There is a lot of talk of Shareholder or Stakeholder democracy, politically and economically, of late. The reality is that the Shareholder is not an individual but an institution like a pension fund, run by managers. Shareholders have been at odds with the company management since the founding of Joint Stock Companies.
The corporate model of capitalism is not the only model of a market economy, nor is it inherently democratic. Instead the real democratic mode of economic development of the market was the Cooperative Commonwealth. History of the Co-operative Movement
Although they date to the earliest days of U.S. history, Utopian communities, intentional communities created to perfect American society, had become institutionalized in American thought by the 1840s. Various groups, struggling under the pressures of urbanization and industrialization, challenged the traditional norms and social conservatism of American society. Their desire to create a perfect world often lay in sharp contradiction to the world in which they lived, one in which capitalism, the INDUSTRIAL REVOLUTION, immigration, and the tension between the individual and the community challenged older forms of living.
The first American Utopias grew out of Robert Owen's attempt to create a model company town in New Lanark, Scotland. In the United States, Owen organized the New Harmony Community along the Wabash River in western Indiana in 1825. There the residents established a socialist community in which everyone was to share equally in labor and profit. Just months after the creation of a constitution in January 1826, the thousand residents at New Harmony divided into sub-communities that then disintegrated into chaos. In 1825 Francis Wright established another Owenite community at Nashoba in Tennessee. Wright had hoped to demonstrate that free labor was more economical than slavery, but Nashoba attracted few settlers, and the community closed its doors within a year.
Ironically those who oppose state capitalism from the right fail to understand the history of cooperatives and how the capitalist state did act against them which is detailed in Hjalmar Petersen of Minnesota: the politics of provincial independence
The problem here is that capitalism was not a level playing field. The joint stock companies, Trusts and Banks opposed authentic shareholder control. And so despite the above authors exhortation of Von Mises and Hyaek's theories to the contrary, the reality of corporate capitalism was that it never was modeled on shareholder democracy nor shareholder responsibility.
Suppose that Mr. Schweickart were right that cooperatives greatly exceed in efficiency standard-model capitalist firms. Nothing prevents cooperatives from developing on the free market and (if Mr. Schweickart's view about their superior efficiency is right) supplanting firms owned by capitalists. The fact that this has not happened suggests that cooperatives are not the paragons of efficiency that Mr. Schweickart imagines.
Mr. Schweickart's response (besides calling me a mean-spirited reactionary) is obvious. He will counter that the capitalist-controlled state and banking system would strangle an incipient cooperative commonwealth in its cradle. In point of fact, precisely the opposite is the case. In spite of large tax advantages cooperatives have never succeeded in making much headway in capitalist economies. It is not necessary to confront fantasies of capitalist resistance: cooperatives characteristically fail to rise to the level at which such resistance would have a point.
Economic counter-institutions, unfortunately, work within the framework of a larger corporate capitalist economy. They compete in markets in which the institutional culture of the dominant firms is top-down and hierarchical, and are in great danger of absorbing this institutional culture themselves. That's why you have a non-profit and cooperative sector whose management is indistinguishable from its capitalist counterparts: prestige salaries, middle management featherbedding, bureaucratic irrationality, and slavish adherence to the latest motivational/management theory dogma. The problem is exacerbated by a capitalist financial system, which extends positive reinforcement (in the form of credit) to firms following an orthodox organizational model (even when bottom-up organization is far more efficient)
As recent work on Scottish Banks and Joint Stock Companies, shows Joint Stock Companies and Banks were not controlled by the shareholders but by the managers. Supported by their State and their control of the laws allowed them to define the market as capitalist while maintaining their mercantile monopolies.
'Shareholder Democracies?' Corporate Governance in Britain, c. 1720-1844
Our paper is based on the constitutions of a sample of 90 companies established in the period 1739-1844 - 30 canal and dock companies, 30 railways and 30 banks - which is part of a larger, ongoing project on the governance of joint-stock companies in Britain in the period. The canals, docks and railways in the sample were all incorporated, the banks all unincorporated. Their constitutions made various provisions for the auditing of accounts, and they granted shareholders differing degrees of access to company books. Through detailed typologies of audit provisions, procedures for presentation of balance sheets, and shareholders’ rights to inspect documents, we compare the three sectors, and consider differences between companies of different sizes, and changes over time. We show that, whereas in many incorporated companies the books of account were, in theory, open for inspection by shareholders ‘at all seasonable times’, in the banking sector a culture of secrecy operated to the extent that shareholders were often not even permitted to inspect the company deed of settlement. This calls into question Pratt and Storrar’s recent generalisation that ‘[u]ntil at least the middle of the 19th century, shareholders were considered to have an inherent right to inspect their companies’ books of account’. In the banking sector, it was standard procedure to provide for an ad hoc internal audit by a shareholders’ committee of inspection if required. By the 1840s railway companies were beginning to provide for permanent audit, and were moving away from the universal right of access that had characterised earlier incorporated companies. This reflects the tendency, identified by Timothy L. Alborn, for joint-stock companies to become less ‘democratic’ in this period.
 Ken C. Pratt and A. Colin Storrar, ‘UK Shareholders’ Lost Access to Management Information’, Accounting and Business Research 27 (1997), 205.
