques and art inside his house.[71]
The Supreme Court repeatedly supported “laissez-faire,” with, perhaps, its most notable ruling in 1905,[72] that a law designed to protect bakers in New York from oppressive hours by restricting their working hours to no more than 60 per week was unconstitutional because it interfered with their “liberty of contract.” It also twice struck down laws governing working hours for children. It was not until the late 1930s that the Court began to reach different conclusions about governmental powers, but the current conservative majority of the Supreme Court has has reverted to positions reminiscent of those of the “robber baron” era.
Even Grover Cleveland, the only Democrat to serve as President between 1861 and 1913 – and also the only President to serve two non-consecutive terms, 1885-1889 and 1893-1897[73] - was as much of a laissez-faire conservative as any Republican. The nation suffered its worst depression up to that time during his second term, with unemployment in some areas reaching 40%, a level never reached before, or since. Cleveland did not believe the government should do anything to restore the economy, or help the people.
“I do not believe that the power and duty of the General Government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit,” he said. “The lesson should constantly be enforced that though the people support the government Government should not support the people.”[74]
This was the height of the “Gilded Age,” when enormous fortunes were made and spent. It was the era of the great houses in New York and Newport, and “Society” parties legendary for their opulence. But for the mass of the population, the people who labored in the plants and factories and generated the output that created this enormous wealth, life was very tough - indeed, for many - quite horrible.
A massive change had occurred in the way many people, who weren't farmers or employed in small businesses, made their livings. They went to work for the corporations that operated the mines, railroads, and factories. Most of these facilities employed hundreds of people, and many employed thousands. There had never been anything like these facilities, and this way of working. The textile mills in New England became sweatshops. Conditions in factories were dangerous and frequently deadly. Hundreds of railroad and mining personnel were killed in accidents every year.[75]
 The workers usually were immigrants, many of them unable to read, or write English, and they competed for any job that might provide enough money to feed their families. The factories, mines and railroads paid the absolute minimums they could get away with – in real terms about what our minimum wage is today - not nearly enough to provide decent livings for the workers and their families then, or now. In the 1890s the vast majority of railroad employees endangered their lives for less than $2 per day,[76] not enough to properly feed their families. Malnutrition was widespread. Starvation was not uncommon. Frequently, thousands of job seekers stood outside factories waiting for jobs to open up that barely would provide subsistence, but were better than nothing.
People worked for those subsistence wages in the factories, sweat shops and slaughter houses, sometimes as long as 18 hours a day. There were no holidays, no vacations, no sick leave, no workman’s compensation. Anyone injured on the job lost his or her job. Union agitators were fired and blacklisted, and frequently killed, either by police or private detectives, or through legally-sanctioned murder by the courts. Miners were charged for their houses and food, and when they died young and penniless, their families were evicted.  The multimillionaire, Marshall Field, made a profit even from his low wage employees by providing housing, food and clothing through payroll withholding that frequently reduced take-home pay to almost nothing.[77] Laws requiring children to be in school were routinely violated so they could work in the mines, mills, stockyards and sweatshops.[78]
In the 1840s, Britain limited the hours that children could work to 6.5 per day. In 1842 Massachusetts was the first state in the U.S. to limit the hours children could work – to 10 hours per day. Other states adopted various limits, but there was very spotty enforcement, even into the 20th Century. There was no federal law regulating child labor until 1916 and that law, and a revision, were separately declared unconstitutional by the U.S. Supreme Court, decisions which were reversed by the Court in 1939.[79] National regulation of hours and wages for children did not come until the Fair Labor Standards Act of 1938.
The early labor unions focused on trying to improve wages while reducing working hours, but not much else, and they faced enormous opposition from owners, and the governments the owners controlled. The mines, railroads and factories were generating hundreds of millions of dollars in profits for the robber barons, but they fought every effort to share a larger portion of their profits to provide their workers and their families with decent livings. All of them could have built their enormous fortunes and still paid reasonable wages to their workers, something that would have dramatically improved the lives of millions, and probably even increased business profits. But it wasn't until Henry Ford in 1914 that any industrialist saw this possibility.
 Wages were set on the basis of what was the lowest amount that could be paid to get people to do the jobs that needed to be done. Workers in factories were viewed as not having much value individually. Like the interchangeable parts that came into common production, workers also were interchangeable in the mass production factories, and labor-intensive mines. It was different from the trades of the past when self-employed craftsmen produced finished products, often with their own brands, or marks, that distinguished them. Now most workers just performed one task in a chain of many, and almost any able-bodied person could perform the task. The companies took advantage of the huge numbers of people desperate for jobs and kept wages to the minimum while operating filthy and dangerous plants and unsafe railroads and mines.
Because an individual's work was given little value by itself, individual workers had no negotiating power when it came to wages, or working conditions. If they didn't accept what was offered, they didn't work. Any complainer, or troublemaker, was fired, and immediately replaced.   Violence, including murder, frequently was employed against union organizers and even pro-union journalists.
When unions first started to try to unite workers in the 19th Century, they had no legal standing. They faced virulent opposition from the owners, who received the support and cooperation of government authorities. Strikers often were physically attacked, shot, and sometimes killed by government agents, police, and soldiers. To break the Pullman Strike in 1894, President Cleveland used federal troops to operate the trains delivering the mail, and employed the Sherman Anti-Trust Act to have Eugene Debs' American Railway Union declared an illegal combination. Workers, and their unions, were not viewed as equals to the owners. When a bomb killed dozens of police who were attacking a union rally at Haymarket Square in Chicago, union leaders were arrested, and without any evidence that they had anything to do with the bombing, four were convicted of murder and hanged.[80]
As industries rapidly expanded in the late 19th Century, there was no labor law.  Most regulation of private enterprise, and the financial system, came from the commercial legal system inherited from England, and modified to a limited extent by state laws. It regulated business transactions such as stock transactions, banking and commercial finance and trade transactions – but not the businesses themselves. It also did not regulate working conditions, sanitation, or wages. The laws that were applied at the time were those of property and contract law that came into being in a different age, and strongly favored property owners. No 19th Century American laws anticipated the situations caused by mass employment in factories and mines. As a result, workers had virtually no legal rights when on the property of their employers. Traditional property law, favoring the property owners, trumped efforts by unions and workers to equalize the playing field.
Conflicts between workers and companies arose out of these situations and presented landmark issues and questions never considered before, and to this date, never fully resolved.  What is the value of an individual's work relative to the value of an enterprise? Why should virtually all of the profits go to the owners? Shouldn't workers collectively be entitled to a reasonable share of the profits of an enterprise? Why should a small number of individuals become obscenely rich while most of the people employed in the businesses generating this wealth have very little? What duties do owners have to employees, especially ones who devote most of their working lives to one employer? 
Unions tried to provide the solution to the workers of the Second Industrial Revolution, but it took until the 1930s, and later, before they achieved widespread positive results. Some basic issues remain unresolved, and they are even more important today in the post-industrial world where there are no powerful unions to protect employees from exploitation.
Many today are confused about our economic system, often using the terms capitalism and free enterprise, or free markets, interchangeably, when, in fact, they are different.  Free enterprise is compatible with capitalism, but capitalism often is not compatible with free enterprise. Free enterprise allows for private ownership of property and business, large and small, except for those carved out for state ownership and control. Free enterprise also allows for free competition among businesses, with the exception of government regulation necessary for protection of public welfare, such as health and safety.
There is a school of thought that argues that capitalism, in its purest forms, is an enemy of free enterprise because capitalists will attempt to stifle competition, which is fundamental to free enterprise. Indeed, if capitalism were taken to its extreme conclusion, there would be but one corporation in the world, with no competition because it would own everything. This idea certainly has plenty of supporting historical evidence, with the trusts that formed in the late 19th Century to limit competition and fix prices. Similarly, today, oligopolies of giant corporations, including many multinationals, dominate our major industries and businesses.
In summing up and analyzing the issues that dominated the Progressive Era at the beginning of the 20th Century, historian Page Smith's description of capitalism seems to apply equally well to contemporary issues:

 “The problem with capitalism, I suspect, is that its champions want to claim for it some inherent moral virtue. It is a very rough kind of economic system with many pre-, post-, and noncapitalist elements woven through it. It is clearly not “free enterprise” or “free competition.” In its heyday and subsequently, it has done its level best, through trusts and various devices, legal and illegal, to suppress free competition and use the national government to advance its interests at the expense of workers and consumers – that is to say, the general public. The best thing that can be said for it is that it has worked, at least on the material level, to provide more people with more things than any other economic system. It has done this, as its critics constantly remind us, at a considerable human cost....capitalism, far from being the champion of individual liberties and the classic American freedoms – of speech, assembly, etc. - has done its best, whenever it was able, to suppress all criticism of it, and prevent all measures designed to make it more responsible to its workers, and more accountable to the public. It has done this in the name of what it claimed to be a sacred and inalienable right (which it invented) to use its property as it sees fit.”[81]

The American economic system that we call capitalism today is a hybrid of industrial and financial capitalism, free enterprise, government regulation and government expenditures that have averaged 20 to 24 per cent of GDP since the 1930s. It has evolved from the brutal industrial capitalism of the 19th Century and the unregulated financial capitalism of the early 20th Century and was saved from its excesses by government intervention and regulation in the Great Depression.
The role that financial capitalism - commercial and investment banking - plays in the economy has steadily grown and today it represents about 40 per cent of the entire economy. The assets of the eight largest banks total $15 trillion – equal to about 90 per cent of the GDP.[82] This is not a very good development. While industrial capitalism created horrendous working conditions and paid slave-labor wages, it never disrupted the economy the way banks have repeatedly done. Bank panics occurred with great regularity during the 19th Century, often followed by periods of recession. After the 1907 panic created a lengthy recession the Federal Reserve System was created to try to stabilize the financial system. However, not enough regulation existed to prevent the stock market bubble and crash of 1929, and the resulting Great Depression.
During the Depression new regulations separated commercial and investment banks and limited panic declines in the stock market. While there were periodic recessions, there was not a serious Wall Street crisis until 2008, nine years after those regulations separating commercial and investment banks were repealed, when the entire banking system came close to failing due to the collapse of the housing bubble, and the derivative market based on home mortgages.
Today, the major Wall Street banks are among the most powerful and profitable businesses in the world. They exercise enormous influence over the federal government, and make huge political contributions. Attempts by the Obama Administration to reimpose regulation were slowed by the lobbying of the giant financial institutions. As a result, the Dodd-Frank law that imposed new regulations on banking has yet to be fully implemented, and little is in place to prevent another crisis similar to that of 2008.
Now that we have passed out of the industrial age into a world of computers, the Internet, and non-union service industries, many of the same questions and issues are being raised again. For the past 30 years the average incomes of the middle class in America have essentially remained flat, while the very richest became far richer. Enormous disparities of income and wealth now exist that rival, and in some areas exceed, those of the Gilded Age. While safety nets exist today that did not in the Gilded Age, their existence is threatened. Millions of people face possible destitution if Republican policies are adopted. In the non-union minimum wage workplaces of Walmart, McDonald's, and others, there is little hope for achieving the American dream. Companies are succeeding in paying wages that are similar, in real terms, to the less than subsistence wages paid during the Gilded Age.
Walmart, the nation's largest corporation, with more than 1.5 million employees and revenues of nearly half a trillion dollars – nearly as much as the nation's defense budget – pays its workers an average of less than $9 per hour. That is barely more than the pay the vast majority of workers were receiving in 1890. It didn't support their families then, and does not today. However, Walmart does offer medical insurance (at a cost), decent working conditions and other benefits that were not provided in 1890.
With profits approaching $100 billion per year, if Walmart doubled its wages, so that its employees actually could support their families, it still would be one of the most profitable businesses in the world. If other similar employers also paid living wages, the effect on the nation's economy would be electric. There would be an economic boom, and everyone, including these businesses, would benefit. This will be discussed in far more detail in Part III.
It seems highly unlikely these modern “robber baron” companies will improve the lives of their employees voluntarily. Indeed, there have been several highly publicized incidents of billionaire company owners complaining about having to pay for employee health care under the Affordable Care Act, a cost they easily can afford. They should be forced to double their wages as well, either by union agreements, or government action.  Their workers then will be able to afford a decent living, and they still will be billionaires.



Chapter 4.  American Progressivism Begins: Food & Drugs, Trust-Busting, Women’s Right to Vote


“The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves -- in their separate, and individual capacities.”

- Abraham Lincoln, 1854[83]

“If it can be shown that Wisconsin is a happier and better state to live in, that its institutions are more democratic, that the opportunities of all its people are more equal, that social justice more nearly prevails, that human life is safer and sweeter – then I shall rest content in the feeling that the Progressive movement has been successful. And I believe all these things can really be shown, and that there is no reason now why the movement should not expand until it covers the entire nation.”

- Robert LaFollette, LaFollette's Autobiography: A Personal Narrative of Political Experiences, (1911)[84]


In her 2014 book, The Bully Pulpit,[85] Doris Kearns Goodwin relates how excited progressives were when Theodore Roosevelt suddenly became President in 1901, following the assassination of William McKinley, because they believed him to be the first progressive to be President since Lincoln. While reviled by Republican Party leaders such as party boss Sen. Mark Hanna (R-Ohio), who called him “that damned cowboy,” Roosevelt considered himself a conservative and a capitalist. He believed that because of its excesses capitalism was in danger. He feared that radical socialists such as union leader Eugene Debs would lead a violent revolution, much like the revolution he predicted would happen in Russia. He decided that capitalism had to be saved from itself. It was in his actions and words as President that Roosevelt initiated the first of the three progressive periods in the 20th Century.
At the end of the 19th Century, laissez-faire capitalism was at its zenith, dominating American culture, but not without criticism and opposition. Reaction against the “Gilded Age,” the robber barons, and oppressive industrialism manifested itself in a variety of ways. The horrible working conditions in the factories and living conditions in cities, including little or no sanitation, began to draw the attention of journalists.  While laissez-faire philosophy dominated business, academia and government, journalists, activists, union leaders and reformers actively opposed it in newspaper and magazine articles, books and speeches. Jane Addams established Hull House in Chicago to provide a refuge for the impoverished and for new immigrants. Mandatory free secondary school education was adopted in many states before 1900, and in all within a few years afterward.
The political reform movement began with the populist People's Party in the 1880s blossomed as the Progressive movement shortly after the turn of the 20th Century with the emergence of dynamic leaders such as Roosevelt and Robert LaFollette, and the rapidly growing influence of the Socialist leader, Debs.  
Reformers managed to gain control of some states and initiate regulations at the state level designed to rein in out of control corporations. The most important and influential state action occurred in Wisconsin in 1900 when LaFollette was elected Governor, defeating an entrenched, corrupt, political machine.
It seems inconceivable today that the idea of government serving all the people, not just special interests, with honesty and integrity, was quite a sensational concept in 1900, usually attributed to radicals such as Debs. But such an idea was brought to fruition mostly by Republican reformers, especially LaFollette. Who coined the name “progressive” and formulated the basic concepts of progressivism that survive to this day, and Roosevelt, whose actions on the national stage displayed their vitality.
As it originally developed, progressivism was a philosophy of government, not an ideology, and not just a specific package of programs. LaFollette, who was a governor and U.S. senator from Wisconsin in the first two decades of the 20th Century, was the principal leader in the development of the progressive philosophy of government. It was first applied in Wisconsin by LaFollette and others, and became known as the “Wisconsin Idea.”
Progressivism was a philosophy of “good” government that imposed on public officials the duty to be honest and to do what was in the best interest of the greatest number of people, to be responsive and responsible to the people, and not be the tool of special interests.[86] Progressives advocated the recruitment of “experts” from academia to solve problems. Many of the faculty of the University of Wisconsin became involved in state government, and later, with the federal government. The author of the Social Security Act was Wisconsin native Edwin Witte, who had been a student of the University of Wisconsin's famous progressive economist, John R. Commons.
While Theodore Roosevelt may have considered himself a conservative, his reformist career as Governor of New York, and the chief of New York City's police department followed him to Washington. He didn't disappoint progressives with his first “Message” to Congress in 1901 outlining legislation he wished to have adopted, including, for the first time in American history, provisions for the regulation of corporations. In those days the President's “Message” essentially was similar to today's “State of the Union” message, except the Pesident did not deliver the message in person. It was read out loud by the clerk.

“There is a widespread conviction ...that combination and concentration should be, not prohibited, but supervised and within reasonable limits controlled; and in my judgment this conviction is right. It is no limitation upon property rights, or freedom of contract, to require that when men receive from government the privilege of doing business under corporate form ...they shall do so, upon absolutely truthful representations … Great corporations exist only because they are created and safeguarded by our institutions; and it is therefore our right and duty to see that they work in harmony with these institutions....In the interest of the public, the government should have the right to inspect and examine the workings of the great corporations....The nation should, without interfering with the power of the States in the matter itself, also assume power of supervision and regulation over all corporations doing interstate business.[87]

It would take only slight revisions to make his statements relevant to the issues of regulating the behavior of today's Wall Street banks and multinational corporations. His Bureau of Corporations in the Commerce Department was the first government agency to have regulatory power over corporations.
Roosevelt was the first modern President, greatly expanding the powers and the role of the Presidency, daring to use Presidential powers not seen since Lincoln and Jackson, and some never seen before.  He was the first President to help settle a labor dispute, intervening in the 1902 Pennsylvania coal mine strike, and forcing mine owners to talk directly to the union leadership for the first time. When he intervened, even his closest advisers did not believe he had the power to do so. But he had something far more controversial in mind if his intervention did not succeed. He planned to have the U.S. Army seize and operate the mines, recounting the actions Lincoln and Jackson had taken before him.

