"A Reply to Readers" Richard Sale

 A Reply to Readers: 

Before going further with writing about Big Business, I would like to express appreciation for the comments of readers whose observations are almost always sincere, civil and thoughtful whether agreement is there or not. 

“Charles,” who advocates a strict interpretation of the Constitution, adds that the Founding Fathers thought the smallest federal government to be the best federal government.  I don’t believe this is entirely correct.  With all due respect, even during the country’s first presidency, while the administration gave lip service to a strict interpretation of the Constriction, under the extremely able leadership of Hamilton and the Federalists, it moved quickly to expand federal authority by enacting legislation on tariffs, the currency, taxes and banking. 

These actions would eventually cause the collapse of the Federalists, because every American government takes power based on a coalition of economic interests.  It was Madison in Essay No. 10 who said that the chief basis of political association was economic interest and economic interest was always localized in a geographic section, and such interests acted to form coalitions that expected rewards from power. Thus, in Washington’s presidency, power was wielded by a coalition made up of northern business, southern planters and western farmers. 

Only northern business got the predominant share of benefits. By 1798, when Adams passed the Alien and Sedition Acts, it was clear that the coalition was going to favor northern business and ignore the expectations of the southern planters and western farmers, and the last two deserted the Federalists and headed for Jefferson, whose explicit aim was to curb growing federal power and rein in banks and northern business. 

Yet what did Jefferson do? He expanded the reach of government, especially by using secret agents and secret means to conclude the Louisiana Purchase, which Jefferson later admitted required a congressional amendment. Jefferson left the federal government a far stronger entity than when he entered and federal authority continued to gain new ground with the highhanded destruction of Biddle’s US Bank under Andrew Jackson.

Under Lincoln, federal authority grew huge after the south refused to accept its defeat at the polls and tried to secede. 

By the 1870s, Big Business was the unassailable power in the land.  Theodore Roosevelt, however, tried to counter it by expanding federal power to include its right to license corporations and government agencies like the Interstate Commerce Commission.  TR tried to include northern laborers and western farmers in his coalition and to some extent succeeded, but Taft botched the job. 

Under Wilson and the Democrats, federal authority grew yet again: women’s suffrage, the establishment of the Federal Reserve System, federal sanction for the organization of labor parties, the eight hour day for railway workers and a whole host of other measures that escape my mind. 

My chief point remains: that no administration gains power except by means of a coalition, and if once in power, the federal government does not meet the coalition’s expectation of benefits, advantage and reward, the coalition dissolves. 

If I am in error here, I will not be surprised nor chagrined to have it pointed out.

This is not my area at all – I am simply a reader who likes to escape my own dim cellar to live in brighter ground. 

I will next try to answer a reader’s point about my apparent inconsistency about my views of Hayek. 

Greetings to all.

Comments

[Arun]

Why is women's suffrage viewed as an expansion of federal power?

[William R. Cumming]

The formation of coalitions also contains the seeds of failure for those very coalitions. Yet democracy and our Republic are in fact based on those gaining power who can form the best coalitions. President Reagan knew that only by breaking down and restructing the NEW DEAL Coalitions could the Republicans resurrect their status as party able to govern. What I find interesting now is that it appears both blacks and hispanics who were part of the Obama coalition now appear ready to stand on the sidelines.

[James Nawrocki]

A truer analysis has never been written. Call me a disallusioned Obamaite.

[Adam L Silverman]

Arun: Generally, from a political science perspective, any extension of the protections and promises in the Bill of Rights (ie Rights), when extended either through legislation or through judicial review, up to and including the Supreme Court level, is considered a Federalization of those rights to or on to the states. So the extension of voting to women and making it uniform throughout the US is a federalization issue. This is why, ultimately, a large number of state level initiatives, largely through legislation or citizen proposition (as in California), create differences from state to state that effect what are considered fundamental rights. Often the term for this is equal access; as in if you have the right to do something as a US citizen or resident alien/legal immigrant in one state, then you are supposed to have that same right in all the states. So ultimately a number of the issues that have been so heatedly contested in certain states over issues such as gun ownership, abortion, adoption, etc - just as earlier issues about prayer in schools, religious classes in schools, access to contraception, etc - are likely to be decided in the Federal Courts. It isn't that each state has to do everything just like the others, rather if, as an American citizen you have the right to do something it applies wherever you are in America - it can't be that 12 states do one thing, and 28 do something else. And quite often there's no consistency on this: one may demand complete adherence to one constitutional provision for all 50 states while at the same time arguing the states have the right to restrict other things. Throughout the 20th Century, several administrations, as Mr. Sale has identified have done this, as have several different Supreme Court decisions that essentially Federalized or nationalized the Bill of Rights onto the States.

Mr. Sale or the legal scholars or some of the others here may have a different take, but what I've written would be the answer I'd give if the question came up in an American Federal Government/American Politics class.

[walrus]

I suspect that big business knows full well about J.K. Galbraiths concept of "countervailing power" - as big manufacturers grow, customers also build stronger organisations so as to be able to bargain on a more equal basis.

The issue, I think, also applies to Government. In an age of transnational corporations with revenues that exceed that of many nation states, producing multiple products of mind numbing complexity through long and convoluted international supply chains, you need regulators who can drill down and understand what is happening.

To put it another way, big, complex, businesses require big complex regulators to regulate them if they are to be effective. The Global financial crisis is in part, I think, caused by a failure to allocate enough resources to its regulation.

I like to believe that America got this balance of regulatory size and power vs. business size and power right most of the time. I'm thinking of the FAA vs. Boeing for example.

While I am romantically attached to the "Small Government" mantra, today that is a recipe for corporate domination.

