Long-term Effects of the Civil War

The Shape of US Populism

By
Henry C.K. Liu

Part I: Legacy of Free Market Capitalism

Part II: Long-term Effects of the Civil War

This article appeared in AToL one March 14, 2008

The long-term effect of the Civil War on the US economy was to accelerate the development of big business manufacturing in the North initiated by the demands of war production. The shortage of labor created by war conscription pushed industrialization in the Northeast, the spread of mechanized farming in the Middle West and the opening of new farms and mines in the West, with post-war decommissioned soldiers facing unemployment. Inflation reached 117% during the war years but wages rose only 43% in the name of patriotic sacrifice, yielding high war profit margins for corporations. War speculation fueled the rise of the finance sector, causing sharp disparity of income and wealth between financiers and workers hitherto unknown in the US economy.

Protectionism and Corporatism

The Republican Party before Lincoln raised tariff with the Morrill Tariff Act to 47% to protect domestic industries from foreign competition, and after Lincoln, to provide revenue to help finance war costs. In 1862, keeping the promise made by the Republican platform of the 1860 election, the Homestead Act became law. It granted all US residents, citizens or alien who had declare an intention to become naturalized the right to receive ownership title to 160 acres of free public land after he had lived and worked on it for 5 years. From the inception of the United States, there had been a clamor for ever-increasing liberalism in the disposition of public lands. From 1830 onward, free distribution of public lands became a demand of the Free-Soil Party, which saw such distribution as a means of stopping the spread of slavery into the new territories, and the policy was subsequently adopted by the Republican Party in its 1860 platform. The Southern states had been the most vociferous opponents of the homesteading policy, and their ill-fated secession cleared the way for its adoption by the victorious North.

In the arid region west of the Rocky Mountains, 160 acres was generally too little land for a viable farm or range. In these areas, homesteads were instead used by big business for strategic control of scarce resources, especially water. Eventually 1.6 million homesteads were granted and 270 million acres of public land were privatized between 1862 and 1964, a total of 10% of all lands in the United States. Much of this land ended up controlled by big business. The Federal Land Policy Act of 1976 ended homesteading with the recognition that the best use of public lands can only be achieved under government control. The only exception to this new policy was in Alaska, for which the law allowed homesteading until 1986.

In 1862, Congress further promoted agricultural development by passing the Morrill Land-Grant Act to set aside public land in every state for the support of colleges to provide scientific training in agriculture. While this was a populist program, much of the research aided the development of large scale agribusiness. The year 1862 also saw the passage of the legislation for government subsidy for building a transcontinental railroad starting from the west in California and the east at Nebraska which linked up in Utah in 1869. Railroad lines were given public land up to forty square miles for every mile constructed, to be located in alternative quarter sections on each side of the track. The total federal acreage awarded to railroads exceeded 100 million plus another 50 million acres from the states, adding to an area as large as the state of Texas falling into private big business hands. The thirty years following the Civil War have been called the railroad age, with a five fold increase in mileage. There is another meaning for the phrase “the railroad age”. It described an era when the government was controlled by the railroads. Even today, the expression: "being railroaded" means to be robbed blind.

The Civil War Transformed the Federal Government into a Ward of Big Business

The sale of war bonds pushed the passage of the National Bank Act of 1863 which allowed banks of a certain capital minimum to qualify for a Federal charter if they invest at least one third of their capital in the purchase of war bonds. In return, the Treasury would give these banks national bank notes up to the value of 90% of their bond holdings. The measure was profitable to the banks which could collect interest on their capital from the treasury and simultaneously lend out the bank notes at higher interest rates. Since the quantity of bank notes in circulation was limited by the war bond purchases, the effect was a stable paper currency. The influence of banks on government policy increased to change the dynamics of national politics.

The Final Defeat of Southern Agrarianism

Civil War era legislative commitments laid the groundwork for rapid economic expansion of the US economy via the private sector in the later decades of the 19^th century. By attempting to secede from the Union to preserve its agrarian economy, the agricultural South brought about the final defeat of the agrarian principles she sought to protect and assured the final victory of industrialism based on the centralized ideals of Alexander Hamilton (1755-1804) and the economic nationalism of Henry Clay (1777-1853), reigning triumphant over the popular democracy of Thomas Jefferson (president 1801-09) and the populist politics of Andrew Jackson (president 1829-37).

The post-war South came under the rule of the “Bourbons”, the mercantile elite of the Confederacy who shared more affinity with Northern moneyed interests than with the plantation aristocracy of the old South. The pejorative term was analogous to the restored bourgeois French monarchists after the fall of Napoleon. The Southern Bourbons adopted a laissez faire economic policy, reduce taxes and cut public spending on education and social welfare. Their ill-considered policies revived the collapsed Southern economy minimally in the short term but condemned the South to the fate of an underdeveloped region for more than a century.

