A rich free-market legacy - for some
By Henry C K Liu
Some snippets:
Both Democrats and Whigs in US political history championed republican principles, but the two parties held conflicting assumptions about the nature of government authority, the correct path to economic development, and true meaning of individual rights. These conflicting assumptions form the ideological struggle behind the sectional conflict that eventually led to the Civil War.
The emphasis on popular democracy by historical populism, with its programs of monetary, financial and political reforms, was resisted by big finance and big business as counterintuitive to the natural needs of modern economic systems and the national security requirement of modern states, let alone the aspiration of a young nation to become a major world power and eventually a superpower.
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The Civil War and big business
Prior to the Civil War which began in July 1861, big business had not enjoyed such clear-cut favoritism from government. The agrarian leaders who controlled the Federal government during 1801 and 1861 had regarded individual property in land as more deserving of government protection than corporate property.
The logic for this belief is that a corporation, by virtue of its nature as an exclusive collection of real persons, is more powerful than any single real person. By granting such an exclusionary collection of select individuals the same protection the Constitution granted to each and every real individual citizen is a distortion of democratic principles of equal protection. It is particularly inequitable when the rights of exclusionary collectivism are protected as the expense of the rights of communal collectivism.
Moreover, the basic raison d'etre of government is its role of protecting the weak, those who could not otherwise protect themselves. Giving powerful corporations the same government protection intended for each powerless private individual separately amounts to a perversion of individual rights as well as the principle of equally before the law, and constitutes a direct threat to the principles of democracy.
After 1835, with Roger Taney (in office 1835-64) appointed by Andrew Jackson (in office 1829-37) to succeed John Marshall as Chief Justice (in office 1801-35), the Supreme Court took a different position to rein in Federalist centralization. Whereas Marshall had extended the "implied power" of the Federal government over the states, Taney ruled to protect those powers of the states that the Constitution had not specifically granted the Federal government, upholding state rights to regulate commerce within their borders and to adopt and enforce economic policies of their own to suit local conditions and traditions for the benefit of citizens within their separate jurisdictions. Whereas Marshal has ruled religiously to uphold the sanctity of contracts and the right of private property, Taney ruled for the right of states to regulate private property rights to promote common welfare.
In 1837, the Charles River Bridge Company, chartered in 1786 by the Commonwealth of Massachusetts, having made enormous profits from tolls on a bridge between Boston and Cambridge, claimed that the terms of its charter forbade the construction of a competitive bridge. The people of Massachusetts authorized a second bridge to relieve traffic congestion and to abolish tolls as the cost of the first bridge had been more than paid for the by its monopolistic tolls. The shareholders of the monopoly brought suit to stop the second bridge.
Taney ruled in an epoch-making decision, declaring that the public interest was more important than the alleged property rights of the private bridge corporation. In his ruling, Taney wrote: "While the rights of private property are sacredly guarded, we must not forget that the community also has rights, and that the happiness and well-being of every citizen depends on their faithful preservation."
Taney died in 1864, the year the Civil War ended, and was replaced by Salmon P Chase, former Treasury Secretary under Lincoln and former leader of the Free Soil Party, which opposed the expansion of slavery into the western territories.
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War saved the Union, destroyed democracy
The Civil War, which lasted from 1861 to 1865, saved the United States from being partitioned by secession, a fact conveniently overlooked by those in Washington who now support secessionist movements around the world, the latest being the secession of Kosovo from Bosnia.
Still, the Civil War was not followed, as Lincoln had hoped, by fraternal love, mutual forgiveness and reconciliation. Most Southerners at the end of the fighting in 1865 were resigned to the need to accept the supremacy of the Federal government and the abolition of the institution of slavery and to move on to the urgent task of rebuilding their war-torn home region where all the fighting had taken place.
But not withstanding Lincoln's inspiring words of "with malice towards none; with charity toward all", Southern sentiments of reconciliation were not reciprocated by a hostile North, where an attitude to treat the South as a conquered territory, the root institutions of which required wholesale reconstruction, lasted more than a decade after war ended. It was not until 1877 that the Union was finally restored along a path towards terms that would be both fair and acceptable to the South.
