The Myth and the Reality
One of the most enduring set of myths from U.S. history comes from the political and social developments in what is called the “Progressive Era,” a period lasting from the late 1800s to the end of World War I. (Of course, one could argue, convincingly, that the Progressive Era never has ended.) The prevailing story told in textbooks, the editorial pages of the New York Times, and the typical classroom holds that this was the time when people began to use the mechanism of government to create the conditions for a better life for all and to begin the arduous process of reining in the excesses of capitalism.
According to the pundits, by the late 1800s many businesses in the United States had grown to gigantic proportions, monopolizing much of the economy. In response to this growing emergency, the government adopted new and “progressive” policies of regulatory agencies and antitrust laws.
Besides regulating business activity, Progressives, through coalitions of intellectuals, political figures, and activists, saw to it that government also began the process of regulating the extraction of natural resources through executive action. (Progressives considered the legislative procedure to be a waste of time that needed to be replaced with a mechanism that permitted the executive branch of government to seek “needed” shortcuts around the give-and-take that accompanied the legislature at work.)
Through Progressive prodding, Congress passed the Pure Food and Drug Act of 1906, which created the Food and Drug Administration and expanded government regulation of food and the workplace. Progressives also secured the right of women to vote and ended the state legislatures’ stranglehold on the national electoral process by mandating the direct election of U.S. senators (which until 1913 were chosen by state legislatures).
Socially, the Progressives were humanitarians who sought to better the lives of ordinary people, with their greatest “triumph” being passage of the Eighteenth Amendment, which ushered in the era of Prohibition. (Most modern Progressives are not particularly proud of this “achievement” by their forbears, but the prohibitionist spirit is much more alive than they would like to admit. Today, Progressive lawyers have been busy suing tobacco companies and the liquor industry and attempting to ban products such as silicon breast implants that feminists and other modern Progressives think are not proper things for people to have.)
Last, the Progressive Era trumpeted science and the “enlightened” Social Gospel, which became the religion of choice for religious skeptics who questioned the core doctrines of the Christian faith. From the implementation of “scientific” principles to govern politics, business, and social relationships, Progressivism helped to create a rational basis for modern society. From the creation of the Federal Reserve System to the Sixteenth Amendment that brought about the national income tax, Progressives were able to do away with the impediments created by the U.S. Constitution, which according to them stood in the way of progress.
If there was a downside to the Progressive Era, its modern supporters say, it was that Progressives were not able to do enough before “reactionary” post—World War I forces set in. “Reforms” such as the banning of child labor, minimum wages, the welfare state, further regulation of business, and a completion of the process of transferring legislative power from the Congress to the executive branch would have to wait until the Great Depression, when the nation had supposedly had its fill of laissez faire. Also, in spite of the best efforts of the Progressives, segregation laws institutionalized racism, which worsened strife between whites and blacks.
While Progressivism has captured the hearts and minds of modern intellectuals and others, there is another story to tell about this era, a much darker tale than what generally is told. In fact, it is not an exaggeration to say that Progressivism helped to destroy, not preserve, the constitutional order. Far from ushering in the social peace, justice, and prosperity that Progressives promised, Progressivism helped to create the conditions for the Great Depression and helped plunge the country into one war after another. Perhaps the only positive thing we can say about the Progressive Era was that it did not do all of the damage that it could have done.
In taking this look at the Progressive Era, I will be examining a number of social and economic initiatives that took place during that time. I begin with the social policies and laws that came about during that era and dissect Progressivism’s long and sorry legacy.
Early U.S. Progressives
Progressives had their forbears in the Unitarians of early- and mid-19th-century New England. The Unitarians were what we would call the theological “liberals” of that era, and they had come to believe that it was their duty to establish a sort of “kingdom of God” on earth (as opposed to the Christianity that stressed the temporal nature of life and the prospect of Heaven for those who were followers of Christ).