After the war, with the abolition of slavery, cotton production in the South increased dramatically, doubling the size of the pre-war crop and doubling again by 1914. This historical fact is often ignored by neoliberal economists who insist that high wages depress growth. New plantations worked by small tenant farmers were established in Arkansas and Texas while the worn-out soil from single crop planting in Georgia and South Carolina was revived with fertilizers. The average White tenant farm had 84 acres while the average newly-freed former slave tenant farm was less than half in size.

Still, the expansion of cotton growing did not bring prosperity to the small tenant growers, Black or White, as they were perpetually in debt to cotton merchants in the North who would charge interest at rates up to 40%. The merchants in turn were exploited by large wholesale houses linked to British capital. The debt economy not only drained wealth from the South to the North, it also prevented the development of a diversified agriculture in the South. Creditors in the North insisted on cotton as the only exportable cash crop and the surplus of low-wage Southern labor prevented any market incentive for industrialization.

Northern Financial Hegemony Kept the Southern Economy Underdeveloped

Many Southerners realized the need to develop industry but the South had to depend on the North for capital which preferred to keep industry in the North and to use the South as a source of raw material. As a result, even the profit from industrialization of raw material production did not stay in the South.

Moreover, as typical of condition of early phases of industrialization, wages stayed low and working hours long and working conditions unbearable in both the South and the North. Workers, often all members of a family that included women and children, were required to routinely work 75 hour weeks at below living wages. Children under 16 constituted over 30% of the work force. Even though corporate profit remained consistently high, wages and benefits stayed low and working condition inhumane, justified by the need to compete with more advanced foreign factories. Nothing was done to correct the situation until the Great Depression which brought into being progressive New Deal legislations of the 1930s.

By the late 1880s, the small farmers of the South and the West began to resist the oppression of the landlords, the industrialists and the financiers. They wanted increased government spending on education, infrastructure and social welfare. They called for a more democratic political process. The discontent was sharpened in the South by a steady fall of cotton prices, dropping by half from 1877 to 1897.

The National Farmers’ Alliance

The National Farmers’ Alliance formed in Texas in 1875 was the first political organization of US populism. Known also as the Southern Alliance, it grew quickly to a membership of three million out of a total adult male working population of 18 million. A separate “Negro” organization, the Colored Farmers’ Alliance, had one million members. Concrete achievements of Southern populism were meager, mostly due to the race problem. The Bourbons managed to control the newly emancipated “Negro” vote with the unhappy result that many White farmers viewed the disenfranchisement of the “Negro” as a necessity for breaking Bourbon domination. Southern populism was diverted in later decades by the Southern upper classes from its original progressive objective to a crusade for White supremacy.

A Northern Alliance of farmers in Kansas, Nebraska, Minnesota and the Dakotas emerged with a stable of able leaders, among whom was Mary Elizabeth Lease who called on farmers to “raise less corn and more hell,” The alliances advocated measures to protect the interests of farmers and appealed to industrial workers for support. With the Southern Alliance leaders preferring to stay within the Democratic Party, the Western leaders formed the populist People’s Party in May 1891 in Cincinnati, Ohio.

The People’s Party

The populist platform of the People’s Party demanded a series of reforms designed to break the control of political bosses and to give back to the people effective control of their government. It also aimed at restoring a more equitable economic system through nationalization of the railroads, communication networks, a graduated income tax, shorter work days and work weeks and a stable currency to ward off inflation that repeatedly outpaced wage increases. To address the problem of farm credit, the platform proposed a “sub-treasury” plan by which the government would store non-perishable farm produce in national warehouses and give loans to farmers to whom it belonged up to but not more than 80% of it value. Populism was essentially a resurgence of the spirit of Jeffersonian agrarian democracy that had shaped American ideals and institutions at the founding of the republic.

The Currency Issue

The issue that aroused most controversy was that of currency. Southern and Western farmers were convinced that the main reason for the fall of farm prices was the policy of deflation adopted by the Federal government after the Civil War to punish Southern debtors. By limiting the quantity of greenbacks and silver dollars, making them redeemable in gold, the Treasury had increased the value of money held by Northern money trusts and correspondingly deflated prices of commodities produced by farmers and miners. Farmers saw the product of the labor decrease in value while their debts increased in value. They felt it unfair that they had to repay the loan they took out earlier when wheat was selling for $1 a bushel with money that could later buy wheat at 60 cents a bushel. The Populists demanded an increase in the quantity of money in the form of paper currency or unrestricted coinage of silver at the constant ratio of 16:1 to gold. The silver coin proposal received strong support from the silver miners.

The Populists were convinced that the maintenance of the gold standard was a conspiracy of international financiers, for whom the Northeastern banks were agents, to impoverish the masses. This attitude was a foundation of isolationist sentiment in the US, particularly in the rural regions of the South, the West and the Middle West.

