Chapter III: • Changing Theory (1)

Unlike as were Thomas Bailey Aldrich, Walt Whitman, and Mark Twain, they belonged equally to an America that was passing. In consequence of the silent drift towards consolidation new philosophies were preparing that were to rephrase the familiar American ideals and adapt current political and economic theory to the needs of the new order. For a decade or more the significance of that drift was obscured by the last great wave of decentralization that swept across the prairie commonwealths; but when the frontier had been pushed to the Pacific Northwest and the free lands had passed into private ownership, the movement of consolidation gathered momentum swiftly. Primarily economic in its origins, it went forward on even foot with the industrial revolution. The vast increase in population, the unprofitable expansion of agriculture, the augmenting resources of liquid capital, the new potentialities revealed by industrialism, were all engaged in the work of transforming a scattered agricultural people into an urbanized industrial people.

And then came the railways to hasten a movement that was implicit in the nature of things. Effective nationality in America issued more immediately from fluid communication than perhaps any other cause. A depressing spirit of isolation--of provincial aloofness--had lain like a heavy weight on the colonial mind. The barriers of distance were made formidable by a rugged untamed country, and to open up free communication was an arduous undertaking. Yet easy communication must be provided if economic development were to go forward. In the early years of the nineteenth century vast plans and great outlays of money went into the work of linking the sundered portions of the country by a system of waterways. The Erie canal, the great lakes, the Ohio and the Mississippi, were creating their own America, picturesque and individual, when the process of differentiation was rudely broken across by the iron rails that ran East and West, disregarding natural barriers and breaking down traditional frontiers. It was the railways that tied the continent effectively together, providing the needed transportation to make possible a national economic system. With the laying of the Union Pacific rails in the late sixties the destiny of America as a self-sufficient economic unity was fixed. Henceforth for an indeterminate period the drift of tendency would be from the outlying frontiers to industrial centers, and with that drift would come far-reaching changes in the daily routine of life. The machine would reach into the remotest villages to disrupt the traditional domestic economy, and the division of labor would substitute for the versatile frontiersman the specialized factory-hand. A new urban psychology would displace the older agrarian, and with the new psychology would come other philosophies in response to the changing realities.

I • Winds of Economic Theory

So profound a revolution could not fail to dislocate the foundations of all traditional schools of thought. Economic and political theory were both thrown out of their earlier beds to flow in new channels. By force of gravitation the main stream of economic theory--like the main stream of political theory--poured into the broadening channels of capitalism, and only the lesser vagrant currents followed the old channels of agrarianism or the new channels of proletarianism. There was much speculation on the disturbing phenomena of the great change, and current economic theory was slow to settle into the conformities of a school. It divided sharply, not only between the advocates of capitalism and agrarianism, but between those who accepted the classical English theory and those who believed that economic conditions in America warranted an independent American school. The first group of professional economists--Henry C. Carey, Francis A. Walker, David A. Wells--made its appearance, and a very considerable group of amateurs--free-lance economists and fireside theorists--contributed to the speculation of the times in the measure of their intelligence. These latter have received scant attention, since the battle went against them; nevertheless they do not deserve to be forgotten, for most often they were an expression of the social conscience of the times--a homely protest against the exploitation of farmer and workingman by the rising capitalism. But because they essayed to turn the course of “manifest destiny” they were ignored or roughly ridden down, and only one of them--Henry George--is still widely influential.

In the primitive early days of America economic theory had been a simple homespun product, woven on fireside looms, and following simple domestic patterns. With the rise of industrialism it passed into the keeping of stockbrokers and textile manufacturers and retail merchants who were looked upon as authoritative expounders of the new science of wealth. In his _Elements of Political Economy_, first published in 1837 and for forty years a standard textbook in American colleges, Francis Wayland accepted this view and offered an apology for treating of the subject at all. “It may possibly be urged,” he said, “that the Author, having had no experience in mercantile business, should have left this subject to be treated of by practical men.” In the days of Henry Clay this view established itself in the halls of Congress, where politicians who had never heard of Ricardo were on profitably intimate terms with Nick Biddle, and respected the interests of influential constituents far more than the principles of Manchesterism. With the appearance of professional economists the breach between economic theory and legislative votes widened to a chasm. Ignored by the politicians except in so far as their views fell in with the current paternalism, the economists retreated to the quiet of the schools and there spun their webs quite harmlessly. Youthful undergraduates were fed on a modified English classical theory in which the pessimism of Ricardo and Malthus, bred of the bitter dislocations of English industrial life, was diluted with an optimism more suited to the temper of the new world.

The academic economists, it must be confessed, were in an unhappy position, not unlike that of the earlier Calvinists. They lived as remote from the realities of life as did those old ministers. Trained in the orthodox English school they felt bound to defend _laissez faire_; yet as members of universities dependent on wealthy patrons they could not well offend powerful interests that wanted none of their free-trade theory. On the whole they stuck pretty manfully to their guns, and from Wayland to Sumner they upheld the abstract principle of free competition; but what they could do in other ways to appease the wrath of the protectionists they did heartily, and the steady rapprochement of academic economic theory and capitalism was foreordained in the nature of things academic. Agrarian and proletarian economics were granted no hearing in the colleges. Other schools than the English classical were not countenanced, Henry George was ridiculed and the left-wing European economists--great thinkers like Sismondi, Saint-Simon, Louis Blanc, Bastiat, Proudhon, Engels, and Karl Marx--were pretty much ignored by professors of economics in the America of the Gilded Age. Something of the intellectual sterility of the genteel tradition descended upon our academic economists; yet amongst them were vigorous and capable minds that must not be overlooked.