According to Samuel Blumenfeld (“Why the Schools Went Public”; Reason Magazine, March 1979), the public-school movement that swept Boston during the 1840s was led by Unitarians such as Horace Mann. While Mann and his followers pushed government education at the expense of private schools, they were able to form coalitions with Calvinists and the Christian Protestant pietists, who saw public schools as a way to “train” the children of Catholic immigrants who were pouring into the country from Ireland and southern Europe. Moreover, Unitarians and the pietists promoted laws to prohibit the making and sale of alcoholic beverages, again a coalition that was promoted, in part, as a wedge against Catholic immigrants, who came from cultures where alcohol consumption was a normal part of life.
When war broke out between North and South in 1861, the Unitarians were among the most forceful in calling for the complete destruction of the South, and while their influence on the actual fields of battle was negligible, they were highly influential on the political home front. (For example, Julia Ward Howe, who wrote “The Battle Hymn of the Republic,” was a Unitarian.)
While the Unitarians and many of their fellow travelers were small in number, they were very influential because of their high levels of education and literacy, and were the forerunners of what one might call the “liberal elite” of modern society. Their rise to power is notable and important because the mentality of the intellectuals of the mid and late 19th century differed substantially from that of the group of intellectuals who fashioned the early documents of the United States. Unlike the early American intellectuals who saw liberty as a polestar and tried to limit the growth and power of the state, the later intellectuals saw the state as a vehicle for their own political and social agendas. While the original American intellectuals championed the federal system with its balance of powers between the states and central government, the later intellectuals placed their faith squarely in the power of the centralized state.
Darwin, intellectuals, and the state
Charles Darwin’s On the Origin of Species by Means of Natural Selection; or the Preservation of Favoured Races in the Struggle for Life (1859) had an enormous effect on how intellectuals viewed the world. First, it seemed to vindicate the liberal elite who saw the religion of their day as mere superstition. Darwin’s theories permitted the reformers to expound on their own beliefs that they could “reform” society through the miracles of science. Second, it gave impetus to those who believed that government power could be used “wisely” to fashion a new society.
Many Progressives reasoned that if human evolution depended on “survival of the fittest,” then humans could help that process along through eugenics, which also meant “breeding” humans in a way that would advance the “superior” races and vanquish those races that were “inferior.” (Progressives supported eugenics until Hitler’s embrace of it gave it a bad name.)
For example, most people know Margaret Sanger as the founder of Planned Parenthood, but she also was a strong advocate of eugenics. In a 1939 letter, she wrote the following:
We should hire three or four colored ministers, preferably with social-service backgrounds, and with engaging personalities. The most successful educational approach to the Negro is through a religious appeal. We don’t want the word to go out that we want to exterminate the Negro population, and the minister is the man who can straighten out that idea if it ever occurs to any of their more rebellious members.
In 1921, she had written,
As an advocate of birth control I wish … to point out that the unbalance between the birth rate of the “unfit” and the “fit,” admittedly the greatest present menace to civilization, can never be rectified by the inauguration of a cradle competition between these two classes. In this matter, the example of the inferior classes, the fertility of the feebleminded, the mentally defective, the poverty-stricken classes, should not be held up for emulation. (“The Eugenic Value of Birth Control Propaganda”; Birth Control Review, October 1921; page 5.)
Another influential Progressive was Herbert Croly, the founder of The New Republic. Libertarian writer Virginia Postrel said of Croly,
Crolyism overturned the ideal of limited government in favor of a combination of elite power — commissions to regulate and plan — and mass democracy…. Frustrated with constitutional limits, Croly wrote, “It remains … true … that every popular government should in the end, and after a necessarily prolonged deliberation, possess the power of taking any action, which, in the opinion of a decisive majority of the people, is demanded by the public welfare.” This statement, while extreme, pretty much sums up today’s governing philosophy.
While Croly is not a household word today, he was an important social theorist who influenced Theodore Roosevelt and Woodrow Wilson. Both of them used the White House to centralize government in Washington. They also helped to bring about two sets of social policies: Prohibition and segregation.