 Timothy L. Alborn, Conceiving Companies: Joint-Stock Politics in Victorian England (1998).Technological Change and Corporate Governance: the case of early 19th Century Coastal Shipping'
The internal politics of corporate governance in British joint-stock companies have recently begun to attract the attention of historians, partly with a view to increasing our understanding of the extent of democratic practice in nineteenth-century Britain, and partly to improve our knowledge of the historical roots of the current debate on modern corporate governance. The focus of this paper is on the governance issues which arose in Scottish coastal shipping companies during the early nineteenth century as they grappled with the central problem of making a successful transition from sail to steam technology. Two questions are addressed in particular: the extent of shareholder participation in the affairs of their companies, and the supposed dichotomy between the ‘economic’ and ‘financial’ motivations of shareholders. It is concluded that, through a number of devices, directors were generally able to overcome any shareholder discontent and manage the companies as they saw fit. Despite the ostensibly democratic features of the shipping company constitutions, ‘shareholder democracy’ in practice was effectively sidelined. This mirrored the experience of stock companies in other sectors during this period.
The result was that new model of market economics was needed and thus the cooperative movement was born.The shareholders, producers and consumers, met in an economic organization that saw itself as the model of social democratic political organization. Not necessarily a political party but a political and economic movement for a different kind of market.
At the turn of the 20th Century various counter economic schemes were developed by those looking for alternatives to capitalism and state socialism. Arising out of Proudhon's Mutualism and later Guild Socialism, the idea of the Cooperative Commonwealth a producer's ideology was born. It gave birth also to Distributism, Social Credit and ultimately in Canada the Cooperative Commonwealth Federation or CCF, and in the United States the Populist Party and localized farmer worker populist parties.
As the IWW motto suggests they were movements to; build the new society within the shell of the old. They were the new utopian's. Today that utopianism has been superseded by the politics of the pragmatic around the public good and politics or the possible. That means the right wing talks about minimizing government while the left talks about extending taxpayer funded social programs. Both are of course two sides of the same coin.
The real Utopian socialism of the Cooperative Commonwealth was a view of a different future one under the direct control of producers/workers and consumers. The move towards parliamentary politics, the politics of the pragmatic was a move towards irrelevance for the movement, real reform which came from the grass roots was diverted to electoral politics, while this was defensive against the vested interests of big capitalist government, it resulted in the slow death of the movement.
That movement to build a new society within the shell of the old is revived by social movements even today as we face the forces of capitalist globalization and the sterility of electoral politics. Workers cooperatives, farmer cooperatives in the third world, calls for socialized self management as an alternative to the capitalist market are the return of the ideals of the cooperative commonwealth. Socialism without the state.
Preamble of the Regina Manifesto
The CCF is a federation of organizations whose purpose is the establishment in Canada of a Co-operative Commonwealth in which the principle regulating production, distribution and exchange will be the supplying of human needs and not the making of profits.
We aim to replace the present capitalist system, with its inherent injustice and inhumanity, by a social order from which the domination and exploitation of one class by another will be eliminated, in which economic planning will supersede unregulated private enterprise and competition, and in which genuine democratic self-government, based upon economic equality will be possible.
The present order is marked by glaring inequalities of wealth and opportunity, by chaotic waste and instability; and in an age of plenty it condemns the great mass of the people to poverty and insecurity. Power has become more and more concentrated into the hands of a small irresponsible minority of financiers and industrialists and to their predatory interests the majority are habitually sacrificed.
We believe that these evils can be removed only in a planned and socialized economy in which our natural resources and the principal means of production and distribution are owned, controlled and operated by the people.
It is an honor and a privilege to be able to address this group this morning. Especially about a subject so near and dear to my heart. Fifty-four years ago next month 130 delegates from around Canada gathered in Regina, Saskatchewan, to establish the principles for what they called a Cooperative Commonwealth. It was a moment in history when the every-man-for-himself ethic had led to disaster. The free enterprise capitalist system was on the verge of collapse. Millions were hungry. Millions more were being forced off their farms or out of their houses. Economies were actually shrinking. The system wasn't working. In the United States, at the same historical moment, Franklin Delano Roosevelt's New Deal Congress had just finished up its first 100 days in office, a three-month frenzy of legislation that restructured much of our economy and and our national government.
The crisis was stark and deep, but the rhetoric was optimistic. There was a sense that by acting together we could right the system. A time when government was the solution, when collective decision making was encouraged, when the nation took responsibility for its own and cooperation was the touchstone and guiding principle of public policy.
Workers were given the right to bargain collectively, as a group. Rural electric cooperatives were rapidly expanded with the aid of substantial federal financing. Credit unions flourished under the new federal credit union laws. The savings and loan institution was reinvented as a community-based, community-owned and community-oriented institution. We all remember that lovely moment in the movie, It's a Wonderful Life when Jimmy Stewart climbs up on the teller's counter and tells the townspeople that their money isn't in the vault because it has been lent to their neighbors.
The 1930s was a time when place and community mattered and government used its powers to create the conditions for cooperation.
But the government didn't simply provide opportunities for cooperation. It also developed protections for those who took advantage of those opportunities.
Workers were not only given the right to organize but the National Labor Relations Board prevented employers from firing individuals who tried to organize their co-workers. Cooperatives and small businesses were not only helped but the unfettered power of large corporations to unfairly compete with these community-based and cooperative enterprises was reined in. For FDR private power was the enemy of the public interest. "Among us today a concentration of private power without equal in history is growing", he warned America.
Congress enacted laws to stop electric-utility holding companies from manipulating markets and plundering the assets of individual utilities. Firewalls were constructed between the speculative and the asset based parts of the financial system.
