NOTE: This is the third installment in a series of essays comprising "A Timeline Part One" and "A Timeline Part Two" as well as the present work. The essays were started with the intent to identify the point, or points, at which the United States turned from the original vision of a minimal government, dedicated to maximum freedom to a state which is more interested in ensuring citizens follow a specific set of beliefs, or, to put it as I often do, a government which looks down upon "the masses" and wishes to "save them from themselves". As the essays have progressed, I have come to believe this goal may be a bit unrealisitic, as the change was not as dramatic as my original thesis would have us believe, instead coming about bit by bit. Thus, I am now more interested in simply recounting events in terms of governmental change, with a focus upon the ever shifting ways in which the state, and the voters, have seen the public at large, and conceived the function of government. Hopefully, this will prove of some utility, or at least interest, to my readers. At the very least, it has been enjoyable, and sometimes enlightening, to write, so even if no one finds any value, it has not been a waste of time.
We broke off our last narrative in the fateful year of 1890, a year I had previously ("A Passing Thought") nominated as one of those points where we could claim the government had changed from largely free to largely unfree. Looking at the specific changes recounted, that may be a bit of a melodramatic description, but it certainly was a year in which the groundwork was laid for many changes which were made in the ensuing two or three decades, many of which changed many of the fundamental assumptions the public, and politicians, held about government and its role.
But we covered 1890 in great detail already, so it is now our task to look at the decade, or two decades, immediately following 1890, as those years, though not filled with as many precise changes to which we can point, or specific years to which events can be attributed, still saw fundamental changes in both political parties, changes which destroyed the party system which, though many historians disagree, had largely existed since the founding of the United States, and created the new political system which would dominate our politics, at least until the 1960's, and in many ways, would continue to the present.
Traditionally, the changes of the 1890's inaugurated the third party system, and some historians go even farther and find three or even four systems preceding the merger of the Populists and Democrats. In most cases, there break is drawn with the death of the Whigs and the birth of the Republicans, but some see earlier discontinuities with the dawn of the Jacksonian era, or even the shift from Federalist to Whig. A few even draw a very early line between the first two presidential terms, when party lines were yet ill-defined, and the beginning of the Adams presidency, when partisan positions began to be clearly defined.
Personally, though I agree the very early post-Constitution years lacked many aspects of later partisan politics, I find a great deal of continuity all the way from the adoption of the constitution through sometime in the 1890's. Admittedly, specific issues rose and fell, immigration went from unimportant to a central and contested topic, for example, or slavery rose from a contentious, but mostly ignored issue to the central focus of many elections, only to disappear once more after the war. However, while specific topics came and went, I find a consistent set of positions in the two parties from 1789 through 1890-1900, whatever name those parties might adopt.
On one side we have the Democrats (nee Democratic-Republicans) which fairly consistently favored decentralized power, strict interpretation of the restrictions upon the federal government, state autonomy (to whatever degree was acceptable in a given era), free trade, low taxes and tariffs, open immigration, and so on. Granted, even as early as the 1850's there were populist rumblings in some of the "farmers'" parties in the midwest and west, which though ostensibly Democrat had a somewhat different outlook, and some of the urban "machine" politics -- especially after large scale immigration gave them absolute security -- were more interested in graft and patronage than anything else, but for the most part, Democrats held to the positions outlined.
On the other side we had the opposition, first formed as the Federalists, later the Whigs and then Republicans. As I mentioned in other essays ( "The Political Spectrum", "The Civil War", "Noble Goals", "A Timeline Part Two"), these parties had an uncomfortable mix of beliefs, and their various components fit together less easily than even the often fragmented Democrats, but they did have one somewhat unifying belief, that being that the government needed to act to make things better. It might be the protectionist belief that the state needed to intervene in trade, banking and other matters, it might be the prohibitionist belief in shutting down taverns, it might be the nationalist belief in the need to control Catholics and immigrants, it might even be, a bit later, the reformer's belief that the state needed to protect the common man from his own bad choices -- or in many cases it might be someone who held two or more of these beliefs simultaneously -- but the Democrat's opposition from the very beginning, through the 1890's always seemed ready to use the power of government to intervene and make what they saw as improvements.
