Economics Without The B.S.**:
[** Double entendre intended.]
[I wrote this in reply to Yuval Levin’s 'American Covenant: How the Constitution Unified Our Nation – And Could Again'. [https://www.youtube.com/watch?v=mBHi_h1ThvE] He was addressing the fracturing in our politics today.]
Levin’s article at American Heritage:
https://www.americanheritage.com/solving-our-political-disarray
Our Founders were great, but they were not perfect. They created a governing system in which “The People” were to be represented, while their rhetoric and founding documents talked about the will of the people. While the intent of our Founders was to avoid a direct democracy, as the nation proceeded, succeeding generations made the nation more democratic than the Founders intended.
By the 1820s this became evident as the electorate was increased tremendously beyond the property interests of white males; and would continue to be increased to former slaves and “non-whites”, women, and the native (Indian) population. In addition, things like the recall of elected officials and popular sovereignty ballot measures which could bypass the objections of state legislatures and governors and greatly diminish the revenue collection of local governments (California Prop 13 being one example) would be enacted by some states; none of these things were ever considered in the Constitutional Convention and are not specifically mentioned in the Constitution nor any amendments.
You have to remember, when you see so many countries struggling with democracy today, that our democratic traditions come somewhat from our English governance, where most countries in the 20th century had no democratic tradition to build on. But also in the first fifty years of our existence we had several changes of governance which had relatively “peaceful” transitions – from Federalist in the 1790s, to Jeffersonian Republicans in the early 1800s, to Jacksonian Democrats in the 1820s/1830s, to the Whigs in the 1830s/1840s. These changes from one political party to another helped to bond and stabilize our democratic process.
You also have to remember that our society is more than just our political system. We co-exist with an economic system that also promotes our ideals – free enterprise – and thrives on the basic principles of governance proclaimed by the Founders. And while our founding was in the 18th century, very quickly in the early 19th century our system underwent a rapid industrialization beyond the awareness of our Founders, which in itself was a revolution evolving out of agrarian and mercantile cultural societies with landed, aristocratic economic interests. The uneven nature of the rapid industrialization of the country is one contributing factor to the Civil War due to the diminishing political influence that slave-holding interests of the Southern states retained in the national government after many decades of continental expansion and greater commercial ties between the North and West vis-à-vis the South and West.
Which brings me to the third point not recognized by our founding generation, the impact of the continental westward expansion of our nation. Even Jefferson who was responsible for it could not envisage what would develop, which was not Jeffersonian yeomen. The Northwest Ordinance of 1787 became a model for some of the new territories as they developed.
When the Erie Canal came into use by the 1820s it not only connected the Great Lake interiors to the Atlantic Ocean coastal states, but the building of canals especially in Ohio, but also in Indiana, connected the Great Lake states to the Ohio River and downstream to the Mississippi. The connection was not just to New Orleans, but to St. Louis and Missouri. St. Louis and western Missouri (Independence and Saint Joseph) became gateways for that westward expansion, later railroads replaced the trails. In effect, these developments helped to connect the interiors of Ohio and Indiana manufacturing and agricultural interests to the greater nation expanding westward.
Texas was the last slave state to come into the union in 1845. After Texas, but before the outbreak of the Civil War in 1860, five more states will come into the union, and none of them come in as slave states even though some have slave interests in their state.
When California comes into the union in 1850, after the Gold Rush of ’49, it has a population of about 90,000, and is pretty isolated from the rest of the country and must resort to self-reliance as it waits on lengthy logistic connections. By 1860, still somewhat isolated, its population has grown to almost 400,000; and over the course of several decades it has many more miners and merchants in its census count than farmers, unlike most states that came into the union earlier.
This is all to say that the “progress” of the nation has not always tracked with its political development. We developed into one vast, diverse continental nation – with one market system to serve that nation.
Pennsylvania, Mississippi, Texas, and California all conducted commerce back in the late 19th century in the same marketplace with the same currency after the Civil War, and a banking system with national correspondence among the many local and regional banks.
We were diverse, and divisiveness reflected our politics. Once you get past the Virginia dynasty of presidents by the 1820s, there are no landslide elections where one political party has its way with governance. Compromise is in order, and the coin of the realm.
Now by landslide election I mean a presidential election in which the presidential candidate takes 60% of the popular vote, and his party takes a great majority of the Senate seats to completely control the Senate, and also has a large majority in the House to completely control the business in the legislative branch. I say 60% of the popular vote, but it is the 40% of the opposition that is important – it is not enough to be a factor in stopping what the president’s party will do, but it is still present in the political framework.
