A dishonest populism

Paul Johnson, in his book The History of the American People, wrote about ordinary Americans in the beginning:

It was short step from admitting ordinary folk had a right to the best to giving them a full share in government--and giving it to them not grudgingly but eagerly. Words like 'husbandman,' 'yeoman,' 'esquire' quickly dropped out of use, being replaced by 'citizen'--a decade before the French Revolutionaries took it up. Collectively, the citizens were the 'Publick.' Cato thought: 'Every ploughman knows a good government from a bad one.' Jefferson agreed. 'State a problem to a ploughman and a professor. The former will decide it often better than the latter, because he had not been led astray by artificial rules.' John Adams invented a hick-farmer archetype, Humphrey Ploughjogger, and extolled his sense and shrewdness in newspaper ariticles. He was 'made of as good a Clay as the so-called Great Ones of the world.' The mob, the herd and the rabble, as the Great always delight to call them.' were, wrote Adams, 'by the unalterable laws of god and Nature, as well entitled to the benefit of the air to breathe, light to see, food to eat, clothes to wear, as the nobles or the king.' All that was necessary was to educate them, to add knowledge to their native wit. 

Populism was part of the early American mindset, and it was, and has been, a double-edged sword in need of context. The final sentence in the above passage from Johnson is one key to understanding. While it's part of a great American philosophy that all people deserve the air to breathe, light to see, etc., not all Americans have complemented their "native wit" with education. Recently, both Republicans and Democrats have participated in a dishonest populism. Democrats have used populist rhetoric to gin up anger at companies like Bain Capital and their CEOs, like Mitt Romney once was. The recent Democrat attack ad against Bain Capital and Romney shows some ordinary people who are claiming Romney didn't care about workers and their situation, only about making money.

I grew up in poor, then later middleclass, communities and lived in such communities until I was around 30 years old. I've heard this type of resentment expressed thousands of times against the owners of business or at some general idea of rich people -- those people with money. The populist anger at the rich is passed along with little thought given to economics, the market, the nature of wealth management, etc. This is because most of the people who simply repeat the attacks on the rich haven't received an education, for whatever reason. Then, there are those who do receive an education, but the education entails a bias against capitalism, so their view toward companies like Bain Capital are skewed. Honest thinkers on the Left like Steve Rattner, Corey Booker and Harold Ford, Jr. have spoken out against the unthinking, populist attacks on Bain Capital and their type of business.

The Right is guilty, at times, of an anti-intellectual populism, sort of like the patronizing praise from Jefferson from above. Is it true an ordinary farmer is more insightful than a professor? Well, it depends. Ordinary working people usually have a type of practical intelligence that's missing among intellectuals, but there's no natural, "native wit" that's superior to higher learning. If a farmer has learned the practical lessons of work and necessity and has complemented his "native wit" with a broad, objective education, then the farmer might have an edge on an intellectual who hasn't lived much in the work-a-day world, and his insights might be richer.

Ordinary people who haven't received an education can believe things that make no sense, and they can say things that are incredibly ignorant. This reliance on populism is a con game played by the political elite to expand their voting base and gain more power -- those ordinary people flattered by pandering pols who praise the uneducated, ordinary, natural intelligence are being played, and if the time ever comes when they want the pols to really listen to and act on the brilliant things they have to say, they'll discover who it really is that doesn't care about their situation but only about gaining more power over their ordinary lives and choices. 

But what about post-fascism?

We've been inundated with history about Hitler and Mussolini and the horrors of their actions leading up to and during WWII, but we don't hear much about what happened afterwards in Italy and Germany. I won't blame this totally on our public education system or media which both find it difficult to praise anything resembling a free market, because the bigger reason is most likely that fascism, mass murder, and the personalities of Hitler and Mussolini are more interesting than the boredom of economic freedom and growth and less dramatic than the more sober duo of Alcide de Gasperi and Konrad Adenauer.

Both were at heart anti-statists in the sense of opposing a powerful State and the nationalistic fervor of the time. although de Gasperi fought to maintain Italian culture. They are both credited as two of the Founding Fathers of the European Union, although it's unlikely that what exists today as the EU is what they had in mind -- more likely, it was the common protection of Europe they had in mind, especially after the horrors of WWII.

What they achieved economically is more remarkable. Both were devout Christians and revered the family. Families had been ripped apart by the totalitarian violence, if not psychologically, then through death of family members, displacement of one parent into a labor camp, or by some form of forced separation. Tony Judt, in his book, Postwar, quoted William Byford-Jones, an officer in the British army:

'Flotsam and jetsam! Women who had lost husbands and children, men who had lost their wives; men and women who had lost their homes and children; families who had lost vast farms and estates, shops, distilleries, factories, flour-mills, mansions. There were also little children who were alone, carrying some small bundle, with a pathetic label attached to them. They had somehow got detached from their mothers, or their mothers had died and been buried by other displaced persons somewhere along the wayside.'