And it is for this reason that -- in a bit of history that might strike moderns as unusual -- the earliest reform movements came from the Republican party. Some of these fit well with the liberal vision of Republicans as racist brutes1, such as restrictions on immigration, first from Asia, later from southern and eastern Europe. There were also reforms such as prohibition movements. But Republicans also played a major part in early antitrust legislation, some early pro-labor efforts, cheap money efforts seen as being "for the little guy" and a host of other laws and regulations we would presently describe as liberal. In short, despite a strong presence of protectionist businessmen in the party2, there were also a number of early "Reform Republicans", who relied on the party's history of using the power of government to gain support for their reform agenda3.
As this could go on at great length, let us just say, with some exceptions, there were effectively two parties, a largely federalist and small government Democratic Party and an opposition party which supported intervention by the state, be it for protectionism, moralism or economic reform, said platform including the extension of the authority of the central government, placing limits on state autonomy, reducing protection of individual rights, and otherwise increasing the power wielded by the central authority, whatever the end goal might be. Of course, within both parties, there were regional variations, small groups with slightly different agendas, periods in which groups within the party pursued other goals and so on. But by and large, until the 1890's, this description is a fair, if broad, description of the US political system, if we ignore a handful of minor parties4.
I say this because in the 1890's all of that changed, and changed in a very significant way. As I mentioned earlier, there had been populist elements within some state parties since at least the Civil War, and likely earlier, especially in the west. And the urban parties began to include ever more industrial laborers, especially foreign ones, from about 1870 onward, many of whom brought with them more socialist political ideas from Europe. Normally, this might not be an issue, as anyone holding beliefs too far from the party platform would be denied positions of authority, or, if a local party drifted too far from the norm, it would be eliminated from the party. But in this era, thanks to machine politics in the large cities, many local politicians were indifferent to the beliefs of their constituents, and, thanks to Republican opposition to immigrants (and to a lesser degree Catholics), many regional Democratic parties had sinecures, as their voters had nowhere else to turn. Thus, the national party had little incentive, or ability, to eliminate these local parties -- especially as many party leaders still espoused the party line, whatever their constituents believed -- and the leaders of the parties had little interest in eliminating nonconforming voters. Thus, a strong populist movement began to grow within the Democrat party in several states, with an official, independent Populist Party growing up alongside it.
By the late 1880s', this party had become large enough to begin drawing national attention, and, at the same time, to convince the many populist sympathizers within the Democratic party their time had come. And so, between 1890 and 1900, the complexion of the Democrats changed completely. Gone were the days of free trade, gold money, federalism and small government. Of its original positions, only its support for immigration and opposition to prohibition remained. In all other regards, the Democrats became almost a carbon copy of the Republicans, at least in terms of their attitude toward government activism and the role of the state5. The party which had championed individual liberty, and insisted if government needed to intervene it was usually best handled on the state level rather swiftly came to believe in a strong central government, as well as rather liberal criteria for what justified state action.
Perhaps the perfect symbol of this change is to be found in Grover Cleveland, the last of the old Democrats. Cleveland was elected on a traditional Democrat platform, supporting gold, opposing unions, free trade and so on. However, after four years, the party had changed enough that he found himself out of office6. He was followed by a series of Republicans, including "trust buster" Theodore Roosevelt, and McKinley of tariff fame. And the next Democrat to follow him into the White House, many years later, was none other then Woodrow Wilson, which should give you some idea of how much the party had changed.
This change is noteworthy for any number of reasons, but what is most noticeable is that the change left voters with very little choice. In essence, the Democrats had become the watered down copy of the Republicans7, pushing their own reform agenda, only with greater tolerance for immigrants, and opposition to Prohibition8. The parties spent the next several decades trying to distinguish themselves from one another, to find a means to taint the opposition in the eyes of the public, and at times one or the other succeeded to a degree, but in truth, the parties had platforms, and fundamental philosophies of government, that differed very little. They might have had different justifications for their beliefs, but their views of the role of government, and of the interaction between government and the ordinary citizen, as well as government's role in the economy, were incredibly similar.