He held to what he called the “Jackson-Lincoln theory of the Presidency; That is, that occasionally great national crises arise which call for immediate and vigorous executive action, and that in such cases it is the duty of the President to act upon the theory that he is the steward of the people, and that the proper attitude for him to take is that he is bound to assume that he has the legal right to do whatever the needs of the people demand, unless the Constitution, or the laws explicitly forbid him to do it.”[88]

He did not have to seize the mines, and probably that was fortunate. When President Harry Truman seized the steel plants during a strike 50 years later even a Supreme Court much more liberal than the one in place in Roosevelt's time found the seizure to be unconstitutional.
Roosevelt was the first President to publicly support unions. He urged that workers be given a fair share of the profits resulting from their work. He called it a “Square Deal.” He initiated the first major government action against the trusts, bringing a suit that eventually broke up the Northern Railroad trust. Even though he came from the wealthy, educated, class, and was personally friendly with many of the nation's wealthiest men, he called them the “malefactors of great wealth.”
He also was the first President to become involved in foreign affairs that did not directly involve the United States. His mediation that ended the Russo-Japanese War earned him the Nobel Peace Prize.
That he saw himself also as the capitalist-in-chief, in charge of the nation's economic well being, as well as commander-in-chief, was best illustrated by his clever and devious manipulation of the political situation in Colombia, causing a revolt that led to independence for Panama, construction of the Panama Canal, and its control by the United States. The Canal was an enormous economic boon to the U.S., as well as an enhancement of national security.
Roosevelt was a master of the use of public opinion to pressure Congress. In 1906, a bill to provide the federal government the power, for the first time, to regulate food and drugs was about to be killed in committee in the House of Representatives just when ardent socialist Upton Sinclair's novel, The Jungle,[89] was published. The novel portrayed horrible conditions in the Chicago meat packing plants, and vividly exposed laissez-faire capitalism – the incredible evil extent to which businesses would go when there were no limits on their exploitation of their workers, or how they operated their facilities. The dangerous and filthy conditions described in the novel, including the grinding up of workers, and the making of sausage out of rotten meat treated with poisonous chemicals, rats and excrement, shocked the nation.
Roosevelt met with Sinclair, and said he remembered the bad canned meat sent to his troops in Cuba during the Spanish-American War by the Chicago meat packing company Sinclair had written about. He sent a team of investigators to Chicago and they confirmed nearly all of what Sinclair described.[90] Roosevelt used the public outrage from the sensational newspaper stories to force a successful vote in the House that resulted in the enactment of the Pure Food and Drug Act.
While Sinclair's purpose in writing the novel was to promote socialism, the initial impact of The Jungle was different. Sinclair's vivid descriptions of the horribly filthy and unhealthy conditions and processes in the meatpacking plants, which he intended only as “color,” drew the greatest outrage from the public. The lasting impact of the novel, what made it a “classic,” was his exposure of the fallacies and cruelties of laissez-faire philosophy, and the results of its actual application in business.  His portrayal of the vicious exploitation of desperate workers remains one of the most effective arguments for government regulation of business ever written. Among all American novels, probably only Uncle Tom's Cabin and The Grapes of Wrath rival The Jungle for the dramatic effect it had on the nation.
Sinclair was not the only one to attack the trust-dominated business world of that time. Other journalists, nicknamed “muckrakers” by Roosevelt, did graphic exposes of other industries.[91] Many of the prominent “muckraker” journalists were friends of Roosevelt, and often provided him with information and advice. When he became the police chief in New York City, the first thing he did was to ask advice on how to carry out his duties from the city's ace police reporter, Lincoln Steffens. As President, he continued to rely on journalists to provide him with information. In return, he created the White House Press Room.
Government regulation of industry became not only acceptable to the public, but demanded by them. Support grew substantially for the Debs' Socialist Party, which advocated government takeover and management of industry to improve employee incomes and working conditions. Roosevelt was determined to counter the appeal of the socialists with reforms designed to save capitalism from a radical revolution. His actions as President generally were practical and progressive, and gave the movement its greatest prestige.
The Progressive Movement drew its intellectual inspiration from many sources, but the three major influences were the perfection of man concepts of Puritanism, the classical liberalism from the18th Century Enlightenment and the progress of history concept of the German philosopher G.F.W. Hegel.
The Puritan influence was strongest in the earliest days of the progressive movement when it supported Prohibition, and when there was a religious-like fervor among progressives. However, the adoption of Prohibition in 1920 and its subsequent enormous unpopularity, was one of the factors that turned the people away from progressives.
A strong belief in the “social contract” is a major underpinning of progressivism, the idea that in a democratic civilization citizens have duties to one another, and willingly give up some of their freedom to ensure everyone's freedom and welfare. This concept comes from the Enlightenment, especially from philosophers John Locke and Jean Jacques Rousseau. The founders of the United States were greatly influenced by those thinkers and were living in the Enlightenment. The Constitution is a document of the Enlightenment, and is a social contract among the people. It clearly states this in the Preamble, which is a perfect description of the goals of progressivism.
The name of the progressive movement is directly derived from the concept of progress, which came to the U.S. from Germany in the late 19th Century. By 1900 the faculties of many of the most prominent colleges and universities contained many with degrees earned in Europe where the German influence was greatest, but also from The Johns Hopkins University in Baltimore. Founded in 1876, Johns Hopkins brought German-style university scholarship to the U.S. One of the most prominent members of the Hopkins faculty was Herbert Baxter Adams, who earned his Ph.D. in history in Germany. He was the first professor in the U.S. to teach with the seminar method and his classes included some men who went on to be among the most influential in the progressive movement. They included Woodrow Wilson (who also taught at Hopkins), Frederick Jackson Turner, John Dewey and Thorstein Veblen.
Hegel wrote that history went through stages of progress and that "The development of the perfected nation-state is the end or goal of history because it provides an optimal level of realization of self-consciousness, a more comprehensive level of realization of freedom than mere natural individuals, or other forms of human organization, can produce."[92]
Hegel had much to say about executives and legislatures and balances of power, which he didn't like. He may have greatly influenced Woodrow Wilson, who did not like the checks and balances in the Constitution, and wrote extensively about the use of the powers of the Presidency long before he became President, with a view remarkably similar to Hegel's. His views may explain why he became so imperious as President, especially in his second term.
Today the terms “liberal” and “progressive” frequently are used interchangeably, but in its basic concepts of governance, progressivism is neither “liberal” nor “conservative.” Progressives will borrow good ideas from any source, and are not afraid to experiment with an untested idea if it seems to make sense as a solution to a particular problem. However, it must be noted that most progressive programs have liberal origins. But then, so does the government of the United States. Progressivism captures the fundamental optimistic American spirit of progress, of making things better.
While many progressives were religious and had high standards of morality – including, unfortunately, support for Prohibition – Progressivism is not Puritanical. It does not impose a rigid set of values, other than the expectation that public officials should act honestly, responsibly, and intelligently. Progressives seek to expand, rather than limit, individual freedom and opportunities, and they will use government as a means to achieve these ends.
Socialists have many progressive ideas, but progressives are not socialists. Progressives do not seek to change the existing economic, or political system. They support American democratic capitalism, and believe their methods and practices only strengthen it. Theodore Roosevelt frequently said that he wanted to protect the existing capitalist system, but that reform and regulation were necessary to do so.
Libertarians also may support some progressive ideas, but progressives are not libertarians. Unlike libertarians, progressives strongly believe in the social contract, and the compact among the people of the United States that was forged when the Constitution was adopted. Libertarians tend to be suspicious of, if not downright hostile to, government.
The original Progressives believed government was a force for good. Later, after Wilson's Presidency, they realized that government also could be a force for curtailment of personal freedom, and they became much more protective of civil rights, and more willing to put constraints on government actions when it came to personal freedom.
            Because progressivism is a philosophy of government, not an ideology, there have been many progressive members of both major political parties. Republicans provided most of the leadership of the first progressive movement, although there were a number of famous early progressive Democrats as well. In addition to William Jennings Bryan, whose popularity influenced Roosevelt to be more progressive, there was Cleveland Mayor Tom Johnson, an early advocate of the municipal ownership of public utilities who was described by Lincoln Steffens as  "the best mayor of the best governed city in America,"[93] and Joseph Folk, whose prosecution of corrupt politicians and businessmen in St. Louis was described in the opening chapter of Steffens' famous book, The Shame of the Cities,[94] which helped Folk to be elected Governor. He later served as a lawyer in Woodrow Wilson's State Department.
Many of the programs of the early progressive movement were adopted from the People's Party that a coalition of Midwestern and Southern populists formed in the 1880s in opposition to both major political parties they said did not represent the people. In particular, they attacked the gold standard and the tight supply of money, which had not grown since the Civil War despite enormous economic and population growth. To expand the money supply, particularly to help farmers, they advocated the minting of coins from silver and significant increases in the printing of paper money (“Greenbacks”).
The populists viewed big business and Wall Street bankers as enemies of the people. They advocated the creation of a federal reserve system to take the control of the nation's money away from the bankers, and they proposed government regulation of the railroads and big business. They opposed the high tariffs that had existed since the Civil War. They also advocated the secret ballot, women having the right to vote, the initiative, referendum, recall, a progressive income tax and a much more aggressive role for the federal government in the economy.
The People's Party's Presidential candidate in 1892, James Weaver, received a little over one million votes – 8.5% of the total - and carried four states, winning 22 Electoral votes.  The People's Party elected five U.S. senators, ten congressmen, and three state governors. During Cleveland's second term, there was a populist-led march on Washington called “Coxie's Army,” demanding government action to end the depression. The march was broken up and soldiers drove the demonstrators out of the nation's capital.
The People's Party was absorbed into the Democratic Party in 1896, when William Jennings Bryan, an ardent opponent of the gold standard, was that party's Presidential candidate. The 36-year old Bryan won the Democratic nomination with his  “Cross of Gold” speech, which still is considered to be one of the greatest political speeches ever delivered. He lost to McKinley, lost again in 1900 to McKinley and Roosevelt, and again in 1908 to William Howard Taft. Bryan may not have won any national elections, but his continuing popularity kept pressure on the Republicans and helped the progressives, like Roosevelt, gain power and influence.
While the populists quickly disappeared as a national political movement, many of their ideas were adopted by progressives in both major political parties, and implemented during the next 25 years. Some of the core anti-big business, anti-bank, concepts of populism continue to have a following today.
With specific and practical goals, the Progressives gained broad support, and over a period of time, almost everything they proposed was achieved. Women won the right to vote. Unions were granted the right to organize workers. Senators became elected by voters, instead of state legislatures. The recall and referendum were adopted by many states. Government began to regulate food and drugs, banks and corporations. The money supply, nearly frozen since the Civil War, was expanded through the increased minting of silver coins and printing of paper money. An estate tax was adopted by Congress, and a Constitutional Amendment permitted the imposition of the progressive income tax. Prohibition also was imposed through a Constitutional Amendment. A minimum wage, a 40-hour week and regulation of the working hours of children also eventually were adopted.
The Progressives succeeded because their programs focused on three principal areas that had wide appeal: expanding economic opportunity, increasing personal freedom and security, and making government more responsive to the people. Unlike the socialists, the Progressives did not seek to change the basic structures of the capitalist economy. They simply sought to bring it under the control of the people, to limit its excesses through responsive and responsible government regulation, and to make its opportunities and advantages available to a much greater number of people.
With Progressives effectively in control of the national government in those years before World War I, the role of government changed. The national government expanded its influence and power, especially the Presidency.
The 1912 Presidential election was the high-water mark of the progressive reform movement. Early in 1912, LaFollette had some kind of breakdown while delivering a speech. He rambled and stumbled through a diatribe against all of his opponents, real and imagined, that went well past midnight. What happened was widely reported as a “nervous breakdown” that made him unfit for public office, and it destroyed his political career.[95]
Roosevelt sought the Republican nomination and he won a large percentage of the delegates to the convention elected in primaries. But party bosses still selected most of the delegates and they made sure that Taft had a clear majority. Roosevelt’s supporters immediately decided to form the Progressive Party.
It was a truly remarkable election because there really was no real conservative candidate. All of the candidates were progressives to varying degrees, although Roosevelt severely chastised Taft for being a conservative. In fact, the differences between the two were relatively minor. Taft was a tougher “trust-buster” than Roosevelt, and the Income Tax was adopted during his Presidency. He just had a more passive and modest personality than Roosevelt, and was not a natural politician, and those attributes made him appear to be more conservative than he really was.
The strength of the pro-progressive spirit in the nation – among the white men who would vote – was demonstrated by the vote Eugene Debs received on the Socialist ticket – more than 900,000 votes out of a total of only about 15 million cast, more than a fourth of what Taft received..[96] That turned out to be the highest percentage of the Presidential vote ever received by a Socialist candidate. However, considering that Wilson also was a progressive – although not at the time admitting to be the believer in an activist national government that Roosevelt was – the candidates who were considered reformers, or progressives, obtained 75 per cent of the votes, far more than such candidates ever received before, or since.
A major issue in the campaign was the role of the national government.

To Roosevelt's supporters, however, Wilson seemed a relic of a bygone era, whose program served the needs of small businessmen but ignored the interests of professionals, consumers, and labor. The New Freedom (Wilson's platform), wrote (Walter) Lippmann, meant “freedom for the little profiteer, but no freedom for the nation from the narrowness, the ...limited vision of small competitors.” Wilson and Brandeis spoke of the “curse of bigness”; what the nation actually needed, Lippmann countered, was frank acceptance of the inevitability and benefits of bigness, coupled with the active intervention of government to counteract the abuses while guiding society toward common goals, Lippman was articulating the core of the New Nationalism, Theodore Roosevelt's alternative vision of 1912. Wilson's statement that limits on governmental power formed the essence of freedom, Roosevelt pointedly remarked, “has not one particle of foundation in the facts of the present day.” It was a recipe for “the enslavement of the people by the great corporations who can only be held in check by the extension of governmental power”; only the “regulatory, the controlling, and directing power of the government” could represent “the liberty of the oppressed.”[97]

Roosevelt and the Progressive Party proposed a series of government actions and programs “to promote social justice.”

Inspired by a group of settlement house feminists, labor reformers, and Progressive social scientists, the platform laid out a blueprint for a modern, democratic welfare state, complete with women's suffrage, federal supervision of corporate enterprise, national labor and health legislation for women and children, an eight-hour day, and a “living wage” for all workers, the right of workers to form unions, and a national system of social insurance covering unemployment, medical care and old age. Roosevelt called it the “most important document” since the end of the Civil War and the platform brought together many of the streams of thought and political experience that flowed into Progressives.”[98]

Wilson turned out to be as aggressive a President as Roosevelt, but without the engaging swagger, the common touch, and the common sense. He expanded the powers of the Presidency and the national government well beyond any that had previously been exercised. No other President had ever studied the Presidency and American government as had Wilson before he became President. He was a leading American historian and has written extensively for many years on government and the Presidency. His major contribution to the organization of the national government was his expansion of the use of independent government agencies.
Wilson distrusted the political process. He particularly did not like the checks and balances among the three branches of the federal government. He did not believe that political oversight of government functions was particularly beneficial to their performance. He believed in having government agencies run by experts independent of political control.
He created the Federal Trade Commission to oversee business, incorporating into it the Commerce Department's Bureau on Corporations that Theodore Roosevelt had gotten Congress to create. Many more independent agencies have been created since Wilson's time, some of which, like the Federal Communications Commission, have had an enormous impact on the nation's culture and economy. The Federal Trade Commission, however, has never been able to perform well the functions it originally was created to do. Regulation of business remains fragmented among many different agencies and cabinet departments.
The Federal Reserve System was created in 1913, the year J.P, Morgan died. It was apparent that something more than reliance on one major investment banker was needed to keep the banking system stable. However, the Fed, designed by a group of bankers, meeting in secret at a Morgan-owned estate, did not turn out to be the kind of reforming organization that many in the populist and progressive movements had hoped for. Its principal powers were control of the nation's money supply, and interest rates, and its purpose was to maintain financial stability by preventing inflation and maintaining full employment. It did not directly control, or regulate the banks.[99]
Under Wilson, Civil War-era tariffs finally were reduced significantly and the lost government revenue was replaced by the progressive Income Tax, approved by Constitutional Amendment while Taft was President.
 In 1914 the Clayton Anti-Trust Act was passed, strengthening the government's ability to fight anti-competitive business competitions. It also was the first legislation providing protection to unions, forbidding that the Sherman Anti-Trust Act be used against them, although the conservative Supreme Court was to weaken this act as it had the Sherman Anti-Trust Act.
The Supreme Court blocked the federal government's effort to regulate child labor. The movements to give women the right to vote, and to outlaw liquor made enormous progress towards the Constitutional amendments that, in 1920, would bring both to reality.
In Roosevelt and Wilson progressives got the more activist government they sought. The two set the precedents for a more aggressive role by the federal government, and by the President, in the economy, as well as in other areas. But there were problems for which the progressives of this period have been criticized ever since.
The progressive agenda did not include support for expanded civil liberties. Progressives ignored the Jim Crow laws in the South that prevented most blacks from voting. No federal action was taken against the lynching of blacks, which was widespread in the early years of the 20th Century, although Roosevelt spoke out against it. In fact, there were no federal laws that could be enforced against it, and no significant popular support for its suppression.
Roosevelt was the first President to openly seek support from black Republicans in the South. Even though they were blocked from voting in elections, they did have votes in Republican presidential conventions. When Booker T. Washington had dinner with Roosevelt in the White House it was the first time a black man had ever been hosted to a dinner by a President. It caused a storm of protest in the South.
As to civil rights, the Supreme Court had ruled that segregation - “separate but equal”_ - was constitutional, and, unlike the 1950s and 60s, there was no organized black resistance. There was no civil rights movement for progressives to support.
Roosevelt turned down the Progressive Party Presidential nomination in 1916, and there was not another major Progressive Party presidential candidate until Robert La Follette in 1924, and none again until Henry Wallace in 1948.
The first Progressive period essentially ended when the United States entered World War I in 1917.  Wilson seized control of the economy, imposed price controls, and drove up prices to provide incentives for greater production. The result was the highest inflation in the 20th Century, approaching 20 percent by the end of the war.  It was the most direct action on the economy the federal government ever had taken. The war caused an economic boom in the U.S., and improved economic conditions lessened support for additional reforms.
What Wilson did during World War I became the model for Franklin Roosevelt's New Deal. He took control of the economy and created the War Industrial Board with the investor, Bernard Baruch as its head. Baruch was to return to government service under Roosevelt as a key figure in the New Deal. There also was a War Finance Corporation and a National War Labor Board.  Industries, labor and government were coordinated, a process called associationalism. That was the concept behind FDR's National Industrial Recovery Act, which subsequently was ruled unconstitutional by the Supreme Court.
There was a reason other than the war that caused erosion of support for progressives, a problem with the stronger federal government and Presidents progressives had not anticipated. A stronger federal government could be a greater force for good, which is what the progressives wanted, but it also could be a force of repression, which is what happened under Wilson. Progressives had not anticipated that the power of a strengthened national government would be used against the people, instead of for them.
Wilson's crackdown on dissent during World War I, including the imprisonment of Eugene Debs, combined with Attorney General Palmer's 1919 midnight “Red Scare” raids, in which thousands of persons suspected of being communists were arrested, disillusioned many about progressivism.
Then there was Prohibition, which had been supported by many progressives, but was hated by a great number of Americans. Its enactment by Constitutional amendment was the last straw. Many Americans no longer saw government as a force for good. The enormous support for progressives that voters displayed in 1912 no longer existed in 1920 when Republican Warren Harding, whose bland and pleasant personality appealed to those tired of the intensity of personalities like Wilson and Roosevelt, swept into power in the biggest Presidential landslide up to that time.
Despite the problems, the positive changes that were made in American government in this first period of progressivism have lasted to the present time. Roosevelt completely altered the Presidency, and he and fellow progressives like LaFollette, and Wilson, and even Taft, completely changed the role of government by establishing the principles that there should be regulation of corporations, food and drugs, that labor unions had a right to represent workers, that workers had a right to a fair share of the profits of the businesses where they worked, that a living wage was a right, that women had the right to vote, that government should act on behalf of all the people, not just for special interests, and that government should take action to restrict consolidation within industries that would limit competition and harm the public interest.
The emergence in the 1920s of a sizable middle class was a direct result of the impact of progressive ideas that also penetrated the business world and American culture in many different ways. The rapid spread of electricity generated a market for home appliances. Labor-saving devices of all kinds were directly the result of progressive ideas about freeing women to do more than take care of a house and a family. The idea of labor-saving produced “efficiency experts” who were widely employed in business and industry. While the practical goal of “efficiency” was to increase profits, it also was instrumental during the 1920s in many businesses voluntarily shortening the work day and the work week without reducing wages.
The Progressive Party collapsed in the 1920s following the death of LaFollette, and after Franklin Roosevelt's election in 1932, most remaining progressives became Democrats. A “liberal” wing of the Republican Party survived for another 50 years, with leaders like Thomas Dewey and Nelson Rockefeller of New York,  William Scranton of Pennsylvania, Theodore McKeldin and Charles Mathias of Maryland, and Earl Warren of California, among others.
The activist role of the national government in response to the Depression of the 1930s came directly from progressive thought. And the basic progressive concept of the government serving the interests of all the people lasted from the Depression to the election of Ronald Reagan in 1980.

