from the Ludwig von Mises Institute
by William L. Anderson
Posted on the Internet January 10, 2000
While Franklin Delano Roosevelt narrowly missed being Time Magazine’s "Man of the Century," there is no doubt that the man who prolonged the Great Depression and helped lay the groundwork for World War II looms large in the consciousness of statist journalists and historians. Although FDR’s role in the Second World War is of utmost importance to the pundits, his main historical role seems to be the New Deal, which permanently established the welfare/warfare state in this country.
Contrary to popular belief, FDR’s New Deal was not the most significant legislative period of the 20th Century. In fact, had it not been for the reign of Progressivism more than two decades earlier, Franklin Roosevelt would simply have been a relatively obscure governor of New York, known more for being a distant cousin of President Theodore Roosevelt.
The New Deal did not rise out of a vacuum. Rather, the New Deal — and the subsequent canonization of FDR — came about as the result of the legal, bureaucratic, and intellectual framework that was laid down during the Progressive Era of the early 1900s.
Without Progressivism, the New Deal would and never could have come into existence. The vast expansion of the state apparatus that occurred during the 1930s moved along tracks already laid by politicians like Teddy Roosevelt and Woodrow Wilson. By the mid-1930s, the New Deal, far from being a legislative aberration, naturally followed the economic crisis that Progressivism had caused.
Just what was Progressivism, what were its causes, and what followed from the Progressive Movement? Historians refer to it as an influential social movement that began in the late 1800s and ended with the United State’s 1917 entry into World War I.
Among the many "successes" of Progressivism were antitrust laws, state and national income taxes, increased business regulation, minimum wage laws, direct election of U.S. senators, creation of the Federal Reserve System, and prohibition of alcoholic beverages.
Other than prohibition, historians (and many economists) almost uniformly praise Progressivism and its results. Take the passage of antitrust laws, for example. Whether it be from history texts, encyclopedias, or news stories, the story is almost always the same: huge business trusts were monopolizing the economy, artificially driving up prices, producing shoddy products, and generally dragging down the standard of living for most people. Aggressive enforcement of antitrust laws, especially after the passage of the Clayton Antitrust Act of 1914, broke up many trusts and set the stage for future prosperity.
The only problem with this explanation is that it is patently untrue. First, if American businesses were stifling competition and charging monopoly prices, they had a strange way of doing it. By almost any standard of measurement, economic prospects for nearly everyone were increasing by the end of the 19th Century, as prices for most goods fell rapidly.
If this era is known for impressive economic accomplishments, it is also known for its journalistic excesses. Not only did William Randolph Hearst and Joseph Pulitzer conspire to inflame Americans with war fever against Spain in 1898, but a group of writers called muckrakers created a false picture of life in the United States.
In fact, it seems that one of the most insidious things to come from the Progressive Era was the wedding of mainstream journalism and statism. The formerly independent journalist now became a flack for expansion of the power of the state, as the chief "beat" of news reporters became the various government agencies.
Most of the "muckrakers" were also socialists. For example Upton Sinclair is famous for his 1906 book, The Jungle, which, among other things, described what were supposedly horrific conditions in the meat packing industry in Chicago. While most history books treat his depiction of rats and even humans being processed into meat sold to consumers as gospel truth, his book was simply untrue and represented a crude attempt to convince Americans that socialism was their only hope. (Investigation after investigation of the meat packing industry showed Sinclair’s claims to be false.)
Sinclair admitted afterward that his book was an attempt to change the "American heart," but instead managed only to affect "its stomach." Historians often say that The Jungle led directly to the passage of the Pure Food and Drug Act of 1906. As usual, the truth is more complicated.
As Milton Friedman has pointed out, American meat processors were anxious to show Europeans that their products were not poisonous and the FDA became the mechanism to do that.
Ida Tarbell’s The History of the Standard Oil Company, an anti-Rockefeller screed which many historians treat as an accurate documentary of Standard Oil’s practices, must be seen in the light of the author herself. Tarbell, another socialist, was the daughter of an oil executive from a rival oil company that had lost the battle of the marketplace to Standard Oil.
Although competent economic historians have pointed out time and again that Rockefeller’s company gained its large market share through efficiency and lower prices, Progressivists who believed oil — like everything else — needed to come under the heavy hand of government spread the lie that Standard Oil had gained its dominant position through violence, fraud, and chicanery.