1 • Henry C. Carey

Henry C. Carey, son of the vigorous Irish Republican, Matthew Carey, who made _The American Museum_ one of the ablest of the eighteenth-century American magazines, may perhaps be justly called our first professional economist. The eighty-six years of his life were filled with enormous labors in the twin fields of economics and sociology. He did his own thinking from a basis of facts that he was at great pains to gather and tabulate, and his intellectual unfolding followed naturally the current material development of the mid-century. His statistics, of which he was excessively fond, no doubt were as unreliable as most statistics that economists love to dabble in, and like other purveyors of columned figures and impressive charts he certainly leaned too heavily on his knotty staff; but unlike academic economists such as Francis Wayland he tried to keep his thinking in contact with reality and in consequence his studies possess a solidity that is still impressive.

Although his father had early been interested in Hamilton’s national system and for a time was president of a Philadelphia society concerned in furthering a protective tariff--for which the great German protectionist List published a number of letters in 1827--Carey began as a follower of the classical school, and in the thirties he published a treatise on political economy that expounded the Manchester doctrine of free-trade. But under the stirring leadership of Henry Clay the American System was making headway fast, and the facts of American expansion impressed him as earlier they had impressed the young List on his visit here. Turning statistician, he soon discovered, as he believed, certain fallacies in the English classical school, and he proceeded to examine afresh the Ricardian theory of rent. (The change came in 1848.) According to this most celebrated of all economic doctrines rent is measured by the difference in productivity between the best land, which is settled first, and the poorest, which social need later brings under cultivation; and hence in every growing community the increment of rent constantly increases at the expense of both labor and capital. But in the America which Carey was acquainted with, and where the story of social development was being swiftly recapitulated, the facts seemed to him to prove quite otherwise. Here the poorer lands were settled first, because their physical condition made them more easily available, and only later, when social pressure increased and larger means were available, were the rich bottom-lands cleared and the marshes drained.

As a result of his narrow interpretation of Ricardo’s doctrine of social fertility, Carey lost faith in the Ricardian theory and turned frankly to the American scene to discover, if possible, a more adequate explanation. Soon the seeds of his intense nationalism were bearing their fruit. An inherited dislike of England led him to fear its industrial preëminence, and he abandoned the ideal of an international division of labor for the ideal of independent nationality, with America developing its individuality through the exploitation of its own resources. Free-trade, he came to believe, is international, it results in establishing a “single factory for the whole world, whither all the raw produce has to be sent whatever be the cost of transport”; whereas any society waxes individual and strong in the measure that it develops variety of employment with its demand for mutual help and service. Only through such associations can man develop his capacities and further his mastery of nature. His patriotism thus became involved in his economics and for years he waged a relentless warfare against Manchesterism. Not only were the English doctrines false to American fact, he pointed out, but they were vicious Tory doctrines which if followed here would keep America poor for the benefit of England. The great idea which came finally to dominate his thinking is suggested by the title of a pamphlet, written in 1852, _The Harmony of Interests: Agricultural, Manufacturing, and Commercial_--a work that suggests Frédéric Bastiat’s _Les harmonies économiques_, published in 1850, and influenced by Carey’s earlier speculations.[586] It was an age much given to discovering harmonies and Carey was not behindhand in the business. In the introduction he traced the ills of contemporary economic life to the Manchester theories of rent and population--theories which had thrown their black shadows over English Parliamentary programs of relief and perverted the normal unfolding of western civilization. In consequence the “tendency of the whole British system of political economy is the production of discord among nations.”[587]

In the background of Carey’s mind was a Physiocratic dislike of the sterile middleman which sharpened his antagonism to an international division of labor, and a sensitive social conscience that was concerned at the ruthless exploitation of English mill-hands. An ardent believer in natural liberty and convinced of its beneficence, he restricted economic freedom within national boundaries. The harmony of interests is local and not international--the tying together of the several parts of the whole. Beyond the national boundaries it ceases. The pessimism of the English school with its iron law of wages and its Malthusian law of population was harshly repugnant to his buoyant optimism. From these vicious roots, he was convinced, sprang the principle of isolation and differentiation--that producer and consumer must live apart, with the corollary that the poor must seek new lands in far countries to supply the places of those from which they have been thrust, there to produce agricultural staples to exchange for the manufactured goods produced in thickly settled countries--a principle that taxes both producer and consumer in the exact measure of transportation tolls, and benefits exclusively the sterile middleman. Applied to America the policy of free-trade must keep this country dependent upon England--keep it agricultural for the benefit of British merchants; and the program that Carey outlined, the complete sufficiency of which he never doubted, was a return to the policy of Adam Smith, to that “general harmony of interests” that must result from bringing the farmer and artisan into neighborhood communities, fashioning the raw materials where they are produced and consuming the farmer’s produce where it is grown. Adam Smith “saw well,” says Carey, “that when men came thus together, there arose a general harmony of interests, each profiting his neighbor, and profiting by that neighbor’s success, whereas the tendency of commercial centralization was toward poverty and discord, abroad and at home.”[588]