Populism Reduced to a Sectional Movement

The election of 1892 showed that US populism, deprived of the support of the Southern populists, was reduced to mostly a sectional movement. Democratic candidate Grover Cleveland, having lost the White House in 1888 to Republican Benjamin Harrison despite a popular vote majority but a 168 to 233 loss in electoral votes, recaptured the presidency from Harrison with both a popular vote and electoral majority. People’s Party candidate James B. Weaver won 1,041,028 popular votes and 22 electoral votes, all of which from states west of the 95^th meridian, with support mostly from Western farmers and miners. Populist appeal to industrial labor was not successful.

Populism Co-opted by Both Major Parties

The long term impact was the growth of populist influence within the two major parties. Populist candidates ran on Democratic and Republican tickets. The most notable was John P. Altgeld, a German immigrant who became Democratic governor of Illinois, giving the state a progressive administration. Shortly after the 1892 election, the country plunge into a severe and long depression in which unemployment grew to over 4 million or 18.4%, with double-digit unemployment from 1893 to 1899.

Cleveland, as the first Democrat in the White House since before the Civil War, pushed during his first term the repeal of the Bland-Allison Silver Purchase Act of 1878 that aimed at free coinage of silver, modified by Senator William B. Allison to require the US Treasury to purchase between $2 million and $4 million worth of silver bullion each month at market prices to be coined into silver dollars, which were made legal tender for all debts. Always a hard-currency advocate, Cleveland believed that inflating the money supply through the purchase and coinage of silver undermined confidence in the nation’s currency and punished creditors by repaying them with money less valuable than they had originally loaned. On this issue Cleveland stood apart from his populist constituency, especially in the South and West.

As with all presidents up to that time, Cleveland did not feel compelled to take any action to stimulate the slowing economy towards recovery, viewing his mandate as limited to balancing the Federal budget and preserving the gold standard.

Gold versus Silver

Agitation for action on the question of silver had become intense by 1890. Farmers were straining under growing debt and falling prices. Western mining interests were anxious for a ready market for their silver and exerted pressure on Congress for bimetallism, the use of both silver and gold as a monetary standard. Western voices were much stronger with the recent addition of Idaho, Montana, Washington, Wyoming and the Dakotas to the Union. The Sherman Silver Purchase Act of 1890 was part of a broader compromise. The Democrats gave their support to the protective McKinley Tariff in return for Republican votes for silver. The Act obliged the Treasury to purchase 4.5 million ounces of silver each month at market rates, doubling the amount authorized by Bland-Allison and to issue notes redeemable in either gold or silver.

The planned government purchases amounted to almost the total monthly output from the mines. The increased supply of silver drove down the price. Many mine operators in the West tried to reduce expenses by cutting miner wages, causing labor unrest and sporadic violence in mining towns.

As the price of silver continued to decline, holders of the government notes rationally redeemed them for gold rather than silver as precribed by Gresham’s Law of bad money driving out good. The result of the growing value disparity between the two metals was the depletion of the US gold reserves and the hoarding of gold by market participants, contributing to the Panic of 1893.

The presidential election of 1896 was set in the depth of a severe depression that stimulated progressive reactions. The public was increasingly convinced that the economy had become fundamentally unsound due to a flawed structure, and that government had a responsibility to protect the general welfare as it became threatened by destructive and unfair market forces. The Republicans nominated William McKinley, an Ohio native and a nationally known figure with a track record of advocating high tariffs on imports to project domestic industry as a formula for prosperity, as typified by his McKinley Tariff of 1890. McKinley was also a fervent defender of the gold standard.

Mark Hanna, the Model for Karl Rove

The McKinley campaign was managed by Mark Hanna who introduced new advertising-style techniques that revolutionized political campaign practices. A century later, the Hanna campaign style would be openly admired as a model by present-day Republican strategist Karl Rove who engineered the two-term victories of George Bush. McKinley, backed by an elite group of rich men in close alliance with government, beat Democratic candidate William Jennings Bryan of Nebraska who was nominated by a party convention dominated by Western and Southern populists. The Democratic platform, drafted by populist Governor Altgeld of Illinois, called for free and unlimited coinage of silver.

Defeat of William Jennings Bryan

Bryan stampeded the Democratic Convention with one of the most famous speeches in US political history:
“There are two ideas of government. There are those who believe that if you just legislate to make the well-to-do prosperous, their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous, their prosperity will find its way up and through every class that rests on it … Having behind us the producing masses of this nation, and the world, supported by the commercial interests, the labor interests, and the toilers everywhere, we will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold.”

The nomination of Bryan, a populist in all but party affiliation, meant the end of populism as a separate political force independent of the two-party system. Thereafter, populism is repeatedly co-opted by the two major parties. For the first time in US political history, a clear cut issue of major importance emerged between the two major political parties. The question of free silver became symbolic of the conflict between capitalism and agrarianism. On the one side is the Hamiltonian notion of a society dominated by big business controlled by the financial elite; on the other side, the Jeffersonian ideal of small, independent and rich agrarian land owners as the core of a democratic society. It was not a class struggle between the rich and poor.