Chapter 5.  The Second Progressive Period:  Union Rights, WPA, Social Security WWII


“I remember '29 very well. We had it made (I didn't but most people did). I remember the drugged and happy faces of people who built paper fortunes on stocks they couldn't possibly have paid for....
In our little town bank presidents and track workers rushed to pay phones to call brokers. Everyone was a broker, more or less. At lunch hour, store clerks and stenographers munched sandwiches while they watched the stock boards and calculated their pyramiding fortunes. Their eyes had the look you see around the roulette table.”[100]

-            John Steinbeck, “Living With Hard Times,” 1960.

“The downward pressure continued relentlessly. In less than four years, the national income was slashed in half. The 1931 forecasts of General Motors and General Electric for 1932, for example, were horrendous. At best they might operate at about 25 per cent of capacity.
The only institution capable of stopping this economic descent was the federal government.[101]

-                   Alfred D. Chandler, The Visible Hand

“The Only Thing We have to Fear is Fear Itself.”

-           Franklin D. Roosevelt, Inauguration Address, 1933

"In the past, when liberalism has resolved the crisis and restored tranquillity, conservatism has recovered power by the laws of political gravity; then it makes a new botch of things, and liberalism again must take over in the name of the nation. But the object of liberalism has never been to destroy capitalism, as conservatism invariably claims - only to keep the capitalists from destroying it."

-         Arthur M. Schlesinger, Jr. The Age of Jackson, 1945[102]

The first Progressive era began because of a single violent act, the assassination of William McKinley that thrust Theodore Roosevelt into the Presidency. The second came about because of another calamity, the Great Crash of the stock market in 1929, which caused the Great Depression and the election of Franklin Roosevelt three years later. Theodore had set the table for his cousin by changing the nature of the Presidency and the role of the federal government. FDR took both to new levels of reach and breadth.  And in the 24 years that separated the two Presidencies, America and the world had changed dramatically, 
World War I, which began in 1914 with cavalry on horseback and ended in 1918 with tanks and airplanes in combat, accelerated technological advances and spurred economic growth in the United States as both industry and agriculture expanded to meet the wartime demands of England and France.
The U.S. government seized German dye patents and turned them over to the chemical companies. A small chemical and munitions company, du Pont, grew by 27 times and emerged from the war the major company it remains to this day. Dow Chemical also expanded dramatically, benefiting from wartime technology.
The sale of horses by American farmers for military use early in the war began the conversion to tractors, and acceleration of the conversion after the war resulted in significant production increases. As evidence of the rapid technological changes in farming, there were 80,000 tractors in use in 1918 and 890,000 in 1929.[103]
In 1914, Henry Ford introduced his eight-hour workday and the highest pay ever given to industrial workers, $5.00 per day – equivalent to about $107 per day in 2010 dollars. That is comparable to the starting wages negotiated for auto workers at General Motors following the company's recent “managed” bankruptcy, and almost 50 per cent more than the average pay of current Walmart employees. He said he wanted his workers to be able to buy his cars. By the early 1920s the Ford Model T had become the dominant American car. Ford's philosophy caught on with other manufacturers, and in the 1920s there was a general improvement in the incomes of factory workers.
After the 20 years of progressive government policies that increased regulation of business, the Republicans in the 1920s restored the laissez-faire policies of the Gilded Age that favored business over all other interests. During Warren Harding's three years as President, and during the five years of the Coolidge Presidency, the federal government operated almost as if the progressive and activist period of Roosevelt, Taft and Wilson had not occurred.
Harding may have been the most ignorant, passive and naïve President in U.S. history. A personally honest man, he was far too trusting of others he thought were his friends. He surrounded himself with men he thought knew more than he did, and could run the government competently. Some did, but others took advantage of him and perpetrated some of the worst scandals ever to occur in a Presidency. The worst was the Tea Pot Dome scandal, diversion of strategic naval oil reserves to private interests; it was not exposed until after his death in 1923.
Harding, who had no strong beliefs about much of anything, simply didn't want to do anything. Coolidge, on the other hand, strongly believed in laissez-faire capitalism and in providing support to business. His administration probably was the most openly pro-business in American history.[104]
The major exception to laissez-faire passive government was Prohibition. The federal government's efforts to enforce the increasingly unpopular ban on alcohol – except in the White House – was often at odds with state and local governments. Prohibition made crime more profitable, and organized crime expanded on a scale not seen before. There are many who are arguing today that the nation's anti-drug campaigns similarly are responsible for the enormous growth of organized crime violence without decreasing the consumption of drugs.
Prohibition had a significant effect on Progressive thought as well. The faith in government that Progressives had before World War I had been shaken by the vicious crackdown by Wilson on antiwar activists, and the federal government's efforts to suppress free speech. It was further shaken by the restriction on personal freedom that Prohibition represented.

(S)ome Progressives now acquired a new appreciation for civil liberties – rights an individual may assert against government – as essential elements of American freedom. In effect, they rediscovered Madison's warning that democratic government itself could endanger freedom. The result was the beginning of a subtle shift from the language of majority rule and effective democracy to a discourse of rights, checks on state power, and individual autonomy. In the name of a “new freedom for the individual,” the 1920s saw the birth of a coherent concept of civil liberties, and with it, the beginnings of meaningful legal protection for freedom of speech against the actions of the state.[105]

While higher tariffs protected American industry they prolonged the financial disaster in post-World War I Europe by choking off European imports. President Harding had no understanding of the implications of his actions. His response to a question from a reporter about his policy of increasing tariffs stands as one of the most bizarre by a President in American history.
“We should adopt a protective tariff of such a character as will help the struggling industries of Europe to get on their feet,”[106] he said.
 While Europe stagnated, providing fodder for new radical movements such as Hitler's National Socialists, America experienced another boom, driven by the auto industry, and dramatic expansion of the consumer economy. Significant technical advances made automobiles cheaper, safer and more reliable. Henry Ford's assembly line innovations enabled him to lower his prices and raise his salaries.
The J.P. Morgan bank and du Pont took over General Motors early in the 1920s and they hired Alfred P. Sloan to manage it. He turned out to be one of the greatest management geniuses of American business history. He not only revolutionized corporate management, establishing a system of professional management that was copied throughout business and industry for most of the 20th Century, he changed the way cars were designed and marketed.
GM's assets grew tenfold between 1917 and 1930, going from $133.7 million to $1.3 billion. Ford had assets of $165 million in 1917, but grew only to $781 million by 1930.[107] GM had passed Ford as the world's biggest car manufacturer.
Financing of car purchases was introduced, and installment purchasing of other products rapidly followed. Automobile ownership grew from 2.6 million in 1915 to 9 million in 1920 and then to more than 27 million by the end of the decade. With the mobility that the automobile provided, America's economy, culture and daily life were transformed.[108]
The rapid growth of auto manufacturing also spurred the growth of many related businesses and industries.  The auto industry was the most important purchaser of rubber, plate glass, nickel and lead; it bought 15 per cent of the steel output of the nation and spurred the petroleum industry to a tremendous expansion. There was scarcely a corner of the American economy that the auto industry did not touch; it stimulated public spending for good roads, extended the housing boom into the suburbs, and created dozens of new small enterprises from hotdog stands to billboards.[109] Eventually, for every employee of the auto companies there were four working for companies supporting the industry.
With advances in various technologies, communications and electricity, the American industrial base rapidly expanded during the 1920s and set the stage for the American victory in World War II and global dominance afterward. However, foreshadowing what would happen towards the end of the 20th Century, the new, more efficient, methods of manufacturing eliminated hundreds of thousands of jobs in traditional industries.
There also were industries, such as textiles, that still operated as most had at the turn of the century. In 1928, male textile workers in Gastonia, NC were making only $18 for a 70-hour workweek, and women were making only half as much. Children were working 11-hour days.[110] This more traditional industry did not grow in the 1920s like the newer ones, such as autos, that employed more modern management methods, and better treatment of employees.[111]
If the automobile provided people with greater freedom and mobility, radio brought them closer together because, for the first time, information could be broadcast live to most of the population who now had electricity in their homes. Companies quickly discovered the value of radio advertising. It was the beginning of the mass market, and mass-market brand name products. 
At the beginning of the 1920s, Baker's Chocolate was the best known of the few brand-name consumer products on the market. Generic foods were sold out of barrels and bins by the general stores. Suddenly, products such as Kellogg's Corn Flakes and Quaker Oats, as well as brand-name manufactured clothes appeared on the market and were sold through intense, image-building advertising on radio, in the mass appeal magazines and in newspapers. It was a conscious, nationally coordinated effort among many businesses to generate higher consumer demand, and it worked. There was a massive expansion of brand-name products. And by the time of the stock market crash in 1929 almost two thirds of autos, radios and furniture were being purchased on credit.[112]
The GDP nearly doubled during the 1920s. Unemployment generally remained around 5%, and despite the fact that union membership declined,[113] average incomes slowly increased, possibly due in part to a significant drop in immigration that lowered competition for jobs. Restrictions placed on immigration following the end of World War I caused a large drop in immigration from the pre-war numbers, and those restrictions were further tightened during the 1920s.
  The Harding and Coolidge Administrations reduced income taxes three times, bringing the top rate down to 25% by 1925 from Wilson's top rate of 91%. The dramatic reduction in the top rate, combined with other factors such as weakness of unions and expansion of the financial markets, had an effect similar to what happened under Presidents Ronald Reagan and George W. Bush. There was a huge increase in the disparity of incomes between the wealthy and the rest of the population, reaching a peak at the time of the 1929 Crash that was a record until 2007.[114]
The dramatic economic growth of the 1920s mostly benefited a minority of the population. In 1929, 71 per cent of Americans earned less than $2,500 a year ($33,000 in today's money) and 41 per cent – about 12 million - earned less than $1,500 (about $20,000 today). By contrast, the earnings of the 36,000 richest people equaled the total of those 12 million.[115]
There were warning signs of problems to come. Farm production soared, causing prices to drop. Farm failures increased and that caused significant numbers of rural bank failures. In some rural areas of the country the Depression already had started when the stock market crash occurred.
Modern American culture took shape in the 1920s, a culture of optimism, relaxed social mores and greater egalitarianism. While there was status consciousness, there were few rigid social barriers – except at the very top, and those that divided the races. Opportunities for financial success expanded. Corporations needed a mass market of people with money to spend on the huge number of products they could produce. Henry Ford proved that paying workers higher wages yielded greater financial benefits than keeping wages low, and most companies soon learned that lesson. Through higher wages, and mass-market brand name advertising, the American mass consumer market was created.
The children of the immigrants who slaved in the meat packing and steel plants at the turn of the 20th Century were growing up, and entering the workforce as literate, English-speaking Americans whose lives were going to be greatly improved over what their parents had experienced. There was a general belief that things were getting better for most people, and could get even better. The war not only had dramatically improved the domestic U.S. economy, it had opened the eyes of the nearly two million men sent to Europe, most of whom probably had never been more than 50 miles from their homes.  There was a drive for success, for money, and for pleasure, that permeated the population.
The demographics of the nation changed significantly in the 1920s because of the mobility afforded by the automobile, the increased economic opportunities of expanding industries, and the decline of farming income. As farm profits dropped, both whites and blacks left rural areas for the cities, mostly in the North. For the first time more Americans lived in urban than in rural areas. And with the automobile came the beginning of the suburbs.
A huge change occurred inside American industry in the late 1920s, “a program of welfare capitalism.”[116] Modern plants were built with safety features to safeguard employees. Perhaps to discourage union organizing, many fringe benefits began to be added to wages, including profit sharing and employee stock plans. Many companies shortened working hours to eight and work weeks to five days without reducing wages. The dramatic expansion of consumer products meant that people who had a little money to spend had far more things they could buy than ever before. Despite the continuing huge number of people at the lower end of the economic scale, millions did benefit from the economic growth. As a result, business achieved its highest level of prestige it ever had experienced.

“The more or less unconscious and unplanned activities of businessmen,” noted Walter Lippman, “are for once more novel, more daring, and in general more revolutionary than the theories of the progressives.”  “Big business in America,” wrote Lincoln Steffens, who had long been a fierce critic of American capitalism, “is producing what the Socialists held up as their goal; food, shelter and clothing for all. You will see it during the Hoover Administration.”
New Era publicists argued that a new kind of “economic democracy” had been established...”We are reaching the position,” declared Coolidge as early as 1919, “where the property class and the employed class are not separate, but identical.”
...a new civilization appeared to be emerging. Without the class hatred or bureaucratic despotism of communism, the United States, it seemed was on its way toward the final abolition of poverty.[117]