To stop people from having to compete with each other at a time of when an oversupply of labor and productive capacity was driving prices and wages and living standards down, Congress established standards for a minimum level of decency for the entire community.
In 1938 the Fair Labor Standards Act established a minimum-wage and maximum-hour standard. The minimum wage was set at about 80 percent of the average wage. It was, in other words, a living wage. And that, according to the President of the United States, was only right. For as FDR declared, "No business which depends for its existence on paying less than living wages to its workers has any right to continue in this country."
To get the people off the dole, Congress created a huge workfare system. But rather than pay the private sector to hire individual workers to do the work of private business, the federal government created a vast program to enhance the public realm. Public works programs brought water systems to rural America and trees to bare hillsides. Public arts programs brought murals to bare walls and theater to working class communities.
The government further tied the nation together and defined it as a caring community by establishing a social security system. To our everlasting regret, an accompanying proposal for a universal health system was defeated.
In the 1930s the economic crisis was fought by the community as a whole acting on behalf of individual communities of workers, of farmers, of neighborhoods.
Into this complex, changing environment, rural Minnesotans introduced cooperatives to bring democracy to the marketplace. Yet these democratic assemblages could not escape the turmoil of change--indeed, they helped to shape it. Given this turbulence, it is not surprising that rural cooperation took many twists and turns and did not quickly find one stable, universal form in Minnesota. It is important to remember that from 1859 to 1939 the very meaning of the term "democracy" was taking twists and turns of its own.3
A rural cooperative was a business in a free-market economy, but it remained a democratic institution with its own internal politics. Though a business, it often shaped farmers' adaptations to new forms of agriculture. Committed to neutrality in partisan politics through its bylaws or customs, it often could not escape the politics of agrarian protest. Membership in any given cooperative was usually open to anyone, but members often belonged to the same ethnic group, and the cooperative preserved ethnicity as effectively as the reading society or mutual-aid association. Its membership was so large as to make it a community institution almost as important as the rural church in cementing social ties. (Business came first; a cooperative's minutes almost never included discussions of political, ethnic, or religious topics.)
Because of these social, ethnic, political, and economic roles, the term "cooperative" must be carefully defined. Economist Richard B. Heflebower defined a cooperative as "the means whereby members by-pass the market adjacent" to them--the market where "they would otherwise make individual arms-length transactions with investor-owned enterprises."4 Instead, they make transactions with themselves--not arm's-length ones. Members deal with a company they own. The cooperative seeks not to accumulate profits but to maximize its members' income or to minimize their expenses. Such is the economists' definition of a cooperative's economic functions. A cooperative is also a polity governing its own affairs. Democratically, it conducts meetings, elects officers, and writes constitutions. In a social sense, it is characterized by mutual expectations: the cooperative will treat each customer-owner equally and fairly, and each will be loyal to the cooperative.
In this study cooperation is defined to include businesses lacking one or two technical characteristics. Where customers combined to own and manage a business through which they bypassed private firms, where this business was democratically operated and characterized by expectations of egalitarian solidarity, the business was accepted as being a cooperative. Nevertheless the importance of certain cooperative principles is not minimized. As early as the 1860s, some Americans felt that the cooperative principles developed in 1844 by the weavers of Rochdale, England, best preserved the democratic, cooperative character of a customer-owned business. Rochdale rules were seen as vital for Minnesota's rural cooperatives (though some cooperators criticized the Rochdale system). They can be summarized as:
- One person, one vote.
- Membership open to anyone interested.
- Political and religious neutrality.
- Limits to returns based on stock ownership.
- Limited number of shares owned by one person.
- Emphasis on returning net margins to customers based on their patronage.
- Cash sales at market prices.
These principles were designed to ensure that the business would be run in customers', rather than investors', interests. To secure capital, Rochdale-style cooperatives sold shares, but they guarded against an investors' faction interested in maximizing its returns at customers' expense. Democracy was the means to keep customers in control; presumably customers would outnumber investors. The rule of one vote per member rather than one vote per share kept the cooperatives egalitarian and democratic.
Rural cooperatives varied in the degree to which they adopted Rochdale principles. Even without all the Rochdale rules, customers and not investors tended to control cooperatives, for few rural cooperatives were attractive investment opportunities. Rural cooperatives often performed an economic function that private investors had found unpromising; cooperatives might have to create a marketplace in rural areas that had none. Even where the Rochdale rules were ignored or unknown, the democratic ethos in many farm communities tended to preserve democracy and customers' control.
Occasionally the phrase "democratic coordination" appears in this study to describe the cooperative way of coordinating economic transactions. The phrase is an adaptation of a concept Alfred D. Chandler, Jr., used in The Visible Hand: The Managerial Revolution in American Business. Chandler argued that "an increase in volume of activity" during the nineteenth century highlighted the inefficiencies of purely "market mechanisms." Managers used an "administrative coordination" of transactions that "permitted greater productivity, lower costs, and higher profits than coordination by market mechanisms."5 Chandler narrowly focused on the railroads and other high-volume, high-speed industries. Yet consumers and farmers also discovered the market's inefficiencies and organized democratically to coordinate transactions, decrease their expenses, and increase their incomes. Democratic coordination seemed as viable an option as administrative coordination in the rural United States in the mid-nineteenth century. Why the latter finally triumphed must be discovered in the historical record, not in some a priori assumption that it was destined to win out.TOWARD THE COOPERATIVE COMMONWEALTH:
AN INTRODUCTORY HISTORY OF THE
FARMER-LABOR MOVEMENT IN
SUBMITTED TO THE FACULTY
OF THE UNION GRADUATE SCHOOL
which is now called The Union Institute ( www.tui.edu )
Thomas Gerald O'Connell
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS
FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY
February 1979The history of the Farmer-Labor Movement can
best be understood in four stages. In the first stage,
EMERGENCE (1917-24), two broad based organizations, the
Farmer's Non-Partisan League, and the Working People's
Non-Partisan League joined forces to challenge
Minnesota's ruling Republicans by taking them on in the
primaries. Though their immediate aims were different,
the two movements found little trouble agreeing on a
political program. Both opposed the state's business
and political elites who controlled the agricultural
markets, and viciously fought workers' attempts to
organize unions. Both favored programs to curb corporate
powers through state regulations and public ownership.
