Orestes Brownson and Socialism, VI: Betrayal

In 1908, Theodore Roosevelt's last full year as president, Orestes Brownson's vision of the direction that America could take in conformity with the universal moral values and political principles embodied in the United States Constitution seemed well on its way to realization. There were, of course, still serious problems, notably the rapid decline in small ownership and the lack of an adequate currency for the day-to-day consumer and business transactions of the economy. Under Roosevelt's leadership, however, the country exhibited every sign that these problems would somehow soon be solved — the efforts of Judge Peter S. Grosscup being notable in this regard.

Consequently, Roosevelt felt it was safe to retire to private life and forgo a third term as president. Matters were well in hand, and a possible second Civil War had been averted. Such was his personal prestige and popularity that Roosevelt was able to hand pick his successor, someone able to carry through the progressive agenda for which he had labored for eight years laying the groundwork.

The choice was between the governor of New York, Charles Evans Hughes, and William Howard Taft. Roosevelt did not give serious consideration to Charles Warren Fairbanks, his vice president. Hughes was a strong reformer, brilliant, and without obligations to the "Old Guard" of the Republican Party that had stymied much of the legislation Roosevelt needed for his program. William Howard Taft was a close political ally whom Roosevelt had been grooming for the position. Roosevelt went with Taft, who seemed to have the right spirit, making possibly the worst political decision of his career.

Taft seemed ideal. Personally honest, of great integrity, progressive in spirit, he also appeared to have a large measure of the good humor that Roosevelt radiated in public. Taft, however, lacked the steel behind Roosevelt's seemingly effortless joviality and camaraderie. Roosevelt used his personality as a natural assist to bring people around to his point of view. This was an ability that later superficial commentators and historians have denigrated, implying that taking advantage of it was somehow sly or dishonest, or that it was a phony act that Roosevelt assumed when it suited him. It was not, nor was it an act Roosevelt put on to impress people. It just happened to be the way he was — however useful it proved to be for him politically.

Taft, on the other hand, was a man who liked to be liked. Where Roosevelt used his natural personality to get others to accept him, Taft used his personality to get himself accepted by others. Taft thus tended to sublimate his better self in an effort to placate the Old Guard Republicans who (as might have been expected after eight years of Roosevelt's soft speaking with a big stick behind it) were intent upon regaining lost ground and purging the Republican Party — and the American Republic — of progressive elements.

This is not to say that the members of the Old Guard were being dishonest, any more than Taft was. Many of them truly saw no difference between Republican progressivism and Democratic populism — and no difference between populism and socialism. Stuck in a paradigm in which they firmly believed that all new capital could only be financed out of existing accumulations of savings, they saw only two alternatives: capitalism or socialism, whatever label might be put on either system.

The conservative Republicans honestly believed that there was no rational alternative to their brand of mercantilist capitalism. If private property were to remain protected as a sacred and natural right, that necessarily included (in their limited understanding) absolute exercise of property as well, with adequate government protections installed to maintain the status quo. Any limits on the exercise of property were thus, in their eyes, limits on the natural right to be an owner itself, and was tantamount to socialism.

With this understanding of private property, the Old Guard could not distinguish between Roosevelt's progressivism which, in the ancient tradition of the west, demanded limitations on the exercise of property in order to secure the right to be an owner to all, and Bryan's populism which, with its undermining of private property through manipulation of the currency, truly was a form of socialism. Consequently, with Roosevelt seemingly safely out of the way, the conservatives moved in as fast as they dared to overturn what they regarded — or professed to regard — as Roosevelt's dangerous socialist innovations.

Taft was tested almost immediately upon taking office. The progressive Republicans made an effort to unseat Joseph G. Cannon, the conservative Speaker of the House of Representatives. Taft, possibly in an effort to secure the powerful backing of Senator Nelson Aldrich, sided with Cannon against the progressives. Aldrich was powerful financially, being linked with J. P. Morgan and the Rockefellers. Taft might have believed (erroneously) that Aldrich's support was essential to secure the necessary reforms of the credit system after the serious weaknesses were exposed by the Panics of 1893 and 1907.

Soon afterwards, progressives in the Senate attempted to nullify the Aldrich amendments to the Payne tariff bill. Taft initially sided with the progressives, and then threw his support to Aldrich. After that, the president went on a speaking tour during which he sent such equivocal messages that the progressives became convinced that he had completely abandoned their cause. A contemporary political cartoon shows Taft supplicating a frowning Aldrich with folded hands and a whining, "Please, Mr. Aldrich!", while Roosevelt's portrait glares down, and the past president's "big stick" gathers cobwebs.

The "Ballinger Affair" (the "Pinchot-Ballinger Controversy") appeared to signal a definite change of heart on the part of Taft. Conservation of the country's natural resources and the national park system had been a primary concern of Roosevelt. Within weeks of taking office, Richard A. Ballinger, Taft's Secretary of the Interior, alienated three million acres of land set aside for conservation, returning them to private use. Taft had appointed Ballinger to replace Roosevelt's appointment, James Rudolph Garfield, son of James Garfield, the murdered president, soon after his inauguration. Conservationists took Garfield's removal as a clear sign that Taft was abandoning Roosevelt's policies.

Convinced that Ballinger intended to bring a halt to the conservation effort, Gifford Pinchot, chief of the United States Forest Service (a McKinley appointee), and other conservationists began efforts to have Ballinger removed from office. Earlier, Louis Glavis, Chief of the Portland, Oregon Field Division of the General Land Office, had accused Ballinger of improper interest in coal claim purchases in Alaska while Ballinger was Commissioner of the General Land Office, and claimed that Ballinger had interfered with investigations of coal claim purchases in Idaho.

