The Relics of Intervention: 1. Populism
APRIL 01, 1982 by CLARENCE B. CARSON
Dr. Carson has written and taught extensively, specializing in American intellectual history. He is the author of several books and a frequent contributor to The Freeman and other scholarly journals.
There is a story of World War II vintage which went something like this. It is about a particular bench on an army post, in Hawaii, I think, and was supposed to have taken place in the early 1940s. It seems that each day the guard whose rounds took him past the bench was issued a special order not to allow anyone to sit on the bench. Someone—probably an Officer of the Day who had nothing better to do once he had posted the guard—took it into his head to try to find out why no one was permitted to sit on the bench. It turned out that during World War I, some twenty years earlier, the bench had been painted. On the day it was painted a special order was issued to prevent anyone from sitting on wet paint. The paint had long since dried, but the order remained.
The order was a relic. A relic is something that remains from the past. Ordinarily, it refers to something of great age or antiquity, but age is not all that essential. By extension, at least, a used tea bag may be a relic from a cup of tea. The remains of a deceased person may be relics. That gets nearer to the heart of the matter. A relic is something out of which the life is gone, if it ever had life. It is the leavings of something. It may be retained as a keepsake or memorial. Or, it may survive only because no one has gone to the trouble to dispose of it, such as, decrepit buildings on old farm sites. Or again, relics may be the remains of something brought into being out of enthusiasm, which never were effective, but which survive because they have been kept going by those who saw it to their advantage to do so.
It is in this latter sense that I use the phrase, “relics of intervention.” By “relics” I mean the vast assortment of government programs, policies, regulations, controls, prohibitions, enterprises, bureaus, offices, commissions, and departments which have resulted from government intervention in the economy and lives of Americans over the past seventy or eighty years. I mean the huge regulatory bureaucracy which has been brought into being to enforce the intervention. I mean, to name a few, the Interstate Commerce Commission, the National Labor Relations Board, the Federal Communications Commission, the Department of Health and Human Services, the Council of Economic Advisers, the Federal Trade Commission, the Federal Power Commission, the Securities and Exchange Commission, and all those other bodies and persons who intervene in various ways.
They are relics, in the first place, of nineteenth-century ideas born in the heated imaginations of utopians, revolutionaries, and reformers. It will be the burden of what follows to show that while some of the ills that reformers decried may have been real enough, the programs involved an enthusiasm for the benefits of government intervention in society and in economy warranted neither by history nor reason. They are relics, in the second place, because the shaky premises and fallacies underlying them have been exposed in land after land time after time in the twentieth century. Most of the interventionist ideas antedated the Bolshevik Revolution and the numerous socialist experiments in the twentieth century but came from the same fount of ideas. They are relics, in the third place, because they obstruct enterprise, strangle initiative, make it exceedingly difficult for governments to have balanced budgets, and have fastened upon us an inflation which is destroying the value of the money.
The History of Intervention
The overall purpose of this study, however, is to place the whole body of the interventions, or so many of them as can be considered, in historical perspective. Much as the inquisitive soldier sought for the origins of the special order about the bench, so it is the purpose here to examine the genesis and development of the interventions. There is some evidence of a growing awareness that much of the intervention is today counterproductive. To unravel the skein of intervention may help in making an evaluation of this. It is true that many of the interventions are still very much a part of the activities of government. It might be supposed, then, that they are not relics. It does not follow. The last soldier who guarded the bench preventing anyone from sitting on it may have done so as vigorously as the first.
Populism is a good place to start the investigation. Not because populism was the first movement toward this type of government intervention. Nor because the ideas advanced by the Populists originated with them, for they did not. Not even because the grievances alleged were newly minted by them. As a matter of fact, the ideas, the alleged grievances, and even political movements to advance them preceded the Populists.
Rather, the Populist movement makes a good starting place because for the first time the interventions they proposed began to make some political impact. Not only did the Populists actually get candidates elected to office in several states, but they also played an important role in the shift of the Democratic Party toward intervention. Eventually, too, some of the particular programs they pushed were passed into law. In short, some of the relics of intervention come to us by way of the Populists, however indirectly. It is important, too, to examine some of these ideas in their crude formulations, for by so doing we can judge the quality of the materials from which interventionist measures were made.
The Populist, or People’s Party, had only a relatively short period of political activity. It was brought into being by action in several states in 1890. It reached a peak of national political activity in 1892, when its presidential candidate, General James B. Weaver, received over a million popular votes and 22 electoral votes. Its denouement came four years later when the Populists nominated the Democratic candidate, William Jennings Bryan, as their presidential candidate also. Its vigorous political activity, then, was concentrated in a period of six years.