After Appomattox, where Robert E Lee surrendered to Ulysses S Grant on April 9, 1865, with Lincoln assassinated five days later on April 15, the returning Confederate soldiers found their home country in an indescribable state of ruin and disorganization. The communication and transportation infrastructure was totally destroyed by the vengeful armies of Sherman and Sheridan. The final phases of the war had degenerated from a patriotic undertaking on the part of the North to subdue the South's will to secede, to a frenzied orgy of savage destruction.
The war debt accumulated by the Confederate government that had absorbed all the savings of the South became worthless in defeat and all Southern banks and insurance companies that held such debt instruments were left insolvent.
The devastation of the Southern economy did not end with the war. The Federal Treasury confiscated all properties of the Confederate government. Federal agents, many of whom were dishonest, exploited the confiscation order to loot the Southern agricultural economy to enrich themselves personally while they transferred wealth northward to support the costly transition of the war economy of the North in peace time. With the defeat of the South went the defeat of popular democracy and the triumph of big business corporatism.
From THE SHAPE OF US POPULISM, Part 2
Long-term effects of the Civil War
By Henry C K Liu
Final defeat of Southern agrarianism
Civil War era legislative commitments laid the groundwork for rapid economic expansion of the US economy via the private sector in the later decades of the 19th century. By attempting to secede from the Union to preserve its agrarian economy, the agricultural South brought about the final defeat of the agrarian principles she sought to protect and assured the final victory of industrialism based on the centralized ideals of Alexander Hamilton (1755-1804) and the economic nationalism of Henry Clay (1777-1853), reigning triumphant over the popular democracy of Thomas Jefferson (president 1801-09) and the populist politics of Andrew Jackson (president 1829-37).
The post-war South came under the rule of the "Bourbons", the mercantile elite of the Confederacy who shared more affinity with Northern moneyed interests than with the plantation aristocracy of the old South. The pejorative term was analogous to the restored bourgeois French monarchists after the fall of Napoleon. The Southern Bourbons adopted a laissez faire economic policy, reduce taxes and cut public spending on education and social welfare. Their ill-considered policies revived the collapsed Southern economy minimally in the short term but condemned the South to the fate of an underdeveloped region for more than a century.
After the war, with the abolition of slavery, cotton production in the South increased dramatically, doubling the size of the pre-war crop and doubling again by 1914. This historical fact is often ignored by neo-liberal economists who insist that high wages depress growth. New plantations worked by small tenant farmers were established in Arkansas and Texas while the worn-out soil from single crop planting in Georgia and South Carolina was revived with fertilizers. The average white tenant farm had 84 acres while the average newly-freed former slave tenant farm was less than half in size.
Still, the expansion of cotton growing did not bring prosperity to the small tenant growers, black or white, as they were perpetually in debt to cotton merchants in the North, who would charge interest at rates up to 40%. The merchants in turn were exploited by large wholesale houses linked to British capital. The debt economy not only drained wealth from the South to the North, it also prevented the development of a diversified agriculture in the South. Creditors in the North insisted on cotton as the only exportable cash crop and the surplus of low-wage Southern labor prevented any market incentive for industrialization.
Many Southerners realized the need to develop industry but the South had to depend for capital on the North, which preferred to keep industry up there and to use the South as a source of raw material. As a result, even the profit from industrialization of raw material production did not stay in the South.
Moreover, typical of conditions of the early phases of industrialization, wages stayed low, working hours were long and working conditions were unbearable in both the South and the North. Workers, often all members of a family, including women and children, were required to routinely work 75-hour weeks at below living wages. Children under 16 constituted over 30% of the work force. Even though corporate profit remained consistently high, wages and benefits stayed low and working condition inhumane, justified by the need to compete with more advanced foreign factories. Nothing was done to correct the situation until the Great Depression, which brought into being progressive New Deal legislation of the 1930s.
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