Bryan conducted a superhuman campaign, traveling over 17,000 miles and delivering more than 600 speeches. But it was no match for Hanna who raised a war chest of over $16 million to flood the country with pro-business propaganda to spread the message that, among other things, Bryan, an old-time Christian fundamentalist, was no better than an anarchist.

Defeat of Populism by Federalism

The McKinley presidency (1897-1901) was widely interpreted as the definitive victory of the Hamiltonian Federalist ideal of using the Federal government to build a strong economy and a powerful military toward great power status for the young nation. As Henry Adam, scion of an aristocratic family in US politics, observed: “The majority at last declared itself, once and for all, in favor of a capitalistic system with all its necessary machinery.”

Integration of Big Business and Government

The integration of business and politics began in earnest with the onset of the 20^th century. Thereafter, an increasing number of rich personage became leading politicians and most politicians left politics rich or to become rich through connections developed while in office. Under McKinley, big business got all it wanted from government and then some. On top of government subsidy and protection, big business gained legitimacy and respectability. The Dingley Tariff of 1897 assured US industry of complete protection from foreign competition. After a half-hearted attempt to negotiate international agreement for the coinage of silver as promised in the 1896 Republican platform, the currency question was settled for the time being by the Gold Standard Act of 1900, and made operative by the happy coincident of discovery of new gold mines in South Africa, which brought a rapid increase of gold supply to produce the currency-led inflation desired by the silver interests.

The Future Belonged to Populism

Yet while big business appeared to have achieved both political and economic dominance, the future belonged to the populists who inherited a movement for the revitalization of popular democracy to express the real interests of the people and the founding ideals of the nation. Under more effective leaders, populism became politically influential whenever the capitalistic system ran itself to the ground from its structural internal contradictions. Both the progressive period before WWI and the New Deal era before WWII were reactions to economic depressions. Eventually, most of the reforms advocated in the Populist Platform of 1892 were put into effect by mid 20^th century. This will prove to be a recurring fate for populism. The financial crisis of 2007 will lay the groundwork for a new wave of populist reform starting in 2008 that may well extend into the early decades of the 21^st century.

Turn of the Century Expansionism

The central attribute of US history during the latter part of the 19^th century was rapid economic expansion. Between 1860 and 1900, railroad mileage increased almost seven folds from 300,000 to 1,930,000 miles. Capital investment in manufacturing multiplied ten folds from $1 billion to $10 billion. The population grew from 31 million to 76 million. The portion of urban population rose from 20% to 40%. The number of workers rose from 1.3 million to 5.3 million, yielding a two and a half times increase of capital investment per worker, from $800 to almost $2,000. The annual value of production multiplied seven folds from less than $2 billion, to more than $130 billion. Worker productivity rose 15 times, from $1,540 per worker to $25,000 per worker. Yet annual wages rose only from $297 in 1860 to $384 in 1870, dropped to $345 in 1980 and rose to $427 in 1890. Overall, corporate profit rose more than three times faster than wages. In constant dollar term, wages were mostly unchanged after inflation.

The economic growth of the US was propelled by a range of material factors, such as abundant flight capital from a Europe beset with social instability from the democratic revolutions of 1848, a flood of labor from immigration to keep wages down, large and seemingly inexhaustible supply of arable land, absence of external threat that would require costly defense expenditure and limitless opportunities for internal development.

Americans arrived in the new land with a deeply imbedded spirit of Calvinism of personal integrity, honesty, thrift and hard work. More importantly, a religious sanction on business, coupled with the optimism of the Enlightenment and an inculcated belief in personal liberty and individual rights, created a national belief that a harmony can be achieved between private individual interest and common welfare and the inevitability of progress. The national character expresses itself in the belief that an individual can best contribute to society by devoting himself first to the accumulation of personal wealth and then repaying society with generous philanthropy. The combination of Calvinism and liberalism shaped a national ethos which glorified the successful businessman as the most useful and respected member of society. This new status of the merchant class is unique in American culture, not found in the old European and Asian societies.

Only Economies Rich in Resources Can Afford Capitalism

Still, the counterfactual question remains whether it was capitalism that produced the industrialization that led to spectacular economic growth in the young nation, or the promising potential richness of the land in the young nation that made capitalism, despite its many internal contradictions that needed regulation, an efficient economic system. Throughout the young nation, there were pockets of successful communities that thrived not on individual competition but on communal cooperation based on collective ownership that lied behind the celebration of the Pilgrim spirit of Thanksgiving.

Social Darwinism and Americanism

In the subsequent mercantile milieu, influenced by the social Darwinism of the survival of the fitting advocated by Herbert Spencer (1920-1903) and the anti-equality ideology of influential Yale professor William Graham Sumner (1840-1910) who labeled democracy as the “pet superstition of the age”, big business found a pseudoscientific rationalization for predatory consolidation. While decrying the early American concept of equality among men as contrary to the law of nature and government action to protect the weak and unfit against the strong and fit as impediment to progress, Sumner thought it was natural for government to assist and protect big business and the elites who ran it to ward off threats from stronger foreign competitors. The survival of the nation depended on effective protection from the fittest among world powers while national fitness depended on domestic survival of the fitting. Economic nationalism trumped economic democracy which was considered a threat to national security.