The People’s Party was an instrument mainly of the Farmer’s Alliances, which were organized by states and divided into Northern and Southern federations. However, they drew reformers and radicals from many other organizations, or none, into the People’s Party. For example, at the Topeka Convention in 1890, in which the People’s Party was organized, for Kansas anyway, the delegates consisted of “forty-one Alliancemen, twenty-eight Knights of Labor, seven Patrons of Husbandry, ten members of the Farmers’ Mutual Benefit Association, and four single-taxers.” To put it another way, the Populists drew into their ranks farmers with a bent for collective action, statists who sought redemption through government action, industrial unionists, those with some particular panacea for the ills of the people, hopeful politicians, and discontented ones eager to blame their ills on those in power.
While the Populists had a considerable variety of programs and proposals, what linked most of them with one another was their belief in a monetary solution to their main problems. The Populists were monetarists. They held that the quantity of money in circulation was vital and crucial to general prosperity. It may well be that John Maynard Keynes devised the most complex and sophisticated justification for government induced inflation, but inflationist panaceas were around long before he was born. In the long perspective of history, Keynes’s theory was just another set of wrinkles on an idea already hoary with age.
An Early Monetarist
The earliest monetarist proposal made in America, known to the present writer, was the one by Benjamin Franklin in 1729. Pennsylvania had some paper currency at the time, but Franklin argued that if the amount of it were greatly increased it would facilitate trade and contribute greatly to the prosperity of the colony as well as the mother country. Thus, his argument con tained the gist of the notion that the quantity of money in circulation is a prime ingredient in prosperity.
However, an historian of populism traces the Populist idea from an obscure writer of the 1840s, Edward Kellogg. He had been in business in the 1830s but was ruined following the Panic of 1837. Since Jackson’s Specie Circular had precipitated that crisis, Kellogg concluded that fiat money would be the solution to the problem. He set forth his thesis in 1849 in a book with this interesting title: Labor and Other Capital: The Rights of Each Secured and the Wrongs of Both Eradicated. Or, an exposition of the cause why few are wealthy and many poor, and the delineation of a system, which, without infringing the rights of property, will give to labor its just reward. In short, if government would just cause enough paper money to be issued everyone could be paid the amount each ought to have.
Kellogg’s ideas continued to be spread after the Civil War, and were eventually taken up to serve as the basis of the Greenback-Labor Party. In the meantime, of course, the paper money enthusiasts had been stimulated by the Greenbacks issued by the government during the Civil War. However, when these began to be redeemed in gold and national bank notes retired, when prices began to fall, the monetarists began to gain some popular following.
Two other things conspired to whip up their energies. One was the “demonetization of silver” in 1873rathe stopping of the minting of the silver dollar—which went unnoticed and unchallenged at the time, but was later taken up as a political cause and became known as “the Crime of ‘73.” The other development was the discovery of large quantities of silver in the West. Unlimited coinage of silver became an inflationist cause as well as that of getting the government to issue paper money. In these matters, the People’s Party was successor to the. Greenback-Labor Party of an earlier decade.
At heart, however, the Populists were not silverites. They were inflationists and, for the moment, unlimited coinage of silver would be inflationary, and they were for it. But their true love was paper money, made legal tender by government, and issued in sufficient quantities to raise prices and keep them high. In our time, caught as we are in the throes of inflation, their idyllic vision of the possibilities of inflation is unlikely to captivate most of us. But it needs to be revisited, because it underlay the inflationary thrust which has brought us to our present impasse.
The Populists tended to attribute all economic ills to the shortage of money. Here, for example, are the ills which Sarah Emery attributed to the demonetization of silver: “Language fails in a description of the blighting misery that desolated the country . . . . From the demonetization of silver, in 1873, to its re-monetization in 1878, may well be called the dark days of the Republic. Bankruptcies and financial disaster brought in train their legitimate offspring, and the statistics of those and the ensuing years are voluminous with the most startling and loathsome crimes; murder, insanity, suicide, divorce, drunkenness, and all forms of immorality and crime have increased from that day to this in the most appalling ratio.” Apparently, contraction of the money supply could be blamed for everything except, possibly, earache, chilblain, and halitosis.