De Gasperi had been jailed by Mussolini in 1927 and likely would not have survived if not for Pius XI securing his release and protecting him in the Vatican Library for fourteen years. After the fail of Mussolini and fascism, de Gasperi, through the Christian Democrat Party, a center-right party, was able to stabilize Italy and bring about economic prosperity and respectability for Italy in the world community. Many of Italy's top industries were developed during the de Gasperi era. De Gasperi was in power for eight years, 1945-53, the longest reign in modern Italy. It was a miraculous turn-around. Among the companies which helped transform Italy from destruction to productivity and stablity were Vespa, Olivetti and Necchi.

Konrad Adenauer's story is interesting because Britain tried to undermine his rise to power in favor of the SPD, the Social Democrats led by Kurt Schumacher. Many British officials thought Germany would be better off under a labor party more like the one in power in Britain, but Schumacher and the Social Democrats, which represented a powerful German State, reunufication under Russian influence leading to collectivism and uniformity, the opposite of the free market direction represented by Adenauer and the Christian Democrats, the Christian Democratic Union (CDU). Adenauer prevailed and his leadership returned the rule of law, even to the State, created astounding economic stability and growth, brought Germany into the West and eventually created the needed partnership with De Gaulle and France that saved West Germany from East Germany's misery, and, ironically, the labor unions under Adenauer implemented everything good about unions, which were lacking in Brtitain. During Adenauer's chancellorship, real incomes tripled in Germany, and Germany became one of the main economic powers in the world. Another "miracle".

History shows the stark contrast of what happened under Adenauer's classical liberal leadership and the horror of East Germany under the USSR and Stalin's totalitarian nightmare. These distinctions should be highlighted in our schools and media representations of that period, but, unfortunately, they aren't. In actuality, these recoveries and transformations in Italy and Germany weren't miracles -- they represent the difference between State-controlled economies and economies working under a relatively free market. To the extent markets are left alone my meddling governments, they move toward prosperity and a higher standard of living -- to the extent markets are controlled by State forces, they stagnate, decline and eventually collapse. Yes, we need to learn these lessons.

For a better understanding of this period, read Chapter 17 of Paul Johnson's book, Modern Times, titled European Lazarus.

Intellectuals have a chance to get it right this time

Our history of intellectual contribution has been a great history, although since the thirties many intellectuals have strangely made some bad calls. Perhaps intellectual fashion has played too large of a role and has led too many thinkers astray through the desire to be seen as cosmopolitan and distinctly cultured in opposition to the crass efforts of capitalists amassing great sums of wealth. Surely intellectual pursuits are higher than the base concerns of money, competition and the material trappings of economic success.

Many intellectuals have used their brain-power to analyze the greater concerns of justice and equality, the meaning of life in a technology-driven society and the limits of economics as the guiding field of concern which will lead humankind to a better life.

Paul Johnson wrties about the early 20th century in his book, Modern Times --

      Loss of faith in American business leaders coincided with a sudden and overwhelming discovery that the Soviet Union existed and that it offered an astonishing and highly relevant alternative to America's agony. Stuart Chase's A New Deal ended with the question: "Why should the Russian's have all the fun of remaking the world?" The first Soviet Five Year Plan had been announced in 1928, but it was only four years later that its importance was grasped by American writers. Then a great spate of books appeared, praising Soviet-style planning and holding it up as a model to America. Joseph Freeman: The Soviet Worker, Waldo Franks: Dawn in Russia, William Z. Foster: Towards Soviet America, Kirby Page: A New Economic Order, Harry Laidler: Socialist Planning, Sherwood Eddy: Russia Today: What Can We Learn From It? all of them published in 1932, reinforced by Lincoln Steffens' best-selling pro-Soviet autobiography, which had appeared the year before, and introduced a still more influential tract, The Coming Struggle for Power by the British Communist John Stachey, which appeared in 1933.
        America was and is a millennarian society where overweening expectations can easily oscillate into catastophic loss of faith. In the early 1930s there was net emigration. When Amtorg, the Soviet trading agency, advertised for 6000 skilled workers, more than 100,000 Americans applied. To the comedian Will Rogers: 'Those rascals in Russia, along with their cuckoo stuff have got some mighty good ideas....Just think of everybody in a country going to work.' "All roads in our day lead to Moscow,' Steffens proclaimed; and Strachey echoed him: 'To travel from the capitalist world into the Soviet territory is to pass from death to birth.' We must now explore the gruesome and unconscious irony of these remarks.

How could so many smart people get something so fundamental and important so wrong?

Johnson goes on to write in the next chapter:

By the time John Strachey wrote of the fleeting capitalist death to find Soviet birth, this gruesome feat of social engineering had been accomplished. Five million peasants were dead; twice as many in forced labour camps.

Most of the world has advanced since then, so it's unlikely intellectuals could be fooled so grandly again by madmen (Hitler was fast on Stalin's heels), yet even today such madness exists. But what relatively milder forms of foolishness can lead the modern intellectuals astray in search of new and fashionable ideologies which promise to defeat realities which offend their enlightened understanding of a more equitable and just society?

