Thursday, July 6, 2017

Lessons of Past Populist Eras

At a time when it seems like the country is hopelessly divided and that too many people are excluded from the American dream, it's helpful to look to US history for perspective and insight.  We have faced divisions within the US that were worse than the ones we face today.


Past Examples of Division and Populism 

Past examples of division and populism reveal some patterns that may be relevant to what we face today.  We have gone through several past cycles of (i) tremendous wealth creation resulting from the development of new technologies, (ii) concentration of wealth by the winners in the new economy, (iii) violence, populism, anti-immigration and anti-globalization by those left behind or left out of the new economy, (iv) financial and banking excesses, market booms and subsequent depressions, (v) racial strife, and (vi) wars.  Eventually, in each of these periods, after bitter and long-lasting disputes, America's leaders and the government had some success promoting the middle class, fair treatment, and competition, resulting in sustained periods of prosperity and peace.


Below is a discussion of three divisive and populist periods in US history.  This is not a complete discussion of the history; it is a sampling of events and trends, and how past challenges were addressed. 

1840s -1870s - the Civil War Period 
Critical events in this period related to slavery, the defeat of the South, railroads, steam power, and economic strife over industrialization.
  • New technologies:  railroads and steam power
  • Winners: railroad owners, merchants, the North generally
  • Left Out:  people of color, the South generally, farmers 
  • Racism:  slavery, and Jim Crow laws that institutionalized racist policies after the abolition of slavery
  • Leadership:  Lincoln
The dominant issue of this period was the bitter division over slavery.

If we think our politicians today treat each other badly, consider what happened in 1856 to the US Senator from Massachusetts and Republican, Charles Sumner.  During an impassioned anti-slavery speech, Sumner insulted Senator Butler from South Carolina.  A few days later, a relative of Butler's, Representative Preston Brooks, confronted Sumner on the floor of the Senate, and beat Sumner almost to death with his cane.  Republicans sought to expel Brooks from Congress, but they couldn't get enough votes to do so.  When Brooks returned to South Carolina, he was treated like a hero.  See Canning of Sumner

Six years later, in 1861, the Civil War began, and in the next four years, over 600,000 Americans died.  Lincoln's leadership - and his words - were critical to preserving the United States, and defeating slavery.  In the Gettysburg Address, a one page speech, given to honor the dead soldiers at a newly dedicated graveyard, Lincoln summed up why a united American democracy free of slavery was worth fighting for: 

"Four score and seven years ago our fathers brought forth on this continent, a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.... we here highly resolve that these dead shall not have died in vain -- that this nation, under God, shall have a new birth of freedom -- and that government of the people, by the people, for the people, shall not perish from the earth."  The Gettysburg Address  


1880s - 1918 - the"Gilded Age" and the "Progressive Era" 
In this period, there were dizzying technology advances, monopolies, industrialization, and inequality leading to populism, violent riots and labor unrest.  Teddy Roosevelt pursued "trust busting" and "Square Deal" policies, seeking to balance the interests of big business and common people.
  • New technologies:  steel and electricity
    • "Bessemer" manufacturing - mass production of steel; first steel plant in Pittsburgh (Carnegie)
    • adoption of electricity - electrification (Edison)
    • telephone is patented (Bell)...
  • Winners:  "Robber Barons" - Andrew Carnegie (steel); E. H. Harriman (railroads); Charles Schwab (oil); John D. Rockefeller (Standard Oil); JP Morgan (finance); Cornelius Vanderbilt (railroads)... 
  • Left Out:  industrial workers and miners (terrible labor conditions, low pay, long hours, child labor, poor health and safety); and farmers (low prices, and high rents to railroads and financiers)
  • Violence/labor unrest:  
  • Populism:  1880s and 1890s - rise of Populist political party
  • "Yellow" Journalism:  the publisher, William Randolph Hearst (who was Harvard educated), uses exaggeration, scandal, crime, sex, and attacks on outsiders to sell newspapers 
  • Government: business regulation
    • Sherman Antitrust Act (regulates monopolies and unfair trade)
    • Interstate Commerce Act (regulates rates charged by railroads)
  • Leadership: Teddy Roosevelt 
While a small number of people who controlled the new technologies amassed huge wealth, industrial workers who moved from the country to growing cities lived and worked in squalid conditions, and many farmers saw their prospects deteriorate.  In 1870, approximately 50% of the US population worked in agriculture.  Over time, the vast majority of farm jobs were eliminated by automation. Today, only 2% of the population works in agriculture.   See Agriculture in the US