Yet the Constitution specifically protects personal private ownership of property by forbidding states to impair of the obligation of contracts. In the summer of 1819, the newly elected governor of New Hampshire, William Plumer, sought to take control of the college’s charter from its elitist Federalist trustees in order to replace the board with elected populist Republican members. Daniel Webster successfully argued for Dartmouth in the US Supreme Court, and Chief Justice John Marshall (in office 1801-35) handed down the landmark decision, interpreting the Fourteenth Amendment, that Dartmouth was a private rather than public entity, therefore, the state of New Hampshire did not have regulatory power over it. This is an important historic decision as it limits the control a state government may have, in the name of the common good, over a corporate charter which is in essence a private contract.

The 14^th Amendment Transformed into Magna Carter for Corporatism

Marshall’s interpretation of the Fourteenth Amendment transformed it into a Magna Carter of corporate right. It ironically turned the Amendment, originally added on June 16, 1866 and ratified on July 23, 1868 to the Constitution for protection against state violation of the rights of “Negro” persons to life, liberty or property without due process of law. A private corporation is regarded by the Marshall decision as a “legal person” and thereby cannot be deprived of its right to conduct business and of its private property rights. The Constitution declares, moreover, that “the Citizen of each State shall be entitled to all Privileges or Immunities of Citizens in several States.” This declaration, when extended to cover corporations as “legal persons” gives corporations chartered in any state the right to conduct business in all states. Since the organization of huge amounts of capital needed by large scale commerce can only be accomplished through the corporate structure, this constitutional and legal protection is vital to the expansion of the capitalistic economy. It paved the path towards corporatism.

Popular Reaction against Corporatism

After the 1819 Supreme Court ruling, throughout the rest of the 1880s, the public was increasingly alarmed by the pervasive growth of monopolies crowding out small businesses. In popular parlance, a large combination was known generally as a trust though in reality big business secures market dominance through a variety of invisible structures, including the use of holding companies to implement mergers and acquisitions that continue to technically evade anti-trust restrictions to this day.

While some states began to impose anti-trust legislations on big business, such restriction were ineffective as long as a few states, notably New Jersey and Delaware, the local politics of which had been controlled by big business interests, continued to place few restrictions on the issuance of corporate charters with which corporations could own properties and conduct business in all other states.

The Toothless Anti-Trust Act

In 1890, Congress passed the Sherman Anti-trust Act by near unanimous vote, which declared that “every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several states or with foreign nations” was declared guilty of a misdemeanor punishable by a fine of not more than $5,000 and/or imprisonment of not more than a year. Those who hope John D. Rockefeller would be heading for jail were disappointed. Prior to 1901, neither the Justice Department nor the courts showed any interest to comply with the Sherman Act. Instead the act was perverted into a weapon for attacking labor unions. Since the Civil War, notwithstanding the Sherman Act, 5,300 separate firms were combines into 318 large corporations by 1904, with 236 of these combinations taking place between 1898 and 1903.

Further Privatization

The development of public utilities fell largely into private hands. Coal, steel and railroads, three interconnected industries, fell under private control from the beginning. Hard anthracite coal soon passed to the control of the railroads, while soft bituminous coal continued to be mined by thousands of small operators. In 1860, the US produced 800,000 tons of pig iron while no steel was produced. By 1900, the US produced 14 million tons of pig iron of which 11 million tons were made into steel, larger than the total production of Britain and Germany combined.

Investment banking is the midwife of mergers and acquisition. This was the period when investment banking first flourished in the US. The chief banking house of the Civil War was Jay Cooke and Company of Philadelphia which had become insolvent in 1873. Financial supremacy passed to New York where the leading firm Drexel, Morgan and Company was reorganized in 1895 as JP Morgan and Company. While apologists rationalized the role of investment banking as introducing order into a chaotic financial market and economy, most of the astronomical profit came from manipulation.

For example, Morgan took control of the New York, New Haven and Hartford Railroads in 1903 and pushed the market capitalization from $93 million to $417 million in nine years, most of which represented water rather than real investment. Applying the same manipulation, Morgan organized US steel after the retirement of Andrew Carnegie with a capitalization of $1.1 billion plus a bond debt of $303 million, reaping an instant profit of over $700 million through watering down the value of the stock while collecting an investment banking fee of $75 million.