What Lippman and Steffens failed to note was this explosion of consumerism was a direct descendant of the Progressive era push to improve the lives of the vast majority of the people. Many of the new products were labor-saving devices, or provided pleasures, capabilities, and opportunities to the average person either never before available to anyone, or previously available just to the rich.
 Published in 1931, after the Depression began, James Truslowe Adams' bestselling, The Epic of America, coined the phrase, “the American Dream,” to describe the spirit that had gripped the American psyche. Although the concept of the uniquely American opportunity of increasing economic success and greater personal freedom had existed since the Pilgrims arrived at Plymouth, it never before had a name, and it has continued to have significant meaning to great numbers of Americans, as well as to the continuing flow of immigrants.
Life not only improved in the 1920s, it sped up, and so did the stock market. For the first time middle class Americans were buying stocks in quantity, often on margin, and that caused the market to rise to all-time levels before it crashed.
While the causes of the Great Crash, the crash of 2008, and the panics of 1893 and 1907, were different from each other, each was made possible by a lack of adequate regulation of Wall Street and the financial markets. As previously noted, despite the various horrors perpetrated on workers and the public by unregulated industrial capitalism, no industrial corporation ever has caused the economic damage to the nation, and to the people, that has resulted numerous times from collapses of the financial markets.  
The Great Crash was different from the stock market crash of 2008 in both its cause and duration. Unlike the rapid recovery of the stock market from the 2008 crash, the stock market was very slow to recover from the 1929 Crash, not reaching its pre-Crash level until 1954.
The 2008 crash primarily was the result of the sub-prime mortgage derivative collapse that caused the failures of Lehman Brothers, Merrill Lynch and Bear Stearns. The 1929 crash occurred because there was a stock market bubble resulting from a speculative frenzy that accelerated during the previous 18 months. There were no significant regulatory controls on the stock market or Wall Street.
In two days of 20+ percentage drops in the market in 1929, much of the money invested in those stocks on margin was wiped out. About $30 billion was lost, a staggering amount for the time, and about 30% of the nation's GDP. That $30 billion today would be worth about $380 billion, less than a third of the $1.2 trillion lost in the one-day drop of the market on Sept. 29, 2008, after Congress initially refused to approve the Wall Street bank bailout bill. While that $1.2 trillion represented just a little over 8% of the nation's GDP, several trillion more dollars were lost in the continuing market declines that followed the Sept, 29, 2008 drop, the total losses eventually reaching, or exceeding the proportions of the 1929 crash. That pushed the nation into the greatest recession since the Great Depression. However, the Great Recession did not become another Great Depression because, with the support of hundreds of billions of federal government dollars, the markets recovered swiftly, unlike the market in 1929 when no such government intervention in the markets occurred.
In 1929, the loss of an amount of money representing nearly a third of the nation's GDP, caused an immediate drop in economic activity. Consumer demand continued dropping month after month. Factories cut back on production. Unemployment increased. There was a liquidity crisis because of a very tight money supply. The U.S. still backed the currency with 40% gold, which limited the amount of money that could be in circulation. Instead of priming the pump through significant deficit spending, or increasing the money supply by abandoning the gold standard, as every other country did fairly quickly following the Crash, the Hoover administration, while increasing deficit spending to some extent, did very little else. It wasn't until 1933, after Franklin Roosevelt became President, that the U.S. abandoned the gold standard.
The Smoot-Hawley Tariff, enacted under Hoover with the intent of protecting domestic products from foreign competition, further slowed down the economy because retaliatory tariffs by other countries caused a worldwide drop in trade, killing American exports. Then banks started to fail, first several hundred, and eventually, thousands. Unemployment soared, eventually reaching a peak of 25%, or, possibly, more.
When he took office in 1933 with his famous “the only thing to fear is fear itself” inauguration address that was broadcast to the nation, Franklin Roosevelt took charge of the economy. While Wilson had done this in World War I, no President ever had done this in peacetime, and FDR forever changed the relationship between the federal government and the economy. The national economy has been part of Presidential responsibility ever since.
Roosevelt changed the mood of the country. By taking charge, he stabilized the country by making people believe things would get better, and that there would not be a repeat of the Crash. A nation in the condition the U.S. was in 1933 needed strong leadership at the federal level, and active federal intervention in the economy. As always, when there is a crisis, laissez-faire was the last thing the people wanted, or the country needed. Roosevelt assembled a brain trust in Washington of experts in a wide range of areas. They developed the New Deal programs that forever altered the role of the federal government.
Even though the National Industrial Recovery Act was declared unconstitutional in 1935, most of its pieces were reconstituted and withstood challenges. Between 1933 and 1937 the American economy grew faster than it ever had in peacetime. Unemployment dropped from 21 percent to 9 per cent. The TVA extended electricity to millions. The Works Progress Administration program of hundreds of thousands of public works projects resulted in everything from the Grand Coolee Dam to New York's Triborough Bridge and Midtown Tunnel, to 639,000 miles of roads and streets to 36.900 schools and 2,552 hospitals. There never had been anything like this in American history.[118]
Steinbeck wrote, “I can't think of any decade in history when so much happened in so many directions. Our country was remodeled, our lives remolded, our Government rebuilt, forced to functions, duties and responsibilities it never had before and can never relinquish. The most rabid, hysterical Roosevelt-hater would not dare to suggest removing the reforms, the safeguards and the new concept that the Government is responsible for all its citizens.”[119]
 Roosevelt encouraged unions, and his National Labor Relations Act finally gave unions the federally protected right to organize, and to collectively bargain with employers. During the late 1930s, the late 1940s and the early 1950s, unions won the right to represent millions of American workers and through collective bargaining and many strikes, they won substantial increases in wages, hours and working conditions for their members.
While the “New Deal” provided economic stimulus through the WPA, electrification projects such as the TVA, and other activities, government expenditures were not dramatically increased. The percentage of the GDP represented by federal government expenditures remained about 20 per cent for the entire decade of the 1930s. In 1940 the GDP was almost exactly the same as it was in 1929.
It is interesting to note that despite the litany from Republicans about increasing spending by Democrats, federal government expenditures in 2013 were 21 percent of GDP.  In fact, federal government expenditures, as a percentage of the GDP, decreased under President Obama, which, unfortunately, was not what the economy needed.
Among the more lasting actions of the New Deal were the new government agencies, regulations and programs designed to prevent future crashes and depressions, and provide financial security to the people. 
The Glass-Steagall Act created the Federal Deposit Insurance Corporation to protect commercial bank depositors. Many other bank reforms were put in place, including limits on the relationships between commercial and investment banks.  Those restrictions prevented a financial panic for more than 70 years. But Steinbeck was wrong. Congress did dare to remove Roosevelt's safeguards, and the barriers between investment and commercial banking, and we all have paid the price for their loss of historical memory.  Some key restrictions on banks were repealed in 1999 and with those barriers no longer in place, the 2008 collapse of the sub prime mortgage derivative market, operated by the investment banks, nearly brought down the entire commercial banking system. Many believe that would have caused a worldwide economic calamity, the likes of which we never have seen, and probably cannot fully imagine. At the least, the economic disruption would have been enormous.
The Roosevelt Administration also created the Securities and Exchange Commission to regulate and monitor the securities market, and to protect investors from frauds. In 2012, Congress, apparently still oblivious to history, passed legislation weakening some restrictions on stock sales.
Various other controls were put in place to limit stock market downturns, many of which have been modified since. The key tool was the ability to stop trading and prevent unlimited declines, and there have been none since it was adopted.
Roosevelt drew intense criticism from the right for proposing to implement Social Security, which, along with some of his other reforms, was called “socialistic” by conservatives. Social Security and other safety net programs had been advocated by socialists for decades, but their first actual implementation was by Imperial Germany in the 1880s under the “Iron Chancellor” Otto von Bismarck. He implemented them to reduce the appeal of the socialists. Those programs survived the Nazis and World War II, and modern versions today provide universal health and retirement insurance to the German people.
 By adopting Social Security and other programs, Roosevelt protected the U.S. from the radical agitation that occurred from both the right and the left in the 1930s. The votes for socialist and communist candidates in the Presidential elections of the period of the Great Depression never approached the size of the votes Eugene Debs received in 1912 and 1920.
Like his cousin, Theodore, Franklin Roosevelt was trying to save capitalism from itself by putting regulations and controls in place to limit its excesses, and provide safety nets to protect the mass of Americans from becoming its innocent victims. When Roosevelt thought the Depression was about over in 1937, he went back to more conservative practices, such as cutting expenditures to try to balance the budget. That threw the country right back into the Depression, and it didn't emerge until after the country was engaged in World War II. The “Sequester” that was implemented in 2013, cutting federal spending, is reminiscent of Roosevelt's 1937 mistake, and like the cutbacks in 1937 it has slowed down the recovery from the Great Recession.
Steinbeck said the proof that Roosevelt was successful could be seen when people starting criticizing him.

I guess Mr. Roosevelt was called more names and accused of more crimes than any man in history, but no one ever thought or said he was afraid. Furthermore, he spread his fearlessness about among the whole people. Much later, when business picked up, and business leaders howled with rage against Government control, and Mr. Roosevelt, they seemed to forget that they had laid their heads in his lap and wept, begged him to take over, to tell them what to do and how to do it, that they had marched and shouted and fought for the Blue Eagle, that system of Government control – but they had.[120]

A little later in the essay, he added:

One of the indices of improvement was that the men who had begged the Administration to take over and tell them what to do were now howling against Government control and calling Mr. Roosevelt highly colored names. This proved that they were on their feet again and was perfectly natural. You only tolerate help when you need it.[121]

Steinbeck's novel, The Grapes of Wrath[122] best depicted the horrors of the Great Depression and the Dust Bowl, much as The Jungle was the novel that best depicted the horrors of laissez-faire capitalism. The Mississippi Valley drought of the early 1930s caused farmland to blow away, creating what was called “the Dust Bowl.” Destitute farmers by the thousands moved west, mostly to California. Steinbeck portrayed the tragic and terrible conditions these American migrants faced, and their enormous grit and determination that enabled them to survive.
Economists and historians still debate what might have been done to prevent the Great Crash from becoming the Great Depression.[123] However, nearly all authorities agree that what was done by the Hoover Administration was wrong, especially enacting the tariff, and keeping the money supply tight. While Hoover did expand the federal budget, it wasn't enough. With consumer demand dramatically reduced, and businesses not expanding, the only way of achieving economic expansion was for the government to engage in substantial deficit spending, with various types of stimulus expenditures. A similar, but not as dire, situation has existed in the U.S. since 2008, but Republicans blocked most programs that might stimulate the economy.
The lessons of the Great Depression seem to have been forgotten – or never learned – by many today. A laissez-faire approach to business can cause considerable economic growth, as occurred during the Gilded Age and during the 1920s and for some of the period since 1980, but without regulation, the avarice of capitalism causes excesses – enormous disparities in wealth, reckless and dangerous investments, and disregard for the welfare of the nation. This eventually leads to disasters like the 1929 Crash and Great Depression, and the 2008 bank meltdown and Great Recession.
When the stock market crash of 1929 wiped out a third of the national wealth, it took many years for the economy to recover, even with the New Deal programs in effect. The combination of the stock market crash of 2008 and the collapse of the housing bubble wiped out an even higher percentage of national wealth. Even though the stock market recovered much faster from the 2008 crash than it did from the Great Crash, the economy has been slow to recover, and for millions, it has not. Those who lost their homes, or were forced to sell at huge discounts to what values had been, never will recover the money they lost. The recovery of the stock market primarily benefited only the wealthy. Since 1979, according to the Congressional Budget Office, the top 10 per cent of the wealth hierarchy garnered 75% of all capital gains.[124]
The decline in the middle class, the loss of housing values, unemployment and under employment stalled consumer spending. These are the reasons why there has been weak expansion of businesses. The situation since 2007 has been the classic case of a recession that traditionally would have been overcome by increased government spending. But Republicans in control of the House, and in blocking position in the Senate, would not approve any stimulus program after the first rather modest one.
The second progressive period effectively ended the same way the first one did, with U.S. entry into a world war. However, what the federal government did with American industry during the war provides the strongest evidence ever of the value of economic stimulus.
Federal government regulation of industry and business became federal government management when the United States entered World War II following the Japanese attack on Pearl Harbor in December, 1941. Under close government supervision, most major industries in the U.S. soon were converted to the manufacture of war materials, especially those companies producing steel, autos, aircraft, ships, rubber, chemicals and anything related to munitions and military supplies.
In May, 1942, prices were frozen on nearly all consumer goods. Ration books and tokens were issued to each family, limiting the amount of each product that could be purchased by each person. The restrictions were administered by 8,000 rationing boards across the country. Recycling drives were organized for materials that were in short supply, such as rubber. Special editions were published of the American Women's Cook Book to provide advice on dealing with food shortages.[125]
In the largest financial stimulus the federal government has ever committed to the national economy, $100 billion - the equivalent of about $1.5 trillion in 2011 dollars but equal to the entire GDP of the nation in 1940 -  was invested in private industry during the war. This was over and above the actual cost of fighting the war. The federal money built new plants, converted old ones, paid for the raw materials needed for war goods manufactures, and for the salaries of the expanded work forces. Virtually every able-bodied working age adult in the nation not in the military was employed in some form. The National Debt soared to nearly 120 % of the GDP, the highest percentage of the GDP it ever has reached.
Imagine the impact on today's U.S. economy if the federal government committed an investment into the economy of an entire year's GDP – more than $15 trillion. The impact on the U.S. economy in the 1940s was tremendous. Proving that financial stimulus, when it is substantial, gets results, the huge deficit expenditures by the federal government ended the Depression and positioned the nation to dominate the world's post-war economy. The industrial production of the nation expanded by 25 times its pre-war level, compared to expansions of the economies of other major nations of only three or four times their pre-war capacities.[126]
There never was a time in the history of the United States when there was so much unity of purpose among the American people. There was a broad consensus that the war had to be won to save the country, and that almost every citizen could play a part in achieving that victory. The nation was in danger, and anything that would save the country was tolerated, even things that shouldn't have been, such as the internment of Japanese-Americans, and the seizure of their property.
The Depression caused all major Allied governments to acknowledge that they had to take responsibility for their economies, that laissez-faire policies ultimately led to excesses that caused financial disasters. The rise of the fascists, extreme nationalism, and the Nazis – which led to World War II - were blamed on the worldwide economic chaos of the Depression. There was a universal understanding that to avoid another Great Depression, and the horrors that resulted from it, governments had to assume the responsibility for maintaining employment, economic stability and growth. A system was needed to prevent some of the nationalistic and isolationist actions that nations took in the 1930s that only made the situation worse.
At the Bretton Woods Conference in 1944, only a few weeks after D-Day, 44 Allied countries agreed on an international economic system to govern after the war. With the U.S. economy the strongest in the world, all currencies were tied to the dollar, which was backed with gold. The U.S. had about 60% of all the gold in the world at the time. The International Monetary Fund was created, along with the International Bank for Reconstruction and Development, which now is part of the World Bank. That international economic system kept the world economy relatively stable for nearly 30 years until the oil crisis of the early 1970s.
The many regulatory actions taken by FDR resulted in an alphabet soup of federal agencies that Woodrow Wilson probably would have admired. Nearly all still are functioning, although the time may have come for a reappraisal. There still is no effective regulation of Wall Street. Corporate regulation is so splintered that while it frustrates businesses, it really doesn't prevent some terrible abuses, including enormous concentration of ownership within industries, and control of vital industries outside of American hands. The Federal Communications Commission has allowed the public airwaves to become monopolized by a handful of corporations and relieved them of any obligation to provide public service, or equal time.
The single greatest contribution of the FDR Presidency is Social Security. It now is the bedrock of retirement for the vast majority of Americans, and for many the only barrier to destitution.

Chapter 6.  The Third Progressive Period: Civil Rights, The Great Society, Medicare


“What is good for the country is good for General Motors—and vice versa.“

-    Charles Wilson, CEO of General Motors in testimony on his nomination
     to be Secretary of Defense, 1953

"In the councils of government, we must guard against the acquisition of
unwarranted influence, whether sought or unsought, by the military-industrial
complex."

-  Dwight D. Eisenhower, Farewell Speech as President, 1961

“Ask not what your country can do for you, but what you can do for your country.”

-  John F. Kennedy, Inauguration Address, 1961

“I have a dream...”

-  Martin Luther King, Jr., March on Washington, 1963

“The great society rests on abundance and liberty for all. It demands an end to poverty and racial injustice, to which we are totally committed in our time.”

-  Lyndon B. Johnson, May 22, 1964


Each of the three progressive periods of the 20th Century was initiated by a calamity, two of them by Presidential assassinations. John Kennedy inspired millions in his brief time as President, but it was Lyndon Johnson, his Vice President who became President on November 22, 1963 when Kennedy was shot to death, who translated that inspiration into concrete action. Following his landslide election in 1964, Johnson initiated the most extensive federal action program since FDR's New Deal in the early years of the Great Depression 30 years earlier.
While one of his key goals was to eliminate poverty, the Great Society was far more focused on social change than either of the two earlier Progressive periods. And Johnson was far more successful in getting his programs approved by Congress and not negated by the Supreme Court than any of his predecessors. If Johnson had not escalated the Vietnam War he might today be viewed as one of our greatest Presidents.
The third progressive period was the shortest of the three and it was not brought about by any banking or financial crisis. The nation still was experiencing enormous economic growth that began at the end of World War II. Lyndon Johnson's Great Society programs addressed major problems not dealt with in the earlier progressive periods, including civil rights, the high rate of poverty, and medical care for the elderly and the poor. All of the legal barriers to racial equality in housing, voting, hiring and education were eliminated. The percentage of people in poverty was cut in half. With Medicare and Medicaid the elderly and the poor no longer had to worry about the cost of medical care.
Johnson's achievements have been eclipsed by the terrible mistake he made in escalating the Vietnam War, but with the wounds of the war receding they now can be seen more objectively as truly phenomenal, especially coming near the end of the greatest economic booms in American history.
The boom began almost as soon as World War II ended. Since there was so little that could be purchased during the war – and so many Americans had earned good incomes  – millions had healthy savings accounts and were ready to spend money when the war ended. Also, $35 billion in private investment from Wall Street poured into American companies in 1946 and instead of a recession that could have been expected with the ending of the massive war spending, there was a post-war boom.
The United States had the only major industrial economy undamaged by World War II, and following the war it became the engine for the rebuilding of Europe and Japan.  American products spread across the globe with little competition, causing unprecedented economic growth in the U.S.  The rapid development of millions of good-paying jobs, many in completely new industries and occupations, was not slowed by the Korean War, the Cold War, or by labor unrest.
The power that labor unions acquired with the National Labor Relations Act of 1935 enabled them to achieve huge improvements in wages, benefits and working conditions, which contributed dramatically to the rapid expansion of the middle class following World War II. These gains often came as the result of strikes, which increased in frequency after the war. There were 43,000 strikes in the ten years following the War. In 1947, a Republican-controlled Congress enacted the Taft-Hartley Act over the veto of President Truman. It cut back on the rights and powers of labor unions granted by the 1935 Act. The Taft-Hartley Act gave states the right to adopt “Right to Work” laws, which outlawed union shops. Since then 24 states have adopted right to work laws, and business interests continue to try to sell the value of these laws to states that have not adopted them.
The mid 1950s turned out to be the high water mark for union membership and influence. Union membership reached its greatest level ever, but then it began to decline. It seemed that almost as soon as unions achieved the kinds of benefits and wages they had been struggling to gain for their members for a century, they started to lose support.
Corporate managements became concerned about the power of unions, particularly their increasing encroachment into areas traditionally considered management responsibilities. Some unions forced “featherbedding” on employers, keeping jobs filled that no longer were needed, and that limited efficiency and sometimes offset the benefits of new technologies.  Unions were frequently viewed as unreasonably resisting the replacement of poor performing employees. Companies began to look for ways to reduce labor-intensity, and their dependence on union-organized workers.  Automation, aided by early generations of computer technology, began to appear in factories. Between 1956 and 1962, 1.5 million factory jobs were eliminated.[127]
 Unions suffered losses in prestige when some were penetrated by organized crime, and corrupt leadership was exposed in others.  White-collar work became more prestigious and more attainable. It usually resulted in a higher income, a more pleasant working environment, and wearing a suit to work. It also usually meant not having to be a member of a union.
While union membership began to decline in the later 1950s, the significant declines did not come until the nation began converting to a post-industrial economy in the 1980s and 1990s. And that is when middle class incomes stagnated. Most of the growth in jobs since then has been in industries where there is little union representation.
There also is the effect of the right to work laws authorized by the Taft-Hartley Act, which make it very difficult for unions to organize. These laws have been successful in reducing union membership in the states where they have been adopted, or preventing it from growing. Among the 20 states with the highest percentage of union workers only Nevada and Michigan have a right to work law. But 19 of the 21 states with the lowest union membership have right to work laws.  Workers in states with right to work laws make less, on average, than those in states that have not adopted them. In fact, there is little evidence that right to work laws benefit anyone other than the businesses that have been able to avoid unionization.
Using government income and unemployment statistics, I compared all 50 states and the District of Columbia on per capita income and unemployment. There are only four right to work states in the top 20 states in per capita income, but 14 of the 20 states with the lowest per capita incomes have adopted right to work laws. The average per capita income of the states without right to work laws, is about 15% higher than the states that have them, approximately $6,000 more per year.
As to unemployment, there seems to be a slight advantage to having right to work laws. Thirteen of the 25 states with the lowest unemployment have right to work laws, as do 11 of the 25 states that have the highest unemployment. The average unemployment rate in states without right to work laws is about .5 % higher than the states with them.
The Economic Policy Institute has done extensive research into right to work laws and states that have adopted them. Their conclusions are similar to mine. There is very little evidence that right to work laws benefit either workers, or the general population of the states that have adopted them.[128]
Perhaps lacking popular support to do so, when Democrats have had the power to do so, they have not repealed the Taft-Hartley Act.