To his death in 1879 Carey was the most distinguished as he had been the most tireless advocate of a system of protection for American manufactures. He was one of the most pugnacious pamphleteers of a pugnacious generation.[589] He was a co-worker with Horace Greeley in the labor of convincing a suspicious people of the common benefits to be got from a subsidy to a class; and their joint influence gave respectability and popularity to the appeals of business men and politicians. Between 1849 and 1857 he “was the virtual editor of the _New York Tribune_” in all matters regarding protection. His chief antagonist in the long struggle was William Cullen Bryant and the _Evening Post_; and he made frequent appeal to Bryant to meet him in a pamphlet debate that should bring before the public both sides of the great question of protectionism. Bryant’s refusal did not lessen his ardor, and in successive pamphlets he laid before the American people a well-rounded argument for tariff subsidies that ranks him in the history of economic thought with Friedrich List, the great German apostle of a nationalist economic system. American manufacturers owe a heavy debt to Henry Carey.

In these early years of industrialism the manufacturer was still dependent on the banker, and industrial development was held back, Carey came to believe, by a false financial policy imposed on the county by the bankers. From his boundless enthusiasm for the ideal of a national economy sprang likewise his unorthodox views on money that so greatly annoyed his fellow economists. Individual in his thinking on this as on other subjects, he espoused theories that to dogmatic bullionists like David A. Wells seemed incendiary at a time (during the post-war years) when so many Americans were bitten with “money heresies.” On this theme his patriotism and his democratic sympathies ran together. He was opposed to the bullion system because it struck at nationalism. An English system, devised by Lombard Street, did not answer the needs of America. The price of gold is established in a world market and the flow of bullion is always toward the great centers already glutted with money. To throw the money of the world into a common pool was to subject the money of poorer and remoter countries to the control of the great financial capitals. Free-trade and the gold standard were the twin weapons forged by England for world-wide economic conquest, and for America to adopt a financial policy that held her subject to Lombard Street, seemed to Carey the height of folly. Gold follows the balance of trade, and until America had built up an adequate domestic economy her specie would continue to drain off, leaving too scanty a supply to do the necessary work of society.

The solution, he believed, lay in the creation of an independent national currency; and an efficient national currency, he held with Bishop Berkeley, was one that was non-exportable, that remained at home to do the day’s work instead of gadding about. To provide such a medium of exchange he proposed a currency founded on the national credit--a “national system,” he argued, “based entirely on the credit of the government with the people, and not liable to interference from abroad.”[590] It was on such grounds that Carey supported the greenback issues and favored the remonetization of silver. The ideal of “societary circulation,” he pointed out, was credit--“that great step towards civilization which consists in substituting _letters of credit_ for material money”; and because “the steady and regular use of the _letter of credit_ known to the world as the ‘greenback,’ or that other known as the ‘national bank note,’”[591] tended to wean the minds of men from dependence on specie, he was warm in their favor.

With a sound national system, let foreigners take our gold for
whatever balance of trade they can impose upon us, having no use
among ourselves for any coin money except what we can retain under
a wholesome foreign commerce.

What we most need today is the establishment of that monetary
independence which results from maintaining absolute command over
the machinery of exchange used within our borders, leaving to
the gold dollar the performance of its duty of arranging for the
settlement of balances throughout the world.[592]

Carey’s insistence on a plentiful supply of money laid him under the charge of being an advocate of “cheap money,” and therefore one of those wicked persons known as “inflationists.” The charge in the main was true. He was pungent in his contrast between the prosperity of war times when an abundant currency released all the energies of the American people, and the stagnation that followed upon contraction. “Cheap money--low interest--enabled our working men to prosper,” whereas dear money--high interest--was bringing distress and hardship. Every reduction in the amount of currency decreases the purchasing power of the people, and slows down the circulatory system. The attempt to retire the greenbacks he regarded as a class attack on the common welfare of the country. “To that end the greenback, everywhere claimed as the people’s money, has by those in high places been denounced, small as is the quantity, when compared with the real need for it.”[593] Paper money is “democratic in its tendencies,” passing from hand to hand and never seeking a bank vault to hide in.

A war upon what is called “paper money” is ... a war upon the
poor in favor of the rich; and that the war being made upon it
has precisely that effect is proved by the fact, that the western
farmer is now being so impoverished by reason of such a reduction
in the price of corn and oats that the former is being used as
fuel, while the latter sold at 8 cents a bushel, [while] houses and
lots in the neighborhood of Wall Street [are] commanding ... prices
such as had never before been heard of.[594]

Considering Carey’s reputation as an economist and his wide influence, such doctrine, in the eyes of all “sound-money men,” was distinctly pernicious. He was giving aid and comfort to the apostles of inflation and repudiation, and he suffered many a sharp attack. But that would not deter a warrior grown gray in battle, and in the very last year of his life he fell upon the bullion theory with the ardor of a young man. He would not suffer the bankers to go unrebuked in their mad attack on the prosperity of the country; he would not be silent while a policy of contraction, that so early as 1866 had reduced the per capita circulation to $12.50--according to his statistics--was still in full swing after the disastrous lesson of 1873. He had much in common with Peter Cooper, who in 1876 took up the battle against Wall Street for a “democratic” monetary system. The blood of the two old men, both born in the last decade of the eighteenth century, had not grown cold or sluggish with long years, but responded ardently to the great cause of democracy that had inspired their youth. That Carey’s national system was a house divided against itself--that industry and finance were engaged in a mortal combat for supremacy--he probably never quite realized. He was concerned that America should be free to create and enjoy the wealth that lay in the potentialities of the continent, and to that end he would have money serve industry, and not industry money.

