Wednesday, July 13, 2016

Future Schacht, III: Economic Prelude to the Great War


Guided by the principles of America’s founders and inspired by Abraham Lincoln, during the election of 1912 there was a nearly successful attempt to reverse the disturbing trends in American society.  This was long past due, as social pressure from the new things noted by Leo XIII had been building up since before the Civil War.
Orestes A. Brownson
In The American Republic (1866), Orestes Brownson framed the Civil War as a struggle between the agrarian capitalism of the South, and the industrial and commercial capitalism of the North.[1]  The war, the Homestead Act, Reconstruction, and (later) the boll weevil shifted the economy from large-scale production of labor-intensive cotton on latifundia-type plantations, to small-scale production of capital-intensive wheat and other crops.
Lack of access to capital credit based on future savings, however, ensured that corporate farming and industrial and commercial consolidation would quickly replace the family farm and small business as the predominant characteristic of economic life in the United States.  Dependent on wage-system jobs outside the family for income, family members would no longer be in a position to “contribute to the common support, according to the capacity of each.”[2]
Peter S. Grosscup
In the early twentieth century, Judge Peter Stenger Grosscup of the United States Seventh Circuit Court of Appeals in Chicago, one of Roosevelt’s “trust busters,” made speeches and wrote a series of articles highlighting the problem of declining small ownership.  Focusing on weaknesses in the Sherman Antitrust Act of 1890,[3] Grosscup recommended a program of expanded capital ownership through reform of corporate law.[4]
Grosscup was also associated with Archbishop Ireland, both being strong progressives.  At this time progressivism was a synonym for common sense political and religious orthodoxy.[5]  This also applied to Roosevelt’s Americanism, the essence being to apply the old principles of the U.S. Constitution in new ways.
Archbishop John Ireland
Archbishop Ireland was another advocate of expanded capital ownership,[6] and a friend of Roosevelt.  Grosscup and Archbishop Ireland may have become acquainted as a result of the archbishop’s approval of Grosscup’s authorizing the use of federal troops to keep order during the Pullman strike of 1894.  Both men served on the Committee on Arrangements of the National Conference on Trusts and Combinations in October 1907.[7]
Unfortunately, Grosscup’s proposals took for granted the presumed necessity of past savings to finance new capital formation.  This ensured its financial impracticability.  Politically, a quarrel with Roosevelt over some legal technicalities in the Standard Oil Rebate case in 1907/1908 ensured that Grosscup’s proposals to (as Grosscup put it) people-ize the corporation came to nothing.
More effective was the formation of a political party to try and implement the progressive program.  Despite his apparent lack of appreciation of the necessity of fostering widespread capital ownership, Roosevelt was the one man in the country who could pull the progressive cause together and had a chance of winning election.
Theodore Roosevelt
Not that Roosevelt was anxious to run.  As H.K. Smith related,
Some time in 1911 I called upon Colonel Roosevelt at the Outlook office, on leave from Washington. I told him I was going home for a few days. He pounced down on me instantly: “H.K., don’t you dare go back to Connecticut and do anything for my nomination for the Presidency in 1912!  I’ve had eight years of the Presidency. I know all the honor and pleasure of it and all of its sorrows and dangers. I have nothing more to gain by being President again and I have a great deal to lose. I am not going to do it! —unless I get a mandate from the American people.” I know much now than I did then what was before his far-seeing eyes as he stood there looking out over the housetops — the fierce strive ahead, the menacing issues lying within it, the far-reverberating results that would follow, the sacrifice that would be required of him.[8]
The presidential campaign of 1912 was unique in U.S. history, with four major candidates for president.  These were Theodore Roosevelt (Progressive), William Howard Taft (Republican), Woodrow Wilson (Democrat), and Eugene V. Debs (Socialist).
William Jennings Bryan
Wilson won the election, but only by joining forces with William Jennings Bryan.  Bryan’s technique (possibly unconscious) was simply to repeat everything Roosevelt said.  The union of Wilson’s elitist conservatism and Bryan’s populism, overlaid with a veneer of superficially progressive goals, defeated Roosevelt.
Even before he was inaugurated, however, Wilson made every effort to avoid keeping the promises Bryan had made on his behalf.  It soon became apparent that, as far as Wilson was concerned, the country had already been headed in the right direction, with power increasingly concentrated in the hands of the “better sort” of people.  Badly needed reforms such as the Federal Reserve Act and the income tax were soon hijacked to serve the demands of the country’s élites instead of the needs of the people and the country as a whole.
It comes as no surprise to learn that Wilson’s doctoral dissertation, Congressional Government (1885), analyzed the constitutional theories of Walter Bagehot.[9]  Bagehot was an elitist who admired Thomas Hobbes and inspired the economic thought of John Maynard Keynes.[10]
In light of these developments, it becomes easier to understand how the First World War happened.  Cut loose from its philosophical, legal, cultural, and religious foundations, Europe fell easy prey to a military cataclysm that mirrored what had already devastated civil and religious society, and today threatens to destroy domestic society.
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[1] Brownson, The American Republic, Ch. 14.
[2] Quadragesimo Anno, § 71.
[3] Peter S. Grosscup, “The Government’s Relation to Corporate Construction and Management,” Annals of the American Academy of Political and Social Science. Vol. 32, Federal Regulation of Industry (July, 1908, 3-29), 18-19.
[4] “Grosscup Will Formulate Law: President Asks Judge to Select Committee and to Suggest Suitable Statute,” The Day, October 28, 1907, 1.
[5] Archbishop Ireland, The Church and Modern Society.  St. Paul, Minnesota: Pioneer Press, 1905, I.133-158.
[6] Rev. James P. Shannon, “Bishop Ireland’s Connemara Experiment,” Minnesota History magazine, March 1957, 205-213.
[7] New York National Civic Federation, Proceedings on the National Conference on Trusts and Combinations Under the Auspices of the National Civic Federation, October 22-25, 1907. New York: The McConnell Printing Company, 1908, 15.  Grosscup spoke on the inadequacy of the anti-trust laws then in force (ibid., 221-231).
[8] Herbert Knox Smith, “The Great Progressive,” Foreword to Social Justice and Popular Rule, op. cit., xiii-xiv.
[9] Arthur S. Link, Woodrow Wilson and the Progressive Era, 1910-1917. New York: Harper and Row, 1954, 8
[10] John Maynard Keynes, “The Works of Bagehot,” The Economic Journal, 25:369–375 (1915).

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