Sunday, February 26, 2012

Native American Citizenship

The original residents of North America, after suffering losses in property and rights, gained back those lands and freedoms in a series of legislative steps. Among the several measures taken, the Dawes Act (with its later emendations) and the Indian Citizenship Act of 1924 stand out.

The Dawes Act was written by a Republican senator, Henry L. Dawes. Because the Republicans had the majority in the Senate at the time, he was able to get his legislation approved in 1887. The basic intention of the Republican Party in passing this bill was to ensure that Native Americans ("Indians") had permanent legal ownership of their land. The Dawes Act was amended by subsequent pieces of legislation over the next two decades.

The 1887 legislation had mixed results. One the one hand, it clearly established legal ownership for Indians. On the other hand, it created a tangled of regulations regarding who had legal jurisdiction over that land, and weakened the role of tribal governments.

Further progress was made with the Indian Citizenship Act of 1924. With both the House of Representatives and the Senate featuring Republican majorities, and with Republican President Calvin Coolidge in the White House, it was finally possible to grant full citizenship to Native Americans.

Friday, February 24, 2012

Coolidge: Loved and Hated

Many older U.S. History textbooks still look at the presidency of Calvin Cooldge (1923 - 1929) unfavorably. This outdated view of one of America's greatest leaders is a hangover from the radicalism of the 1960's, when many leaders were denigrated simply because they were leaders. Contemporary historians take a more nuanced view of Coolidge. Ann Coulter writes that

Coolidge cut taxes, didn't get the country in any wars, cut the national debt almost in half, and presided over a calm, scandal-free administration, a period of peace, 17.5 percent growth in the gross national product, low inflation (.4 percent) and low unemployment (3.6 percent).

But let Coolidge speak for himself. On August 11, 1924, he gave a speech, in which he analyzed what would be necessary for the nation to make the kind of progress which would benefit all Americans at all income levels. He said:

This country needs every ounce of its energy to restore itself. The costs of government are all assessed upon the people. This means that the farmer is doomed to provide a certain amount of money out of the sale of his produce, no matter how low the price, to pay his taxes. The manufacturer, the professional man, the clerk, must do the same from their income. The wage earner, often at a higher rate when compared to his earning, makes his contribution, perhaps not directly but indirectly, in the advanced cost of everything he buys.

Coolidge saw that government was a burden upon people, and that taxation would slow the nation's ability to foster its own growth. To create prosperity for the ordinary person, government should get out of the way, lower taxes, and curtail its activities. Such a policy allows the economy to grow at maximum pace. The president continued:

The expenses of government reach everybody. Taxes take from everyone a part of his earnings and force everyone to work for a certain part of his time for the government.

President Coolidge saw that we cannot tax only a part of the population. It is an illusion to think that we can "tax the rich" or "tax the north" or "tax the south" or "tax young" or "tax the old" - a tax on anyone will result in a burden for everyone. If one person pays taxes, that is money taken out of the productive economy, and the ripple effect goes through all sectors of the nation.

When we come to realize that the yearly expenses of the governments of this country - the stupendous sum of about 7 billion, 500 million dollars — we get 700 million dollars — is needed by the national government, and the remainder by local governments. Such a sum is difficult to comprehend. It represents all the pay of five million wage earners receiving five dollars a day, working 300 days in the year. If the government should add 100 million dollars of expense, it would represent four days more work of these wage earners. These are some of the reasons why I want to cut down public expense.

Government expenses in Coolidge's day were small compared to later years, but in either case, the government repented a huge drag on the any productive worker. The amount of time - for money is time - consumed by the government, when measured in the labor of ordinary people, is breathtaking. Millions of working women and men are denied the wages which are rightfully theirs, because the taxes confiscate them. Coolidge's economic insights made him a excellent leader. What was a minor fluctuation in the economy became the Great Depression because later leaders did not follow Coolidge's example.