Nor was Progressivism the domain of just one political party, as both Republicans and Democrats vied with each other to see who could more thoroughly expand the state. Republicans, led by Theodore Roosevelt and Sen. Robert LaFollette of Wisconsin, pushed for high tariffs, government ownership of natural resources, antitrust legislation, and imperialistic adventures abroad.
Democrats, on the other hand, led by William Jennings Bryan and Woodrow Wilson, pushed the income tax, inflation through debasement of the money supply, and the internal protectionist device known as Jim Crow laws, which attempted to shield white workers from competition from blacks. Both parties favored expansion of voting rights to women. What is clear is that neither party had any intention of honoring the U.S. Constitution.
In fact, the Progressive Era would not have had its social and legal effect had it not been for its reworking of the Constitution through the amendment process. The 16th, 17th, 18th and 19th amendments reworked the political landscape and greatly expanded the scope of the central government, one of the main goals of progressives. The 16th Amendment was probably the worst, as it authorized Congress for the first time to levy an income tax that would not be struck down by the Supreme Court.
The 17th Amendment took power of appointment of U.S. senators from the state legislatures and and placed it in the hands of voters. This further helped make the states subservient to the national agenda of progressives. The 18th Amendment was the infamous prohibition of alcoholic beverages, while the 19th Amendment forced all states to permit women to vote.
The imposition of the income tax was a green light for unbridled growth of the central government by allowing politicians to confiscate willy-nilly the property of individuals — and especially the property of the most productive citizens. Prohibition further increased the power of the central government over the property of Americans, while the other two amendments permanently altered the delicate balance of powers that the framers of the Constitution so painstakingly laid out in 1787.
Entry into World War I in 1917 was not, as many historians have said, the end of Progressivism, but rather — as Murray Rothbard so aptly pointed out [.pdf file] — its fulfillment. The advent of war empowered the central government to seize ownership of U.S. railroads, as well as to reorganize much of the economy into a series of cartels controlled by committees of business executives, military officers, and bureaucrats. Strong press censorship reigned, all with the express backing of mainstream journalists. The Progressivist dream of socialism came into being through the auspices of patriotism.
Although most historians lament the "demise" of Progressivism during the 1920s, in truth, it hardly disappeared. For one, the Federal Reserve System worked feverishly to maintain the artificial rate of exchange of the British Pound and the U.S. Dollar and expand the domestic money supply, feeding speculative bubbles which finally collapsed with Black Thursday on Wall Street. Second, even though Congress cut the top income tax rate from its World War I high of more than 60 percent to 25 percent, this tax still was the main source of revenue for a government that had not ever shrunk back to its prewar levels.
After the Fed-induced crash of 1929, President Herbert Hoover, a favorite of a large number of Progressives, decided to take a non laissez-faire approach to the economic downturn that followed the crash. Within a couple of years, Hoover had openly urged business owners to keep wages and prices artificially high, signed the disastrous Smoot-Hawley Tariff into law and oversaw the doubling of tax rates. As Rothbard noted in America’s Great Depression, all of these measures took what would have been a brief recession and turned it into the greatest economic calamity in U.S. history.
That Progressivism ultimately led to the Great Depression should be obvious. Not surprisingly, Franklin Roosevelt chose to expand the powers of the state. Not surprisingly, his actions prolonged the depression. And, not surprisingly, the Progressivist propaganda machine was able to convince the public that the solution lay not in elimination of government intervention, but rather in further expansion of government.
While the names of interventionist politicians have changed, the Progressive Era still remains. The modern regulatory state is firmly rooted in Progressivist legislation of 100 years ago, the income tax still confiscates hard-earned wealth of productive Americans, and the Fed continues to inflate. The U.S. Supreme Court, once the bulwark against the Progressivist agenda, today gives rubber stamp approval to the latest legislative outrages.
Just as the political classes turned liberalism upon its head with Liberalism, so have Progressivists undermined the meaning of progress. The rise of humanity from its existence of perpetual poverty to the modern standard of living has occurred precisely because people were free to dream, invent, and invest. Real progress has happened because the stifling chains of government were removed from people. It is false Progress which seeks to reimpose those shackles.
|William Anderson teaches economics at North Greenville College.|
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