At the end of the 19th century the United States was, by any measure, in serious danger. By 1900 the two camps of capitalism and socialism were stalemated. Attitudes had solidified to the point where compromise, even reaching a reasonable accommodation, seemed impossible. As Herbert Knox Smith recalled years later,
"The years from 1901 to 1909 were the prologue for 1910 to 1914. In 1900 the surface of American life was, as it were, hardening, was growing less plastic. Dangerous division lines were opening from the pressures beneath, splitting the unity of the nation. The great trust movement was in full force, sweeping into a few hands special industrial privileges, the control of natural resources, and decisive advantages in transportation. Individual opportunity and the open highways of commerce were narrowing. Great corporations were considering themselves above the law, with the cynical but increasing concurrence of the public. A sinister atmosphere was gathering, menacing to American initiative and American ideals." (Herbert Knox Smith, "Introduction," Social Justice and Popular Rule, Volume XVII of the Complete Works of Theodore Roosevelt. New York: Charles Scribner's Sons, 1926, xi.)
With the reelection of William McKinley on the wave of prosperity that followed the bumper crops of 1897-1898 that ended the Great Depression of the 1890s, the capitalists believed they had the upper hand — an opinion shared by the socialists. In McKinley, the capitalists had a "safe" man who, while not dishonest or corrupt, could be counted on to do the "right" thing . . . for the capitalists, in the sincere belief that it was best for the country.
Ever since the Pullman Strike of 1894 "Labor" had felt itself under siege, with the combined strength of the government, finance, industry and commerce ranged against the working man and woman. An uneasy alliance still existed with populism, but populism was, where not considered just another form of socialism, a spent force politically and, with the growing economic disenfranchisement caused by the decay of small ownership, economically as well. There was a definite air of desperation throughout the country.
At the same time, however, there was a wildcard in the deck. McKinley's vice president was a man with known reforming views, a "progressive Republican" by the name of Theodore Roosevelt. Roosevelt had been selected by the Old Guard Republicans as vice president in order to get him safely out of the way. The ultra-conservative Old Guard Republicans were suspicious of the young New Yorker because of his demonstrated reforming spirit. The ultra-radical socialists were suspicious of the hero of San Juan Hill because he was a Republican of a wealthy family. Both groups evidently felt that the potential problem Roosevelt represented was shelved for at least four years, possibly more, as the vice presidency was frequently the road to political oblivion.
Then came McKinley's assassination and Roosevelt's sudden ascension to the presidency. While it took a great national tragedy to bring about, Roosevelt quickly demonstrated that he was the right man in the right place at the right time. It is quite possible that no other man — or woman — in the United States combined the prestige, charisma, intelligence and sheer ability that gave Roosevelt exactly what was needed to avert what threatened to become a second, and even more vicious civil war.
Extremists on both sides were increasingly uncomfortable with Roosevelt as time went on. The accusation that "TR" stood for "Theodore Rex" came from both ends of the political spectrum. There was, nevertheless, something in his personality that resonated well with the vast American middle. This was what was called in the late 20th century "the Silent Majority," those who, ironically, make the news and keep the country going, but rarely get reported.
Roosevelt used his prestige wisely and effectively. He laid the groundwork for breaking up the trusts, and recognizing and for protecting of the rights of propertyless workers, farmers, and small businessmen. He was handicapped to a great extent by operating from within a paradigm dictated by the currency principle (although he seemed to have an inherent understanding that there was something profoundly amiss in the financial system), but — even given that debilitating constraint, he never forgot the principle that all men have rights, not just those currently popular with the government or the public. As he said a decade later when the danger from both individualists and collectivists had resurfaced,
"If I could ask but one thing of my fellow countrymen, my request would be that, whenever they go in for reform, they remember the two sides, and that they always exact justice from one side as much as from the other. I have small use for the public servant who can always see and denounce the corruption of the capitalist, but who cannot persuade himself, especially before election, to say a word about lawless mob-violence. And I have equally small use for the man, be he a judge on the bench, or editor of a great paper, or wealthy and influential private citizen, who can see clearly enough and denounce the lawlessness of mob-violence, but whose eyes are closed so that he is blind when the question is one of corruption in business on a gigantic scale. Also remember what I said about excess in reformer and reactionary alike. If the reactionary man, who thinks of nothing but the rights of property, could have his way, he would bring about a revolution; and one of my chief fears in connection with progress comes because I do not want to see our people, for lack of proper leadership, compelled to follow men whose intentions are excellent, but who eyes are a little too wild to make it really safe to trust them." (Theodore Roosevelt, "The New Nationalism," Social Justice and Popular Rule. New York: Charles Scribner and Sons, 1926, 18.)
The problem is that Roosevelt was, in common with almost everyone else since the conquest of the global financial system by the assumptions embodied in the British Bank Charter Act of 1844 and the National Bank Act of 1863, a slave to past savings. He did not see any way that new capital could be financed except by cutting consumption and accumulating money savings. Obviously this required a class of persons, necessarily small, who controlled sufficient wealth to be able to set sufficient cash aside without suffering deprivation. As technology advanced and new capital became increasingly expensive, the concentration of wealth must, it was believed, become increasingly greater.