In the Fall of 1917, organizers from the Farmer's
Non-Partisan League crisscrossed the state, signing up
50,000 farmers on an anti-monopoly program patterned
after the successful effort of North Dakota farmers the
year before. From the beginning, opposition was intense.
League organizing took place during the heat of U.S.
involvement in World War I. Main Street "patriots"
busted up meetings and ran organizers out of town. The
Republican administration carried on a campaign of
harassment, branding both farm and labor militants as
disloyal, and jailing leaders for sedition.
Still, the organizing continued. In 1918,
Congressman Charles Lindbergh, father of the famous
aviator, came within 50,000 votes of defeating Governor
J. A. A. Burnquist in the primary. The Farmer-Labor
coalition elected a respectable number of state
legislators and firmly established itself as the second
most powerful political force in the state--well ahead
of the hapless Democrats.
In 1920 and '22, the two leagues continued their
coalition with even better results, strengthening the
hands of those who favored merger of the two leagues
into a genuine third party. In 1924 the two
organizations rounded the Farmer-Labor Federation-
renamed the "Association" the following year. This
event marked the beginning of the second stage of
Farmer-Labor history, CONSOLIDATION (1924-30).
The development of a genuine Farmer-Labor Party
did not result in any dramatic improvement in Farmer-
Labor fortunes--at first. In 1924, the charismatic
Hennepin County Attorney, Floyd Olson fell short in
his bid to win the governorship. Throughout the rest
of the decade the Association found itself swimming
upstream, keeping its "loyal opposition" status in the
legislature, but unable to catchup with the Republicans.
Unlike many third party efforts, however, the
organization held together, less a "movement" now with
all the unfettered energy and participation the term
implies, but a viable organization--nonetheless. The
continued support of the AFL and the widespread network
of ideologically committed Farmer-Laborites from both
city and country kept the program and spirit alive.
In 1930 the steady work payed off. Floyd Olson
was elected governor, beginning the third and most
successful period of Farmer-Labor history, the HIGHTIDE
(1930-38). The immensely popular Olson was elected
governor three times and was a shoe-in for senator
before he died of a stomach tumor in 1936. Olson's
success was paralleled throughout the organization.
Dues paying membership in the Association rose to almost
40,000 as organizers setup clubs across the state.
Hundreds of Farmer-Laborites held elected offices at
all levels of government--from city council to U.S.
Senate. In 1936 Farmer-Laborites captured five of
eight Congressional seats, the governorship, and a solid
majority in the Minnesota House of Representatives.
Political success was buoyed by the spectacular
re-emergence of mass movements. The Farm Holiday
Movement revived the dormant populist spirit of
Minnesota farmers as thousands participated in strikes
and direct action tactics to resist foreclosures. In
Minneapolis the Teamsters faced down the Citizens
Alliance, the country's most notorious anti-labor
organization and won an epic strike battle that opened
up the state's largest city to the labor movement. In
1936-38 the newly organized C.I.O. set the Iron Range
on fire with militant campaigns among the lumberjacks
and iron ore miners.
Labor and farm organizing was complemented by
other efforts as well. The Workers Alliance set up
councils of the unemployed across the state, leading
the fight for adequate relief and modern social security
programs. Coops of all kinds sprung up in town and
country alike: electric power coops, food coops,
marketing coops, hardware stores, gas stations, grain
elevators, . . . . All of these movements allied
themselves with the Association, often times formally,
as affiliated organizations. The Association became
the political extension of the great social movements
of the '30s.
But, the '30s ended, and with them, the glory
days of the Farmer-Labor Movement. In 1938, Floyd
Olson's successor, Elmer Benson, was overwhelmingly
defeated by a reform Republican named Harold Stassen.
The inability of successive Farmer-Labor administrations
to solve the economic problems of the Great Depression;
the people's weariness of class confrontation politics;
a systematic anti-Semitic and anti-Communist campaign
from both within and outside the Association; and
serious divisions within the Association itself, were
all factors in the overwhelming Farmer-Labor defeat.
The period of DECLINE (1938-48) set in.
The careers of George W. Norris of Nebraska and Tommy Douglas of Saskatchewan, two extraordinary Prairie progressives, cover nearly a century of political activism, and tell us something about both what was possible and what was never even considered in Great Plains (1). That their seemingly different heritages, one a dyed-in-the-wool Republican from Ohio and one a Scots Labourite, should result in similar solutions to the problems of European-style agriculture on the Great Plains illustrates the significance of geography, independent of ideology, in determining the lifestyles that will work for a region.Recovering Our Roots: Mutualism, Mutuals and the ALP
The Labour Movement is sometimes said to have stemmed more from Methodism than from Marx. In reality, Labour owes less to either Methodism or Marx than to Robert Owen. Owen endowed the early Labour Movement with a guiding philosophy - a philosophy which energised and inspired its adherents, and enabled them to overcome immense obstacles and, at a later date, gave rise to the Labor Party. Its name was mutualism. 1
The founders of the Labour Movement - driven as for the most part they had been from the land by the enclosures and clearances, and reduced in the new industrial towns to extremes of poverty, destitution and degradation such as are today all but unimaginable - embraced mutualism as an alternative to the rampant free market capitalism of their day. Mutualism was expressive of the fundamental Labour Movement truth, that more by far can be achieved by working together for common objectives than in isolation from one another. It was encapsulated in that greatest of all Labour Movement rallying cries "one for all and all for one".