2 • Francis A. Walker

The social conscience of Carey was colored with an optimism that was the spontaneous expression of a generation that set no limits to the beneficent development of American industrialism. No storm-clouds had yet gathered on the horizon; no hostile systems challenged the sufficiency of capitalism. But a change was at hand. By the end of the seventies the complacency of the Gilded Age was disturbed by the rise of pestilent heresies in the shape of new economic dogmas. The surplus-value theory of Marx and the unearned-increment theory of Henry George were spreading widely through America, to the unsettlement of susceptible minds; and the Knights of Labor were preparing to launch a general attack against the whole system of capitalistic exploitation. Carey had sufficed the wants of his simpler day, but there was need of a new champion to wield the sword of pure Ricardian doctrine against these later heresies.

Francis A. Walker, son of the economist Amasa Walker, Brigadier General in the Civil War, Professor at Sheffield Scientific School and later President of the Massachusetts Institute of Technology, was to be the self-appointed champion of industrialism, the official economist of the Gilded Age, and forerunner of a long line of academic purveyors of economic dogma. As the author of a college textbook that superseded Francis Wayland’s naïve _Elements of Political Economy_--a work that had served innumerable college generations as a quarry of economic doctrine--he elaborated a complete system of economics with a geniality that went far to popularize the “dismal science” with vast numbers of undergraduates; and as an authoritative apologist for entrepreneur profits he rendered a service to capitalism that quite erased his little Ricardian peccadillo of free-trade prejudice. There runs through his solid pages the confident optimism of his generation--an optimism that discovers in the heresies of socialism and single-tax the only storm-clouds on the fair American horizons. He saw no reason to question the ultimate good of industrialism, or to fear any deep-seated clash between labor and capital. He carried water easily on both shoulders, for he was so fortunate as to have worked out to his complete satisfaction, a magic economic formula that should return both to master and workman their just shares of the total production. In the light of his exegesis there could be no Marxian struggle of the classes. The captain of industry must no longer be regarded with sour aspect as a parasite upon labor, but as a fellow worker, the creator of those profits which are not subtracted for his benefit from the portion of labor. From Ricardo to Marx the economists had been barking up the wrong tree in their analysis of the rewards of the entrepreneur.

The classical school of the Gilded Age was in like position with the eighteenth-century Calvinists; they must either abandon their dogmas or reinterpret them to meet current needs. Walker was too good a Ricardian to abandon them, so he proposed to reinterpret them. The urgent problems to which he addressed himself were the sources of profits and of wages; and the examination of those problems led him to his theory of the function of the entrepreneur and to a rejection of the classical wage-fund theory. He refused to discard his suit of Ricardian clothes as Carey had done. They could never go out of style, he believed, so long as honest thinking was respected. He accepted most of the Ricardian dogmas without question. “Capital,” he asserted soberly, “arises solely from saving. It stands always for self-denial and abstinence,” and interest is the “reward of abstinence.” But one important dogma, the classical wage-fund theory, he insisted on stripping away. He was too genial an optimist to rest content with the bleak conception that the margin of subsistence circumscribes the rewards of labor, and too enlightened an apologist of industrialism to assert that “profits are the leavings of wages.” He could not hope to erect a theory suitable to the Gilded Age on such skimpy hypotheses, and he scourged them from the temple of economic law. Wages, to be sure, are the leavings after rent, interest, and profits have been deducted from the total production; but vast and dangerous misconceptions have arisen in regard to the portions that accrue to these several partners, and in particular mischievous perversions touching the share of profits. This was the crux of the problem of distribution and until the nature of profits should be determined the question of wages would remain to befuddle weak heads.

The heart of Walker’s doctrine, therefore, is his theory of profits. He proposed to show that according to the true law of profits this flexible increment is never a moiety wrested from labor, but an additional earning of management that justly accrues to him who creates it. The doctrine from which he deduced his theory of the entrepreneur was the Ricardian theory of rent. On this point Walker was the most loyal of Ricardians, and he violently attacked Carey for repudiating the classical dogma. In a word “Ricardo’s doctrine can no more be impugned than the sun in the heaven,” he asserted, “and those who mouth at it simply show that they do not know what it was Ricardo taught.”[595] What was needed was to understand its wide implications rather than to seek to destroy it--to trace in all its reaches the doctrine of fertility and discover how in other spheres than land the difference between fertile and unfertile measures the return upon economic endeavor. For the great doctrine of fertility, Walker pointed out, following Mill, is capable of expansion to cover wider fields than rent; it applies equally to management and labor; it broadens out into a comprehensive principle that exactly measures the most bitterly disputed of the several increments, the increment of profits.