And thus, from the turn of the century, until sometime in the 1940's, there was effectively no party representing federalism, small government, non-intervention or anything else of the kind. The choice was between the nominally pro-business, though still interventionist, and strongly reform oriented, Republicans, and the nominally pro-labor, pro-farmer Democrats, who favored a very similar program of intervention. There remained a few differences. The Democrats were pro-immigrant, the Republicans favored higher tariffs. The Democrats favored more secular-based intervention, the Republicans more religious. But, in the end, there really was little difference. Once the Populists had merged with the Democrats, the parties began to strongly resemble one another.
What is interesting is how that near universal acceptance of intervention expressed itself. For example, while the twentieth century saw more acceptance of the early labor movement than had existed in the 19th century9, the early twentieth century also saw the deportation of communist and anarchist immigrants, the first real arrests on the basis of political expression10, and an environment which generally accepted government omnipotence as normal. It is not a coincidence that it was the following decade, the teens, that saw the creation of direct taxation and direct election of senators, both eliminating a degree of state autonomy11, along with the birth of the Federal Reserve, the first national laws restricting immigration, and a host of other authoritarian and centralizing measures.
However I am getting ahead of myself. Before the teens, the Great War, the League of Nations, the Federal Reserve and so on, there was the first decade of the 20th century, the era of Teddy Roosevelt, gunboat diplomacy, Upton Sinclair, muckrakers, the FDA and so on. Granted, this era flowed relatively seamlessly into the next, but before discussing the age of Wilson, it is important to look at the post-Cleveland "reform Republicans" and the nation they created.
Rather than spend too much time on any single event in the early twentieth century, let us look instead at the general change in the way government was operated, and how people perceived the role of the state. For example, the muck raking journalists, such as Upton Sinclair, and their role in generating public interest in the FDA and similar consumer protection measures12. In decades past, general claims of the sort that Sinclair espoused might have brought some indignation, but, more likely, unless they claimed specific real life abuses, they would have been largely ignored. And even specific claims, rather than calls for large government measures intended to protect us from nebulous evils, would have generated calls for criminal prosecution. Not in every generation or place, of course, but in general, prior to the 20th century, societal ills were either treated through the criminal justice system, or else were remedied by state action -- that is if people did not simply see them as regrettable truths about which little could be done. It was only with the 20th century that stories of social ills suddenly became calls to action, inspiring the creation of a number of massive, intrusive federal agencies. In the decade or two between 1890 and 1910, the public had undergone a massive change, and come to accept both a massively centralized federal government and also the philosophy which saw the role of government as being to protect us from every imaginable harm, not just threats to individual rights.
This desire to use the state to remedy all ills can be seen in the actions the government undertook13. For example, prior to the FDA, the quality of food and medicine was seen as an issue between the buyer and seller14. In earlier years, many people bought food of lesser quality, even of questionable safety, largely due to poverty. With increasing wealth, it became possible for safe food to enjoy widespread availability, but as with all transitions, there remained elements of the older system for a time, allowing some thrifty individuals to buy lower priced goods by picking through cheap goods for better quality bits. To the wealthy who set opinions, and even the middle class, now used to greater affluence, this seemed unacceptable, and they decided to remove this option and enforce rules mandating the quality of food. And thanks to the change in perspectives about government,the public at large had no objection to removing the option of individual choice, and instead imposing upon everyone their own requirements15.
A similar perspective drove the noted efforts to aggressively enforce antitrust laws and other regulations of business, stocks and banking.This was driven by a combination of forces, all of which agreed on two things, that, left to its own devices, the public would make a mess of things and the power of government could be used to remedy this situation. Now, some were motivated by the Reform Republican fear of business, and worries about businesses exploiting the common man, while others were driven by various mercantilist theories that imagined the market was somehow defective and needed repairs for business to thrive. And thus, whether approaching the matter from a largely pro-labor perspective, or from a pro-business one, the Republicans (and Democrats) of the era were united in endorsing the power of government as the solution to the problem. In fact, in many cases, the two even reached the same conclusions, for example, the case for breaking up trusts being simultaneously to protect the common man from the exploitation of the trusts while simultaneously correcting market imbalances and allowing competitors to level the playing field16. Once it was accepted that intervention by the state was a panacea, it was not difficult for all points on the political spectrum to begin calling for their own specific reforms, and, as with modern politics, often various groups were willing to support the measures of others, so long as it meant support for their own.