Practical, hands-on mutualism became the means whereby the oppressed and excluded - in Franz Fanon's stark phrase "the wretched of the earth" - obtained through self-help the necessities of life which otherwise would have been unavailable or higher priced. For example, the Rochdale Pioneers - the twenty-eight poor cotton weavers who established their co-operative store in Rochdale near Manchester in 1844 - were responding to an urgent community need for affordable household requisites such as food and fuel.
Credit co-operatives were a response to the need for affordable carry-on loans for smallholder farmers and later for affordable household credit. Friendly societies were initially a response to the need for funeral benefits, and, later, for unemployment benefits, sickness benefits and medical and hospital care. Access to affordable life assurance was offered by mutual life assurance societies, as was access to affordable home loans by building societies.
Agricultural processing and marketing co-operatives met a pressing need on the part of farmers to capture value added to their produce beyond the farm gate. Worker co-operatives responded to the need on the part of workers for secure employment by enabling them to own their workplaces and jobs. Trade unions were originally mutualist bodies or co-operatives formed by employees in response to a pressing need to obtain better working conditions and a just price for their labour.
The late Max Scherr, Editor of The Berkeley Barb, holding court in the Mediterraneum coffee house in the '60s, used to maintain that there were roughly eight different kinds of socialism in the American political experience. With the possible exception of the Black Panther Party, which received the brunt of the CoIntelPro operation attacks during the late sixties and early seventies, it is fair to say that the form of socialism in America that historically received the most deadly treatment and suffered the most persecution, even to the suppression of their literature, was the movement known as the Non-Partisan League (1915 to 1922) that developed into the Farmer-Labor Party of Minnesota. This is ironic, because the League was not an armed movement at all.
The Non-Partisan League, like Jazz, was a purely American accident. As Jazz was a melding of Cajun (Acadian, Scotch-Irish, and French) fiddle music with Afro-American field hollers and African thumb-harp music in the melting pot of Louisiana at the mouth of the Mississippi River, so the League was a produce of the miscegenation in the upper MIssissippi Valley of an indigenous, American, Jeffersonian radicalism descended from the American revolution, with the first wave of Fabian-Socialist ideas that hit these shores from England, Scandinavia and the Continent, and penetrated into the Midwest, beginning in the 1880s.
The League, first organized in 1915 in North Dakota by several socialist organizers who had left the Socialist Party because it did not adequately address the needs of the farmers, organized quietly and almost unnoticed for several months. Formulating a Five-Point Platform, the League as a "non party" party, vowed to support any candidate of any party who would support their platform and to work against any candidate who would deny or oppose their platform. The platform, which called for state-owned grain elevators, a state bank, and state-owned hail and fire insurance companies (for the spring wheat) was clearly the reflection of the agrarian concerns of the farmers of North Dakota.
It was also the most radical and revolutionary state platform that has ever been formulated and effectively written, enacted into law in all of American history. From inauspicious beginnings "with an idea and a Ford," in the sub-zero tundra of North Dakota in the winter of 1915, the Non-Partisan League grew and organized and quickly became a force. A marvelous book Political Prairie Fire by Robert Morlan, published by the Minnesota Historical Society, is must reading for all organizers who would learn the secrets of the amazing growth of this movement.
In the populist socialism of the Non-Partisan League and the Farmer-Labor Party, traditional monetary concerns about who controls credit and who issues the money, central to any understanding of Jeffersonian and Lincoln-Greenback radicalism of the nineteenth century, merged, with the near-Marxist, class-conscious, and anti-plutocratic language of early socialism. This was before "socialism" had become a dirty word. To the Farmer-Laborites, the first step towards achieving the "Cooperative Commonwealth," the earthly paradise, was to nationalize credit and the Federal Reserve Bank.
In 1913 Socialist Party (SP) leader Morris Hillquit contended that the United States had embarked on the path toward socialism. He argued that the "modern principle of control and regulation of industries by the government indicates the complete collapse of the purely capitalist ideal of non-interference, and signifies that the government may change from an instrument of class rule and exploitation into one of social regulation and protection." He then asserted that like "the industries, the government is being socialized. The general tendency of both is distinctly towards a Socialist order." This fit with his under standing of the stages a nation underwent as it progressed first from a society with little to no state involvement in the economy, to a social democracy with state regulation of corporations and protections for workers, to, finally, a socialist state where a government which the people elected managed the economy.
FROM NEW DEAL TO COLD WAR: THE RISE AND FALL AND PARTIAL RISE OF ECONOMIC PLANNING
by David Ciepley
Alongside these changes in party government, and really underlying them, were changes in the relation of the federal government, or “state,” to the economy. Only in these years, for example, was the principle finally established, both in the popular mind and, after a struggle, on the Supreme Court, that the federal government, not the state
governments, bears ultimate responsibility for managing the economic system. This was a dramatic change in principle, and one for which progressives had long fought. But it left unanswered the question of how the system would be managed—with what instrumentalities and to what ends. It is here that a revision of the received wisdom is needed.