With that said when is our first landslide election? 1920! (Harding 60% to 34%) And what are the others? -- 1928 Hoover has almost 60% (58% to 41%), FDR in 1932 (57% to 40%) and 1936 (61% to 37%), and the last one was LBJ in 1964 (61% to 39%).
That’s it; that’s all there is. We have had no landslide elections since then – contrary to the outbursts of some candidates. Although Nixon did get over 60% of the popular vote in 1972 but had to deal with a Democratic control of Congress. And Reagan had a landslide in popular votes of 59% to 41% in 1984 but had to deal with Democratic control of the House, and his Republican Party did not have complete control of the Senate and Reagan’s “coattails” actually lost two senators.
Harding was a capable politician, but I will not get into the reasons he was unable to pass comprehensive legislation. Hoover of course did not have time, and was dealing with the onset of the Great Depression within seven months of taking office, and I don’t think the concept of a “honeymoon with Congress” during the first days was in effect at that time.
But certainly FDR and LBJ used their landslides to enact all kinds of legislation which were out of the norm, but accepted by “The People”, the great majority of them anyway. But then, there is always that 40% left out. What happens when things reverse?
Do we really need unity when we do not think alike? If compromise is in order and the coin of the realm, what happens when political discussions and debates center around cultural issues as well as economic material well-being issues? In the U.S. you have a mixture of issues -- primarily race, class, gender, education, maybe generation (age); mix that in with religion, nationalism -- and you have the use of cultural issues to drive a wedge between groups for identity for political advantage. It is the use of cultural touchstones that get coupled to the material well-being (economics) of folks, that forments the political unrest.
Our country works best when there is compromise among competing political interests. The problem with cultural issues is that they are strong enough so that people identify their individual values to the cultural issues, and that can result in a distrust of people you do not share your values with. When the issues are economic -- your material well-being -- the personal value system is less of a factor, and so compromise has a more likely outcome of success.
Looking to the political sphere for answers to issues that confront us is not the only way to go about it. The “progress” of our nation has not always tracked with its political development. We have a business community which guides our economic development. We also have civic engagement. Leadership comes from a variety of engagements.
In my opinion our political divisions have more to do with the generations. The Greatest Generation – and they didn’t name themselves; and like our Founders, they aren’t called The Perfect Generation – had a certain cohesiveness sharing the experiences of the Great Depression followed by the war. If you notice they were around through most of the landslide elections (1928 through 1964) which I pointed out were very rare in our history. The zenith for them would have been the 1960s, arguably the best economic performance in our history, during the great economic expansion of 1947 to 1973. Your view of the Sixties probably says something about your views today.
The generations which follow – the Silent Generation and the Boomers – in my opinion, dropped the baton of progress that was handed to them by the late 1960s, and we have been mostly in political disarray since then, and with much slower rates of economic growth. I’ll skip the Gen Xers, they are somewhat similar to their parents. But the younger generations – Gen Y Millennials and Gen Z – have grown up with much different life experiences – high cost of education and life-time training, high cost of housing, a very dynamic work environment, an abundance of consumerism – and what appears to be a great societal transition from an Industrial Age to something else, perhaps an Information Age or Knowledge Economy, and how that would affect the American Dream.
Our Founders gave us a system – both political and economic – which makes us amenable to change; and we have definitely changed over time. Our economic system thrives on competition and is a dynamic one. It gives our society the vitality it needs to confront changing times. Success in the economic sphere concentrates power, while our political sphere was designed by our Founders to be fragmented to diffuse the concentration of power. This interplay between the two spheres of our society creates a tension that feeds the vitality needed for rejuvenation.
There is a trade off between economic stability and economic growth; and since the 1960s our economic growth rates have been in a declining trend line – well below our historic average of over 3.5% annual real GDP. As a world leader, and with our dollar as the reserve currency internationally, so when the Fed sets monetary policy it does so for the rest of the world, and other countries adjust their policies to it. Economic stability is important to avoid disorder which disrupts commerce; but we cannot sacrifice economic growth which is needed to invigorate our society to be innovative and productive to the max. And in a globalized world economically it affects the democratic development of other nations as well as our own.
As individuals we have to open ourselves to these possibilities. We do not want a government which is overbearing. The revolution of our Founders was about establishing and preserving individual liberty. The second revolution, the Civil War, was about equality and the healing that brings us together. It is up to us to confront the issues that divide us and come to some resolution. Our institutions can aid us in our material well-being; but it is our spiritual existence that gives meaning to life and is for us, as individuals, to figure out. That is beyond the province of government.