Which now brings us to the Great war and the years immediately before and after, during which several very significant pieces of legislation were passed, and the dangerous idea of one world government was first seriously introduced by a major world power. All of this came about largely as a consequence of the environment we have been describing, so there will be little need to look for the causes, but as these changes played such a tremendous role in things to come, let us stop for a moment and look at a few of them, specifically the Federal Reserve, the 16th and 17th amendments and the League of Nations. Afterward we shall look in a more general way at many other aspects of the Wilson years.
It is difficult to know how to approach the question of the Federal Reserve. So many crank theories center around our monetary system, that any complaint about it risks one being labelled a loon, or at least solidly on the political fringe. Even those who do not immediately dismiss you still have an alarming tendency to recite Keynesian absurdities about gold being an anachronism and our modern system somehow being scientific17. Among all the measures enacted by the proponents of big government and centralized authority, the only bigger success may be Social Security18. For, no matter what you think of the Federal Reserve, you must admit that America has been completely convinced that (1) gold based currency is impossible in a modern era, (2) government management of the currency is a necessity, (3) free banks result in financial chaos and (4) our present system is the only viable alternative.
And all of that began, at least in some sense, in 191719.
As it is such a contentious and involved issue, we will not be covering the Federal Reserve in detail. Instead I will simply point out the most significant aspects, the major ways in which it changed the economy and government.
First, it was a significant blow to federalism, along with the income tax. Because the system was based on creating money from government debt (as we shall discuss shortly), it allowed the federal government to sell almost unlimited quantities of debt. Granted, selling enough debt would have economic impact, but then again, selling "too little" was seen as deflationary and harmful, so not only did this system give the government a way to raise funds independent of the states, but it also essentially insisted the government spend a certain amount lest interest rates rise.
In addition to giving the central government funding independent of state control, it also removed measures traditionally controlled by the state, such as the declaration of bank holidays or passing of bank regulations20, and moved them to the federal government. While not formally eliminating the ability of states to intervene in banking matters, the centralized control and degree of federal involvement essentially made state regulation irrelevant, making matters of money and banking almost entirely the interest of the federal government.
Moving away from questions of federalism and division of power, the Federal Reserve was also a boon for both protectionists and reformers. For the former, the ability to issue credit, without any matching means to easily retire it, meant that the money supply would either remain fixed or grow21, there was simply no easy way to cause it to shrink, and thus, money would always be "cheap", which protectionists and populists both saw as in the interests of their constituents. The latter were equally delighted by the ability to manipulate interest and money supply. Though there was not yet anything called "Keynesianism" there were many theories similar to those Keynes would eventually propose, and so many regulators had an interest in using monetary manipulation to try to "fine tune" the economy, ensuring continual growth and low unemployment22.
Other than the Federal Reserve, there were two other measures which had a profound effect on federalism, state autonomy and the division of power. These are the 16th and 17th Amendments to the Constitution. The first allowed the federal government to create an income tax23, allowing it to directly tax citizens, circumventing the traditional state control over finances24. The second ended the state selection of senators, substituting popular election and making them representatives of the state populace rather than of the state government has had been intended. The importance of the former is recognized by many federalists, but not the latter. However, eliminating the voice of the state is quite significant. Where at one time senators were intended to act as brakes upon measures which would harm state interests, they now were as beholden to the public as representatives, and thus became just another representative of the public at large, as subject to whims and excessive enthusiasms as the other house. These two combined basically left the states with very little control over the federal government, which began the rather swift process of reducing states from independent partners to mere administrative units25.