The New Deal is conventionally understood as the culmination of fifty years of progressive reform efforts. It did in fact start out this way. But it ended up institutionalizing a dramatically foreshortened progressive agenda. The impression that it was a culmination thus says more about the contraction of reform aspirations in this period than about their satisfaction. Enough changes were made to make the federal government the focus of economic and political attention. But if one compares state-economy relations in the United States at the end of this period with the state-economy relations prevailing, or soon to prevail, in all other industrialized and industrializing countries, one cannot fail to be struck by the conservatism of the American formula. All other countries, whether belonging to the First World of democratic countries, the Second World of communist countries, or the Third World of developing countries, embraced some degree of “collectivism” after the war. The Europeans, for example, developed what they termed “mixed economies,” partly market-driven and partly governmentalist. This generally included the nationalization of basic industries (gas, coal, steel, rail, and sometimes even banking), and might also include doses of central economic planning (as undertaken by the French Commissariat Général du Plan) and corporatist government-business-labor bargaining (as in the German “social market”). The Europeans supplemented these structural changes with thick social safety nets, providing social insurance against all the major disruptions of industrial life—unemployment, disablement, illness, old age, and childbirth. Third World countries, for their part, could hardly match Europe’s generous safety nets, but they could and did overmatch Europe in their embrace of national
economic planning. As for the communist countries, their embrace of national economic planning goes without saying. In contrast, the United States, alone among the world’s nations, threw off its wartime economic controls and fully reembraced the principle of free enterprise.
Seymour Martin Lipset and Gary Marks
An excerptFor radicals, "American exceptionalism" meant a specific question: Why did the United States, alone among industrial societies, lack a significant socialist movement or labor party? This question bedeviled socialist theorists from the late nineteenth century on. Engels tried to answer it in the last decade of his life. The German socialist and sociologist Werner Sombart dealt with it in a major book published in his native language in 1906, Why Is There No Socialism in the United States? The question was addressed by the Fabian H. G. Wells in The Future in America, which came out the same year. Both Lenin and Trotsky were deeply concerned with American exceptionalism, for it questioned the inner logic of Marxism, expressed by Karl Marx in the preface to Capital: "The country that is more developed industrially shows to the less developed the image of their future." And there is no questioning the fact that, from the last quarter of the nineteenth century on, the most developed country has been the United States.
In trying to explain the absence of a socialist movement, many socialist writers have described America in terms not dissimilar from those of Tocqueville. The great Frenchman had noted in 1831 that the United States is "exceptional," qualitatively different in its organizing principles and political and religious institutions from those of other western societies. Features of the United States that Tocqueville, and many others since, have focused on include its relatively high levels of social egalitarianism, economic productivity, and social mobility (particularly into elite strata), alongside the strength of religion, the weakness of the central state, the earlier timing of electoral democracy, ethnic and racial diversity, and the absence of feudal remnants, especially fixed social classes. In this introductory chapter, we examine the way socialist intellectuals have seen the country when trying to explain the weakness of their movement.The ultimate source of authority in the American polity can be found in the Preamble of the Constitution, which starts with the words "We, the people of the United States." Populism is constrained, however, in the American experience, by constitutionalism. The Revolutionary Americans, having defeated a tyrannical king, feared the power of a unified, central state. They sought to avoid tyranny by checks and balances, dividing power among different political bodies, all subject to a Bill of Rights limiting government authority. The antistatist, antiauthoritarian component of American ideology, derived from Jefferson's Declaration of Independence, remains an underlying source of the weakness of socialism in the United States.
American radicals have generally been more sympathetic to libertarianism and to syndicalism than to state collectivism. Analyzing this tradition, historian David DeLeon notes that unlike Scandinavian social democracy, Fabian bureaucratic socialism, and Soviet communism, American radicalism has been permeated by suspicion, if not hostility, toward centralized power. The essence of this heritage—which has been expressed in both individualistic and communal forms—may be described as "antistatism," "libertarianism," or, more provocatively, "anarchism."
This heritage may be seen in the behavior of the American labor movement. The ideology of the American Federation of Labor (AFL) was syndicalist for much of its first half century. The AFL's radical competitor, the Industrial Workers of the World (IWW), was anarcho-syndicalist. Both the AFL and the IWW regarded the state as an enemy and felt that government-owned industry would be much more difficult for workers and unions to resist than private companies. Samuel Gompers, the leader of the AFL for four decades, emphasized that what the state can give, the state can take away, and concluded from this that workers must rely on themselves. Gompers and much of the old AFL were far from conservative. In 1920 Gompers described himself as "three-quarters anarchist." As Daniel Bell, the foremost student of American socialism, has noted, the AFL was more militant than European labor movements before and immediately after World War I, as reflected in its greater propensity to strike and engage in violence.
Richard Flacks, a founder and leader of Students for a Democratic Society (SDS) in the sixties, writing as a left-wing academic in the mid-nineties, has emphasized the ties between the radical, but nonsocialist, New Left and the antistatist tradition:
The dominant spirit in the 60s was neither social-democratic nor statist/ stalinist/leninist, but owed more to anarchist/pacifist/radical democratic traditions: Students and workers should claim voice in the institutions they inhabit; communities and neighborhoods should have democratic control over their futures; co-ops, communes, and collectives should be the places to try alternative futures and practice authentic vocation.... Here in short was a thoroughgoing critique of statism, advanced not by the right, but by young Black and White activist/intellectuals devoted to a decentralizing, devolutionary, radical-democratic politics.