In the 1880s and 1890s, the Populist political party was established and gained support, largely from farmers who were being left out of the new economy.  The Populists claimed to love America and to be patriotic; they also opposed "East Coast elites", called for some socialist policies, including government seizure of the railroads, and they were anti-immigrants and anti-foreigners.  The Populist party never gained a majority in the US; some of their policies were tempered and eventually incorporated into the Democratic Party platform.


In the early 1900s, Teddy Roosevelt, whose domestic agenda was know as the Square Deal, sought to balance the interests of big business and average Americans, while still promoting capitalism and not crossing into socialism. He actively enforced the Sherman Antitrust Act, dissolving dozens of monopolies, focusing on companies that engaged in corrupt and anti-competitive practices (rather than merely focusing on those companies that became "too big").  Roosevelt's legacy included the progressive use of the federal government to promote the overall public interest and the interests of the middle class.  


1920s - 1965 - age of the automobile and oil 
During this period, automobiles and other consumer goods began to be mass produced and sold to the growing middle class; tremendous wealth creation; financial speculation, the Great Depression, and Franklin D Roosevelt's "New Deal".   
  • New technologies:  mass production of the automobile (Henry Ford); oil refinement
  • Winners:  eventually, the middle class
  • Left Out:  pervasive misery during the Depression
  • Violence/labor unrest: widespread labor organization and strikes including in the automative industry 
  • Populists: Huey Long (Senator from Louisiana), and Father Charles Coughlin (Detroit priest with a national radio talk show)
  • Racism:  Japanese interment camps 
  • Government:  significant New Deal legislation:
    • CCC, WPA and TVA - (millions of people employed by the government on road and bridge construction and other infrastructure projects)
    • Social Security Act (old age insurance)
    • Fair Labor Standards Act (minimum wage and 40 hour work week)
    • Glass-Steagall Act of 1933 (federal insurance of bank deposits and a separation of consumer and investment banking)
    • National Labor Relations Act (workers' right to collectively bargain)
    • Securities and Exchange Acts of 1933 and 1934 (financial disclosure, prohibition of fraudulent securities practices)  
  • Leadership:  FDR
During the course of the "roaring 20s", the nation's wealth nearly doubled, but after rampant market speculation, fraud and international economic shocks, the stock market crashed in 1929 and many banks failed, leading to the Great Depression - the worst economic downturn in history.  In 1933, the unemployment rate hit nearly 25%; people in America were starving to death.  

The Depression was a world-wide phenomena.  For example, Germany, with Hitler as its leader, reacted to the Depression with a policy of national socialism and genocide - choices that eventually resulted in defeat and humiliation.  See Man in the High Castle (TV show) and The Plot Against America (book) for fictional but chilling explorations of how America, with different leadership, might have abandoned democracy for national socialism during this timeframe.    

Widespread misery contributed to the support of populists in the US.  Huey Long, a Democratic Senator who supported socialist redistribution of wealth, was popular enough to have presidential aspirations, but he was assassinated in 1935.  Another populist, Father Coughlin, used his popular radio show to espouse economic redistribution, as well as bigoted, anti-semitic conspiracy theories about international banking.  The Church leadership eventually forced him to cease doing the talk show.  

FDR was President from 1933 to 1945.  During his time, he was bitterly opposed including by business leaders, who viewed him as a "traitor to his class" because of his pro-middle-class policies.  Today, some also view FDR's legacy as the establishment of the welfare state and oversized government.  Others view him as one of the greatest presidents in history.  Many of the laws passed by his administration are seen today almost universally as necessary and beneficial.  Viewed in the context of the challenges he faced, there can be little question that with his leadership, the US bounced back from the Depression, rebuilt the country's infrastructure, got people back to work, preserved democracy at home and abroad  and won the Second World War - after which, America was a preeminent superpower, and it's middle class the strongest in its history.  FDR was also politically astute - using his "fireside chat" radio shows to deliver his message directly to the American people.  