Prohibition was the shotgun wedding of the secular Progressives and the Christian fundamentalists, both of whom wanted to ban intoxicating beverages, but for different reasons. Progressives saw it as a way to promote what Rexford G. Tugwell called “social virtues,” while fundamentalists thought that alcohol consumption was sinful, which was reason enough for the central government to ban it.
(At least the Progressives realized that the U.S. Constitution did not permit Congress to outlaw the manufacture or sale of alcoholic beverages without the authority of a constitutional amendment. Today’s “war on drugs,” however, is carried on without such constitutional niceties.)
While Prohibition today is painted as the triumph of fundamentalist bluenoses, most Progressive groups supported it, from the feminists to those who believed that entry into World War I was necessary to spread democracy throughout the world. (For more on this subject, see Murray N. Rothbard’s “World War I as Fulfillment: Power and the Intellectuals,” Journal of Libertarian Studies, winter 1989.)
Woodrow Wilson brought segregationist policies to the federal government. Many states and localities already had implemented those laws in their respective areas but with Wilson’s presidency, which began in 1913, the federal government became a leading force in discriminating against blacks in federal hiring practices. Notes Charles Paul Freund,
Wilson’s historical reputation is that of a far-sighted progressive. That role has been assigned to him by historians based on his battle for the League of Nations, and the opposition he faced from isolationist Republicans. Indeed, the adjective “Wilsonian,” still in use, implies a positive if hopelessly idealistic vision for the extension of justice and democratic values throughout the world. Domestically, however, Wilson was a retrograde racist, one who attempted to engineer the diminution of both justice and democracy for American blacks — who were enjoying little of either to begin with. (In fact, Wilson reportedly struck a racial equality clause from the League of Nations charter as well.)
While some have tried to claim that Wilson’s racism was due to his Southern upbringing, he simply was acting as a leading Progressive. Progressives reasoned that blacks were not as far “evolved” as whites and, thus, should not be given the same rights and responsibilities. When one combines Wilson’s acts of segregation with racist eugenics practices (through birth control and outright sterilization), it is not hard to understand why the Progressive Era was anything but “progressive” when it came to the rights of African-Americans.
The Progressive Era, contrary to popular belief, was not a time when the U.S. government began to adopt “wise” and “far-sighted” policies that matched the political, economic, and social “needs” of that time. Instead, it was a period during which many of the constitutional limits on government were either “reinterpreted” or simply eviscerated.
Progressives believed that they were bringing in an age of knowledge, enlightenment, and security. Instead, they brought social turmoil, injustice, and war.
Progressives and the Economy
The last quarter of the 19th century and the first decade or so of the 20th century saw the rise of the large corporation in the United States. Those of us who are used to mega-multi-national firms cannot appreciate the sea change that occurred in the United States, as business enterprises, from manufacturing to retail, were transformed from the small, mom-and-pop operations to something akin to what we see today.
Naturally, many Americans mistrusted this development, especially since many of these new “captains of industry” also worked closely with whoever was in political power, from the local mayor to the president of the United States. Given this background, it is not surprising that a number of myths have endured regarding business and the development of the central regulatory state during the Progressive Era. In fact, whenever someone attempts to challenge the current regulatory apparatus, invariably someone else will bring up the “bad old days” of “untrammeled free enterprise” before the state reeled in business enterprises to make them (as the story goes) more “responsive” to the “needs of the public.”
Thus, if we are to rebuff the claims of Progressives that the “reforms” of the Progressive Era signaled positive change, we have to begin with the myths created about the various economic enterprises that seemed to define life in the United States around the turn of the century. The place to begin is with the historians themselves.
As historian David M. Kennedy has written, “Most American academic historians have thought of themselves as the political heirs of the Progressive tradition.” Indeed, it is not just the historians who crave the Progressive mantle but also mainstream journalists, who long have promoted growth of the regulatory and welfare state, not to mention most politicians. While they no doubt are writing and speaking from a perspective they believe to be true, when one examines the historical record one finds that the Progressives are leaving out some important information, and it is precisely that information that I wish to share with readers.