Finally, let us jump ahead to the end of the Great War and look at Wilson's ill-fated dream of the League of Nations. The League, for lack of a better description, was essentially a proto-UN. Which is rather amusing, as conventional history books are quite open about discussing the weaknesses of the League, yet they completely ignore the fact that most of the same problems still exist in the modern UN.
The League was one of those bad ideas that continually appear and reappear, this one being the idea of a worldwide government. Granted, the League was not as prone to dreams of being a true government as the UN has become, yet it still was an early step at trying to push the centralizing trend beyond a single nation to the level of world government. Again, as with the Federal Reserve, the issue of world government is a complex one, requiring more space than we have here, and yet some of the most basic problems can be explained easily.
First, world government rests on one simply problem, how to handle bad government. Of course, those who promote a world government tend to also be those who have limitless faith in the state, and they must if they want a single government. However, more realistic types must ask, if the government is bad, if it does not meet the needs of many individuals, where do they go? It is bad enough to have a single national government, as it forces a "one size fits all" mindset on so many26 forcing the unhappy to leave the entire nation, but if we do it worldwide, where can you run?
Similarly, the single world government takes the other weakness of centralized government and makes it even worse. If we have a single government, how do we know if a measure is good or bad? If there are many states, we can look at, say, a communist nation and a free nation, and to some degree use them to compare the systems. Or we can see if a single state passes a measure, and good or bad things happen there that happen nowhere else, we can decide that the measure may play a part. But with a single world government, we can't tell what is due to a law, and what is just chance. Nor can we tell if a measure is good or bad, as there is nothing to which it can be compared.
There is more, of course, but those two arguments should give more than enough idea of why one world government is full of unrecognized dangers, and why it tends to appeal most to those with limitless faith in the benevolence of government.
There were other measures we should probably examine, such as immigration restrictions, but this is getting rather lengthy, and the end is not too far off, so let us leave the Wilson era, and look at the return of the Republicans in the "roaring twenties".
The 1920s are often portrayed as a pro-business era, in which the Republicans let business run wild, with the resulting crash. However, the 1920s were nothing of the kind, as can be shown by just two words: prohibition and tariffs. Prohibition alone shows it was hardly a laissez-faire wonderland. When the government tells a large percentage of the population that they cannot choose a course of action which violates no rights, because it is "bad for them", it is not a free government any longer. Likewise, when the state undertakes strong protectionist measures, there is no free trade. I could probably go on, but the simple truth is, the Republicans, like the Democrats, were not interested in freedom. They wanted to both force people to do things for their own good, to protect them from themselves, and also to enact laws to create general prosperity. The fact that the Republicans favored protectionist measures intended to help trade, while Democrats tended to more often support labor movements does not make one a proponent of freedom or big business. Both were interested in big government and intervention, they simply differed as to the means.
And even then, the difference was nowhere near as great as both Democrats at the time, and historians since, have tried to make it seem. The supposedly plutocratic Hoover responded to the crash of 1929 and subsequent depression with measures almost identical to those initial efforts FDR made, differing only in scope. Between tariffs, bailout, inflationary measures and the like, the two did very little differently form one another. And thus, it seems absurd to claim one was a friend of business and the other an enemy.
I am tempted to try to wrap this up quickly, summarizing the crash and depression, rushing through FDR and leaving off everything after him, but I think that would be unfair, having put in so much time on this series. Thus, I think, in order to get something posted, I will stop here, with the end of the roaring twenties, and will finish up this series by explaining the crash and the subsequent depression, take a detailed look at FDR's actions, and how they link to what we have already discussed, and then take us through the post-FDR world, through the Great Society, the reappearance of at least a minority supporting smaller government, federalism and free markets, the Nixon closure of the gold window, the results in the Carter era, and briefly look at everything following that, from the Reagan years and their true significance, the Bush and Clinton reactions, and the modern age of Bush and Obama.
I had really hoped to finish this all in this installment, but it is just too long. So please forgive me, I promise there will be just one more.