This theory of fertility, introduced into the law of distribution, is Walker’s most interesting contribution to economic speculation. By it he supplemented the trinity of land, capital, and labor--or in terms of distribution, of rent, interest, and wages--with a new entity--management and the earnings of management. The argument is highly ingenious. Assuming a no-profits employer at the lowest scale of the entrepreneur system, by analogy from the Ricardian no-rent grade of land, he asserted that similarly “profits are measured upwards from the level of the no-profits class of employers,” and hence “it appears that the gains of the employer are not taken from the earnings of the laboring class, but measure the difference in production between the commonplace or bad, and the able, and shrewd, and strong management of business.”[596] Profits, then, are an added increment of management, secured by foresight and business skill, the fruit of managerial fertility; and since they flow solely from the entrepreneur they belong to him alone and no portion may be justly claimed for rent, interest, or wages. The complete theory he states thus:

Under free and full competition, the successful employers of labour
would earn a remuneration which would be exactly measured, in the
case of each man, by the amount of wealth which he could produce,
with a given application of labour and capital, over and above
what would be produced by employers of the lowest industrial,
or no-profits, grade, making use of the same amounts of labour
and capital, just as rent measures the surplus of the produce of
the better lands over and above what would be produced by the
same application of labour and capital to the least productive
lands which contribute to the supply of the market, lands which
themselves bear no rent.[597]

It is a persuasive argument of which Walker was vastly proud. The germ of it later historians of economic thought have traced to Senior and John Stuart Mill, who had suggested the idea of “differential rent,” or “rent of ability,” which is the reward of “all peculiar advantages of extraordinary qualities of body and mind.”[598] From whatever source it issued, the usefulness of such doctrine in the days of an expanding industrialism, and the ends it might serve in counteracting proletarian philosophies, are too evident to need comment. The Marxian dogma of surplus value--that profits are stealings from wages--was certainly calculated to breed dissatisfaction in weak proletarian heads. Marx was a good Ricardian in his major postulates and the Ricardians had failed to analyze adequately the true sources of profits; because of such failure the classical school had underestimated the social beneficence of the capitalistic system. Chained to the iron law of wages the school had been forced to envisage a bleak future with labor kept always at the margin of subsistence. From this pessimism Walker proposed to rid economic theory, by showing that entrepreneur profits augment the wage fund and hence that the entrepreneur is the benefactor rather than the exploiter of labor. With his business skill the captain of industry, like the inventor of a new machine, lays open new sources of wealth for all, and if he gains much for himself he gives more to society; for every improvement in business methods accrues in the end to society as a whole, for the new technique soon becomes a common possession.

The validity of Walker’s theory of profits does not concern us here; it is a matter for economists to determine. To one who is under the spell of no doctrinaire system the theory seems somewhat too neat with its assumption of “free and full competition”;[599] and in its conscious purpose to glorify the captain of industry it is freighted rather too heavily with the spirit of the Gilded Age. It not only throws the door wide to exploitation but it invites everybody to the feast. Yet the work of the apologist was only half done. Having established to his satisfaction the law of profits, Walker was prepared to take equally high ground in determining the increment that falls to labor. To glorify profits and at the same time defend the pessimism of the wage-fund theory, would have been foolish tactics in presence of the Marxian surplus-value theory; proletarian discontent must be dealt with and Walker was prepared to deal with it. Having ascertained exactly the several increments due to rent, interest, and profits--which in his system are rigidly determined by economic law--he confidently assigned all the residual increment to wages. Labor not only gets all it earns, he argued, but far more, since what does not fall to the just shares of the other partners falls to it--that is the “whole remaining body of wealth.” If it be recalled that the total social fund of inventions, machinery, trade processes, systems of transportation, business methods, are alike in the service of all employers--the no-profit entrepreneur equally with the high-profit--it follows that the individual employer can derive from such social wealth no modicum of profit above and beyond what his individual fertility has produced. Where then can the income from such social fund flow except to wages? “Every invention in mechanics, every discovery in the chemical art, no matter by whom made, inures directly and immediately” to the benefit of labor.[600] This, to be sure, on the hypothesis of “full and free competition,” which may be interfered with by various means but which in the long run prevails. How else shall one explain the constant rise in the wage-scale that has marked the Industrial Revolution and that has gone hand in hand with vast profits to the entrepreneur class?

It was a robust optimism that could lay down the theory that labor is “the residual claimant to the product of industry.” Although Walker prided himself on his discovery, it seems to have made slight impression on later economic thought. Like too many members of the classical school the apologist of the Gilded Age failed to keep his feet on the plebeian earth; and his conclusions suggest how great mischief _a priori_ reasoning may work in the speculations of academic gentlemen. A moderate dash of realism might have lessened his buoyant optimism; but Walker was too warm an admirer of capitalism, too eager to assert the beneficence of industrialism, to inquire curiously into the everyday facts of current exploitation. As a realistic statistician he was far inferior to Carey. But why demand a plodding realism of the economist when all America was romantic? If the economic theory of General Walker was a pleasant blend of Ricardo and Colonel Sellers, would it not hit the taste of the age to a nicety? Its sturdy optimism was a soothing antidote to the Jeremiads of the Marxians and the shrill demands of the single-taxers. The Gold Coast of America looked to its official economists for a confutation of all economic heresies, and who was so well equipped for that business as a doughty Colonel Sellers armed with a sharp Ricardian sword?