Cornelius Vanderbilt, a semi-illiterate New Yorker who started on his road to massive fortune running a ferry between Manhattan and Staten Island, and later ran barges on the Hudson river. In 1862, at age 62, he began buying railroads and before his death in 1877, expanded the New York Central into a vast network serving New York and Chicago, boosting his fortune from $10 million to $100 million is 15 years. Notorious for his bad grammar and worse attitude, he was recorded as having boasted: “Law, what do I care about law? H’aint I got the power?” Vanderbilt and fur trading real estate tycoon John Jacob Astor, then the richest man in America from 1835 on, became leaders of New York society and arbiter of upper class mannerism.

Populist opposition to the growing abuse of power by railroad owners was building. The main complaint was the railroads practice of rebates to preferred shipper such as Rockefeller’s oil monopoly to drive competitors into distressed selling to a predator acquirer. Countless hardworking real entrepreneurs were driven bankrupt by a select numbers of manipulative robber barons.

The Rockefeller interests and the House of Morgan established interlocking directorates in the corporations they controlled. The Pujo Commission of the House of Representatives reported in 1912 that through the banks, trusts and insurance companies, the Rockefeller/Morgan combination had control of financial resources amounting to more than $6 billion and that member of the group held directorships in 112 major corporations with a total capitalization of $22 billion. The Federal revenue in 1912 was $693 million and the GDP was $37.4 billion.

Big business, particularly the public utility sectors such as railroads, oil and electricity, sought with overwhelming success to make themselves immune from public control by unethical devises ranging from giving free service to politicians, newspaper owners and editors, and other influential personage to wholesale bribery to gain control of political institutions. Several key state legislatures including New Hampshire, Pennsylvania, California, were known to be under the control of railroad interests. Massachusetts led the way toward re-imposing public control by setting up a commission to investigate popular complaints against the railroad corruption.

Granger Laws

The strongest attack on big business corruption was led by a farmer organization in the Mid West known as the Grange. In 1871, the Illinois legislator passed “Granger laws” prohibiting price and access discrimination and setting up a Railway and Warehouse Commission. Similar Granger laws were adopted in Iowa, Minnesota and Wisconsin. The railroad countered with the argument that such laws were unconstitutional but in 1876, in Munn v. Illinois and other “Granger Cases”, the Supreme Court upheld the right of a state to regulate public utility.

Reaffirming traditional common law principles, Chief Justice Morrison R. Waite (in office 1874-1888) declared that “property does become clothed with a public interest when used in a manner to make it of public consequence and affects the community at large. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be enrolled by the public for the common good, to the extend of the interest he had created.” Waite went on to rule that public control include the power to fix maximum charges and declared: “we know that this is a power which may be abused, but that is no argument against its existence. For protection against abuses by the legislature, the people must resort to the polls, not to the courts.”

A decade later, the Supreme Court modified its populist attitude. In 1886, in the case of Wabash, St Louis and Pacific Railway Company v. Illinois, the Court invalidated an Illinois law prohibiting rate discrimination on the ground that the state had no authority to violate interstate commerce which was the exclusive purview of the Federal government. In the same year, in the case of Santa Cara County v. Southern Pacific Railroad, the Court ruled again that corporations were among the “persons” protected by the Fourteenth Amendment. In this and subsequent rulings, the Court declared that a corporation must be allowed a “reasonable” return on its investments, thus reversing Munn v. Illinois.

Corporate Hostility towards Labor

The hostility held by management towards labor was one of the most counterproductive errors of the capitalist system. Capitalism is a system that requires a symbiosis of capital and labor. Capital cannot exist without labor. Until resources are invested in the improvement of labor productivity, they remain idle assets. Worse still, if resources are invested in speculation, it is destructive to productivity. In the age of industrial overcapacity, oppression of labor either by holding down wages and benefits or adding to the work load by lengthening the work day is simply poor macro strategy. Since most capital now comes from worker pension funds, increasing wages and pension benefit actually increases the supply of capital for growth.

Toward the end of the 19^th century, immigration and urban migration from the rural areas caused a four-fold increase of the wage earning class between 1860 and 1900. The labor force in the anthracite coal mines in Western Pennsylvania and the steel mills in the Mid West were a mixture of newly arrived Italians, Czechs, Slovaks, Hungarians, Croats, Slovenes, Poles, Ukrainians and Russians. In 1900, more than 2 million children under 16 were wage earners. Management distorted the laissez-faire principle against trade restraint to reject workers’ right to collective bargaining to balance the uneven market power between corporate employers and individual workers. Management believed that the iron law of wages that rationalizes subsistence wage levels to be a natural law.

Ironically, the investment in machinery required longer working hours to amortize the capital. Work was organized to maximize utility of the machines rather than regulated by natural human rhythm and time motion expert were constantly devising ways to speed up work by breaking down operations to monotonous tasks requiring little skill. It was not necessary to let workers understand the complex design that produced the final product. The time-motion pressure resulted in high accident rates but workers were not protected by compensation. The pain of the cyclical depressions of 1873 and 1893 were borne mostly by unemployed workers and their families while financiers profited from the restructuring of distressed company and the consolidation of outdated economic sectors.