1. It may be useful to recall that the Republicans were also those who favored strong government intervention after the Civil War to benefit recently freed black slaves, so the image of Republicans as racists seems rather difficult to apply consistently. (Not that I accept this characterization for past or present Republicans. There certainly are individual racists in both parties, but I believe the Democrat slur is ill-founded, and I find the Democrats' condescending attitude toward minorities to be much more racist than many Republican actions they denounce. See "I Don't Get It. Actually, I Do, and It Is Horribly Insulting", "It Is All In How You Say It", "Eurocentrism? Racism? Liberal Traits All", "The Condescention of "Understanding"" and "The Racism of the Left".)
2. In some ways this is less inconsistent than some imagine. Easy money is pleasing to all creditors, and merchants and manufacturers are often deeper in debt than anyone other than the government, so easy money is hardly contrary to the wishes of many businessmen. Likewise, antitrust legislation is often beneficial to those facing large competitors, so the Sherman Act and its subsequent amendments, revisions and related laws was likely seen as potentially helpful by any number of more traditional Republicans in the late 19th century.
3. This does help demonstrate an argument I make regularly, that once we accept a given premise, someone will take it to its logical conclusion. ("Slippery Slopes", "No Dividing Line", "Harming Society", "You've Come a Long Way, Baby!", "In Loco Parentis", "Hard Cases Make Bad Law", "Tyranny Without Tyrants", "Some Thoughts on "Summerhill"", "In Defense of Zero Tolerance, or, And Examination of Law, Common Sense and Consistency", "With Good Intentions", "In The Most Favorable Light", "Inescapable Logic", "Recipe For Disaster", "The Endless Cycle of Intervention", "The Cycle of Compassion", "Grow or Die, The Inevitable Expansion of Everything" and "Inspections, Regulations and Bans" ) In this case, many of the reforms enacted were probably not pleasing to the older party members, but having argued for using government to improve business, pushing for removing restrictions on government power, and claiming that the power of the state could be used to "make things better", they had no counter argument to the reform agenda.
4. As minor parties never presented much hope of winning the presidency, or even more than a few -- if any -- seats in congress, throughout the 19th century, it seems fair to ignore them. Third parties may have raised issues that the major parties latched onto, or acted as spoilers in a very few elections, but, for the most part, studying US history without reference to any minority parties would still give a pretty accurate description.
5. See "Rethinking the Scopes Trial".
6. The Democrats, and the nation as a whole, were in a state of flux throughout the last decade of the 19th century, and nothing shows this better than the fact Cleveland was the only president to serve non-consecutive terms in office. There were a few times when a sitting president found it difficult to gain his party's nomination, so Cleveland was not alone there, but it is worth noting that in most of those cases, there was a significant change taking place either in the country or the party. See "Four Elections".)
7. In a lot of ways, this reminds me of the many moderate and centrist Republicans who fare so poorly trying to cast themselves as "Democrats Lite", adopting relatively liberal positions to get good coverage from the media and play to a wider audience, but then losing because those to whom such positions appeal can get better results from actual Democrats, rather than those imitating them.
8. There were a few other differences, but fundamentally there was little to distinguish the two parties. We can see this in the 20's and 30's when the two tried to distinguish themselves, with Democrats caricaturing Republicans as lapdogs of big business, and Republicans demonizing Democrats as supporting labor agitation and drunkenness, while in truth both supported largely similar agendas except for immigration and prohibition. For example, the differences between Hoover in 21-32 and FDR in 33-34 was more a matter of degree than anything else. Hoover tried the same tariffs, monetary manipulation and the rest as FDR, he just did not do it to quite the same scale, yet history continues to characterize Hoover as a supporter of big business and FDR as an enlightened friend of the worker.
9. Labor was still not completely accepted, and the government went back and forth in its attitude toward labor. It tended to be more accepting of moderate unions, and more impatient with communist and anarchist unions. Still, even with moderate unions, the state was at times inclined to resort to pre-20th century anti-union policies at times, though more out of convenience for the state or crucial industries than out of any antipathy to labor. It is similar to the fate of unions in the early stages of authoritarian revolutions, such as in communist nations (or under the first years of the National Socialist regime of Hitler). The state ostensibly supports organized labor, but should labor get int he way of state goals, they are treated with as much disdain as any other group of citizens. And since the demands of labor inevitably conflict with some state interest or other, labor is regularly treated in incredibly inconsistent ways.