In this brisk work Walker engaged with gusto. In his onslaught upon Marx and Henry George he was untroubled by doubt. He first demolished the structure of their theory and then impugned their honesty. His condemnation of single-tax is bold and sweeping. There is a bitter asperity in his denunciation of the economic heresies of _Progress and Poverty_, and he dismisses the proposal to tax unearned increment with the comment, “Every honest man will resent such a proposition as an insult.”[601] His discussion of the economics of the question is only casual and he hastens back to the safe haven of Ricardian doctrine.[602] In his commentary on the Knights of Labor he is somewhat vindictive for a well-bred gentleman. He charges the syndicalistic attack on the profits system to immigrant foreigners, asserts that the law of profit fertility is an insuperable obstacle to any proletarian control of industry, and finally damns it as un-American. The honest, native American “knows that for himself and his children the way is open clear to the top”; his “spirit is that of civility, reciprocity and fair play”; and he concludes:

Had it been left to our native population alone, not one of those
violent and reckless attacks upon production and transportation,
which have, within the past two or three years, shocked the whole
industrial system and have come near to produce a general crisis of
trade, would ever have taken place.[603]

Yet in spite of his genial optimism he discovered specks on the fair picture of society. To the Ricardian logic the stupidity of men is a constant irritant; if only men were rational the path of progress would be so much easier! After economic law has been demonstrated with the finality of a Euclidian theorem, it is disconcerting to see how the multitude will not be reasoned with, but persist in following after the last false prophet who cries in the market-place. The clamor raised by single-tax was especially annoying. “That such an argument,” he remarked a bit testily, “should for a moment have imposed upon anybody, is enough to give one a new conception of the intellectual capabilities of mankind.”[604] Fortunate it is for society, he concludes, that while man proposes, economic law disposes. False prophets will have their little day, but from their secure watch-tower the Ricardians calmly look out upon a world of which they alone hold the key.[605]

II • The Conscription of Political Theory

When the social fabric is being torn rudely across by a changing economics, political theory and practice will suffer from the attendant confusions. The America of the Gilded Age accounted itself a democracy and was outwardly content to make use of the familiar democratic machinery; but until it was determined whether majority or minority rule should prevail, whether the well-being of the many or the property of the few should be the chief object of government, there would be no serious effort to create a political state for adequate social control. In the meantime the old individualisms would range the land seeking what they might devour, and the common attitude toward the political state would remain one of good-natured contempt. A shambling government, corrupt and incompetent, awakened no man’s hope or pride, and amidst the slovenly anarchisms of the times, with a crude exploitation in the saddle, the state would be pretty much ignored except when its services might prove useful to such exploitation. The plutocracy would oppose the erection of a vigorous state until such time as it felt strong enough to control its activities. The principle of the majority-will held grave potentialities that might threaten the eventual mastership of wealth, and until the plutocracy had created its strongholds within the framework of the democracy it would bitterly oppose any extension of democratic control.

Broadly two great movements were going forward side by side in the unconscious drift of political tendency--the democratic and the plutocratic. The former, drawn chiefly from agrarian and labor elements with a considerable following of the middle and professional classes, was determined to carry forward and supplement the Jacksonian movement. It was honestly concerned for the development of the democratic principle. It would purify government by the application of civil service reform, it would steadily enlarge the bounds of social control of economic forces, and it would strengthen the political state to enable it to cope with corporate wealth and constrain the ambitions of the plutocracy into conformity with democratic ends. To such a democratic program the plutocracy was necessarily opposed. It professed the warmest loyalty to the abstract principle of democracy while bending every energy to emasculate effective democratic control. The problem confronting it was the familiar Federalistic problem--how to protect the minority from the majority and set property interests above human interests; but the problem had been immensely complicated by the strategic advances made by democracy. The democratic principle could not be easily thrust aside, it must be undermined. And so while awaiting the time when it should be strong enough to set up boldly its mastery of society, plutocracy took refuge in two principles, the superman theory and the _laissez-faire_ theory, both of which it asserted to be democratic, the very essence of democracy. The former was “The public be damned” theory, which held that the economic leaders of society must be left free to manage their properties as they saw fit; and the latter was the familiar doctrine of individual initiative, that looked with suspicion on any interference by the political state with economic activity. If a bureaucracy may stick its nose into the citizen’s private affairs what becomes of individual liberty?

But the plutocracy was building its real defenses elsewhere. Shrewdly aware of the potentialities of a Constitution that had been designed for the protection of property interests, it followed two main lines of development: it furthered the popular development of a cult of the Constitution by praising the excellence of a system of checks and balances, and spreading the view that to tamper with any provisions of the instrument was little short of sacrilege; and at the same time it bent every energy to extend the range of judicial prerogative and bring the legislative branch under control of the judiciary. It sought extra-constitutional indulgences that were dispensed by the courts in the name of the police power. The way had been prepared by Marbury vs. Madison and Dred Scott vs. Sanford, and during the Gilded Age a broad path to judicial control was opened by the elaboration of the “due process of law” principle discovered in the fourteenth amendment. With the development of the plutocracy the extension of the doctrine of judicial review went forward rapidly, providing an impregnable defense for property interests that promised ill for the principle of democratic control in the interests of the common well-being. The democracy was being driven from the inner keep of the castle.