For the most part, historians, academicians, and mainstream journalists have held that the late 19th and early 20th centuries were periods dominated by rapacious, greedy businessmen who were corrupting government through bribery and bilking the public. The prevailing view is that these enterprises actually were impoverishing most Americans and that, as they grew, they became gluttonous monopolies that used their market power to force up prices and produce inferior goods.
Indeed, some of the so-called robber barons of that age were little more than con men and crooks. They were what the economic historian Robert Higgs calls the “political entrepreneurs,” men who demanded and received large subsidies from governments and ran inefficient, costly enterprises. For example, the famed transcontinental railway that still is portrayed as a great achievement in U.S. history with the driving of the “golden spike” at Promontory Point, Utah, in 1869 actually was little more than an exercise in fraud.
As Burton W. Folsom Jr. points out in his book The Myth of the Robber Barons, the Union Pacific and Central Pacific railroads received lavish government subsidies to complete the link between Omaha, Nebraska, and Sacramento, California, which meant crossing the physically imposing territories of the Sierra Nevada, the Great Basin, and the Rocky Mountains when there was no economic reason to do so at that time. The vast subsidies given to the two railroad companies created the incentives for shoddy workmanship and inferior rails and crossties, and hurried construction techniques that emphasized length over efficiency. (The railroads were paid by the mile, and they bilked the taxpayers out of every penny they could.)
The near-criminal exploits of the UP and CP are placed in stark contrast to the building of the Great Northern line by James J. Hill, who constructed his transcontinental railway across the northern states using private funds. Furthermore, Hill built as the market dictated, not according to what was politically feasible, and he encouraged the development of agriculture and other businesses that could be served by his railroad. In other words, the Great Northern’s transcontinental railroad was not politically driven but instead served an economic purpose.
The marvelous accomplishments of the Great Northern were, however, swallowed by the shenanigans of many railroad owners. While competition was fierce and the various attempts at forming cartels to hold rates high failed, railroads often were unpopular among the intellectuals as well as the populist farmers and others who were becoming increasingly involved in the political process. The agitation resulted in the formation of the Interstate Commerce Commission in 1887, the first of many commissions and agencies that ultimately were to make Congress the “regulator” of interstate commerce.
As Milton Friedman notes in Free to Choose, the results of the ICC were much different than what the “reformers” had anticipated. Instead of independently “regulating” the railroads, the ICC, which was staffed by people with ties to rail companies, worked hand in glove with the entities it was supposed to be overseeing. Thus, the first “revolving door” between industry and the entities that regulate it was established.
One of the great myths arising from the Progressive Era was that the “captains of industry” were promoters of economic laissez faire; the reality is quite different. For example, American historians widely assume that the Sherman Antitrust Act of 1890 was passed to correct abuse caused by “monopolies” and “price fixing.” The assumption was that business was becoming increasingly monopolized and that companies were conspiring with one another to produce inferior products at high prices.
The record is quite different. From John D. Rockefeller’s Standard Oil Company to the various producers of capital and consumer goods, the trend was for prices to fall and for the quality and availability of goods to increase. When Rockefeller entered the oil business in the mid-1860s, the price of a gallon of kerosene (the main refined fuel of choice in that day) was about 60 cents. By the turn of the century, Rockefeller’s efforts at eliminating waste and improving production methods brought the price of kerosene to less than 6 cents per gallon, and his story was typical of that era.
Although the free-enterprise system had resulted in the creation of vast amounts of wealth and an increasing standard of living for most Americans, the intellectuals and journalists of the day became infatuated with collectivist ideology. Many business leaders also bought into collectivist ideology, and, as Murray Rothbard points out, there was no one left to resist the clarion call to government regulation and cartelization.
The collectivist mindset
Influential writers such as Walter Lippman insisted on calling corporations themselves entities of collectivism, and others also bought into that error. He could not have been more mistaken, as the supposed power enjoyed by even the largest businesses depended entirely on how well they served their customers and on making correct predictions about the direction their particular industries would be going. Businesses that must serve customers, unlike governments, do not exist as a result of force.