 

The Korean War and the Cold War helped the economy. Instead of a complete demobilization following World War II, as the United States historically had done after wars, the nation now had to maintain a powerful peacetime military. The defense industry, essentially created by World War II, continued to grow and produce more modern planes, ships and other weapons. American-built passenger planes, a direct result of the massive defense industry, dominated the skies around the world for more than a generation after the war.
In his farewell address as President in 1961, Dwight Eisenhower, the great military hero of World War II, warned Americans about the growing power and influence of the “military-industrial complex.” We did not pay much attention. It is far more powerful today, and nearly the largest component of our economy, and the defense budget is expected to remain close to its present size even after most American troops are out of Afghanistan.
The 1950s were an amazing period of economic, technological and social change. A rapid rise in the incomes of millions of Americans fueled a mass migration to homes in the suburbs, and a dramatic expansion of a consumer economy driven by advertising, new products, and retail chains located in the new shopping centers. The first nationwide television broadcast was in 1951 and in a very short time it became the national passion. Television united the nation, and through its entertainment and advertising, it portrayed the ideals of middle class living.

There had been nothing like it before in the history of the world. National output doubled between 1946 and 1956 and would double again by 1970.  With the exception of the elderly on fixed incomes, the mass of people enjoyed spectacular increases in their spending power. Personal incomes nearly tripled between 1940 and 1955. A whole new middle class, made up of 60 per cent of all American families, was created...
Some 13 million new homes were bought in the decade after 1948; 83 per cent of American homes had a television; the number of two-car families doubled between 1951 and 1958; and the consumption of hot dogs went from 750 million in 1950 to 2 billion in 1960. America, with 6 per cent of the world's population, was consuming one third of the world's goods and services. But that same 6 per cent was making no less than two thirds of the world's manufactures.[129]

A huge increase in the birth rate followed the war and those children soon had their own name, the “Baby Boomers,” and by the time they were teenagers, their own identity and culture that frequently clashed with that of their parents. Between 1950 and 1960, the population grew by 29 million, from 150 million to 179 million, the largest population increase in any decade until the 1990-2000 decade when it grew by 33 million, but that included many more immigrants.
Despite the fact that the highest income tax rates were in the 90% range, every level above the bottom 20% experienced substantial income growth during the 1950s. 
The period from 1945 to 1980 saw the greatest increase in the wealth of the middle class, and the least disparity in income across most levels, according to Thomas Piketty's research, since at least the 18th Century.[130] Despite the high taxes at the top end, the consumer demand of the increasingly affluent middle class fueled economic growth that also made the rich even richer. Millions of American families had their own personal success stories, improving their lives far beyond what their parents had. Many of their children went to college, far more than ever before. In 20 years – one generation – a majority of Americans went from economic desperation to reasonable financial security.
What was considered middle class in the 1950s probably would be considered lower middle class today. The divisions weren't so distinct then, and there was a huge step-up from the destitution of the 1930s. Most people were not especially affluent by the standards of today, but they could buy what they needed to live reasonably comfortably. Most important, this new middle class lifestyle generally was being supported by one income, compared to the two incomes required today that often still are falling short. Most married women with children did not work outside the home. Salaries were modest, even for management positions. Big bonuses and large stock options were uncommon. But the cost of living was such that middle class families had enough money to buy, or build, small houses, usually with no more than three or four bedrooms, and often with only one bathroom. Almost every family had at least one car.
Homes were furnished with new home appliances General Electric, Westinghouse, RCA and others brought to market in increasing numbers and greater variety -  washers and driers, dishwashers, electric and gas stoves and refrigerator-freezers, televisions and hi-fis - and, they were made in America.
In the middle part of the decade the number of people employed in white collar jobs passed the number in blue collars for the first time. It became the era of “The Man in the Gray Flannel Suit.”[131]
The 1950s had a sinister side. Sen. Joe McCarthy, R-WI, led an investigation into supposed communist penetration of government and American culture. It stemmed from the espionage the Soviet Union conducted on the U.S. in the 1940s and 1950s when they acquired the U.S. secrets of the atomic bomb, as well as other intelligence. Ethel and Julius Rosenberg were convicted of espionage for the Soviets and executed in 1953, the first – and last - civilians ever executed by the U.S. for espionage. The case was enormously controversial with considerable doubt expressed by many about the couple's guilt.
While McCarthy's investigation did not involve nighttime raids on private homes and thousands of illegal arrests like the 1919 red scare raids, he got even more attention because his sensational congressional hearings were televised – one of the first major events shown on national television. His investigation resulted in the “blacklisting” of people who were identified as having communist “sympathies,” including some prominent writers in Hollywood. Others who refused to testify served time in prison for contempt of Congress.
The “Red Scare” faded when CBS journalist Edward R. Murrow attacked McCarthy for his demagoguery, and when McCarthy accused heroes such as Gen. George Marshall of being communists. As it turned out, documents released by Russia after the collapse of the Soviet Union confirmed the guilt of Julius Rosenberg, but not necessarily that of his wife. The documents also confirmed that Alger Hiss, who was convicted of perjury in 1950 through the efforts of California Republican Congressman Richard Nixon, was a Soviet spy.
The Russian “Venona” documents detailed an extensive Soviet professional espionage network in the U.S. in the 1940s and 50s, but it did not involve many amateurs, and none of the Hollywood writers and performers whose lives were damaged by McCarthy. Communist agents were not in every neighborhood as the television show, “I Led Three Lives,” based on the book by an FBI agent, made people believe.[132]
The paranoid suspicions about the loyalty of people who advocate liberal and progressive ideas that marked the period of World War I and the McCarthy era of the 1950s has recently been revived. Extreme right-wing members of Congress have accused progressive Democratic members of being communists. Once upon a time, when communist countries such as the Soviet Union and China were America's major enemies, that also was an accusation of treason. Today, with only a few nations left with communist governments, such accusations seem rather silly, but do provide insight into those making them.
The John Birch Society was formed in 1958 by Joseph Welch who had a paranoid vision of the world, believing that communists ran both the U.S. and the Soviet governments. Welch also did not believe in democracy, arguing that the founders never intended the U.S. to be a democracy. He was an admirer of the fascist Italian dictator Mussolini because he opposed communism. One of the co-founders of the John Birch Society was Edward Koch, founder of Koch Industries, an oil refinery company that today is the second largest privately owned corporation in America. Two of his sons, both multi-billionaires, have provided major financial support to the extreme right-wing Tea Party, and to many other Republicans, and right-wing causes, some of whom recently have been accusing progressives of being communists. Currently the Koch brothers probably are providing more money to extreme right-wing causes in the U.S. than anyone else, although current laws prevent us from knowing for sure.
Welch organized the John Birch Society into secretive “cells” and was believed to have attracted 80,000 members within a couple of years.[133] The mainstream conservatives of the Republican Party viewed the John Birch Society as fascist, and discounted its influence.[134] However, Tear Party extremists have revived many of its core principles and are having great influence on the Republican Party.
Earlier in the 1950s William F. Buckley, Jr. published his book, God and Man at Yale,[135] in which he accused Yale professors of anti-religious and anti-capitalist teachings. The book had enormous influence on the development of resurgent conservative thinking in the 1950s. Buckley went on to found The National Review, which became the intellectual leader of the conservative movement, and continues to have considerable influence today. Buckley's conservatism was considerably more rational than the extremist views of Joseph Welch, and it developed a far larger following for many years.
In some ways the 1950s resembled the 1920s. The 1920s had the “Lost Generation.” The 1950s had the “Beats.” The 1920s had the Charleston. The 1950s had Rock n' Roll. There was a huge emphasis in both decades on material goods, making money, having fun and getting ahead. In both decades, the middle class expanded. Unlike the 1920s, wealth disparity lessened in the 1950s. The highest tax rate was 91% in the 1950s compared to 25% in the 1920s. At the same time, unions, which had great difficulty in the 1920s, achieved record-level wages and benefits for their members in the 1950s. Thus, in the 1950s, many more Americans were sharing in the American dream than ever before.
There was little political activism in either decade. Except for the first two years of 1950s, Republicans occupied the White House in both decades, and political controversy was almost non-existent. The Democratic Party ran weak candidates against very popular Republicans. The Democrats did try a Catholic in 1928 and he was defeated in a landslide. Another Catholic was preparing to run for President at the end of the 1950s. The result would be considerably different from that of 1928.
Progressives were not very visible in either the 1920s or 1950s. The Party disappeared in the 1920s. By the 1950s, the term had disappeared. Progressive ideas and programs historically have been more popular when times are tough. When times are good, the people tend to become more conservative. That's what happened in the 1950s with the rapid improvement in the national economy, the dramatic increases in the standard of living, and the explosion of the middle class. It took the civil rights movement and the rebelliousness of the Baby Boomers for the progressive spirit to come back to life.
Like the 1920s, corporate power and influence grew substantially in the 1950s. However, unlike the 1920s, government was not a sideshow. Big government, financial regulation, a huge military, and a budget close to 20% of the GDP that came with the Depression and World War II, were here to stay. Perhaps because of this, the 1950s, unlike the 1920s, did not end with a financial disaster. While there were occasional recessions, there were no major financial bubbles, scandals, or panics. There generally was steady, solid economic growth across the economy, major technological advances, and the creation of a massive middle class.
There were five significant developments in the 1950s that bear special attention because they altered the course of future events, and their effects still are with us.
The 1954 Brown v. Board of Education[136] Supreme Court decision that banned school segregation and the 1955 Montgomery, Alabama, bus boycott that resulted from Rosa Parks' defiance, were the sparks that ignited the Civil Rights movement that dramatically altered American culture and politics. The success of the movement - the ending of official racial discrimination in the 1960s - caused dramatic social, economic and political changes in the nation, but especially in the South, that we still are experiencing today.
The introduction of industrial computers that began automating factory processes eventually had a dramatic effect on manufacturing employment as automation eliminated jobs. The concepts of these computers also set the stage for the PC and every aspect of computing that has since occurred.
The Soviet launch of the Sputnik satellite in 1957 set off the space race that led to the United States landing a man on the moon in 1969. That feat required an explosion of technological inventions and innovations, especially in digital communications and computers, as well as other areas such as chemistry, that have impacted the world in many different ways.
Major cultural changes resulted from the existence of the Baby Boomers, including the orientation of advertising, and virtually the entire culture, to youth. For the first time in the nation's history there was a youth culture of great magnitude and distinct identity, united by radio and television. The music of the Baby Boomers was Rock, which in its rebelliousness, set the generation apart and changed social and sexual behavior.
I think the most significant event of the 1950s was nationwide television. For the first time, the entire nation could see live events, or be spoken to by people whose images and words could not be edited, or censored. The nation found it riveting. Movies and newsreels had provided visual images and imaginary experiences, but seeing events live on television every day was a totally new experience.
The televising of fire hoses used on blacks in the South had an impact on the national psyche similar to the impact Upton Sinclair's The Jungle had, only more so, because people did not have to imagine images. They could see the real things.
It is impossible to underestimate the impact these and other images shown by the three television networks had on the nation. And as television technology improved, so did its impact get even greater. People could see for themselves what was going on in the world, without the information being filtered. Television network news in the 1950s was written and broadcast by professional journalists, many of whom formerly were prominent newspaper, radio and wire service reporters. Expressing a personal opinion in a newscast might end a career, and thus, seldom happened. Opinions were offered in commentary and interview programs, such as the ones done by Edward R. Murrow. There were no networks like the Fox network of today which operates as a propaganda agent of the Republican Party. In the 1950s, all three networks had credibility, professionalism, and the goal of objectivity. There were not different “facts” on different networks, and the facts could not be denied. People believed what they saw, and the instantaneous effect of television's capability of imparting information and knowledge dramatically altered American life.
The major technological events of the 1950s – the introduction of computers, television and space technologies - stimulated entire new industries and killed off others. They were the seeds of the dominant technologies of the Information Age that has flowered in the 21st Century – personal computing and various forms of digital communications, including the Internet and wireless telephony.

The election of John Kennedy as President in 1960 helped to set in motion forces that were to dramatically alter the United States over the next 20 years. It was as if Kennedy awoke a sleeping giant. That giant was the Baby Boomers, who were beginning to enter college early in the decade. Even though many Baby Boomers had spent their high school years in conflict with either their parents, or their teachers, or both, the liberal contingent did not become politically active to any great extent until Kennedy. The conservative organization, Young Americans for Freedom, had started a little earlier, inspired by William Buckley. Even before Kennedy defeated Nixon in 1960, the YAF leaders were organizing support for conservative Sen. Barry Goldwater for 1964.
Far more Baby Boomers were inspired by Kennedy's optimism and energy, as well as that of other leaders like Dr. Martin Luther King. Folk and protest music suddenly became enormously popular. Music of long-forgotten left-wing heroes of the Dust Bowl and Depression, Woody Guthrie, the Almanac Singers and Pete Seeger, burst on the scene, along with contemporary folk singers.
 College campuses became hotbeds of protest and “freedom  ride” organizing. Conferences were held at various schools to bring college leaders together for training. The Students for a Democratic Society promoted a strongly leftist vision and attracted a large following. Bob Dylan provided the perfect description: “The Times, They are a Changing,”and the anthem of the 1960s, “Blowing in the Wind.”
Not only were more young people going to college than in their parent's generation, far more women were going to college than ever before. Marking perhaps the greatest social change in history, those women started entering the workforce in large numbers late in the decade. That began the era of the “two-income family” that for some years helped to extend the post-war economic boom, but now barely sustains millions of families.
These were years of huge events. The Cold War with the Soviets intensified with the Cuban Missile Crisis in 1962. The Civil Rights Movement engendered enormous unrest and violence in the South, but segregation ended in schools and in public accommodations. Racial violence also flared outside the South with riots in many large cities. The nation was shaken by the assassinations of President Kennedy, Robert Kennedy and Martin Luther King.  The Vietnam War, and the opposition to it, ended the Presidency of Lyndon Johnson who had pushed the “Great Society” programs through Congress, including Medicare, Medicaid, Headstart and voting rights for blacks in the South. The Ozzie and Harriet culture of the 1950s vanished with Woodstock. Perhaps the most inspiring moment of the decade was the Moon landing in 1969.
President John Kennedy's goal, announced in his inaugural address in 1961, of sending a man to the Moon and returning him safely by 1970, gave a new generation a lofty goal to achieve, to keep faith with the achievements of previous generations – surviving the Great Depression and winning World War II. It also gave a huge shot in the arm to the engineering world, as well as massive infusions of government money. The requirements of travel in space brought dramatic technological advances in electronics, computers, communications, energy, metallurgy, and many more. That set the stage for the huge growth of communications and information technologies in the 1980s and 90s.
Lyndon Johnson became President upon John Kennedy's assassination in 1963 and then won the Presidential election in 1964 by the greatest popular vote margin in history.[137] The Democrats won two thirds of both houses of Congress and proceeded to enact Johnson's “Great Society” programs. Eighty-four of the 87 bills Johnson sent to Congress in 1965 were passed, a record no other Congress has ever matched.[138] Those programs still are the greatest peacetime expansion of federal power over the economy, and American society.
While similar in some respects to Franklin Roosevelt's New Deal, the Great Society Programs were targeted more at making significant social changes, while also improving the economic well being of more Americans. They focused on raising people out of poverty, ending racial discrimination, improving education at all levels (from pre-school with Head Start through college by expanding student aid, as well as direct aid to institutions), providing more security to the elderly, expanding cultural opportunities and functions, providing greater consumer protections and greater protection for the environment and our natural heritage.
Racial discrimination was outlawed in housing, public accommodations and employment. Literacy tests and other means by which black voting had been suppressed in the South were outlawed. The Voting Rights Act, a key portion of which was declared unconstitutional by the Supreme Court in 2013, finally provided a means by which blacks could vote in Southern states, where their voting had been stymied since the end of Reconstruction.
A large number of anti-poverty programs were passed, and funds spent on the poor more than tripled in the late 1960s. By 1970 the percentage of people below the poverty line had dropped to slightly more than 12 per cent compared to 22 per cent in 1961. The percentage below the poverty line has ranged between 12 and 15 per cent ever since, approaching the 15 per cent level recently.
The creation of Medicare and Medicaid solved the historic problem of how the elderly and the poor could obtain decent medical care, and both have become among the nation's most important, and most successful, safety net programs. Many of the Johnson Administration programs and laws still are with us, and are taken for granted, including Headstart, Medicare, Medicaid, crash-testing and safety-rating of automobiles, National Public Radio, and freedom for anyone to buy a home anywhere, and to be served in any business establishment open to the public.
Lyndon Johnson's progressive programs of Medicare and Medicaid improved the economic security of Americans greater than any programs since Social Security, and his civil rights laws advanced the cause of personal freedom further than any governmental action since the 13th Amendment ended slavery.
In the words of Joseph Califano, Jr., one of the significant officials in the Johnson Administration, LBJ “tore down the 'whites only' signs” with his legislation that outlawed racial discrimination in hiring, housing, public accommodations, and voting.[139]Medicare and Medicaid dramatically reduced infant mortality, and increased average lifespans by more than 10 per cent. Johnson's programs cut the poverty rate nearly in half, but since the Great Recession began, there has been about a 50 per cent increase in the number of people in poverty. In fact, in the years since the Great Recession began, in 2008, nearly one third of the population has been below the poverty lines at some point, or another.
Lyndon Johnson's progressive actions were eclipsed shortly afterward by his escalation of the Vietnam War, and the increasing public opposition to the war. Although Vice President Hubert Humphrey was the leading progressive of his time, his failure to win the Presidency in 1968 was not because the people were opposed to progressivism. It was due to the division in the Democratic Party that resulted from the war, which Humphrey supported, and to the disastrous Democratic Convention in Chicago. Many Democrats either voted for Nixon, or did not vote at all.
The assassinations, the racial violence and the war had many negative effects on the United States, some of which have been long lasting. The explosion of activism, optimism and idealism of the early part of the decade was replaced with disillusionment, drugs, and cynicism at the end when the war continued to drag on with Richard Nixon in the White House. Those who opposed the war did not give themselves enough credit. They changed the nation's views, and that led to the end of the war, but it took far longer than many thought it should have.
Economists mark President Nixon's abrupt ending of the gold standard in 1971 – and thus cancellation of the Bretton Woods agreements of 1944 – as the official end of the post-war boom. But the practical end of the years of optimism was the Democratic Presidential Convention of 1968 when the party was torn apart by dissension over the Vietnam War, and the city of Chicago was the scene of riots. Vice President Hubert Humphrey, perhaps the most progressive Democrat of his generation, won the Presidential nomination, but because he continued to support the war, he failed to unite the party, and Richard Nixon won in a very tight race.
All three progressive periods of the 20th Century began because of calamities – two Presidential assassinations and the Great Depression – and all three ended because of wars. The challenge for progressives is to gain power without a calamity and to continue in power for longer periods so that the benefits of progressive government become more obvious to the people.