While the real struggle was thus going on in the court-room, with the outcome in the hands of the judges, political speculation was playing havoc with certain of our oldest and most cherished doctrines. Pursuing the path suggested by Webster and Francis Lieber, it turned away from the particularism of Calhoun to explore the reaches of a consolidating nationalism. The inevitable drift towards unity--whether democratic or plutocratic--was daily gathering momentum. The destruction of the states-rights program and party had cleared the ground for a new conception of the dignity and powers of the political state. With the social shift from dispersion to centralization the federal government was destined to grow in authority; and political theory was destined to follow the same course, seeking to justify in principle what was being accomplished in fact. The end of the philosophy of dispersion was in sight. The tide was running toward an exaltation of the doctrine of sovereignty, with the consequent exaltation of the abstract political state. As the individual coalesced in the mass, the rights and dignity of the individual would lessen in the presence of an engulfing sovereignty. The traditional doctrine of natural rights was in for a slashing attack. Centralization must destroy the shambling Jacksonian structure and erect in its place a grandiose organic theory.

During the Gilded Age a number of systematic studies of political theory appeared, amongst which the most significant were, Woolsey’s _Political Science, or the State_ (1877), Bryce’s _The American Commonwealth_ (1888), Woodrow Wilson’s _The State_ (1889), and Burgess’s _Political Science and Constitutional Law_ (1891). Of these the formal studies of Woolsey and Burgess may serve to illustrate the changing thought of the times. Both are academic reflections of the current drift of tendency, and both reveal the academic sympathy with the master movement of centralization. The work of Woolsey was a revision of classroom notes used between 1846 and 1871 and strongly colored by pre-war views; the work of Burgess was the first-fruits of the influence of German speculation on the nature of the leviathan state.

1 • Theodore Woolsey

Theodore Dwight Woolsey, professor of Greek and president of Yale, was an heir in direct succession of Connecticut Federalism. Nephew of Timothy Dwight, a minister, and distinguished member of the social oligarchy that in its decadence still held Connecticut opinion in a strong grip, he could scarcely escape a predilection for the moralistic authoritative dogmatisms that marked the old Connecticut _régime_. The principle of coercive authority had lain at the heart of the political theory of Timothy Dwight, and Theodore Woolsey was true to his Puritan antecedents in asserting the supremacy of authority over liberty. The only important element in his thinking that sets him apart from his uncle was the influence of Francis Lieber, whose conception of organic growth in social custom he made his own, and whose disciple he professed to be. Naturally he retained the old Puritan dislike of leveling--the traditional Connecticut distrust of democracy. He would have no weakening of authority, no Jacobean license; and for anarchism, socialism, communism, which he reckoned the nastiest spawn of Jacobinism, his abhorrence was what one would expect of a Connecticut Federalist. The two ponderous volumes that he issued in 1877 are learned studies that bear on their dun pages many a telltale mark of earlier times. In them Theodore Woolsey was renewing the fight against an infidel philosophy that with its doctrine of natural rights denied the authority of the godly to police society.

In harmony with Lieber and Calhoun he rejected the romantic doctrine of natural rights, and substituted a composite social-moralistic conception, that from John Winthrop and Roger Williams to Channing and Emerson had colored the Puritan thought of New England. Natural rights, he asserted, are those which belong to man by reason of the nature God has endowed him with; and the state is a moral agent, arising out of custom, to secure and guarantee such rights. It is “as truly natural as rights are, and as society is”; for established in the social nature of man it is the natural repository and guardian of his rights in a social order. It is an expression of the teleological purpose that underlies all things. The manner in which Woolsey elaborated his moralistic theory will be evident from the following passages:

The considerations that men exist together in society, that they
have an irresistible impulse towards society, that their perfection
of soul and of outward condition can be secured only in a social
life, and, on the other hand, that recognition of rights and
obligation alone make a social life a tolerable or even a possible
thing, and that wherever men reflect on their own nature they
admit the existence of certain classes of rights and shield them
by public power, show a divine purpose which none who believe in
a Creator of the world can deny. The Creator of man, having made
him such that his temporal, moral, and spiritual perfection can be
found only in society, prepared his moral feelings for the life
for which he was destined. The destination for society; the means
within human nature by which it is fulfilled; the means by which
the individual and the community, when brought into society, are
able to secure the good and avoid the evils possible in a state
of coexistence--these form a complete, harmonious whole, which
manifest comprehension of view and forethought. It is provided
in our nature, when it is not perverted--that is, when it does
not swerve from the true idea of human nature--that we shall form
societies under law. A state of society is a state of nature, and
the only true one.

When therefore _natural_ rights are spoken of, we can accept the
term, if it be used to denote such rights as grow out of our
nature, and may be inferred from the destination to which it
points us. Another and a heathenish kind of sense was attached
to the words, when they were taken to mean the rights, or rather
uncontrolled liberties, which men possessed in a state of human
nature in which there was no organized society or government....
[Such a theory] contemplates men as enjoying certain powers of
free action in this state of nature, and these powers must serve
for a foundation of their state as members of society, or so many
of them as it cannot be shown that they gave up, in order to make
a state of law and order possible. In other words, the theory of
the derivation of these rights from a state of nature may take a
hypothetical shape, and deduce rights from what a man could do in a
state of things which exists only in a jural fiction....