It's not fair to accuse all intellectuals of fashion-pursuit at the expense of reason and time-tested principles, but history has shown that intellectual herding has given us absurd reults like the extremes of post-modern thought, moral relativity and, here recently, a new progressivism.

The U.S. is in dire need of great thinkers -- free thinkers, not parlor cliques who cleverly denigrate the nuts and bolts of a capitalist society with nothing of substance as a replacement. Progressivism has actually become less intellectual and more emotional as its practical application piles unintended consequence upon unintended consequence and throttles our economy in the name of a higher moral calling. This is where the intellectuals have failed to be free thinkers -- in the moral realm. The insistence that progressive policies speak to the moral concerns of a soulless, capitalist nation, fail to see the squalor of dependence and downward spiralling economy which is throwing people into joblessness everyday. The progressive intellectual fails to acknowledge the immorality of violating individual rights in pursuit of some greater good which doesn't exist.

Until free-thinkers can consider freedom, charity and spontaneous order as a means by which a free people can cooperate and compete to find their own flourishing, then the intellectual movement is stunted by fashion and partisanship, and a need to be accepted by the politically correct group. A free intellectual searches without fear.  

Analogies to America's 2009 recession

Written in 1982, Paul Johnson's book, Modern Times, in the chapter dedicated to the economy of the 20s and the subsequent Great Depression, contains some chilling similarities to our present recession. Many libertarian thinkers are familiar with this history of events in contrast to the popular myth of evil capitalism being reined in by super-president FDR with oodles of government intervention. I have to say Johnson's history, which is more economics-based than a progressive, moral story of greedy, epicurean individualism, makes a lot more sense and explains why the depression of the thirties lasted much longer than previous depressions which ended in a year or so. It appears we have learned nothing, but then most peope are still stuck on the myth of FDR and the Great Depression. In the tradition of Rothbard and Friedman, Johnson presents a different history.

I would like to quote the whole chapter, but, for brevity's sake, here's a portion of Chapter 7 -- everyone should at least read this chapter of Johnson's book:

It is astonishing that, once margin-trading and investment-trusting took over, the Federal bankers failed to raise interest rates and persisted in cheap money. But many of the bankers had lost their sense of reality by the beginning of 1929. Indeed, they were speculating themselves, often in their own stock. One of the worst offenders was Charles Mitchell (finally indicted for grand larceny in 1938), the Chairman of National City Bank, who, on 1 January 1929, became a director of the Federal Reserve Bank of New York. Mitchell filled the role of Strong, at a cruder level, and kept the boom going through most of 1929. Of course many practices which contributed to the crash, and were made illegal by Congress and the new Securities and Exchange Commission in the 1930s were regarded as acceptable in 1929. The ferocious witch-hunt begun in 1932 by the Senate Committee on Banking and the Currency, which served as a prototype for the witch-hunts of the 1940s and early 1950s actually disclosed little law-breaking. Mitchell was the only major victim and even his case revealed more of the social mores of high finance than actual wickedness. Henry James would have had no complaints; but the Marxist zealots were disappointed. 'Every great crisis', Bagehot remarked, 'reveals the excessive specualtions of many houses which no one before suspected.' The 1929 crash exposed in addition the naviety and ignorance of bankers, businessmen, Wall Street experts and academic economists high and low; it showed they did not understand the sytem they had been so confidantly manipulating. They had tried to substitute their own well-meaning policies for what Adam Smith called the 'the invisible hand' of the market and they had wrought disaster. Far from demonstrating, as Keynes and his school later argued -- at the time Keynes failed to predict either the crash or the extent and duration of the Depression -- the dangers of a self-regulating economy, the degringolade indicated the opposite: the risks of ill-informed meddling.

Johnson lays out the events before and after The Great Depression to present the case that social engineering by politicians and their corporate partners was the main cause of the Depression, not capitalism. Like today, the incentives presented by the government did cause greed and irrational exuberance among the sanest of people, but contrary to the popular version of the Roaring Twenties, where greed and immorality ran rampant, in actuality the twenties were a period of widespread wealth generation that reached all levels of society -- it was a time of prosperity and innovation. Yet, even under Harding and Coolidge, who believed a government that did the least was the best, there was still the belief that tariffs and money manipulation were the way to go rather than allow interest rates to follow the natural path of the market -- they implemented monetary (through the recently created Fedral Reserve) and trade policies they thought helped workers and promoted prosperity at home, but what they were doing was interfering with capitalism and setting up the foundation for the Depression -- it only took the literal engineer, Hoover, to apply his social engineering to the country to blow the Depression wide open and set the stage for FDR and subsequent long-lasting disaster.

I will use Johnson's chapter to write several posts, so as not to go on too long in any one post, but Chapter 7 should be required reading for every student of history or anyone troubled and confused by our present crisis -- I can't really do justice to Johnson's writing on this topic, so, if you get a chance, read it. He wrote this book over twenty years before our recession -- it's scary how the same things are happening again, and those sounding the alarm are being ignored by the political class which is going full-speed ahead with grand social-engineering schemes as if history means nothing when you have the best and brightest at the helm.