Friday, February 17, 2012

The Moral Equivalent of War

It has always been difficult to have enough patience with our constitutional system. Visionary leaders want to make sweeping changes immediately, but our system is deliberately designed to slow everything down. Why? Moving slowly is a good way to safeguard our freedom. Those who lack the necessary patience often look fondly at wartime situations. In the urgency of war, big decisions are made conclusively by a leader and implemented swiftly. Progressives, like Woodrow Wilson, wonder why we can't bring that same decisiveness to other activities. Because they see this military behavior as paradigmatic, they generate phrases like "the war on poverty" or the "war on narcotics" as they try to generate that same authoritarian leadership - a leadership which would run roughshod over constitutional processes, and over civil rights. George Will writes that

War, said James Madison, is "the true nurse of executive aggrandizement." Randolph Bourne, the radical essayist killed by the influenza unleashed by World War I, warned, "War is the health of the state."

Both sides agree - war inflates executive power. But is that a good thing? Progressives think so. A strong executive can boldly re-engineer society. It doesn't matter weather or not society wants to be re-engineered, or if we have to trim personal liberty in the process: this is the essence of progressivism.

The armed services' ethos, although noble, is not a template for civilian society, unless the aspiration is to extinguish politics. People marching in serried ranks, fused into a solid mass by the heat of martial ardor, proceeding in lockstep, shoulder to shoulder, obedient to orders from a commanding officer — this is a recurring dream of progressives eager to dispense with tiresome persuasion and untidy dissension in a free, tumultuous society.

While there may be a justification for unilateral executive power in the form of a military officer commanding troops, there is no justification for it in a civilian government. It endangers the very freedom which the government is supposed to protect.

Progressive presidents use martial language as a way of encouraging Americans to confuse civilian politics with military exertions, thereby circumventing an impediment to progressive aspirations — the Constitution, and the patience it demands. As a young professor, Woodrow Wilson had lamented that America’s political parties “are like armies without officers.” The most theoretically inclined of progressive politicians, Wilson was the first president to criticize America’s founding. This he did thoroughly, rejecting the Madisonian system of checks and balances — the separation of powers, a crucial component of limited government — because it makes a government that can not be wielded efficiently by a strong executive.

Woodrow Wilson, and other progressives, don't want to wait for the legislative process, and believe that their plans for society are so important, and so correct, that they can't risk diluting them with compromise.

Franklin Roosevelt agreed. He complained about "the three-horse team of the American system": "If one horse lies down in the traces or plunges off in another direction, the field will not be plowed." And progressive plowing takes precedence over constitutional equipoise among the three branches of government. Hence FDR’s attempt to break the Supreme Court to his will by enlarging it.

Franklin Roosevelt learned from Woodrow Wilson. There could be no debate, and no compromise, for his plans. But the mistake Roosevelt and Wilson made was in failing to see that personal liberty is the core value of our constitutional system. Nothing justifies compromising individual freedom. But FDR and Wilson believed that nothing, not even respect for freedom, justified compromising their attempt to re-design societies or economies.

In his first inaugural address, FDR demanded "broad executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe." He said Americans must "move as a trained and loyal army" with "a unity of duty hitherto evoked only in time of armed strife." The next day, addressing the American Legion, Roosevelt said it was "a mistake to assume that the virtues of war differ essentially from the virtues of peace." In such a time, dissent is disloyalty.

To the ears of someone who understands the American notion of liberty, Roosevelt's words are shocking. A carefully designed separation of powers was put into place to prevent suddenly unilateral action: FDR would cheerfully brush it all aside and gather dictatorial power to himself. In fact, the word 'dictator' was seen as something rather good by the progressives: among people like Woodrow Wilson in 1912 and FDR in 1932,

Yearnings for a command society were common and respectable then.

The media of that era echoed this desire for dictatorship:

Walter Lippmann, then America’s pre-eminent columnist, said: "A mild species of dictatorship will help us over the roughest spots in the road ahead." The New York Daily News, then the nation's largest-circulation newspaper, cheerfully editorialized: "A lot of us have been asking for a dictator. Now we have one. ... It is Roosevelt. ... Dictatorship in crises was ancient Rome’s best era." The New York Herald Tribune titled an editorial "For Dictatorship if Necessary."

The demand for dictator-like powers

expresses progressivism's impatience with our constitutional system of concurrent majorities. To enact and execute federal laws under Madison’s institutional architecture requires three, and sometimes more, such majorities. There must be majorities in the House and Senate, each body having distinctive constituencies and electoral rhythms. The law must be affirmed by the president, who has a distinctive electoral base and election schedule. Supermajorities in both houses of Congress are required to override presidential vetoes. And a Supreme Court majority is required to sustain laws against constitutional challenges.