10. In many cases these arrests were on some pretext such as vagrancy, or disorderly conduct, but it was in the early years of the 20th century that the practice of reading the declaration of independence or constitution as a form of protest was born. As those organizing labor, and promoting communism and anarchism were regularly arrested, this was seen as a way of baiting the authorities. (A practice which was revived in the 1960, during much less oppressive times, though the protesters of the age claimed the opposite.) I suppose, if you are so inclined, you could claim the sedition laws of the first decades of constitutional government also led to arrests on grounds of political expression, but they were used much less extensively than were various pretexts for arrest or deportation in the early 20th century.
11. Direct taxation gave the federal government a source of revenue independent of state approval. Granted, there had been some income from tariffs in the past, but the income tax was the first large scale source of regular and predictable income for the federal government. Similarly, by implementing the direct election of senators, they ceased to be the voice of the state government's interests and instead became another form of popular representation, like the representatives. See "Minimal Reforms".
12. See "Consumer Protection" and "Child Labor".
13. See my essays "Child Labor and the Industrial Revolution", "Mistaken Perceptions of the Industrial Age" , "Child Labor", "Gun Control, The FDA and Regulating the Law Abiding" and "Bar Fights, Riots and Drug Markets - The Limits of Law", in which I discuss both the common misunderstandings about the preceding years in the 19th century, and also why the supposed ills existed in the first place.
14. There are a few exceptions. For example, in many states local medical societies fought a war against other sources of medicine in the early- to mid-19th century, and thus there were some restrictions on medicines in states. This was nominally done to make medicine safe, but seems more likely an effort to close the market and ensure high profits. (See "Medical Regulations", "Medical Regulation II" and "Distorted Perspectives".) Before anyone accuses me of cynicism, recall the "safe" medicine started off including bleeding, which was replaced by mercury-based purgatives, and then "heroic minimalism" in which treatment largely consisted of doing nothing. True, the alternatives included a variety of herbal treatments, metallic "tractors" [metal rods used to somehow heal the body], sweating, and a number of other concepts neither more nor less useful than the time's "scientific" medicine.
15. Likely, given times, the ever falling demand for lower quality food would have driven it from the market entirely, without the FDA ever being created. As I have discussed in many places, the market itself enforces certain standards, and it is self-defeating to spend a long time building up a reputation, only to ruin it to "make a killing". It is government standards which allow fly by night firms to be assumed safe and make instant profits on subpar quality. In an unregulated market, it takes time to establish a reputation, and spending the time required to build the reputation needed to charge decent prices, only to ruin it for a quick return is self-defeating. Thus, regulation actually makes it easier to make a quick buck in unsafe food and drugs.
16. Please note I do not claim these beliefs are accurate representations of the market, far from it. (See "Competition", "Big Box Stores and "The Climate of Greed"", "Moral For Me, But Not For Thee", "Symmetry and Greed" , "The Problem of Antitrust", "The Problem With Microeconomics", "A New Look At Intervention", "Saving Us From Lower Prices", "In Praise of Contracts", "Greed Versus Evil", "Fairness and the Free Market", "Fear of Trade", "Exploiting Workers?", "Clarifying a Reality of Capitalism", "Put Your Money Where Your Mouth Is, Or The Logical Implications of Price Gouging Laws", "Capitalism and Its Consequences", "Greed", "Greed Part 2", "The Triumph of Good" and "Mergers and Acquisitions") However, they were and still are common justifications for breaking up firms seen as monopolies, or even simply large enough to "restrain trade", and thus played a part in the justification of large scale intervention at the open of the 20th century.