Until the 20^th century, non-skilled labor remained unorganized. Labor solidarity was hampered by racial conflict and discrimination against new immigrants by native born workers. Such social conflicts played into the hands of corporate management in its strategy to exploit labor disunity. A craft labor movement emerged among skilled workers along the line of medieval guilds. In 1865, William H. Sylvis of the Moulders’ Union organized the National Labor Union with a membership of 600,000 by 1868 but disappeared four years later by 1872, having dissipated its energy advocating over ambitious political reforms.

Knights of Labor

The Knights of Labor was founded in 1869 by Philadelphia garment cutters under the leadership of Uriah Stephens. It admitted all except lawyers, bankers, stockbrokers, liquor dealers and professional gamblers. It pushed for organizing cooperatives through legislation rather than direct confrontation with the employer class. In the spirit of Jeffersonian democracy, it aimed “to secure to the toilers a proper share of the wealth that they create” and to make “every man his own master – every man his own employer.”

The Wizard of Oz a Populist Allegory

Most readers the world over who have enjoyed Lyman Frank Baum’s The Wonderful Wizard of Oz, and the audiences that have been delighted by the Hollywood movie, do not realize it as an allegory of populist efforts to reform the nation in 1896. Born in 1856 near Syracuse to a wealth family, Baum moved in 1887 to Aberdeen, South Dakota, a little prairie town where he edited the local weekly until it failed in 1891, during which time Western farmers had been in a state of loud, though unsuccessful, revolt. The Romantic view of benign nature had disappeared, replaced by the stark reality of the dry, open plains. The acquiescence towards social Darwinism served to crush Romantic idealism.

In 1891 Baum moved to Chicago where he later saw first-hand the miseries of the frightful depression of 1893 and was drawn to dynamic reform elements led by populist governor John P. Altgeld. In Chicago, Baum took part in the pivotal election of 1896, marching in “torch-light parades for William Jennings Bryan.” Bryan consolidated all the farmers’ hopes in a campaign basket of “free coinage of silver.” Even in defeat, he brought the hopeless plight of the little man into national consciousness.

Between 1896 and 1900, while Baum worked and wrote in Chicago, the great depression of 1893 was put to an end by the war with Spain which thrust the United States into world power status, just as the great depression of 1933 was put to an end by the Second World War which thrust the US into superpower status.
Bryan in defeat maintained control over the Midwestern base of the Democratic Party, and spoke out against US policies toward the newly acquired colonies of Cuba and the Philippines. By 1900, as Bryan prepared to run again, anti-imperialism and not silver became the prime campaign issue, with the silver as a background leitmotif.

Baum introduces Dorothy and Kansas by contrast:
"Dorothy lived in the midst of the great Kansas prairies, with Uncle Henry, who was a farmer, and Aunt Em, who was the farmer’s wife. Their house was small, for the lumber to build it had to be carried by wagon many miles. There were four walls, a floor and a roof, which made one room; and this room contained a rusty-looking cooking stove, a cupboard for the dishes, a table, three or four chairs, and the beds.

“When Dorothy stood in the doorway and looked around, she could see nothing but the great gray prairie on every side. Not a tree nor a house broke the broad sweep of flat country that reached to the edge of the sky in all directions. The sun had baked the plowed land into a gray mass, with little cracks running through it. Even the grass was not green, for the sun had burned the tops of the long blades until they were the same gray color to be seen everywhere. Once the house had been painted, but the sun blistered the paint and the rains washed it away, and now the house was as dull and gray as everything else.

“When Aunt Em came there to live she was a young pretty wife. The sun and wind had changed her too. They had taken the sparkle from her eyes and left them a sober gray; they had taken the red from her cheeks and lips, and they were gray also. She was thin and gaunt, and never smiled now. When Dorothy, who was an orphan, first came to her, Aunt Em had been so startled by the child's laughter that she would scream and press her hand upon her heart whenever Dorothy's merry voice reached her ears; and she still looked at the little girl with wonder that she could find anything to laugh at.

“Uncle Henry never laughed. He worked hard from morning till night and did not know what joy was. He was gray also, from his long beard to his rough boots, and he looked stern and solemn, and rarely spoke.
“It was Toto that made Dorothy laugh, and saved her from growing as gray as her other surroundings. Toto was not gray; he was a little black dog, with long silky hair and small black eyes that twinkled merrily on either side of his funny, wee nose. Toto played all day long, and Dorothy played with him, and loved him dearly.”