Chapter 7.  The Reagan Counter-Revolution Crushes the American Dream


"In this present crisis, government is not the solution to our problem; government is the problem."

- Ronald Reagan, Inaugural Address, 1981

In his book, Here Comes Trouble,[140] Michael Moore recounted how, in the early 1980s, he posed as a Michigan businessman to attend a conference in Mexico, sponsored by the Reagan Administration, where American corporations were encouraged to move their factories to Mexico to take advantage of low wages, and increase their profits. Not long after that General Motors closed factories in Michigan and moved some of its manufacturing to Mexico.
The Reagan people did not consider what a negative ripple effect the major plant closings would have. The impact of the unemployment of tens of thousands of people, and the loss of their purchasing power, was a disaster to other businesses across Michigan and, eventually, over a much wider area, and many more jobs were lost than just the ones that were moved to Mexico. Moore called this the beginning of the end of the middle class.
The Reagan Republicans believed that an increase in the profits of major corporations would benefit the economy. This was consistent with their “trickle-down” theory of economics, that when the rich get richer, some additional wealth also flows down the economic ladder to the less fortunate. In running unsuccessfully against Reagan for the 1980 Presidential nomination, George H.W. Bush called this idea “Voodoo Economics,” but later embraced it after becoming Reagan's running mate. When, as President, he turned away from the theory, Bush was attacked by his own party and defeated for re-election by a little-known Arkansas Governor, Bill Clinton. But Bush was right. It was Voodoo economics and it cast a powerful evil spell on the Republican Party that continues to do damage to the American economy.
Reagan's Presidency was a counter-revolution against basic progressive concepts that both political parties generally had adopted during and after the Great Depression. The ideals of the New Deal continued to dominate the Democratic Party into the 1970s. Even the two Republican Presidents elected between 1928 and 1980, Dwight Eisenhower and Richard Nixon, shared many of the basic concepts. Neither made any attempt to help the rich get richer. Eisenhower continued the 91% top income tax rate imposed just before World War II. Nixon did not lower taxes from the 71% top rate established by the Kennedy-Johnson Administration in the 1960s. 
In addition to progressive political principles, the prevailing philosophy that governed American economic policies was that of John Maynard Keynes, who believed that consumer demand drove economies, and when consumer demand dropped during recessions, governments should employ deficit spending to spur the economy. He also believed in using monetary policy to control inflation by manipulating the money supply and interest rates.
Conservative economist Milton Friedman at the University of Chicago School of Economics led a revolt against Keynesian economics, and his ideas were adopted by conservative Republicans, and, initially, by some Democrats. He argued that supply drove the economy and that the economy could be spurred by increasing the incentives for corporations and the rich to invest in economic expansion. This meant lowering taxes, reducing regulation, and tightly controlling inflation. The “trickle-down” theory was a corollary to these concepts because it was based on the idea that as the economy expanded the benefits of such expansion would be widely shared. This concept had its roots in the Social Darwinist “laissez-faire” philosophy of the 19th Century “Gilded Age,” virtually identical to what William Jennings Bryan described in his “Cross of Gold” speech in 1896.
These arguments over economic principles passed far over the heads of most Americans. They had little to do with Reagan's election and his enormous popularity. It took many years before the real damage of the Reagan economic policies became obvious to many, and still Republicans cling to the concepts.
This radical change in American politics and economic policies came after a decade of political, social and economic turbulence that caused millions of Americans to lose confidence in the progressive New Deal methods of government, and in liberalism in general. Reagan, who was a brilliant politician, exploited the fissures in American society caused by the civil rights movement, high inflation, high unemployment, and inept political leadership. In doing so he drew support from white lower middle class union workers in the North, who became known as “Reagan Democrats,” and completed the mass conversion of whites in the South from the Democratic to the Republican Party that began with the Civil Rights legislation of Lyndon Johnson's Great Society.
The 1970s began with Richard Nixon in the White House, the Vietnam War raging, and oil prices heading up. Nixon was an ardent anti-communist, but he was not the classic conservative. His presidency was activist and pragmatic, oriented to getting things done, most successfully in foreign policy. Nixon opened relations with China, negotiated an anti-ballistic missile treaty with the Soviet Union, began joint space program coordination with the Soviets, and expanded the Vietnam War while secretly trying to negotiate a settlement, and American withdrawal, which he accomplished not long before he was forced to resign because of the Watergate scandal.
Only recently, as the LBJ Library has opened more files and released more audio tapes, has it become known that Nixon’s Watergate cover-up was not his first. Towards the end of the 1968 Presidential election, which was very close between Nixon and Hubert Humphrey, individuals who supported Nixon had secret direct contact with the South Vietnam government and told them that they would get a better deal in pending peace talks if Nixon were elected, and that they should delay participating in the peace talks until after the election. Evidence has been released that indicates that President Johnson became aware of the interference by these Republican operatives and talked with Nixon directly. Nixon denied any knowledge of the interference and told Johnson he would never support such action. Johnson did not believe him. He was convinced that the Republican operatives would not have acted without Nixon’s knowledge.[141]
However, Johnson had used the FBI to investigate and wiretap the suspected Republican operatives during a Presidential campaign, an action, if not illegal, certainly would have been a major scandal. He found himself in a position where he could not expose the Republican interference in the peace talks that he considered to be treason without also revealing his use of the FBI to investigate the opponent political party during a campaign. So, nothing was done, and without South Vietnam’s participation, the peace talks failed, and thus did the possible chance to end the war many years earlier than its eventual end.
LBJ’s National Security Advisor Walt Rostow eventually filed the material on the episode at the Brookings Institution. But after the Watergate break-in, and Nixon’s involvement, were revealed, he moved the file to the LBJ Library and wrote a note on it that it should not be opened for 50 years. The Library decided not to honor that restriction.
An audio tape of a conversation between President Nixon and H.R. Haldeman in 1971, before the Watergate break-in, revealed that Nixon was aware that the file was at the Brookings Institution, and he pressed Haldeman to have the operatives who were later caught at the Watergate, do a break-in at Brookings to steal the file. There is no indication that a break-in thee was ever attempted.
Nixon tried to shift some of the Great Society programs to the states, but generally the programs were continued. He created two agencies that are hated by conservatives today: the Environmental Protection Agency and the Occupational Safety and Health Administration (OSHA). He supported the Clean Air Act and the National Environmental Policy Act, which requires many government projects to obtain environmental impact statements. He even proposed a limited form of national health insurance that would have provided health insurance to the poor and required all employers to offer insurance to their employees. He also supported the Equal Rights Amendment, which eventually failed.

Through the late forties, fifties and sixties Americans had taken it for granted that their country was invulnerable and their own prosperity sweeter every year. The ever more outrageous fins on Detroit's gas-guzzlers perfectly expressed the reckless flamboyance of the nation. For the majority who considered themselves middle class, the good times were a fact. Median family income increased annually by 2.7 per cent between 1947 and 1973. It was all downhill from there, especially for the bottom two-thirds of the workforce. Family income fell and kept falling right into the early eighties. And, unthinkably, America ran out of gas.[142]

 Oil prices quintupled between 1970 and 1974. Following the Yom Kippur War of 1973, the OPEC nations tried to blackmail their customers – mostly Europe, Japan and the U.S. - into opposing Israel. Japan and the European nations – except for The Netherlands - acquiesced to some degree. The U.S. did not, and for a period of time there were long lines at gasoline stations in the U.S. after Mideast oil supplies were cut off.
In 1970, even though the U.S. imported some oil, it still could meet its needs with domestic suppliers operating at full capacity. By 1973 that no longer was true. U.S. production was declining and the nation had become partially dependent on imported oil.[143] The Islamic countries unsuccessfully tried to force a wedge between the U.S. and Israel. They failed, but their price of oil went from $1.80/barrel in 1970 ($10.00 in today's dollars) to $11.65 in 1974, ($51.00 in today's dollars).  During that time it occasionally spiked to levels that in today's dollars would be in the $100/barrel range, a price that has been fairly common recently.
This dramatic increase in oil prices and the Federal Reserve's expansionary monetary policy combined to spur inflation. It was 4.7% when Nixon became President, and through wage and price controls, and other methods, he kept inflation below 6% until 1973 when it was 6.16%. It then jumped to 11% in 1974 a few months after his resignation.[144]
Nixon's charge to the Fed, which did not operate with as much effective autonomy as it does today, was to keep unemployment down even if it meant higher inflation, and while the unemployment rate hit 6.1% twice during his Presidency, he generally was successful in keeping it under control.
Nixon's limited second term presaged the tumult of the rest of the decade. First, his Vice President, Spiro Agnew, was forced to resign, after being accused of accepting bribes while Governor of Maryland. Then Nixon resigned, and Gerald Ford, the Republican Leader in the House of Representatives, who Nixon had appointed to succeed Agnew, became President.
Ford had huge problems both with inflation and with unemployment, which hit 9% in 1975 at the same time when inflation was running between 9 and 10%. This previously unknown phenomenon became known as “stagflation,” something that under the Keynes theories should not have occurred. And that contributed considerably to a loss of faith in Keynesian theories. The unemployment rate didn't get back to 6% again until the second half of 1978.[145]
He faced anger from the left over his pardon of Nixon, and from the right for the ending of American involvement in Vietnam, and South Vietnam's conquest by the North Vietnamese. In his effort to combat inflation, Ford used the phrase “Whip Inflation Now” and “WIN” buttons appeared, but while the buttons were not taken seriously, inflation did decline in his last year in office. Ford did not have wide support in his own party, and was defeated in a very close Presidential election in 1976 by a virtual unknown, former Georgia Gov. Jimmy Carter.
Carter's presidency suffered a number of disasters, some of his own making. He and his staff were more conservative than expected and their relations with the Democratic Party-controlled Congress were soon poisoned. Particularly alienated were its most powerful members, Senators Ted Kennedy (who unsuccessfully ran against Carter for the Democratic Presidential nomination in 1980, which Carter still believes contributed to his defeat by Ronald Reagan) and Russell Long (D-La.), as well as House Speaker Tip O'Neill. Carter and Kennedy clashed over health insurance reform, which resulted in nothing being adopted. Congress refused to approve some of his programs, and he vetoed some bills passed by Congress.
Inflation was 5.2% when Carter took office in January, 1977, and it never was that low again while he was President. It rose nearly every month until March of 1980 when it peaked at 14.8%. The inflation rate of 13.6% for 1980 was the highest annual rate since the 14.65% of 1947. Overall, the decade of the 1970s had higher inflation than any other in American history except the period of World War I.[146]
Even though the average wage more than doubled during the 1970s, inflation of about 170% more than canceled that out. Even worse, because income tax brackets were not adjusted for inflation, the cumulative, and insidious, effect of high inflation on the wage increases during the decade was to move many middle class families into higher tax brackets, from the low 20% range of the 1960s to the mid 30% range by the late 1970s.  In real terms, the combination of inflation and higher tax rates reduced the incomes of millions of middle class families. By 1980, the average American middle class family was being taxed at twice the level of the average family of 1950.[147] Popular support for social programs, government spending, and the entire liberal agenda that had existed since the 1930s, declined dramatically. For many, “liberal” was an epithet.
Carter's most significant appointment as President, for which he received little credit, and none of the benefit, may have been Paul Volcker as Chairman of the Fed in 1979. Unlike his predecessor, Volcker imposed a tight money policy and drove interest rates to double digits, eventually to the astronomical level of 20% by 1980. That finally broke the cycle of inflation. Within two years, inflation rates dropped back to historically normal levels, where they have remained ever since.
Carter's successes included the creation of the Departments of Education and Energy. With high oil prices continuing to fuel inflation and disrupt the American economy, he was the first President to try to force energy conservation, even having the thermostats turned down in federal buildings.  He also imposed price controls on gasoline.
 It was Carter who actually began the unraveling of the regulatory structure of the New Deal that was to accelerate under his successor, Ronald Reagan. Airlines were deregulated when the Civil Aeronautics Board was abolished. Deregulation of trucking, railroads, communications and the finance industry also began.[148]
In 1979 Chrysler was bailed out when Congress agreed to guarantee private loans that kept it from going bankrupt. While no government money was loaned to Chrysler, it set the precedent for the Obama Administration’s bailouts of Chrysler and General Motors.
Carter's greatest success, which led to him receiving the Nobel Peace Prize in 2002, was the Camp David Peace Accords that brought peace between Israel and Egypt. His greatest failure was the effort to rescue the Americans held hostage by Iranian radicals in 1979 that ended with a helicopter crash in an Iranian desert. The continuing hostage crisis was a major factor in his defeat for re-election by Ronald Reagan in 1980. His support for the turning over of the Panama Canal to Panama also alienated many conservatives. And then in 1979, the Soviets invaded Afghanistan, and Carter's response was to withdraw the U.S. from the 1980 Summer Olympics that took place in Moscow, an extremely unpopular, and completely ineffective, action.
The governmental and economic tumult of the 1970s left the nation disillusioned with its political leadership, as was shown by the failures of Ford and Carter to win re-election. Neither projected command of coherent strategies and both lacked the political skills and clout of their predecessors. Pointing to the ineptness of the national government, as well as high taxes and inflation, Ronald Reagan said, “Government is the problem.” He defeated Carter for re-election in 1980 and became the first conservative Republican to be elected President since 1928.
Ronald Reagan was underestimated by his critics, but has been greatly overestimated by his fans. He was a charismatic, charming, President, a man who knew how to play the role. He had considerable successes in foreign policy, and he helped to restore some of the pride in the country that had diminished during the 1970s. However, Reaganomics was a disaster for the middle class, and its effects continue because Republicans refuse to face the facts of its damage to America.  The “trickle-down,” lower tax philosophy has become a religion, with its adherents ignoring reality. It caused the huge disparity in wealth and income we now are experiencing and it has damaged the American economy.

Reaganism turned out to be something new in American politics: a form of state capitalism in which the services of a large federal government were put behind the wealthiest and most powerful private interests in the country. Reagan's income tax cuts proved illusory for all except the rich. In fact, a sharp increase in the regressive Social Security tax in 1983 and higher state and local taxes actually increased the total tax burden on the average family in the conservative eighties.[149]