The Present

Today, America is the wealthiest country with the most powerful military in history.  We also have historic wealth inequality, and cultural, political and racial division that is growing worse over time - with some people on each side of the current "culture wars" challenging not the ideas of the other side, but the legitimacy of the other side to exist.  There has also been a return to an earlier era of "yellow journalism" and partisan - rather than objective - media coverage.   

The speed of technological change is also increasing, creating both wealth and disruption.  In the early 1970s, Intel produced the first microchips, and the age of information began.  Since then, we have had the personal computer revolution (which automated paper based office processes), the widespread adoption of the internet (making communications and social media ubiquitous, and human knowledge searchable), the iPhone (putting a supercomputer in everyone's pocket), and cloud computing (driving down the price of computing and storage, leading to an age where "software is eating the world"). See  WSJ Article Quoting Marc Andreessen  

Just as in prior eras, these new technologies have lead to dramatic improvements, wealth creation (such as in financial services and high tech), as well as wealth inequality.  For example, the top 400 families in America have more wealth than the bottom 61% of the population combined (194 million people).  See Forbes 400 Study  

We also have a massive federal government bureaucracy and large deficits that are directing wealth to the current older generation and away from the future younger generations.  According to a recent study, a child born today, has only a 50/50 chance of having more material success than her parents, as compared to a 90% chance for those who were born in the 1940s.  See NPR Article on Inequality  Traditionally, an American differentiator has been equality of opportunity, including for immigrants, which allows America to harness the best and brightest, here and around the world, no matter what their background, gender or physical characteristics.  


"Great Man" Theory of History

Historians sometimes debate whether it is great men and women who shape history or whether history is dictated by uncontrollable forces that can't be impacted by individuals.  Tolstoy wrote about this in "War and Peace" where he characterized Napoleon not as a great general and shaper of history, but as someone merely swept up in uncontrollable events.  

This "great man" debate is academic since it is not one or the other - it is both historic forces and great leaders that impact events.  For example, the direction of Russia has been impacted by Stalin and Putin, China by Mao and Deng, India by Gandhi, the United Kingdom by Churchill, and so on.  Sometimes leaders direct events for the better and sometimes for the worse.  

Similarly, it may be that Lincoln, Teddy Roosevelt and FDR are some of our greatest leaders because they were the most capable, or it may be that they faced great challenges which created the opportunities for greatness.  Either way, they had success using their leadership skills to redirect widespread distress to try to unite the country.  


Lessons of Past Populist Eras 

In my view, these past populist periods carry key lessons for the present.  First, individual leaders matter.  Second, technology advances are inevitable, they create great good for a great many people and they are part of what differentiates America.  Such advances can also contribute to inequality that can tear at the fabric of the nation because many can be left out and their jobs commoditized or eliminated by automation.  Yet, it is also true that, in the past, those whose jobs were eliminated - such as the vast majority of people who worked in agriculture - found new ones in the newly created industries.  Third, in times of great technological change and inequality, the federal government has a role to play in promoting democracy, capitalism, and a level playing field and in helping transition those who are displaced through no fault of their own.  

Each generation of Americans must contend in new ways with: 
(i) inequality; 
(ii) harnessing the benefits and addressing the disruption of new technologies and trade; 
(iii) racial and cultural divisions; and
(iv) the role of government, including to build new networks and infrastructures.  

To solve any hard problem, you need facts and data, diversity, empathy, hard work, experience, creativity, passion, simplification and brilliance.  In the past, we were able to do so - we sometimes resorted to violence, but ultimately, we solved hard problems led by people who could build broad consensus, and convince disparate groups to put the common interests of the nation ahead of individual groups or factions, to sacrifice and to compromise.  Such leaders today seem hard to find, but if we're going to solve generational problems, we'll need to find them, elect them, or become them.  











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