One route which progressives use when circumventing constitutional systems is the perception that there is a current crisis requiring immediate action. Whether or not there is a crisis, the perception will justify the executive grasping the powers which properly belong to the other two branches of government so that he can deal decisively with the perceived danger. This was famously summed up by Rahm Emanuel:

You never want a serious crisis to go to waste. And what I mean by that: it's an opportunity to do things that you think you could not do otherwise.

From the Roman Republic to twentieth century Europe to twenty-first century America, this has been a political strategy - "this is a crisis - give me the power to rule absolutely so that I can get things back in order." Narratives beginning with phrases like these rarely have happy endings.

Breaking a Non-Monopoly

Rockefeller's Standard Oil Company is often described as a "monopoly" which was "broken up" by the Supreme Court under pressure from Teddy Roosevelt. It was never a true monopoly, meaning that it never had 100% of the market. It wasn't broken up by the Supreme Court or by Roosevelt; its market share had already fallen by the time the 1911 ruling was issued.

Standard Oil's market share peaked at over 50%. There are various ways to measure market share: production, final retail sales, gallons pumped, etc. There is no doubt the that company was huge, and its large market share allowed it to impact prices. But given the presence of competitors, Standard Oil did not have complete control over the market.

When a company is as big as Standard Oil, two problems arise: there is a lot more room for waste and inefficiency, which means that your competitors have a chance of underpricing you; being the biggest, you are the primary target for all competitors. Both of these factors began to take Standard Oil down, before the federal government took any action. Thomas Woods writes:

the federal government moved to dissolve Standard Oil during Theodore Roosevelt's presidency. But by the time the federal government dissolved Standard Oil in 1911, the company's market share had already been reduced to 25 percent as a result of normal market competition.

Different historians give different numbers regarding Standard Oil's market share, but all agree that its market share fell significantly, and long before the Supreme Court ruling began to appear likely.

historian Gabriel Kolko notes that from 1899, Standard Oil had "entered a progressive decline in its control over the oil industry, a decline accelerated, but certainly not initiated, by the dissolution." Standard's decline, Kolko explains, was "primarily of its own doing - the responsibility of its conservative management and lack of initiative."

If a market is free enough - unfettered by regulation - it will keep itself in order, even to the point of dismantling companies which threaten to approach monopoly status. By contrast, only with the the help of government intervention and regulation can a company become a true monopoly with 100% market share.

Tuesday, February 14, 2012

Crony Capitalism vs. Free-Market Capitalism

Is capitalism good or bad? Does it create prosperity for the average citizen or enslave them in low-paying labor? The answer is not simple, because there are various types of capitalism.

In the history of the United States, we have seen two main sorts of capitalism in action. Free-market capitalism, known by the phrase laissez-faire, calls for open competition between companies, and for the government to refrain from regulating economic activity so that this competition can be fair - "a level playing field."

The other form of capitalism in American history is called crony capitalism. In this system, companies hope to enlist the government on their side in competition against other companies. Large corporations lobby or otherwise influence legislators and regulators to write rules which will hinder competitors; they also seek subsidies and other support from the government.

These two types of capitalism are directly opposed to each other. Not only are they opposed in their methods - free markets vs. regulated markets - but they are opposed in their goals and outcomes: the goal of crony capitalism is monopoly. One business hopes to use the government as a weapon against its competitors, and hopes to corner the market in its products. Indeed, a true monopoly can only arise and exist when the government intervenes in the market.

Free-market capitalism ensures that a monopoly cannot have a solid hold on the market. As soon as one company seems situated to become a monopoly, there is a strong profit motive for a competitor who believes that there is a way to undersell or outsell the would-be monopolist.

The result of free markets is efficiency. The result of crony capitalism is waste. This can be seen clearly in the transcontinental railroads of the 1860's. When the Union Pacific and the Central Pacific enjoyed subsidies from the federal government and were thus shielded from market forces, their construction quality was low and their waste massive.

By contrast, other railroad lines built without government support were built better, quicker, and were operated more profitably.

It is very important to distinguish between these two types of capitalism.