 Reaganomics had mixed results.  Inflation was curbed, and it has remained curbed ever since, but government spending actually increased, and the deficit tripled to its highest level in history. After his first major tax cut, Reagan had 11 more tax actions as President and they all involved various types of increases. The greatest beneficiaries of his tax cuts were the wealthy because the top bracket was lowered from 71% to 28%, which essentially eliminated the progressive nature of the tax system. Capital gains tax rates also were lowered. Various tax reforms, including the elimination of many deductions and loopholes actually had the effect of increasing the taxes of the middle class.
The support for big business, and the moving of jobs out of the country, had horrible effects on the American middle class. It has been estimated that between 1980 and 2005, 4.5 million middle class manufacturing jobs were lost in the U.S. and several million more manufacturing and service jobs have been lost since 2005.[150] Some were moved overseas, others were eliminated by automation, and many were lost to foreign competition. Entire industries vanished from the U.S., including much of the textile manufacturing and almost the entire rapidly growing electronics business. Foreign car sales cut deeply into the domestic business of Ford, Chrysler and General Motors.
During Reagan's Presidency, the average weekly wage in the United States declined from $387 to $335.[151] While this was happening, there was a surge in the wealth of the richest Americans for the first time since before World War II.
Since 1979 the disparity in income between the top 1% and everyone else has reached levels not seen since records started being kept early in the 1900s.[152] While middle class incomes stagnated, the rich got much richer and that has continued to the present time.
“Average income for a household in the top 1 percent has more than tripled, from $350,000 in 1979 to $1.3 million in 2007, according to data tracked by Lane Kenworthy, a University of Arizona sociologist drawing on numbers crunched by the Congressional Budget Office,” the Christian Science Monitor reported in 2012. “These figures are adjusted for inflation and look at household income after taxes and any transfer payments from the government.
“By comparison during those three decades, households in the middle 60 percent saw average real income go from $44,000 to $57,000. For the bottom 20 percent, this gauge shows average household income rising from $15,500 to $17,500.”[153]
Even under President Obama, the disparity between the wealthiest 1% and everyone else has gotten worse.[154]
There were three major developments during the 1980s that have had an immeasurable impact on the world: the deregulation of telecommunications, the licensing of cellular telephone systems, and the personal computer. MCI successfully challenged AT&T's near monopoly in the telephone business, and the resulting deregulation of telecommunications caused an enormous explosion of competition, many new companies, and the introduction of new technologies such as fiber optics and cellular telephones, as well as new services such as eMail and the Internet. 
The personal computer combined with digital communications and the Internet to become the greatest single instrument of change of the modern age, and that revolution continues. Cellular service began in the 1980s but did not take off until lower-cost, higher capacity, digital wireless services were introduced in the mid 1990s. The I-Phone and I-Pad, and their competitors, successfully merged all of these technologies and services.
However, the competition in telecommunications that rapidly produced so many advances had a short life span. Lax enforcement of antitrust laws, and other regulations under Reagan, and every President since, resulted in waves of mergers and acquisitions that reduced the number of national competitors to an oligopoly of four: Verizon, AT&T, Sprint and T-Mobile. Sprint and T-Mobile now are foreign-owned, and Verizon has substantial foreign ownership. The intense competition among service providers that once spurred advances in technologies, imaginative services, and lower service prices, no longer exists. It would have been even worse had government not finally opposed one of the proposed mergers, one between AT&T and T-Mobile.
Because of the communications advances, by the early 1990s it cost no more to call across the country than it cost to call a nearby city. International fiber optic cables made it feasible to operate customer service centers in low-wage countries like India and the Philippines at much lower cost than in the U.S. No longer were just manufacturing jobs being moved overseas. The Internet enabled on-line businesses and lowered communications costs. The combination of computer and telecommunication technologies made international business operations far more practical, enabled greater automation, and supported different, and more efficient, forms of management.
The contraction of competition in the telecommunications industry is but one of many that occurred in all major industries during the past 20 years, resulting in the fourth major development of this period: the growth and dominance of multinational corporations that now dominate most major areas of business.
The corporation was a creation of government to provide a vehicle for economic growth. It was intended to provide a means of pooling capital from investors to develop businesses that would benefit the state by providing jobs and economic benefits. Corporations were more attractive to investors than partnerships because in a corporation the shareholders have no responsibility for the business's debts or other liabilities. Their potential losses are limited to their investment.
Just as the United States today is different from the country of our parents and grandparents, today's corporations are radically different from those of the “Gray Flannel Suit” of the 1950s. Management structures are different. Incentives are different. Career paths are different, if there are any. It is quite uncommon today for people to spend their careers with one company. Major areas of business generally are dominated by a small number of companies, oligopolies, and in the major industries those companies are multinationals.
 The Alfred P. Sloan, traditional vertical, or military-style, organization, with many layers of middle management, in use in most major corporations for much of the 20th Century, was abandoned late in the century. It was replaced by horizontal functional organizations requiring fewer layers of management, ultimately eliminating the jobs of many middle managers. The result was significant improvement in productivity, which began to show in the 1990s.
The expansions of the computer and telecommunications industries not only made it more feasible for corporations to move operations overseas, but for a period of time, the jobs created in the U.S. in these new fields masked the impact of the loss of more traditional jobs. But millions of manufacturing and customer services jobs disappeared, either from relocation to foreign countries, or as the result of automation.
During the Reagan, George H.W. Bush and Clinton Administrations, there was another factor at work that had the greatest impact of any on the way corporations were managed.
In 1977, Alfred D. Chandler, Jr., a Professor at the Harvard Business School, was awarded the Pulitzer and Bancroft Prizes for the previously cited The Visible Hand; The Managerial Revolution in American Business. The title comes from Adam Smith's use of the term “the invisible hand” which he said was the “market” guiding business decisions. Chandler's thesis, backed by a comprehensive study of the growth of American business from the start of the Republic to the second half of the 20th Century, was that once modern corporations appeared in the 1850s – the railroads and the telegraph companies – the “invisible hand” was replaced by professional managers.
Over time, those professional managers became such a force in the governance and direction of American corporations that their interests, including those of other employees, were served even more than those of the shareholders, despite the fact that the legal responsibility of corporations was to shareholders. No state law imposed a fiduciary responsibility on a corporation to its employees, or to the communities where it operated.
The presence and power of this class of professional manager was a major factor in long life spans for successful companies, lifetime employment for many employees, and generous, but not outrageous, compensation and benefits. Steady stock growth was important, but quarter-to quarter performance was not the prime focus of management. Stock options and other performance-based forms of compensation were not as significant as they are today. Most companies had their own pension programs, which further encouraged lifetime employment.
Chandler's book was but one of several factors that influenced investors in the 1980s to  become more demanding. Corporations came under greater pressure to maximize shareholder returns by improving stock performance, especially quarter-to-quarter performance.
The development of 401-K plans in the 1980s, which greatly expanded investment in mutual funds, contributed to increasing attention paid to the stock performance of companies. As 401-K plans have become ubiquitous, so has the demand for stock performance.[155]
The growth of 401-K plans may also have had an unintended consequence. The 401-K plans had enormous appeal to employers as replacements for the pension plans they had to fund. With 401-K plans they contributed a certain percentage of their stock to the employee's account, and then had no further obligation.  Unions also liked them because they gave employees a greater share of company ownership. As an individual's 401-K grew, the great percentage of it usually was invested in mutual funds. The company's stock contributed to the plan could be exchanged for mutual funds as well. The 401-K plans as replacements for pension funds not only lessened the ties between employees and their employers; they also created a huge pool of mutual fund investment that forced changes in corporate management.
For the first time more than 50% of the stock of public companies was held by mutual and pension funds, rather than by individuals. Unlike many traditional individual investors, institutional investors have little emotional attachment to the companies in which they invest. Their only interest is in buying stocks that will increase in value, and, in many cases, the increases are expected in the near term. If companies do not perform as expected, or better, their stocks are dumped, and their stock prices decline, sometimes substantially.
This increased emphasis on short-term stock performance put enormous pressure on CEOs to improve their bottom lines and keep their stock prices rising, on a quarter-to-quarter basis. Corporations thinned out their management ranks, and looked for other ways to improve profits, such as shifting operations to less expensive foreign countries.
In 1992, the Securities and Exchange Commission promulgated regulations that had dramatic effects on corporate governance and strategies. Public companies had to disclose how the compensation of their CEOs related to the performance of their stocks. Any compensation of executives in excess of $1 million a year was not tax deductible unless it was tied to performance.
Maximizing shareholder short-term returns became the primary duty of corporate senior managements, at the expense of all other stakeholders, and sometimes the longer-term interests of the company. It is impossible to overestimate the impact of these misguided regulations on the governance of corporations, and their negative effect on American competitiveness. Quarter-to-quarter stock performance became the most important measure of success. It provided a justification for massive increases in CEO, and senior executive, compensation keyed to stock performance.
With such a short-term focus, there is little incentive for companies to take chances on higher risk ventures, technologies, or innovations that require years to produce results. More patient foreign companies, with longer horizons, have gained great advantage. For example, many Japanese companies typically operate on a 20-year business plan. American companies operate on much shorter plans, usually not longer than five years, and almost never longer than ten. The investment community, which provides the capital for start-ups and expansion, usually has even shorter horizons for obtaining returns on its investments. This made it very difficult for an American company to raise capital to develop advanced technologies that might take five to ten years, or longer, to produce profits.
Following the earlier pattern of consumer electronics, many fast growing areas of high tech and precision technology became the specialties of countries more willing to wait for longer term payoffs, including Japan, South Korea, Germany, Canada, Finland, Sweden, and, more recently, China. Most personal computers, cell phones, and wireless transmission equipment, are manufactured outside the U.S., including the sensationally successful Apple I-Phone and I-Pad.
The demand for quarterly performance also meant that if the stock price of a company with solid assets and good cash flow stopped increasing at the pace expected by Wall Street the company could become a target for a takeover. Such takeovers often resulted in a break-up of a company's assets, and the laying off of most, if not all, of its employees. Such takeovers usually bring a premium on the current stock price and are justified by company management as the only way to maximize shareholder value.
With fiduciary duties of the corporate management entirely to shareholders, no  consideration is required to the communities where companies operate for the benefits the communities may have provided to the corporations, nor to the dependencies and loyalties of employees.
In recent years there has been a movement to change this state of affairs. Approximately thirty states have adopted “Constituent statutes” that permit corporate managements to consider factors other than shareholder returns when making major decisions. In 2010 Maryland adopted a new form of corporation, the “Benefit” corporation, also known, slightly incorrectly, as the “B Corporation.” Many other states and the District of Columbia have since adopted similar legislation. This form of corporation is a hybrid between a for profit and a non-profit corporation. The corporate commits to providing a “public service” and the fiduciary responsibility of the management is extended beyond shareholders to other stakeholders, including employees, communities, and the public in general. Actions can be brought against the management of these companies to enforce this broader range of responsibility.
These changes have been heralded as injecting a new sense, and a new opportunity, in business for social responsibility. These changes, if universally adopted, hold the promise of ending the period of almost mindless commitments of companies to short term profits, and may slow down corporate mergers and acquisitions. However, it remains to be seen if these changes in fiduciary responsibilities have a chilling effect on capital sources. All companies need capital, and some need a great deal. Some types of investors, particularly mutual funds, may not find this type of corporation particularly attractive.
As a result of the laissez-faire practices of Reagan and his successors, consolidation within industries accelerated.  The Federal Communications Commission eliminated many of the regulations of broadcasting, including equal time and fairness doctrine rules that required broadcasters to make time available for different points of view. The FCC also eliminated most restrictions on ownership, which permitted massive consolidation of ownership of broadcast stations and networks, greatly reducing competition and access to the media by all points of view.
The lack of enforcement of antitrust laws accelerated the formation of giant multinational corporations that now own most of the major brand names. And because of the rapid expansion of economies around the world since the end of the Cold War, many multinational corporations no longer rely on the American market for the majority of their revenues, or profits, and, as a result, have less loyalty to America, if they have any. Resources are focused where they are likely to produce the greatest profits, and recently, that has not been in the United States.
There are only 27 countries with GDPs higher than the gross revenues of the three largest corporations, Royal Dutch Shell, Exxon-Mobil, and Walmart. Most of the world's countries have lower GDPs than the 25 corporations that have revenues greater than $142 billion. Those 25 corporations include 11 oil and gas companies (3 U.S.), four auto manufacturers (1 U.S.), two diversified manufacturers (1 U.S.), two national public utility companies, one commodities dealer, one insurance company, one retailer (U.S.), one financial institution, one national postal service and one conglomerate (U.S.). Only the two public utility firms (China and Italy) and Japan's postal service are not “multinational,” operating in many countries. The one conglomerate, Warren Buffet's Berkshire Hathaway, primarily is an investment company, and its largest investments are in American companies.[156]
The existence today of multinational corporations so huge that their incomes are larger than most countries is one of the most significant business developments in modern history that has yet to be fully understood and evaluated. Many of these corporations operate almost entirely independent of any nation's laws, and essentially are virtual countries, without the restrictions and limitations that real ones have. Some, like Exxon-Mobil, have their own armed forces.
Collectively, multinationals control trillions of dollars and much of international trade, banking and commerce. They have the power today to destroy the economies of countries, if they choose to do so, or to exercise such influence that they virtually own countries. Walmart has been implicated in a massive national bribery scandal in Mexico.[157]
Almost from the beginning of the nation, it was considered a social good to have successful businesses providing employment, and tax revenues. Through a series of early Supreme Court decisions corporations received many of the same Constitutional protections as individuals, including property and contract rights. As a creation of the state, corporations have duties to the state. They are subject to its laws, regulations and taxes. However, contrary to some beliefs, the Supreme Court never has ruled that a corporation is a person. A chief justice in the 1880s said in dicta in a decision that they were, under the 14th Amendment, but that simply was his opinion, and it never has been validated by a decision.
In recent years, however, the Court has expanded the rights of corporations to include some previously only held by individuals, including the right to free speech. The Supreme Court's recent decision in Citizens United[158] that permits corporations to make unlimited contributions in political campaigns expanded earlier decisions of the Court by ruling that there can be no limits on the amounts of money corporations contribute to political action groups because money is equivalent to speech, and speech cannot be limited. While rights of corporations have been expanded, their duties and responsibilities have not been. They are not subject to the restrictions imposed on governments in the Bill of Rights of the Constitution.
The Citizens United decision has been quite controversial, and has been subject to considerable criticism. A movement is underway to amend the Constitution to limit the definition of corporations so that they do not have all the rights of individuals. Until that, or some other change occurs, the decision has given corporations more potential legal influence on politics and government than ever before.
With the ability to spend enormous amounts of money on behalf of political candidates, the huge multinational corporations that have little loyalty to the U.S., as well as extremely wealthy individuals, are positioned to exercise much greater influence on American governmental decisions at both the federal and state levels. Those decisions range from lowering taxes and regulation to giving private enterprises greater control over government functions through privatization. There is an enormous risk that far more activities of government will wind up being performed by profit-seeking businesses that do not face the same kind of public scrutiny and political control that government agencies do. Major industries also may obtain far greater control over natural resources and may be able to exploit them with less regulation, particularly environmental regulation.
The implications of the growing power of multinational corporations, and the continuing failure of governments to control them, still are not fully appreciated. This concentration of power is one of the worst legacies of the Reagan era, but one now shared with his successors.


[1]      Adams, James Truslow. The Epic of America. Boston: Little Brown, 1931.
[2]      de Tocqueville, Alexis. Democracy in America. Translated, Edited and with an Introduction by Harvey C. Mansfield and Delba Winthrop. Chicago: The University of Chicago Press, 2000.
[3]      Hessel, Stephane. “Indignez-Vous!” The Nation. March 7/14, 2011. pp 15-19.
[4]    Piketty, Thomas. Capital in the Twenty-First Century. Cambridge MA and London: Harvard University Press, 2014.
[5]    Branko Milanovic. The return of “patrimonial capitalism” review of Thomas Pikietty's Capital in the 21st Century. Munich Perosnal RePEc Archive. October, 2013
[6]    Hartmann, Thomas. Rebooting the American Dream. San Francisco: Barrett-Koehler, 2010.
[7]    For a recent example, see my essay on the Supreme Court's voting rights decision and the Chief Justice's misquoting of the 10th Amendment, and alteration of a quote from an earlier case, thus changing its meaning: Dan Riker. "Deception and Error: The Supreme Court's Wrong Decision on Voting Rights." July 12, 2013. http://danriker.blogspot.com/2013/07/deception-and-error-supreme-courts.html (also published on www.Truth-out.org)

[8]      Myers, Gustavus. History of the Great American Fortunes. New York: Modern Library, 1936.

[9]      Sinclair, Upton. The Jungle. New York: Doubleday, Page & Company, 1906. The edition referenced in this book is Sinclair, Upon, (Fletcher Martin, Illus.) The Jungle. With a new Preface by the author. Norwalk, CT: The Heritage Press, 1965. Reprint of the Limited Editions Club edition.

[10]            Ehrenreich, Barbara. Nickel and Dimed. On (Not) Getting By in America. New York: Metropolitan Books/Henry Holt, 2001.

[11]    Stiglitz, Joseph E. The Price of Inequality. How Today's Divided Society Endangers our Future. New York: Norton, 2012.
[12]    Friedman, Thomas L. and Michael Mandelbaum. That Used to be Us. New York: Farrar, Straus & Giroux, 2011. pp.3-5.

[13]  From Waist Deep in the Big Muddy and Other Love Songs. (1993)
[14]  Adams, p -
[15]  Stiglitz p. 137.                
[16]  Reagan, who defeated President Jimmy Carter's re-election effort in 1980, becoming the first conservative to be elected President since before the Great Depression, repeatedly used the term “shining city on a hill” as his vision of America during his eight years in office, echoing the writing of the Puritan John Winthrop and Jesus' Sermon on the Mount. Reagan's emphasis was somewhat different from the Puritan Winthrop's whose focus almost entirely was on religious purity of the city. Reagan's concept echoed de Tocqueville and Adams. In his 1989 farewell address Reagan described it as, “a tall proud city built on rocks stronger than oceans, wind-swept, God-blessed and teeming with people of all kinds living in harmony and peace, a city with free ports that hummed with commerce and creativity, and if there had to be city walls, the walls had doors and the doors were open to anyone with the will and the heart to get here.”
[17]  William R. Emmons and Bryan J. Noeth. "Housing Rebound Broadens the Wealth Recovery But Much More is Needed." Federal Reserve Bank of St. Louis. "In the Balance," Issue 5-2013.  http://www.stlouisfed.org/publications/itb/articles/?id=2438 accessed June 22, 2014
[18]  Saez, Emmanuel with Thomas Piketty. "Striking it Richer: The Evolution of Top Incomes in the United States", Summary updated January 2013  http://elsa.berkeley.edu/~saez/saez-UStopincomes-2011.pdf
[19]  Ibid.
[20]  Stiglitz, Joseph E. “Of the 1%, by the 1%, for the 1%.” New York: Vanity Fair, May, 2011.
[22]  Estelle Sommeiller and Mark Price.”The Increasing Unequal States of America.” Washington, DC: Economic Analysis and Research Network, Feb. 10, 2014 http://s2.epi.org/files/2014/Income-Inequality-by-State-Final.pdf (accessed June 27, 2014)
[23]  The exception was Alaska, which only became a state in 1959.
[24]           The term “robber barons” did not come into general use until the publication of The Robber Barons: The Great American Capitalists  1861-1901 by Matthew Josephson (Harcourt Brace, 1934, 1962)..
      Perhaps the landmark history of the robber barons – although he did not use that term - and the criminal and other nefarious methods they employed to create their family financial empires, is the work cited in the Preface, History of the Great American Fortunes, by Gustavus Myers. Chicago: Charles H. Kerr & Co., 1909–1910. Three volumes. This is a work of enormous original research and detail, and it was substantially revised and updated to the 1930s by the author in a one volume edition published in 1936 by The Modern Library. That is the edition that will be referenced herein.
[25]    Perhaps the only 19th Century “Robber Baron” whose criminal conduct was detailed in a Congressional investigation of his fraudulent and corrupt dealings with the Union before and during the Civil War, including selling the government a ship that he knew not to be seaworthy. .Myers pp. 279-289
[26]  Duhigg, Charles  and David Barboza. “In China, Human Costs Are Built Into an iPad.” The New York Times. Jan. 25, 2012.
[27]  ROE v. WADE, 410 U.S. 113 (1973)
[29]  "Data Brief: The Low-Wage Recovery, Industry Employment and Wages Four Years into the Recovery." New York: National Employment Law Project, April, 2014.
[30]  A union organizing effort in a Tennessee BMW plant in 2014 failed to win the votes necessary to form a bargaining unit.
[31]  The decision by the author of the Preamble, Gouvenor Morris, to use the word “People,” rather than states, as suggested by others, was intentional. Bowen, Catherine Drinker. Miracle at Philadelphia, ------ p.
[32]  Cooper v. Aaron, 358 U.S. 1 (1958) States cannot nullify federal laws. Texas v. White, 74 U.S. 700 (1869 Secession was unconstitutional.
[33]  De Tocqueville, pp. 239-264
[34]  Even orders of the “Secret” court, created by the Patriot Act and itself of questionable constitutionality, have been defied by intelligence agencies. Jonathan S. Landay and Ali Watkins. "Newly declassified documents show NSA repeatedly violated own rules, court orders." http://http://www.mcclatchydc.com/2013/11/19/209092/newly-declassified-documents-show.html Nov. 19, 2013. Accessed June 27, 2014.
[35]  National Federation of Independent Business, et. al. v. Sebelius. 567 US __ (2012) slip opinion.
[36]  See fn 7.
[37]  Rhode Island was the last state to abolish property ownership as a requirement for the right to vote.
[38]  One of the most well-documented frauds was the sale of a non-seaworthy ship to the Union Navy by Cornelius Vanderbilt during the Civil War. If it had not been discovered before the vessel was sent out to sea, the fraud might have resulted in hundreds of deaths.. There was a lengthy and detailed Congressional investigation, with a publicly-released record that showed he was guilty of criminal conduct in this case, as well as in many other dealings with the government. However, because of behind the scenes pressures – and, no doubt, bribes, no prosecution was proposed. He also was not required to reimburse the government for any of his fraudulent transactions. In fact, he went on to become one of the world's richest men, continuing to employ unpunished bribery, fraud and extortion to grow his empire. Myers pp. 295-298
[39]  Hamilton kept a copy of the charter of the Bank of England in his desk. Chernow, Ron. Alexander Hamilton. New York: Penguin Press, 2004. p. 347.
[40]  Ibid. p. 347-48.
[42]  McCulloch v. Maryland, 17 U.S. 316 (1819)
[43]  Weber, Max. The Protestant Ethic and the Spirit of Capitalism. New York: Charles Scribner's Sons, 1958. Translated by Talcott Parsons.  p. 1(c). This is a new edition of the work first published in German in 1904-05, with the addition of the historian Tawney's Foreward, originally written in 1930.
[44]  Proclamation Regarding Nullification, December 10, 1832 http://avalon.law.yale.edu/19th_century/jack01.asp  (accessed July 2, 2014)
[45]  Myers, p 147.
[46]  Chandler, Jr., Alfred D. The Visible Hand. Cambridge, MA: Harvard University Press, 1977. pp. 72-75
[47]  Hofstadter, Richard. The American Political Tradition And the Men Who Made It. New York: Vintage Books,  1974. Reprint of the 1948 edition published by Alfred Knopt, but with a new Foreward by Christopher Lasch and a new Preface by the author.
[48]  Remini, Robert V. Andrew Jackson. Vol. 3 The Course of American Democracy, 1833-1845. Baltimore: The Johns Hopkins University Press, 1998. (Kindle locations 4-6) Originally published in 1984 as Andrew Jackson and the Course of American Democracy, 1833–1845, by Harper & Row, Publishers, Inc.