Not all Populists were so imaginative as Mrs. Emery in the ills they attributed to constriction of the money supply, but they all agreed it had drastic consequences. Ignatius Donnelly had a character in one of his novels describe the impact this way:
Take a child a few years old; let a blacksmith weld around the waist an iron band. At first it causes him little inconvenience. He plays. As he grows older it becomes tighter; it causes him pain; he scarcely knows what ails him. He still grows. All his internal organs are cramped and displaced. He grows still larger; he has the head, shoulders and limbs of a man and the waist of a child. He is a monstrosity. He dies. This is a picture of the world of today, bound in the silly superstition of some prehistoric nation. But this is not all. Every decrease in the quantity, actual or relative, of gold and silver increases the purchasing power of the dollars made out of them; and the dollar becomes the equivalent for a larger amount of the labor of man and his productions. This makes the rich man richer and the poor man poorer. The iron band is displacing the organs of life. As the dollar rises in value, man sinks. Hence the decrease in wages; the increase in the power of wealth; the luxury of the few; the misery of the many.
Such claims as these informed the famous last sentence of William Jennings Bryan’s peroration to the Keynote Address at the Democratic Convention in 1896: “You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold.”
An Ever-Normal Dollar
What Donnelly, and other Populists, failed to point out, of course, is that prices are the means by which the supply of money is adjusted to the supply of goods. There is no “iron band” or “cross of gold” if prices are free to fluctuate. It is true that long term debts may be more difficult to retire if the money supply is contracted, and that, if creditors could get them paid off at face value, not very probable, they might be considerably enriched. It is equally true that if the money supply is increased, creditors may lose and debtors gain. These are better arguments against long term indebtedness, however, than for anything else, so far as I can see.
If their more complex analysis is to be taken seriously, what the Populists apparently wanted was a dollar that did not fluctuate in value. They were affronted by the notion that a dollar might buy a bushel of wheat one year, while fifty cents might buy a like bushel the next year. They wanted an “ever normal dollar,” so to speak. They did not want prices, at least of labor and farm products, to fluctuate in the market. We might suppose that they would have advocated taking the most direct route to their goal, by way of price controls, but the thought may not have occurred to them.
Instead, they proposed a monetary solution. They particularized their proposal in what is known as “The Subtreasury Plan.” This Plan was devised especially to deal with farm prices. The argument was made that farm prices immediately following harvests are likely to be at the lowest point during the year. What farmers needed, they reasoned, was some means of holding on to their crops until prices would rise. Governments must intervene, they argued, to make this possible. Local governments should donate the land and build the structures for storing the crops. The United States government should then intervene by lending up to 80% of the current value of the crops to the farmers. The money lent would be created by issuing paper money which the government would declare to be legal tender. Somehow, this paper money would be secured by warehouse receipts which would have to be redeemed within a twelve month period. (How all this would work out is by no means clearly set forth in the Plan.) Populists claimed that this would make plenty of money available when the crops were harvested, and that the amount of money would be reduced in the course of the year as it was used to buy the crops.
Whether the Plan would have worked as billed need not concern us. Probably not, but the important point about it was that it tied an inflationary scheme to the agricultural situation, helping to sell many farmers on inflation. But however vigorously some of the Populists might push the Subtreasury Plan, it was government induced inflation they were selling in the final analysis. And inflation would cure the ills of mankind.
If there were only an international paper money, Ignatius Donnelly said, “The world, released from its iron band, would leap forward to marvelous prosperity; there would be no financial panics, for there would be no contraction; there would be no more torpid ‘middle ages,’ dead for lack of currency, for the money of a nation would expand, pari passu, side by side with the growth of its population. There would be no limit to the development of mankind, save the capacities of the planet; and even these, through the skill of man could be increased a thousand- fold beyond what our ancestors dreamed of. The very seas and lakes, judiciously farmed, would support more people than the earth now maintains. A million fish ova now go to waste where one grows to maturity.” A bountiful paper money would apparently change all that.
Call for Intervention
But the Populists had more than one string to their bow. Most of them were monetarists, at least the leaders were, but there was something broader than that impelling them onward. Many historians have treated the Populist movement as if it were simply the offspring of agricultural (and perhaps, industrial worker) discontent. Discontent there undoubtedly was, but it only provided the fertile ground for the sowing of an idea, not the idea itself.
The Populist leaders were under the sway of an idea. The idea, when its trappings are removed, is this: That if government will only intervene in the economy on the side of “the people,” i.e., farmers and industrial workers, it can cure the ills besetting mankind. As Donnelly put it, “We have but to expand the powers of government to solve the enigma of the world . . . . There was a time when every man provided, at great cost, for the carriage of his own letters. Now the government . . . takes the business off his hands. There was a time when each house had to provide itself with water. Now the municipality furnishes water to all . . . . These hints must be followed out. The city of the future must furnish doctors for all; lawyers for all; entertainment for all; business guidance for all. It will see to it that no man is plundered, and no man starved who is willing to work.