For example, Rockefeller’s Standard Oil Company enjoyed almost a 90 percent market share at the turn of the century, but by the time his company lost a landmark antitrust decision at the hands of the U.S. Supreme Court in 1911, its share had fallen to about 65 percent and was falling quickly, as competitors moved into the newly discovered oil fields in Texas and Oklahoma. Whatever influence Rockefeller might have had with politicians was no match for competitors who could equal or better his prices.
Collectivism had been gaining force since the late 19th century, but the unhappy marriage of socialism and the business enterprise was spurred by the U.S. entry into World War I in 1917. Rothbard writes,
More than any other single period, World War I was the critical watershed for the American business system. It was a “war collectivism,” a totally planned economy run largely by big-business interests through the instrumentality of the central government, which served as the model, the precedent, and the inspiration for state corporate capitalism for the remainder of the twentieth century.
The development of “war socialism” for the purpose of waging “total war” was approved by both political parties, Progressives, business leaders, and religious leaders. Furthermore, the practitioners saw this as a new horizon, an onward-and-upward step in the development of the United States. Rothbard writes,
Apart from the role of big business in pushing America down the road to war, business was equally enthusiastic about the extensive planning and economic mobilization that the war would clearly entail. Thus, an early enthusiast for war mobilization was the U.S. Chamber of Commerce, which had been a leading champion of industrial cartelization under the aegis of the federal government since its formation in 1912. The Chamber’s monthly, The Nation’s Business, foresaw in mid 1916 that a mobilized economy would bring about a sharing of power and responsibility between government and business. And the chairman of the U.S. Chamber’s Executive Committee on National Defense wrote to the du Ponts, at the end of 1916, of his expectation that “this munitions question would seem to be the greatest opportunity to foster the new spirit” of cooperation between government and industry.
As I pointed out earlier, many of the nation’s intellectuals were won over to collectivism in the first half of the 19th century, and that trend accelerated, especially after the Northern victory in the Civil War. Nor were American intellectuals alone in their endorsement of socialism; the ideology, after all, had come from Europe. Great Britain and states such as Germany, in order to hold off the more radical calls for communism, already had implemented some “progressive” policies such as the establishment of government “old-age pensions” and some small forms of socialistic medical care.
The desire for intellectual “respectability” carried over to those involved in business, as intellectuals often displayed scorn for those involved in the “trades.” (This was hardly a new phenomenon, as the antipathy toward work and those engaged in trade existed in antiquity, and still is part of the intellectual mindset today.) But as many people began to pile up large fortunes, they also found they could afford to enter a world that previously had been closed to them.
In a recent conversation I had with the economic historian Robert Higgs, he said that he believed that the desire for “respectability” was one of the driving forces of the Progressive Era. This certainly would have been true for many of the so-called captains of industry. Embracing collectivism and an ordered system of government regulation placed them in much more “respectable” company than would have been the case had they insisted on the “unscientific” and “unsophisticated” regime of laissez faire, with all of its “dog-eat-dog” implications of unfettered competition. Notes Rothbard,
The new dispensation cloaked the new form of rule in the guise of promotion of the overall national interest, of the welfare of the workers through the new representation for labor, and of the common good of all citizens. Hence the importance, for providing a much-needed popular legitimacy and support, of the new ideology of twentieth-century liberalism, which sanctioned and glorified the new order. In contrast to the older laissez-faire liberalism of the previous century, the new liberalism gained popular sanction for the new system by proclaiming that it differed radically from the old, exploitative mercantilism in its advancement of the welfare of the whole society. And in return for this ideological buttressing by the new “corporate” liberals, the new system furnished the liberals the prestige, the income, and the power that came with posts for the concrete, detailed planning of the system as well as for ideological propaganda on its behalf.
Yet, as Rothbard also points out, the end result was the return of mercantilist policies that benefited the politically connected firms at the expense of those who were lacking political ties. In the final irony, in the name of preserving competition and promoting the “public welfare,” the Progressives ultimately created a system that stifled competition and created entrenched interest groups and the ubiquitous “revolving door” between regulated businesses and the agencies that regulate them.