[49]  Remini, Robert V.
[50]  Remini Kindle locations 998-1009.
[51]        Meacham, Jon. American Lion: Andrew Jackson in the White House. New York: Random House, 2008. p. 247.
[52]  Remini,
[53]  President Jackson's Veto Message Regarding the Bank of the United States; July 10, 1832 http://avalon.law.yale.edu/19th_century/ajveto01.asp (accessed July 3, 2014)
[54]  Evans. p.22.
[55]  Myers, pp 407-421. In 1795 a massive land fraud was pulled off in Georgia when millions of acres of state land were sold for almost nothing to speculators who had bribed the state legislature. Angry citizens of the state threw out most of the legislature in the election the next year, and the new legislature revoked the contracts. Lengthy litigation resulted in the Supreme Court ruling that the legislature's revocation of the grants was a violation of the right of contract. Myers pp. 216-217 In 1856, virtually the entire state government of Wisconsin, including most of the legislature and the governor, were paid more than $800,000 by the LaCrosse and Milwaukee Railroad in return for a land grant of one million acres. Myers p 460
[56]  The nation's greatest financial scandal to that time erupted when it was revealed that the entity formed to manage the construction, the Credit Mobilier, had defrauded the government of tens of millions of dollars by charging nearly twice as much as it cost to build the railroad. It also was accused of bribing many high ranking officials, including two men who were to become President, James A. Garfield and Rutherford B. Hayes, as well as leading members of Congress. The scandal drove the Union Pacific into bankruptcy, but it survived, eventually becoming one the nation's largest and most profitable businesses. Myers, pp. 441-444
[57]  In total railroads received for free approximately 170 million acres of federal land – about the size of Texas - 35 million of which they later forfeited for not meeting the terms of the grants. Clanton, O. Gene. Kansas Populism Ideas and Men. Lawrence, KS: University Press of Kansas, 1969, p. 14.
[58]  Chandler, Jr., Alfred D. Scale and Scope: The Dynamics of Industrial Capitalism. Cambridge, MA: Harvard University Press, 1990. pp. 3-13.
[59]  Allen, p. 30.
[60]  U.S. Census data.
[61]  Irwin, Neil. --- pp.
[62]  Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. London: W. Strahan; and T. Cadell, 1776. The edition I am referencing is the 1952 edition published by the Encyclopedia Britannica as Vol. 39 in Great Books of the Western World.
[63]  Ibid p. 194.
[64]           Zinn, Howard, A People's History of the United States 1492-present, p. 235
[65]             The mythology about the robber barons that developed, and is so much of our culture today, is a subject of Josephson's new Foreward to the 1962 edition of The Robber Barons:
        “In the crisis years of the 1930s economic intervention by the Federal Government was employed on an unprecedented scale, not only in the interests of human welfare, but also to regulate and control the masters of capital who, by their excesses and bad leadership, had helped to bring about the debacle of 1929-1933. At that period a critical literature also arose (of which the present work may perhaps be taken as an example), providing background material to the men of the New Deal.
        Of late years, however, a group of academic historians have constituted themselves what may be called a revisionist school, which reacts against the critical spirit of the 1930s. They reject the idea that our nineteenth-century barons-of-the-bags may have been inspired by the same motives animating the ancient barons-of-the-crags—who, by force of arms, instead of corporate combinations, monopolized strategic valley roads or mountain passes through which commerce flowed. To the revisionists of our history our old-time money lords “were not robber barons but architects of material progress,” and, in somewise, “saviors” of our country. They have proposed rewriting parts of America’s history so that the image of the old-school capitalists should be retouched and restored, like rare pieces of antique furniture.
        This business of rewriting our history—perhaps in conformity to current fashions in intellectual reaction—has unpleasant connotations to my mind, recalling the propaganda schemes used in authoritarian societies and the “truth factories” in George Orwell’s antiutopian novel 1984.”
[66]  This is ironic considering that the religious views of many in the right-wing reject Darwin's theory of evolution. For a more extensive discussion of contemporary “Social-Darwinism” see Reich, Robert. Beyond Outrage: What Has Gone Wrong with Our Economy and How to Fix It. New York: Alfred A. Knopf, 2012.
[67]  Sumner, William Graham. What Social Classes Owe to Each Other. Harper & Brothers New York 1883 (available in a number of reprint editions, as well as in a PDF edition on line).
[68]  Ibid.
[70]  Myers, p -
[71]  Myers pp 203-204
[72]  Lochner v. New York. 198 U.S. 45 (1905),
[73]  Cleveland won the popular vote in 1888, but lost the electoral vote. Thus he, Andrew Jackson and Franklin Roosevelt were the only Presidents to win the popular vote in more than two elections, and he was one of only four Presidential candidates to win the popular vote but lose an election, along with Jackson in 1824, Samuel Tilden in 1876 and Albert Gore in 2000.
[74]  Evans. p.22.

[75]        Extensive stats on mine and railroad deaths in: Aldrich, Mark. “History of Workplace Safety in the United States, 1880-1970.”  http://eh.net/encyclopedia/article/aldrich.safety.workplace.us Also see Myers, p 376 fn 7

[76]  Myers p 376-77
[77]  Ibid pp. 198-200
[78]  This was the time when Mother Jones led her famous “Children's Crusade” march, consisting of many children who had suffered crippling injuries while working, from Washington, DC to the home of President Roosevelt in New York.
[79]  citation
[80]  Myers, pp 354-55
[81]  Page Smith, pp. 1032-33.
[82]  NY Times
[83]  Abraham Lincoln Speeches and Writings 1832-1858. New York: Library of America, 1984. p.301.
[84]  as excerpted in Pestrito, Ronald, J and William J.Atto. American Progressivism, A Reader. Lanham, Md: Lexington Books, 2008, p.237
[85]  Goodwin, Doris Kearns. The Bully Pulpit. New York: Simon & Schuster, 2013.
[86]  For a contemporary view of early 20th Century Progressivism, see Hochstein, Irma. A Progressive Primer.  Madison: Wisconsin Women's Progressive Association, 1922.   “We must elect to represent us  in the city councils and in the legislative bodies, men and women who understand the problems of government and who are honestly endeavoring to pass laws so that no injustice will be done to the people's interests.” p. 10. and “The progressive in politics is one who sees what the next steps are in bringing a better civilization , and who knows how to take those steps without being retarded.” p 62  http://content.wisconsinhistory.org/cdm/ref/collection/tp/id/56073  
[87]  Morris, Edmund. Theodore Rex. New York: Random House, 2001. pp. 73-74.
[88]  Goodwin, p 314.
[89]  The Jungle first appeared as a serial in the socialist newspaper, Appeal to Reason, in Chicago in 1905, and it was published in book form in 1906, and remains in print. At one time it was the most widely translated American novel, published in 60 languages.
[90]  In 1965, at the age of 87, Sinclair, who by then had written 85 books, wrote a new Preface to the illustrated edition of The Jungle, published by The Limited Editions Club, and subsequently reprinted by The Heritage Press, and the Easton Press, in which he revealed, for the first time, this account of his meeting with Roosevelt, and how he told the New York Times the results of the government investigation. The newspaper stopped the presses to insert the story that caused a national sensation. Mark Sullivan did not have the benefit of Sinclair's account of his meeting with Roosevelt when he wrote America Finding Herself, the second volume of his wonderful Our Times series in 1927, but he did provide a very colorful account of the efforts to have government regulation of food and drugs, and Roosevelt's use of The Jungle to political advantage.  Sinclair, Mark. Our Times The United States 1900-1925 II America Finding Herself. New York: Charles Scribner's Sons, 1927. pp. 471-483.
[91]  Goodwin's The Bully Pulpit recounts the history of McClure's Magazine, and other periodicals of the time that employed some of America's greatest journalists:  Ida Tarbell, Lincoln Steffens, Ray Stannard Baker and William Allen White, and their relationships with Roosevelt and the progressive reformers of the period.
[92] “Hegel: Social and Political Thought.” Internet Encyclopedia of Philosophy. http://www.iep.utm.edu/hegelsoc/ (accessed August 25, 2014). For the detailed argument see the Introduction to, Hegel, Georg Wilhelm Friedrich.  The Philosophy of History.  With Prefaces by Charles Hegel and the Translator, J Sibree. London and New York: The Colonial Press, 1900. pp. 54-72.
[93]  The Encyclopedia of Cleveland History. http://ech.case.edu/cgi/article.pl?id=JTL (accessed August 25, 2014)

[94]  Steffens, Lincoln. The Shame of the Cities. New York: McClure, Phillips & Co., 1904. (many reprint copies available)
[95]  For a detailed account see Wolraich, Michael. Unreasonable Men. Theodore Roosevelt and the Republican Rebels Who Crreated Progressive Politics. New York: Palgrave/MacMillan, 2014. pp. 222-224.
[96]  The 1912 vote: Wilson, 6,296,284 (41.84% ); Roosevelt, 4,122,721 (27.40%), Taft, 3,486,242 (23.17% ); Debs, 901,551 (5.99% ).  Debs received 913,693 votes in 1920, but it was only 3.4% of the total of 26.8 million votes cast in the first Presidential election when women could vote No Socialist has since come anywhere close to either of those vote totals.
[97]  Foner, Eric. The Story of American Freedom. New York: W.W. Norton, 1998, p.160 (italics, mine)
[98]  Ibid.
[99]  cite
[100]          Steinbeck, John. “Living with Hard Times.” Esquire. June, 1983, p 27-28 (reprint of an essay, “A Primer on the Thirties,” first published in 1960.
[101]          Chandler. The Visible Hand.  p. 496
[102]          Schlesinger, p. 522
[103]          Leuchtenburg, William. E. The Perils of Prosperity 1914-32. Chicago: University of Chicago Press, 1958. p. 181.
[104]          Ibid. p 96-97.
[105]          Foner, p183.
[106]          Leuchtenburg. p. 110.
[107]          Chandler.  Scale and Scope, pp. 642 and 649.
[108]          Allen, p. 124
[109]          Leuchtenburg, p. 186
[110]          Stillman, Edmund. The American Heritage History of the 1920s & 1930s. New York: American Heritage/Bonanza, 1987. Reprint of work first published in 1970. p. 158.
[111]          Chandler. Scale and Scope. pp. 639, 645.
[112]          Rifkin, Jeremy. The End of Work. New York: Putnam, 1995. pp. 19-25.
[113]          Strikes in the steel and coal mining industries failed, also causing significant declines in union membership.
[114]          Saez, Emmanuel. “ Striking it Richer: The Evolution of Top Incomes in the United States
      (Updated with 2009 and 2010 estimates).” March 12, 2012. http://elsa.berkeley.edu/~saez/saez-UStopincomes-2010.pdf
[115]          Leuchtenburg, p. 194.
[116]          Leuchtenburg p 201
[117]          Ibid. p.202-203
[118]  Lind, Michael. Land of Promise. An Economic History of the United States. New York: Harper Collins, 2012. pp. 303-306.
[119]  Steinbeck. p 27
[120]          Ibid. p 30
[121]          Ibid p. 32. An echo of the fact that banks opposed reforms proposed by the Obama Administration to try to prevent future bailouts of banks of the type that were required in 2008 and 2009 to save the banking system.
[122]          Steinbeck, John. The Grapes of Wrath. New York: Viking, 1939. Winner of the 1940 Pulitzer Prize, and cited as a primary reason for Steinbeck being awarded the Nobel Prize for Literature in 1962.
[123]          cites
[124]          Cited by Paul Krugman, March 25, 2014.
[125]          Berolzheimer, Ruth (editor). The American Woman’s Cook Book Victory Edition. With New Material on Economical   Food Substitutes and Wartime Recipes. Chicago: Culinary Arts Institute, 1942 (reprinted as the Wartime Edition with a different dust jacket design in 1943, also reprinted by Consolidated Book Publishers in 1943).
[126] Evans, p. 314.
[127]          Rifkin, pp. 66-67.
[128]          http://www.epi.org/publication/right-to-work-research/  (accessed Sept. 3, 2014)
[129] Evans, p. 435.
[130] Piketty put all his charts and tables on-line at http://piketty.pse.ens.fr/capital21c (accessed July 12, 2014)

[131] Wilson, Sloan. The Man in the Gray Flannel Suit. New York: Simon & Schuster, 1955. Also, made into a movie that starred Gregory Peck, this best-selling novel explored the impact of America’s rapidly expanding corporate culture on those employed by it, and their families.
[132] Philbrick, Herbert. I Led Three Lives.Citizen - Communist - Counter-Spy. New York: McGraw-Hill, 1952. There was a television series by the same name, narrated by Philbrick, of 117 episodes from 1953-1956, each episode portraying the foiling of a communist plot inside the U.S.
[133] Nagle, Robert. American Conservatism.  New York: Philosophical Library, 1988. p. 237.
[134] Ibid. P. 220.
[135]          Buckley, Jr. William F. God and Man at Yale. Chicago: Regnery, 1951.
[136] Brown v. Board of Education 347 U.S. 483 (1954)
[137] Lyndon B. Johnson won 42,825,463 popular votes and 486 electoral votes to Barry Goldwater’s 27,146,969 popular votes and only 52 electoral votes.              

[138] Even then, despite the overwhelming Democratic edge, the gun lobby had enormous influence. LBJ could not get Congress to approve the licensing of gun owners, or the required registration of guns.
[139]  Joseph A. Califano, Jr.  “What Was Really Great About the Great Society..” The Washington Monthly. October, 1999.
[140]          Moore, Michael. Here Comes Trouble: Stories from My Life. New York: Grand Central Publishing, 2011.
[141] The most detailed account of these events can be found in:. Parry, Robert. America’s Stolen Narrative. New York: The Media Consortium, 2012. The audio tapes of LBJ’s conversations now can be heard. They are available on-line from the LBJ Library at http://www.lbjlib.utexas.edu/johnson/archives.hom/dictabelt.hom/highlights/may68jan69.shtm
[142]          Evans, p. 604.
[143]          Yergin, Daniel. The Prize: The Epic Quest for Oil, Money & Power. New York: Simon & Schuster, 1991. pp. 588-592
[144]          Bureau of Labor Statistics historical data.
[145]          Ibid.
[146]          Ibid.
[147]          Evans. p. 620.
[148]  "How Reaganism actually started with Carter". Salon.com. http://www.salon.com/2011/02/08/lind_reaganism_carter/

[149] Evans, p. 623.
[150] Atkins, Priscilla, et. al. “Manufacturing Job Loss: What Can Economic Development Policy Do?” Washington, DC: The Brookings Institution, June, 2011 http://www.brookings.edu/~/media/Files/rc/papers/2011/06_manufacturing_job_loss/06_manufacturing_job_loss.pdf

[151] Rifkin, p. 168.
[152] Saez.
[153] “America's big wealth gap: Is it good, bad, or irrelevant?” The Christian Science Monitor. Feb. 12, 2012.
[154] Saez.
[155] See Gelter, Martn. “The Pension System and the Rise of Shareholder Primacy” June 7, 2012. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2079607 in which the author argues that the development of the 401-K is a prime cause of the conversion of “managerial capitalism” to “shareholder capitalism,” the changes of the focus of corporate management from its own interests to an almost exclusive focus on the interests of shareholders.
[158] Citizens United v. Federal Election Commission 558 U. S. ____ (2010)



2 comments:

  1. The Progressive Era is a period of American history that deserves more attention. Thank you for making this work available.

    ReplyDelete
  2. Please update to include Trump and friends.

    ReplyDelete

Civil commentary is welcome, including criticism, disagreement, or, hopefully, agreement and support!