17. For some of the more popular arguments offered against free banking and an unregulated currency, see "Stupid Quote of the Day (January 7, 2012)", "Why Gold?", "Proof Keynes (and Krugman) Are Insane", "CNN's Keynesian Nonsense", "Inflation and Uncertainty", "Bad Economics Part 7", "Bad Economics Part 8", "What Is Money? ", "What Is A Dollar?", "The Gold Question, Not "Why?" But "When?"", "Bad Economics Part 19", "Fiscal Discipline", "Putting the Bull in Bull Market" and "The Rubber Yardstick" .
18. Social Security is finally beginning to draw some criticism as its inevitable bankruptcy becomes ever more obvious, but it is still largely embraced by much of the public which still sees it as "insurance", and believes their payments are not welfare but just "getting back what I paid in." For a look at this attitude, see "Not Quite True". See also "Social Security is Not Insurance", "Selling Yourself Cheap", "A True Conservative Platform" and "How Not To Argue About Social Security".
19. Admittedly, much of the pressure for government regulation of the banks began well before 1917, as described in the last installment ("A Timeline Part Two"), and part of the selling of government regulation was convincing the public free banks were a failure. Of course, many of the faults blamed on free banks were the result of earlier government intervention and not the free market, but the public very rarely makes that kind of distinction. ( "How To Blame the Free Market", "Of Wheat and Doctors", "The Inevitability of Bureaucratic Management in Government Enterprises", "Misunderstanding the Market", "Government Quackery", "Bad Economics Part 17", and "Bad Economics Part 10")
20. State banking regulation had been weakening since the Civil War, with more and more power being centralized in the federal government, mostly relating to reserve ratios and the like. However, states had still maintained the right to declare bank holidays, to determine what rates were usurious and so on. With the rise of the Federal Reserve, except for a few trivial matters, such as usury laws -- which remain state laws even today -- the federal government effectively assumed complete regulatory control. Though it was not truly until the creation of the FDIC that federal regulation completely drove out the states.
21. In theory the Federal Reserve could refuse to reissue money that came into its possession, or not issue money on the debt it had purchased (whatever the form, notes or bonds). However, in practice, the only real question was how much debt the Federal Reserve would buy at a given time, and how much additional credit would be piled upon that debt. In other words, not whether it would inflate, just to what degree.
22. At this date it was not yet "conventional wisdom" that inflation could cure unemployment (which is not true, though commonly believed -- see "Bad Economics Part 14", "Government as Indulgent Parent" and "Overly Simplified Economics and Confused Interpretations"), nor was there yet the erroneous belief that the "boom-bust cycle" was a feature of an unregulated market. However, it was not long before both became popular misconceptions, and even at this early date, many were already adopting early technocratic beliefs, such as the belief that monetary manipulation could ensure continual growth.
23. Though it is worth noting the federal government enacted an income tax during the Civil War without any such amendment. Which shows, if nothing else, that no amendment is needed, nor can any law stop the government, if the popular will does not feel strongly enough. (See "The Single Greatest Weakness" and "Bar Fights, Riots and Drug Markets - The Limits of Law" .)
24. As mentioned before, there was always a small amount of direct funding through duties and the like, but the vast majority of federal funding came via the states.
25. For a more detailed discussion of the impact of these two amendments see "Minimal Reforms".
26. See "An On Demand World" and "Why Government Fails".
This installment was much harder to write than the earlier two, and I am afraid it shows. In the earlier essays, though I knew the nation was headed toward a tremendous loss of freedom and the victory of a host of bad ideas and dangerous philosophies, there were at least some bright spots and a few individuals who fought for the right ideas. Sadly, in this decade, I had to make my way through six decades in which it seems everyone was pushing in the wrong direction, rushing headlong down the road to ruin. Yes, there is the relatively bright spot of Goldwater, and the modern "economic conservatives" and (some) libertarians from 1960 to the present, but even there it is mostly a tale of lost opportunities and slow successes lost swiftly to unworthy successors. (With a handful of modestly successful exceptions, such as the general recognition that deregulation is a valid position, a modest win if ever there was one.) And so it was very difficult to make it through the description of these many years. However, it had to be written, and so I toughed it out. But, I am afraid my reluctant shows, and, if so, I apologize.