Monday, November 18, 2013

"Distributive Justice"?, XVIII: The Rise of Socialism


As we saw in the previous posting in this series, following the Civil War the supply of funds available for the “small” man — homesteaders and small businessmen — shrank dramatically.  This was the result of an at first official, and later unofficial policy of deflating the paper Greenback currency backed with government debt to restore parity with the gold reserve currency.

The rich industrial and commercial interests, however, with their government subsidies and collateral, could either obtain the money they needed from government subsidies, or create what they needed on easy terms by discounting bills either in trade or at the commercial banks.  As a result, productive capacity kept outstripping consumption power, and financial panics followed by depressions occurred in 1873 and 1893.

At the same time, technology was advancing rapidly and displacing greater amounts of human labor from the production process.  While this made chattel slavery uneconomic, it also did the same for wage slavery — which didn’t do too much either for the former slaves or the men who had fought to free them.  Real wages declined dramatically, and there was an increase in abuse and bad working conditions, especially in the East, as wage workers lost both political and economic power in competition with the owners of the new technology.

In the West matters degenerated more slowly.  The great cattle ranches that provided beef for the East and for Europe tended to be run as feudal fiefdoms.  The workers were invariably armed, sometimes as a condition of employment, and treated more as vassals and retainers than as wage workers.

Their degradation into serfs was prevented both by their access to personal weapons and the tradition of dueling to settle disputes, and by the fact that, until the early 1890s, any dissatisfied worker on a ranch could either go work for someone else — skilled cattle handlers being in great demand — or file a homestead claim, becoming a farmer, rancher, or mine owner himself.  The novels of, e.g., Louis L’Amour, while held in disdain by many of today’s academics, in fictional form accurately depict both the spirit and the conditions of the West.

Consequently, in the East socialism found fertile soil after the Civil War, while in the West and the South populism — originally a property-based movement — took root.  Both opposed the growing concentration of landed, industrial, and commercial capital in private hands that seemed an inevitable consequence of economic growth based on advancing technology in an economy based on the traditional understanding of private property.

Neither the populists nor the socialists realized that it was the methods of capitalist finance of advancing technology, not finance or technology itself, that made the concentration of capital ownership seem inevitable.  As a result, both populists and socialists began to target “capitalism,” not the monetary and fiscal system that led to capitalism, as the enemy.

As the “free land” under Lincoln’s 1862 Homestead Act — the only capital available to ordinary people on easy terms — began to run out in the 1890s, populism and socialism began to merge, in ideology, if not organizationally.  William Jennings Bryan’s populist demand for “free silver” to inflate the currency and benefit small businessmen and farmers was widely — and not completely inaccurately — castigated among conservatives as “silver socialism.”  The program of Coxey’s Army, a populist movement, called for an inflated Greenback or National Bank Note currency to finance public works projects to increase employment by government and stimulate the economy.

People began looking more to the State to solve their problems, rather than to their own resources — especially since there didn’t seem to be any way to obtain access to those resources.  As Frederick Jackson Turner presciently observed in the paper he delivered at the Colombian Exposition in 1893, the end of “free land” under the Homestead Act meant the end of democracy.  Turner also pointed out that the end of widespread capital ownership also meant the beginning of the loss of the distinctive American character and the rapid growth of State power on the European model, which increasingly meant socialism.

The combination of the effective end of “free” land and the Panic of 1893 caused “the Conspiracy” to take root in America.  Not understanding that it was the system of money, credit, and finance that was flawed, many people who felt themselves victims began to blame other groups and individuals for their economic and political woes.

The Coinage Act of 1873, in part an effort to restore parity of the paper currency with gold and to address the problem of rapidly depreciating silver, now (twenty years later) became known as “The Crime of ’73.”  Of what, exactly, the “crime” consisted, very few people were able to state with any accuracy.  That it was a “crime,” however, seemed evident to many people — for how else could you explain the fact that productive capacity seemed intact, yet people unable to benefit from production, or even participate in production?

By the disconnect between production and consumption, of course, which caused the failure of Say’s Law of Markets by separating money creation from the financing of productive capacity, and by raising barriers against ordinary people having access to capital credit to purchase the technology that was displacing them from their jobs and driving wages down.  Trapped by the assumptions of the currency principle, however, which mandated that only past savings could be used to finance new capital formation, people did not realize that ownership of new capital did not have to be concentrated.  Capitalism — which was now interpreted as private ownership or control of capital instead of concentrated private ownership or control of capital — became the enemy, and the target of all who believed themselves oppressed by “the Conspiracy.”

Not that these beliefs and attitudes sprang full-grown on the world of the 1890s.  In the East, where the process of concentration of private ownership of capital had begun decades before the Civil War, socialism had begun taking root in the 1840s, although with little popular support.  Anyone who truly felt oppressed, after all, could simply go west, even before the Homestead Act made the process relatively easy.

Still, for decades before the 1890s socialism had been gaining a broad base of support in the East.  This was especially the case among recent immigrants, who were less likely than native-born Americans to take advantage of the western option.  Many of these immigrants were Catholic, which gave an opening into Catholic social teaching by a back door, as it were.  Nowhere is this better illustrated than by the career of the agrarian socialist, Henry George.

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