We find no fault with the objects which the theories had in view,
but with the want of conformity to truth. It must be pronounced,
in _the first place_, contrary to fact, that such a state of
nature ever existed. Man has always been under law; he is a ζῷον
πολιτικόν....

_Secondly_, if it could be shown that he had such an origin, it
would prove nothing.[606]

Having thus established both society and the state in the nature of man, and dismissed the romantic interpretation of natural rights as heathenish, Woolsey turned to examine the true sphere and function of the political state. He rejected in the main the _laissez-faire_ view of Mill and Spencer, but he refused to go so far as Burgess. He will have no omnicompetent state. A just mean must be laid down between authority and liberty, and that mean he discovered in the dictum, “The sphere of the state ... may reach as far as the nature of man and needs of man and of men reach”;[607] that is to say, its control runs far beyond mere police powers, and concerns itself not only with material ends but with the “intellectual and aesthetic wants of the individual, and the religious and moral nature of its citizens.” A state swollen to great powers he regarded as likely to swallow up liberty in paternalism, and a state immediately responsive to the popular will is certain to run into “extreme democracy.” His ideal government he discovered in the rule of the Connecticut oligarchy, under which a homogeneous people, with simple agrarian habits, disciplined by religion and responsive to moral leadership, enjoyed a stable government administered by proved executives. Unfortunately with the nineteenth century began a decline in American government, resulting from economic changes, the growth of cities, lower-class immigration, and the “gradual reception of doctrines of political rights, which belong to extreme democracy.” Such pernicious doctrines, in his judgment, were: the short term of office, popular election of judges to hold for a fixed period instead of for life, the debasement of the representative system by subjecting the representative to his constituents, and the spoils system.[608] In a later study he added two other evils: direct legislation through the initiative, and a popular referendum on war and peace.[609]

In spite of an imposing display of classical learning these two stout volumes reveal a childlike ignorance of _Realpolitik_, a naïve inability to grasp the significance of economic groupings that underlie all political alignments. Neither as minister nor as college president did Theodore Woolsey learn anything about the robust materialisms which any realistic political theory must take into great account. His knowledge of ancient Greek institutions no doubt was adequate, but his knowledge of American constitutional development was singularly inadequate. He accepted without question the argument of Story and Webster that the phrase, “We the people,” proves the original, consolidating intention of the document; he discussed the history of party government in the United States without touching on the economic alignment of agrarianism and capitalism; and he could discover only one thoroughly admirable political party--“the upright federal party.” He extols the Supreme Court as the triumph of the American Constitution, without considering the desirability of a judicial veto on legislative enactments, or suggesting a potential alignment of the judiciary with the master forces of a generation. The moralistic bias of his thought is perhaps sufficiently revealed in a comment on the functions of the judges. “In a higher sense, they are not representatives of the community nor of its chief magistrates, but of justice and of God.... They are in fact more immediately servants of God than any other men who manage the affairs of a country, because expediency, departure from law or from the constitution, is for them in no circumstance a thing to be conceived of.”[610] Mark Twain, it would seem, was not the only humorist of the Gilded Age.

In his later years Woolsey was much disturbed by the spread of collectivist doctrine, and in the thick of the economic unrest of the times he felt it to be his duty to assist in stemming the advance of such doctrine. In his great work on political theory, he demolished the communist-anarchist-socialist arguments in a few pages, and then remarked with excellent candor, “There is an extensive literature, relating to the subject ... with much of which I am not familiar.” Fearful that he might not have delivered a death-blow, after further reading he returned to the attack three years later, and in 1880 published a volume entitled _Communism and Socialism_. For so difficult a business he was even then inadequately equipped. He did not realize the magnitude of his task. Marx’s _Capital_ could not be undermined in ten pages, even with the help of Cairnes, Mill, and Ricardo, and a political scientist with a theological background was scarcely competent to untie the close-knit threads of the Marxian economics. His exposition in consequence is incomplete and faulty; it largely overlooks the Marxian philosophy of history and ignores the doctrine of economic determinism. What troubles him most is the lack of religious faith amongst socialists. The validity of a theory he is satisfied to test by the morality of the theorist. One can easily guess that President Woolsey’s opinions had turned into dogmatic conviction before a page of the literature to be examined had come under his eyes. Yet that so shallow a book should have issued from an academic pen will surprise no one who is aware of the incredible number of shallow books that actually have issued from academic pens. Provocative social thinking and the American university seem never to have got on well together.

In the fact that Woolsey’s speculations on the nature of the state were accounted significant contributions to political science by his generation of Americans, the historian may find added confirmation of the shallowness of the Gilded Age. A stale Connecticut Calvinism, molding in the corner of the cupboard, is poor food to nourish thinking, and a man who knows nothing about the deeper springs of political struggle is singularly unqualified to elaborate a science of the state. Theodore Woolsey’s weighty volumes were a dignified attempt to rehabilitate the old Connecticut Federalism and suit it to the taste of a new age. But what measure of political intelligence can one expect of a people fed on pious fictions by their most authoritative expounder of the noble art of government?

2 • John W. Burgess