There is a striking similarity between the orientation of the IWW and that of the New Left, both of which emphasized individualism and antistatism. The New Left's confrontational tactics, involving civil disobedience, also followed in the footsteps of the Wobblies. One of the most influential academic stimulators of the early New Left, William Appleman Williams, expressed his antistatism in his strong preference for Herbert Hoover over Franklin Roosevelt. He noted that Hoover did not propose to strengthen the power of the central state but favored "voluntaristic but nevertheless organized cooperation within and between each major sector of the economy."In 1944, the Cooperative Commonwealth Federation (CCF) came to power in the Canadian province of Saskatchewan. The CCF had been founded as an amalgam of farmer and labor movements and small political parties, some with a Marxist orientation. At its first national convention in 1933, the CCF adopted a socialist agenda. The Saskatchewan party was an outgrowth of the national party, though with an independent streak that reflected its particular environment.1 Saskatchewan was then (and even now) a largely agricultural province dominated by wheat, sparsely populated, and ethnically diverse. Agrarian socialism was produced from this setting. When Seymour Martin Lipset became a graduate student at Columbia University, the CCF victory gave him an opportunity to explain why socialism could take root among wheat-belt farmers, including those in the United States, even though the United States itself could not generate a viable socialist party with a more traditional urban working class base.2
From instances like these Lipset is led to observe that democracy necessarily constrains what a government can do. This is particularly likely to happen when the government is opposed by entrenched interests, as in the case of health care, and the electorate itself seems largely indifferent to major changes. More generally,
The social changes introduced by democratic radical movements appear to result more from objective pressures in the society for such changes than from a small doctrinaire minority converting the majority of the population. The stronger a radical social movement becomes in a democracy, the less radical it appears in terms of the general cultural values.6
If the changes introduced seem relatively modest ones, that is because they are all the community can bear.
The question of why socialist legislation does not live up to socialist ideals is now answered in a way unanticipated by the original formulation. The answer that evolves from Agrarian Socialism is that socialism is constrained by democracy. But we should not conclude that democracy is necessarily a higher good, distinct from socialism. Instead, socialism (always in its democratic forms) is itself a higher form of democracy. In this sense the CCF could claim that its policies and programs were ways to produce a more democratic society.
The Republican Tradition
From Oklahoma Populism: A History of the People's Party in the Oklahoma Territory (Norman and London: University of Oklahoma Press, 1987)
Reprinted in William F. Holmes (ed.), American Populism. Problems in American Civilization Series. (Lexington, MA: D.C. Heath & Co., 1994)
The Populist Revolt was the product of the still-vital neo-republican mind of the late nineteenth century as it evaluated the results of the economic, political, and social revolutions of Gilded Age America. Throughout the late nineteenth century, spokesmen representing a series of egalitarian third-party movements put forth an apocalyptic critique of the Gilded Age's cosmopolitan ethos that was rooted in the ideology of the founding fathers. Third-party agitators were especially successful in mobilizing a following where economic and political conditions had discredited major-party spokesmen, as on the Great Plains and in the cotton-belt South during the late 1880s and 1890s.
Whether the course of late-nineteenth-century development constituted an advance of civilization or a degeneration toward barbarism became a major point of contention in America with the coming of the Populist revolt. Cosmopolitan elements looked back to the pronouncements of John Locke, who elevated property rights to an equal place beside human rights, for inspiration in judging contemporary events. These men pointed to such material factors as increased wealth, expanded production, and a proliferation of services as signs of the nation's advance. They were, in essence, system-oriented. They saw the plight of individual victims as a small price to pay for the significant advances of the nation as a whole.
The republican ideal of the founding fathers, which informed the Populists' assessment of late-nineteenth-century events, viewed the protection of individual liberties as the ultimate goal of society. The role of government was to promote social conditions that would aid the individual's God-given right to self-fulfillment. This humanistic orientation was moral in nature and based upon precepts of justice to the individual. It dictated the rejection of any social development that encouraged the debasement of any human. Such a viewpoint naturally had special appeal to those who saw themselves as victims of the contemporary system.
When railroads first appeared in a region, the almost universal response was enthusiasm for the new commercial and industrial world. Farmers and merchants alike wanted to believe that they were on the brink of the sustained prosperity that the philosophies of laissez-faire capitalism and social Darwinism promised. The more aggressive farmers bought machinery, fertilizer, and more land, all on credit, and quickly discovered that they were the most efficient producers of the age. Their agricultural production vastly outpaced the purchasing capacity of other Americans and even the world. Prices for agricultural commodities naturally plummeted. Railroad operators and other middlemen, however, took their profits regardless of the farmers' plight. In site of this, commercial elements proclaimed the emerging economic system just and laid the blame for agrarian problems on the farmer. He overproduced, they claimed. A crisis in agriculture occurred when mortgages were numerous, credit was tight, and transportation costs were more expensive.
As the economy of the Plains and the South worsened, farmers turned to their elected officials for aid. Government had provided tariffs to protect manufacturers, land grants to aid railroads, and deflation to help creditors. But when farmers put forth their claims upon the political process, they received little more than the worn out slogans of laissez-faire. The inadequate response of the Gilded Age's political elite to the plight of the farmer produced a political crisis in these outlying regions of the nation.