Jacob S. Coxey, leader of “Coxey’s Army” in 1894, declared, in a speech written to be delivered to Congress, but never delivered: “We are here to petition for legislation which will furnish employment for every man able and willing to work; for legislation which will bring universal prosperity . . . . We have come to the only source which is competent to aid the people in their day of dire distress.” Lorenzo Dow Lewelling said, “I claim it is the business of Government to make it possible for me to live and sustain the life of my family.”
Some contemporary critics saw the socialist animus behind the movement. A contemporary historian pointed out that “Populists may claim, as many of them do, that they are not socialists, and that they are opposed to socialism; the fact remains that their attitude is socialistic. Their demands for government interference for the correction of evils are socialistic. They believe that government can do better for individuals, in many cases, than the individuals can do for themselves. Furthermore, their proposals are the very ones advocated by socialists.”
Signs of Socialism
After the Democrats had adopted a Populist leaning platform in 1896, Archbishop John Ireland of Minnesota deplored the “spirit of socialism that permeates the whole movement which has issued from the convention at Chicago.” The Catholic bishop of Omaha denied that he called Populists anarchists. “But I did say,” he declared, “and I now say, that Populists, Anarchists, and Communists must not be permitted to destroy the financial credit of our country.”
Most Populists did not, of course, avow their socialism. Henry Demarest Lloyd, who was both a Populist and an avowed socialist, expressed his irritation about the refusal of others to admit it in a letter to Edward Bellamy in 1896. “The movement we are in,” he said, “is International Socialism . . . . Why not recognize it and say so.” Bellamy’s utopian novel, Looking Backward, published in 1888, had such an impact that one observer at the Populist Convention in 1892 declared that readers of his book “were the brains of the convention.” But the clubs formed to spread the word from Bellamy were called Nationalist Clubs.
There can be little doubt that Populists were collectivists. It comes through rather clearly in the language that they employed, even if their intent to use government for their ends be set aside. In a speech in 1894, Lorenzo Dow Lewelling said:
We have come here today pleading for truth against error. Men are nothing in a great contest of the people like this. It matters not who is the leader so that all the people stand together united for the great principles of humanity.
James B. Weaver, Populist presidential candidate in 1892, made his collectivist position clear enough, when he said: “Capital possesses one thing which labor does not—ready cash. They will not hesitate to make the best possible use of it. But labor possesses that which capital does not—numbers. They should be made effective.”
A Class Struggle
There can be no doubt that the Populist programs were advanced in the most blatant class terms. The struggle for which they girded themselves was of the masses with the classes, or as Populists were most apt to characterize it, “the people” against “the interests.” A hundred examples could be given, but this excerpt from a speech by Mary E. Lease in 1890 will have to suffice to give the flavor of so many others:
Wall Street owns the country. It is no longer a government of the people, by the people and for the people, but a government of Wall Street, by Wall Street and for Wall Street. The great common people of this country are slaves, and monopoly is the master. The West and South are bound and prostrate before the manufacturing East . . . . Kansas suffers from two great robbers, the Santa Fe Railroad and the loan companies. The common people are robbed to enrich their masters . . . . There are thirty men in the United States whose aggregate wealth is over one and one- half billion dollars. There are half a million looking for work . . . . We want money, land and transportation. We want the abolition of the National Banks, and we want the power to make loans direct from the government. We want the accursed foreclosure system wiped out . . . . The people are at bay, let the bloodhounds of money who have dogged us thus far beware.
But the best evidence of Populist’s beliefs is in the various platforms that they drew. That they were for government intervention, that they tended to favor government ownership, and that they were monetarists, comes out in every one of them. One peculiarity of their platforms is worth noting. They were given to prefacing their planks with the phrase, “We demand.” This phrase occurs in the Farmer’s Alliance platforms which antedate the formation of the People’s Party and may well have been a “relic” carried over when they organized politically. At any rate, the People’s Party platform of 1892 is the penultimate one, and these excerpts from it recapitulate the substance of their demands. The 1892 platform was largely the work of Ignatius Donnelly of Minnesota. It read, in part:
We demand a national currency, safe, sound, and flexible, issued by the general government only, a full legal tender for all debts, public and private, and that without the use of banking corporations, a just, equitable, and efficient means of distribution direct to the people.
1. We demand free and unlimited coinage of silver and gold at the present legal ratio of 16 to 1.
2. We demand that the amount of the circulating medium be speedily increased to not less than $50 per capita.
3. We demand a graduated income tax.
4. We believe that the money of the country should be kept as much as possible in the hands of the people, and hence we demand that all State and national revenues shall be limited to the necessary expenses of the government, economically and honestly administered.
