by Sheldon Richman
Sheldon Richman is the editor of The Freeman and In brief. TGIF appears Fridays.
For historian Arthur A. Ekirch Jr., the decline of American liberalism tracked the rise of nationalism and the corporate state, the intimate alliance between business and government. He equates liberalism — libertarianism — with economic freedom and property rights for the common citizen, not just for an aristocracy. From the relative, though imperfect, laissez-faire periods of the Jefferson and Jackson presidencies, the United States moved almost unswervingly to become what Albert Jay Nock would call a Merchant-state in which the central government heavily intervened on behalf of particular business interests, hampering the independence and progress of upstart competitors as well as workers. For most people, this is what the word capitalism would come to denote. (See TGIF: Arthur A. Ekirch Jr.,'s The Decline of American Liberalism.)
The Civil War was the great impetus in this direction: In economic matters the war also occasioned a tremendous expansion of the role of the Federal government. Along with the obvious part played by official Washington in contracting for the purchase of army supplies there was the important financial legislation passed by the new Republican administration. In place of the low duties current in the era from Jackson to Lincoln, the Republican Congress returned to the Whig theory of a protective tariff for American manufacturers. The period also saw the granting of Federal lands and funds for railroad building [and] the use of the Civil War army to suppress labor disturbances.
Finally, the position of the Federal government as against the individual or the separate states was strengthened by such wartime legislation as the National Bank Act, an unprecedented income tax, and a variety of excise taxes which were the equivalent almost of universal sales tax. …Later, in the postwar period, it would be forgotten that many of the national problems associated with the rise of big business and monopoly had their origins in this earlier era of expansion and consolidation during the Civil War.
Ekirch tells a story of how one violation of liberalism leads to others. The most fundamental violation was slavery, which led eventually to the secession crisis. To prevent dissolution of the Union, Lincoln went to war, which in turn brought more violations of liberal principles. A growing nationalism and centralization, accompanied by a diminishing liberalism and individualism, was one of the important results of the Civil War, Ekirch writes. He agrees with another historian (H. B. Parkes) that the war brought the triumph of Hamiltonian economics. Despite the one liberal result — the end of slavery — the war killed (in the words of Vernon L. Parrington) the old idea of decentralized democracies, of individual liberty; and with the overthrow of the traditional principles in their last refuge, the nation hurried along the path of an unquestioning and uncritical consolidation, that was to throw the coercive powers of a centralizing state into the hands of the new industrialism.
Ekirch comments, Thus, the saving of the Union made possible a degree of integral nationalism inconceivable in the old federalized Union States…. The postwar Gilded Age is known for what Ekirch himself calls crude materialism and selfish exploitation. But he joins Parrington is identifying the period as one of paternalism, marked by the theory of Whiggery, which sees government as a means to riches. This is not laissez faire but something far more active and insidious. The well-connected were more likely to prosper by this system than the common citizen. Instead of the limited state desired by the Jeffersonian believers in an agrarian society, Ekirch writes, the post-Civil War era was characterized by the passage of a stream of tariffs, taxes, and subsidies unprecedented in their volume and score. The role of government borrowing — what Samuel J. Tilden, the liberal Democratic presidential candidate in 1876, called false systems of public finance — cannot be overstated in the building of modern American corporatism. Tilden was certainly unlike any presidential candidate we've seen in a long time. Perhaps that's why Ekirch quoted him at length:
The demoralization of war — a spirit of gambling adventure, engendered by false systems of public finance; a grasping centralism, absorbing all functions from the local authorities, and assuming to control the industries of individuals by largesses to favored classes from the public treasury of moneys wrung from the body of the people by taxation — were then, as now, characteristics of the period. …The classes who desire pecuniary profit from existing governmental abuses have become numerous and powerful beyond any example in our country…. For the first time in our national history such classes have become powerful enough to aspire to be in America the ruling classes, as they have been and are in the corrupt societies of the Old World.
Tilden's tocsin was echoed, Ekirch points out, in the (then) liberal magazine The Nation. What to do about the atmosphere of scandal and privilege? The remedy is simple, editor E. L. Godkin wrote, The Government must get out of the 'protective' business and the 'subsidy' business and the 'improvement' and the 'development' business. It must let trade, and commerce, and manufactures, and steamboats, and railroads, and telegraphs alone. It cannot touch them without breeding corruption. Godkin was a descendant of earlier radical Jacksonians, the Locofoco, personified by the liberal New York newspaper editor William Leggett.
Land speculation was also a concern to the remaining advocates of pure liberalism. The government's homesteading policies made it possible, Ekirch writes, for speculators to buy up vast quantities of land. …Thus authentic homesteaders, eager to avail themselves of a farm by fulfilling the terms of cultivating the soil for five years, were often forced to move beyond the range of the more desirable lands, which had already been pre-empted by speculators or dummy settlers. Ekirch's account reminds me of what Ludwig von Mises wrote in Socialism: Nowhere and at no time has the large scale ownership of land come into being through the working of economic forces in the market. It is the result of military and political effort…. The great landed fortunes did not arise through the economic superiority of large scale ownership, but through violent annexation outside the area of trade.
The progress of the late nineteenth century resolves any mystery about American statism in the twentieth, for the groundwork was clearly laid in this era. Power flowed inexorably to the center. For instance, in 1887 the Interstate Commerce Commission was created with the support of both parties in Congress and President Grover Cleveland. (See TGIF: The Rent-Seeking Habit.) Ekirch reserves special scorn for the Supreme Court's interpretation of the Fourteenth Amendment placing corporations within the definition of persons deserving protection by the national government. This vastly extended the domain of the Federal government, which had been subsidizing and protecting big business for years.
Ekirch writes, [I]n the America of the [eighteen] eighties and nineties, doctrines of laissez faire and of the limited state were being twisted and distorted from their original meaning. Businessmen and judges took up the individualism of Jefferson and [Herbert] Spencer and converted it into a rationale for materialist exploitation. Resisting public intervention or government regulation when it confined or restrained special interests, the business community, however, could see no inconsistency in an acceptance of the stream of subsidies and tariffs, of which Henry George and other individualists complained. Ekirch quotes the Englishman and America-watcher James Bryce: One half of the capitalists are occupied in preaching laissez faire as regards railroad control, the other half in resisting it in railroad rate matters, in order to have their goods carried more cheaply, and in tariff matters, in order to protect industries threatened with foreign competition. Yet they manage to hold well together.
The mixed-message from industrialists helped to erode public support for the free market, making people receptive to what was to come. To many, Ekirch writes, liberalism seemed to have evolved into a pro-corporation doctrine…. (The industrialists' anticompetitive program also emboldened the few genuine state socialists on the scene.) Action against the trusts would be the rallying cry in the next chapter of American history, the Progressive Era, complete with regulation, nationalism, and militarism. But, as was perceptively pointed out at the time, The tariff is the mother of trusts. That is, they too were creatures of government intervention. The stage was now set for demands for comprehensive national regulation. But overlooked in the whole development, Ekirch writes, was the initial responsibility of the Federal government in helping to create what it was subsequently called upon to regulate.