Many southern and western farmers had never completely committed themselves to the panaceas of Gilded Age enterprise. Although they had entered the world of commercial agriculture, they were primarily family farmers, not agribusinessmen. By the 1890s their operations often were only marginally profitable. Diversification, however, saved them from the worst effects of the late nineteenth century's agricultural crisis. This reaffirmed their commitment to the more traditional agrarian ethos. In the darkest days of the depression of the 1890s, many who had committed themselves to the dominant ideology of the era began to have second thoughts about their new commitment and searched for new answers. Frequently they found the ideology of the People's party more rewarding.
The cyclical interpretation of social development that late-nineteenth-century egalitarians inherited from the founding fathers lent positive connotations to the simplicity, equality, industriousness, and frugality of the developing society and a negative attitude to the hedonism, luxury, venality, and exploitation of a developed nation. Their Whiggish orientation caused them to see the latter as a triumph of power over liberty....
Late-nineteenth-century egalitarians believed that the principles handed down by the founding fathers were universal truths, valid for all times and conditions. Many of the economic and social developments of the Gilded Age, furthermore, appeared to be consistent with the inherited warnings of social degeneration. Lawmakers seemed to abdicate their responsibility for monetary policy to America's, and, worse yet, England's, banker elite. Government policies, such as the protective tariff and land grants to railroads, promoted the ultimate consolidation of wealth and power-monopoly. The gap between the rich and the poor widened distinctly. The process also destroyed the independent family farmer, the bulwark of liberty in a republic. Rather than using the power of government to stem this spreading cancer, Populists believed that America's Gilded Age political elite aided the process through unneeded extravagance, financed by bonding schemes likely to force future generations into economic dependence.
To return America to the path charted at the nation's founding, late-nineteenth-century egalitarians devised a series of remedies that, when combined, formed the Omaha platform of 1892. With the exception of the Alliance's subtreasury plan, each demand cataloged in the document had appeared in previous third-party manifestos. The People's party was only the largest and most successful of a series of late-nineteenth-century egalitarian movements that shared a common spirit rooted in the republican ideology of the American Revolution....
In the national arena Populists looked to an active government as the salvation of the nation. They called for elected representatives to restore monetary policy to popular control and then to reverse the trend toward concentrated wealth with the graduated income tax. Populists called for greenbacks to reflate the currency and provide needed credit in outlying regions of the nation. They favored postal-savings banks to secure the deposits of average citizens, who often lost everything through the speculations of bankers. Populist spokesmen also called for government ownership of the railroads, telephones, and telegraphs. They reasoned that such monopolies concentrated too much wealth and power in the hands of the few. Although this solution seemed to contradict the Populists' antipathy toward the proliferation of offices, returning the American people to their egalitarian heritage and popular control would make active government acceptable. To facilitate the return of popular control, Populists also advocated direct democracy through the initiative and referendum, plus popular election of the president and senators. Where Adam Smith had feared the power of the government, Populists feared the power of the few and saw popular control of an active government as their savior....
Populist anti-elitism also manifested itself in other ways. Third-party legislators generally opposed bills to professionalize what today are called the "professions." They believed that such preference amounted to granting a special franchise or establishing an aristocracy. More important, however, Populists wished to deny the Gilded Age elite's claim to special status. Such men were seen as wanting the government to grant them monopoly status because of their superior advantages, namely a better education....
How well most Populists understood the workings of the modem industrial economy can be questioned. Some third-party advocates clearly realized that many of the undesirable events in a modern industrial society resulted from the impersonal workings of a complex economic system rather than from conspiracies. Many others did not. Using the conspiracy metaphor, however, Populists could label their opposition immoral, which provided a stronger motivation for action than did appeals not invested with moral overtones. Still, Populists were not unique in their conspiracy mindedness. The so-called anarchist plots associated with the agrarian and labor troubles of the late nineteenth century played an equally important role in the minds of their cosmopolitan rivals, who might have been expected to know better. Industrialism was in its infancy, and most people struggled to understand the meaning of its impact. In large part, accusations of conspiracy were simply the level upon which politics was played in the 1890s.
Although Populists chose economic policy as their battlefield, morality was their cause. They looked backward to an earlier moral order for their inspiration. Populists did recognize, however, that commercial and industrial society was a permanent part of the American landscape. Instead of engaging in a frenzy of Luddite retrogression, they attempted to address problems within the context of their morally based mind-set. They accepted industrialism but demanded that it be made humane. The adoption of many of their solutions in the twentieth century attests to the practicality of their reforms. Populists wanted both the benefits of industrialization and a moral social order.
Various scholars have noted the almost religious fervor of the Populist appeal. For many, the People's party replaced the church as a vehicle for moral expression. The apocalyptic vision of Populism, however, encouraged a drive for quick victory. Third party disciples believed that the crisis of the age was upon them in 1896. The result would be either civilization or barbarism. Desperation caused many of Populism's oldest and most noted leaders to temporize their positions and accept the pragmatism of fusion with Democrats. Those not disheartened by this transition from justice to expediency finally lost heart upon the defeat of William Jennings Bryan.
The nomination of Bryan for president in 1896 saved the Democratic party from going the way of the Whigs. Three major parties vied for the allegiance of the American electorate in the 1890s. If men like Grover Cleveland had controlled the Democratic party in 1896, the People's party could well have replaced it as the GOP's major rival. If the People's party had survived as a major force in the political life of the nation, the American electorate would have been presented with a continuing debate over its commitment to capitalism. Instead, the great political debate of twentieth-century America has been over how best to save capitalism.
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