5. We demand that postal savings banks be established by the government for the safe deposit of the earnings of the people and to facilitate exchange.
Transportation being a means of exchange and a public necessity, the government should own and operate the railroads in the interest of the people. The telegraph, telephone, like the post-office system, being a necessity for the transmission of news, should be owned and operated by the government in the interest of the people.
The land, including all the natural resources of wealth, is the heritage of the people, and should not be monopolized for speculative purposes . . . . All land now held by railroads and other corporations in excess of their actual needs . . . should be reclaimed by the government and held for actual settlers only.
The Populists also expressed “sentiments” in favor of such measures to make the government more popular as the secret ballot, the direct election of Senators, restriction of Presidents to a single term, and the use of the initiative and referendum to obtain legislation. For organized labor, they favored ‘shorter hours, immigration restriction, more stringent enforcement of restrictions on contract labor, abolition of the Pink-erton detective system, and, for flavor, “we condemn the recent invasion of the Territory of Wyoming by the hired assassins of plutocracy, assisted by Federal officers.”
It would be an exaggeration, of course, to attribute all the programs since enacted which bear some resemblance to theirs to the Populist impetus. After all, most of the ideas that the Populists advanced did not originate with them. Moreover, the Populists themselves were never able to enact into law a single program of theirs on a national scale. Even so, they did give impetus to a surprising number of ideas which have since been articulated in one way or another into the framework of government activity and intervention. To see this, it helps to focus on the goals of their programs rather than sticking too closely to the specifics of their recommendations.
Take their monetary program, for example. Neither the Populists, nor the Democratic silverites ever managed to get free coinage of silver. But it would be a mistake to suppose that was anywhere near the ultimate goal. In the first place, they wanted to get off the gold standard. In the early and mid-1890s, free coinage of silver would have accomplished that in short order. This was well illustrated by the ill-fated Sherman Silver Purchase Act of 1890.
While this act did not provide for “free coinage,” it did authorize large scale purchase of silver by the Treasury, and the certificates issued for it were redeemable in either gold or silver. Since gold was undervalued at the prevailing ratio, a run on gold was precipitated, and a money panic ensued. The Cleveland Administration was only able to meet its gold obligations by extensive gold purchases and, ultimately, by getting the Sherman Act repealed. Free coinage at a ratio of 16:1 would have driven gold out of circulation quickly and decisively.
But silverism was only a tactic for the Populists. What they sought was to be rid of gold so as to have a flexible paper money system under the control of the government. Almost everything they sought has long since been achieved. The movement toward a flexible currency bore fruit first in the Aldrich-Vreeland Act in 1908, but that was shortly superseded by the much more thorough Federal Reserve System. Gold has long since ceased to be legal tender and been replaced by paper money. On one point, the Populist goal was apparently thwarted, that of the abolition of the national banks. But regulation and control has effectively brought them under government power. The Populists did not envision the possibilities of government regulation, and, in that sense, they were not precursors of a major species of government intervention.
Many other ideas advanced by the Populists have also been enacted. The graduated income tax has been a fixture since the early twentieth century. A Postal Savings Bank was inaugurated. Direct election of Senators became the law of the land. An 8-hour work day and a favorable cli mate for labor unions became government policy. The government has not generally taken over by ownership the means of transportation and communication, but it has achieved much the same end by regulation. Land has not been directly appropriated by government on a class basis from corporations, but the Federal government is today reckoned to be the largest landowner in the world outside Communist countries, and the power of eminent domain is now exercised to take private property from some who are not using it in an approved fashion to turn it over to others. Even Ignatius Donnelly’s vision of government paying legal and medical bills is now being realized in such programs as the Public Defender system and Medicaid.
Equally, or more, important there is a residue of ideas from populism which is still very much alive. There is the notion that government should intervene on behalf of farmers, industrial workers, and the poor. There is the belief in monetarism and the associated quantity of money theory. And, above all, the idea that wealth and corporate power are a menace to the Republic is so much alive today that it is more apt to be heard on Madison Avenue than from the stump in Kansas.
In short, relics of populism abound today. Occasionally, one of them is decently interred. Crop loan programs, for example, have been largely abandoned. That financial dinosaur, the Postal Savings Bank, has finally been phased out. But for the most part, the relics of populism are still very much with us. The depredations of inflation are now worse than ever. The graduated income tax is an almost immovable fixture. Corporate earnings are subject to virtually confiscatory taxation. Labor unions have grown increasingly strong among government employees themselves.
But there is much more to the story of the relics of intervention than the early advancement of programs and ideas by Populists. Those had to become law, and many other interventions were advanced. These, too, need to be examined.