While still Commissioner, Ballinger rejected Glavis's claims and removed Glavis from the investigation of possible anti-trust violations that implicated Ballinger. Pinchot arranged for Glavis to meet with Taft. Glavis detailed his findings in a fifty-page report to the president. Taft issued a letter exonerating Ballinger and authorizing Glavis's termination on the grounds of insubordination. At the same time, Taft tried to reassure Pinchot that his administration was fully committed to the cause of conservation.

Glavis went public, publishing an article, "The Whitewashing of Ballinger: Are the Guggenheims in Charge of the Department of the Interior?" (Colliers Weekly, November 1909.) In January of the following year Pinchot sent an open letter to Senator Jonathan P. Dolliver of Iowa, which was read into the Congressional Record. Pinchot, a personal friend of Roosevelt, praised Glavis's patriotism, rebuked Taft, called for an investigation — and was promptly fired.

Taft's final break with the progressives came in the Spring of 1910. A large number of progressive Republicans were coming up for reelection in the Midwest. The conservatives, headed by Aldrich, Cannon and Taft, mounted a well-funded campaign to prevent their re-nomination. The effort failed, and talk began among the progressives of forming a third party to challenge the Old Guard permanently.

In November of 1910 a secret meeting to discuss financial reform took place on Jekyll Island, Georgia. The meeting has entered conspiracy lore as the source of the proposal that led to the Federal Reserve System. The fact that the meeting was secret has assumed an importance far beyond its actual import. The reason for secrecy was to hide deliberations from the progressive Republicans.

Aldrich was by this time persuaded that he had Taft right where he wanted him — but had to step carefully as Taft (and Aldrich) still needed the support of the progressives to maintain power. Due to Taft's fumbling of the Ballinger Affair and the subsequent speaking tour, however, the progressives were hardly likely to be taken in. They were already on the warpath and were seeking more evidence (as if they needed any) of Taft's and the conservative's betrayal of Roosevelt's legacy.

And a betrayal it was. Fortunately, the "Aldrich Plan" that came out of the Jekyll Island meeting was never adopted. It had certain superficial similarities to the Federal Reserve Act, but there were a number of critical differences. The Aldrich Plan would have kept the money power centralized in the hands of a tiny elite in New York City. As Harold Moulton explained the relationship between the Aldrich proposal that came out of the meeting and the Federal Reserve Act of 1913,

"The task of framing a currency law was conceived as one of modifying the Aldrich bill in such a way as to meet the fundamental objections that had been raised to that measure and to perfect a banking organization that would provide the necessary centralization of power without vesting too much control in the hands of the "financial interests"; it was felt that a democratic spirit should pervade the organization and that it should be developed in accordance with the "genius of our institutions." The Democratic party thus reaped the fruits of the investigations that had been conducted by the National Monetary Commission and by other students of banking reform, as well as the advantage of the criticisms that had been made of the Aldrich bill; and especially it profited by the nation-wide discussion of the fundamental principles involved in banking reform. Great credit must, however, be given to the Democratic leaders for the efficient way in which the problem was handled and for the speed with which the bill was enacted into law." (Moulton, The Financial Organization of Society. Washington, DC: The Brookings Institution, 1930, 530-531.)

True, the Federal Reserve System enacted three years later conformed to the broad outlines of the Aldrich Plan, and several of the participants in the meeting took credit for being the guiding spirits of the central bank of the United States, but that was clearly an example of wishful thinking and self-glorification. As Moulton stated, "The Federal Reserve Act is an outgrowth of the Aldrich plan, though modified in numerous details and in some very important respects." As Moulton explained the Aldrich plan as the precursor to the Federal Reserve Act,

"The Aldrich plan, which was presented to Congress early in 1911, was discussed the country over perhaps more thoroughly than any other measure ever before Congress. The bill is generally conceded to have had many excellent provisions; many of them, indeed, subsequently became embodied in the Federal Reserve Act. But the prevalent distrust of Mr. Aldrich in consequence of his unsavory reputation on tariff matters, together with the fact that his proposal was undoubtedly a very strongly centralizing measure, made its enactment into law a political impossibility, especially after the coming of the Democrats to power in 1912." (Moulton, Principles of Money and Banking. Chicago, Illinois: The University of Chicago Press, 1916, II.261.)

The plan of the Federal Reserve System was based on the Reichsbank and the banks of the constituent states of the German Empire. This came from information gathered during Senator Aldrich's investigative trip to Europe in 1908, not anything that was developed at Jekyll Island. At most, all that the Jekyll Island meeting participants could in honesty claim credit for was the decision to use the Imperial German system as the model for the new central bank of the United States. As Moulton noted,

"The Federal Reserve Act is a substantial improvement over the Aldrich plan. It should be chronicled here that the Federal Reserve Act is not a mere plagiarism of the Aldrich plan. In certain fundamental respects the new law is markedly different from and markedly superior to the Aldrich plan . . . . Subject to a great deal of hostile comment by the financial and business press during the period of its discussion before Congress, after passage the law very quickly became recognized at its true worth as the most constructive piece of legislation that had ever been placed upon the American statute-books. For once, at least, a vitally important, though technical, question had been resolved into its fundamental issues through public discussion, and in this instance a measure emerging into law did represent the best constructive thinking of the nation." (Moulton, The Financial Organization of Society, op. cit., 531-532.)

That was to come, however. In the meantime, Taft and his new guides and mentors in the conservative faction of the Republican Party had to face the ire of Theodore Roosevelt, newly returned from Africa and Europe.

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