[Cynthia]

Richard Sale,

The problem isn't so much that government has gotten too powerful as it is that Wall Street has gained too much power over government. This wouldn't be such a problem if Wall Street had remained well connected with Main Street. But unfortunately, this is not the case. Wall Street has become so disconnected from Main Street that it's no longer true that profits on Wall Street translates into profits on Main Street. In fact, this disconnect between Wall Street and Main Street has become so severe that it's turning America into a land of plutocrats and plebs with nothing in between. So if this latest news about how Washington wants to cut Social Security while it continues to hand out welfare checks to Wall Street doesn't get us plebs on Main Street all fired up for class warfare, I don't know what will!

So in order to reconnect Wall Street with Main Street, we must stop allowing corporations, who pay next-to-nothing in taxes, to have unfettered power and influence in Washington. To make corporations more beholden to the American economy and less to the global economy, we must mandate into law that the less corporations pay in taxes, the less power and influence they can have in Washington. But this won't help restore Main Street to its reform glory unless we tax the hell out of corporations for moving their operations beyond our nation's borders. These actions will also help neutralize the Supreme Court's recent decision to give corporations even more freedom to use their vast amounts of wealth to exert even more power and influence in Washington. But none of these actions will do a thing for us plebs on Main Street as long as the plutocrats on Wall Street own most of the mainstream-media outlets and all three branches of government. This is why we the plebs must declare war on the plutocrats and we must do it before they drive us all into servitude!

[Cynthia]

Another problem that we've got on our hands is our executive branch has gained too much power over our other two branches of government. This wouldn't be such a problem had we scaled back the Patriot Act.

Thinking back, we should've never allow our government to evolve where its executive branch wields far more power than its other two branches combined. But now that it has, thanks mostly to the passage of the Patriot Act, America is losing its roots in democracy and thus gaining roots in autocracy. So whenever I hear others say that Obama must do this or that to get our economy back on track, or must do this or that to prevent our nation from being destroy by Islamic terrorism, speaking as though he should be crowned emperor with absolute monopoly on power, I want to remind them that our nation's founders fought tooth and nail to prevent autocracy from taking root here in the US. Allow me to also remind them that autocracy has a long and sordid history of shaping foreign and domestic policy so that wealth and power remain concentrated in the hands of the moneyed and military elites, leaving the people powerless and penniless.

And now that Obama is getting away with being just as big of an autocrat as Bush was, we might as well kiss our government of and by and for the people goodbye and say hello to a government of and by and for the elites!

[frank durkee]

Walrus, that doesn't deal with the issue of "regulatiion capture by those being regulated. Indeed perhaps the issue today is "government capture" by the richest interests, Both effective regulation and the issue of "capture" have to be addressed. Hence the need to build the "counter valing force" which brings us back to community organization at the national level.i.ee. the only effective counterbalance to money is votes.

[walrus]

Frank, I agree I haven't discussed regulatory capture nor the revolving door whereby todays regulators become tomorrows captains of industry and then switch back to being regulators as each election cycle runs its course.

I also haven't discussed the rotten electoral system that ensures that only money and privilege are heard in Washington.

I also haven't discussed an electoral system that allows 59 Senators to be over the age of Sixty, with Twenty Six of those being over Seventy.

I also haven't discussed the fact that the average wealth of U.S. Senators is $8.9 million.

http://www.forbes.com/2006/11/17/senate-politics-washington-biz-wash_cx_jh_1120senate.html

I haven't discussed the fact that the average wealth in the House Of Representatives is $2.28 million.

http://www.rollcall.com/issues/55_61/news/40959-1.html

What I am asking myself is how America survives in spite of these so obviously broken systems, and for how long it will continue to survive without an upheaval, perhaps brought on by the sovereign debt crisis now visible in Europe, that is spreading inexorably in your direction.

[William R. Cumming]

Good post and comments. The failure of the two party system has been documented since it is now only one party-the incumbency party.

Perhaps November 2010 will see some change,perhaps not. What is clear is that few in the circles of governance have any real feel for the issues impacting main street--jobs for example.

[Adam L Silverman]

This article at the NY Review of Books makes some very interesting arguments that compliment Mr. Sale's current post, his previous one, as well as several other recent threads here at SST:
http://www.nybooks.com/articles/archives/2010/may/27/tea-party-jacobins/?page=1

[Sidney O. Smith III]

Mr. Sale

I was enjoying an all star special at the Waffle house recently when it suddenly dawned on me that the FDR tradition and that of F. Hayek are mutually exclusive. At least that is my position right now, and I think the waitress -- who may or may not be on probation for meth possession (she has that gaunt look) -- would agree with me, if I spoke to her about it.

If you can synthesize the two traditions, then you are breaking new ground in my opinion.

Not issuing a challenge as much as I am an obligation and I do so for the following reason. Perhaps because of the rate of change now taking place in the world, no paradigms work. It is a time of intellectual chaos . How thoroughly exciting!

I suppose by contemplating the FDR tradition and the Hayek tradition at the same time, one creates a cognitive dissonance, which in turns, supposedly triggers creativity (the methodology of a great federal judge?) that will benefit the USA.

As for myself, I have reached a conclusion as best I can, and when I muster up the courage, I hope to discuss my preliminary findings with the waffle house waitress. My intuition tells me she is tired of hearing about spring football in the SEC.

But before doing so, I would like to read the book The Forgotten Man: A New History of the Depression but don’t know when I will get around to it. (still working with Shelby Foote). In college, I actually focused on US history during the 1930's (the So. Tenant Farmers’ Union as well as the photographers of the FSA to be more precise) but now all my assumptions about the New Deal era have been blown asunder.