While an orientation based on the banking principle would have solved this dilemma, Roosevelt was not an economist or a financier. Consequently, like any good leader, he went with experts he felt he could trust — and what the experts were telling him was that new capital formation requires reductions in consumption in order to accumulate sufficient financial capital to bring new productive capital on line, and thus concentration of capital ownership: "Combinations in industry are the result of an imperative economic law which cannot be repealed by political legislation." (Ibid., 12.)
Unfortunately, the natural tendency of a reliance on past savings is to force an economy into capitalism (concentrated private ownership of capital) or socialism (State ownership or control of capital). A remarkable and very strong leader can, for a time (and if he or she faces no solid opposition from special interests), hold back these tendencies by judicious use of the State's power to regulate commerce. By this means, even within a system based on past savings, the leader can ameliorate the harshness of capitalism and the false and forced equalities of socialism without succumbing to the temptation to impose direct control of the economy and establish the Servile State.
Given the reliance on past savings to finance new capital formation, however, and the consequent rise of capitalism and socialism, most people are ill-prepared to recognize the sometimes subtle difference between regulation and control. From a systemic point of view, internal controls by means of which the system regulates itself, and the enforcement of which is linked through widespread capital ownership to the public's self-interest, are most effective, and thus most socially just.
Unfortunately, with concentrated ownership of capital, whether in the private hands or the State, internal controls are, paradoxically, rejected as ineffective. In socialism, this is because the laws of economics and the self-interest of the public can operate to produce results at odds with short-term political ends. In capitalism, this is because the controls themselves interfere with maximizing short-term gains, even to the detriment of the long-term survival of a company, even an industry or an entire economy.
The "solution" in the case of both capitalism and socialism is the same — and the reason why both capitalism and socialism inevitably merge into the Servile State: imposition of external regulation by the State that is tantamount to direct control of the economy, but through the private sector. Without a strong and principled leader, however, in capitalism the external regulations are evaded in the pursuit of business-as-usual. Violations are either ignored if immaterial (which can hide serious systemic problems), or debated endlessly, usually in the courts, in an effort to avoid responsibility — and cost. To try and plug the loopholes that allow vague interpretations, the State imposes more and more regulatory requirements and, finally, direct control.
In socialism, the failure of political methods to achieve economic ends also results in imposing more and more regulatory requirements, and (ultimately) direct control. "Free market reforms" usually take the form of favoring the managerial class over workers, and of allowing private ownership within a larger framework of State control — a phantom freedom that can be taken away at any time.
In both cases what results is the Servile State, which can be understood within the context of this discussion as either capitalism with a socialist veneer, or socialism with a capitalist veneer. In both cases it is the ordinary citizen who suffers by outright elimination or re-definition of fundamental rights to life, liberty and property.
Thus, on becoming president, Roosevelt faced a crisis that had been developing since the founding of the American republic, but which had become critical with the new understanding of private property in particular, and human rights in general that became "official" with the Supreme Court's opinion in the Slaughterhouse Cases.
As both the majority and dissenting opinions made clear (and which Justice Field acknowledged as an error twenty years later), the ruling in the Slaughterhouse Cases assumed as a given that rights come from the State instead of being inherent or inalienable in the human person. This meant that instead of merely defining the exercise of rights — as required by man's political nature — the State was defining (re-defining, actually) what it means for something to be a right, and the substantial nature of specific rights.
Roosevelt, of course, as one of the last true "Lincoln Republicans," was still going on the assumption that people grant rights to the State, not the other way around. This put him at odds with both the Old Guard Republicans, who tended to be reactionary-style capitalists, and Populist/Socialist Democrats, who (as we might expect) tended to some form of socialism, but increasingly drifting from more or less benevolent Fabian socialism to radical Marxism.
Roosevelt-style progressivism, then, was based on traditional American acceptance of the un-re-defined natural law principles that guided the Framers of the Constitution — but with one, fatal flaw: reliance on the assumption that new capital formation can only be financed out of existing accumulations of savings.
Roosevelt's leadership had the potential, based on him personally, to avert the crisis that threatened the country. In this, Roosevelt can be compared to a Caesar, but not the Julius that today's critics and those of his day assumed. It was, rather, Augustus Caesar, who claimed to have restored the Roman Republic, but by keeping the outward forms of old institutions and adapting them to the needs of the Empire.
Roosevelt's job was much harder than that of Augustus Caesar, and not just because Roosevelt did not have the public and governmental support that Augustus could take for granted. Roosevelt had to restore the substance of Americans' natural rights using new institutions, not simply adapt existing institutions to serve new needs. This, as anyone who understands the social doctrine of Pope Pius XI as explained by Father William Ferree, is a much harder task.
The fact that Roosevelt succeeded at all within a paradigm dictated by the slavery of past savings could almost be described as miraculous. Augustus Caesar was able to lay the foundation of a system that survived, in one form or another, until 1918, because he was able to effect genuine institutional and systemic reforms. Roosevelt's reforms, which are little understood today, and which depended on him personally, lasted barely a decade and a half before being subsumed back into the conflict between capitalism and socialism.