Henry M. Littlefield’s "The Wizard of Oz: Parable on Populism." describes a wealth of allusions to Gilded Age society in Baum’s The Wonderful Wizard of Oz. The wicked Witch of the East who controls the Munchkins represented Eastern industrialists and bankers who control the working people; the Scarecrow is the wise but naive Western farmer; the Tin Woodman stood for the dehumanized industrial worker; the Cowardly Lion was William Jennings Bryan, Populist presidential candidate in 1896; the Yellow Brick Road, with all its dangers, was the gold standard; Dorothy's silver slippers (Judy Garland's are ruby red in the movie, but in Baum’s version they are silver) represent the Populists' solution to the nation's economic woes by “the free and unlimited coinage of silver”; Emerald City is Washington, D.C.; the Wizard, “a little bumbling old man, hiding behind a facade of papier-mâché and meaningless noise, . . . able to be everything to everybody," is the parade of Gilded Age presidents, or Mark Hanna, McKinley’s campaign manager, and subsequent campaign strategist who manufacture winning images for undeserving candidates.

The Deadly Poppy Field, where the Cowardly Lion fell asleep and could not move forward, is the anti-imperialism that threatened to make Bryan forget the main issue of silver (note the Oriental connotation of poppies and opium). Once in the Emerald Palace, Dorothy has to pass through seven halls and climb three flights of stairs; seven and three make seventy-three, which stands for the Crime of 1873, the congressional act that eliminated the coinage of silver and that proved to all Populists the collusion between Congress and bankers. The Wicked Witch of the East is Grover Cleveland; of the West, William McKinley. The enslavement of the yellow Winkies is “a not very well disguised reference to McKinley’s decision to deny immediate independence to the Philippines” after the Spanish-American War.

Wagner’s Ring Cycle

Der Ring der Nibelungen (The Ring of the Nibelungen), a cycle of four epic music dramas by the great German Neo-Romanticist composer Richard Wagner (1813-1883), is influenced by German populism. Wagner began work on the mammoth project at age 35 and completed the cycle over a course of 26 years from 1848 to 1874: Das Rheingold (The Rhinegold) completed in 1869, Die Walküre (The Valkyrie) in 1870, Siegfried (previously entitled Der junge Siegfried or The young Siegfried) in 1871, and Götterdämmerung (Twilight of the Gods) (originally entitled Siegfrieds Tod or The Death of Siegfried) in 1874.

In autumn 1848, Wagner became involved with revolutionary events and came under the influence of the writings of German philosopher-anthropologist Ludwig Feuerbach (1804-1872) that “Christianity has in fact long vanished not only from reason but also from the life of mankind, that it is nothing more than a fixated idea.” Wagner was also influenced by French social theorist Pierre-Jean Proudhon (1809-65), whose What is Property (1840) condemned the abuses of private property, who, after being elected to the French constituent assembly after the Revolution of 1848, tried in vain to establish a national bank for the reorganization of credit in the interest of workers.

Under the influence of these ideas, Wagner conceived the fable that was later set to music in The Ring of the Nibelungen, the intellectual content was based on the concepts of "true socialism" and symbolically dealt with the struggle of humanity against the rule of gold. In personal contact with the Russian revolutionary anarchist Mikhail Bakunin (1814-76) in the spring of 1849, Wagner's democratic views had become more radical. He published several articles in the Volksblätter edited by August Röckel propagating anarchist colored, utopian-socialist concepts and established the necessity of a new revolutionary uprising.

The young Wagner was influenced by the events of the democratic Revolutions of 1848 and participated in manning street barricades in the Dresden uprising from May 3-9, 1849 in support of the provisional government and called upon the Saxon military to provide fraternal support for the insurgents. Together with the leaders of the uprising, he left Dresden on May 9 for Chemnitz, whence, with the help of Franz List, he escaped a warrant for his arrest by fleeing to exile in Switzerland.

George Bernard Shaw’s The Perfect Wagnerite (1898) interpreted the Ring as a socialist allegory in the industrial revolution.

During the first years of his exile Wagner still hoped that the revolution would break out again in Germany. For his own ideological self-awareness and to define the objectives of his artistic creation he wrote several works based on the ideas of his last months in Dresden, among others Art and Revolution (1849), The Work of Art of the Future (1850) and Opera and Drama (1851). After 1854, under the influence of the philosophy of Arthur Schopenhauer, he modified his belief in progress, championed pessimistic and fatalistic views, and saw the sense of his art as the moral refinement of humanity.

The cycle of four operas tells the story of the struggle by different classes for the gold Ring forged from the enchanted flat-stone of the Rhine which endows its owner with power over the world, but only at the cost of forsaking love and trading his soul for the Ring’s awesome power. The operas tell the convoluted story of greed, treachery and betrayal.

Wontan, the leading God, represents the moral pessimism of Schopenhauer. The Giants, Fafnir and Fasolt, represent capitalism that oppresses workers who are represented by the Nibelungen, built Valhalla for the Gods, but Wotan, tempted by Loge, demigod of fire, with the magic fire representing greed, pays the Giants with the Ring of Rhine Gold guarded by Rhine maidens who represent bountiful nature the privatization of which would bring destruction to the world.

As a universal principle, populism is a discourse that juxtaposes the interests of “the people” with those of “the elites”. In practice, populism comes in all shades in the political spectrum affected by incidental socioeconomic factors.

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