(B.1.a) Big government, European style
From that small colony of Pilgrims arose modern America, where the government is roughly one-third of the economy, and most of that one-third devoted to transferring wealth from the working young and rich to the old and poor (but mostly the old), resulting in what many call a welfare state. Most Americans find that for every extra dollar they earn 40% goes to a federal or local government, and for many Californians that percentage is 60%.(P2) Think of that! When a Californian makes a dollar, the government takes more than half of it! In addition to transferring large amounts of money between citizens, the government attempts to enforce around 160,000 rules and regulations each year—and that's just from the federal government! So many new rules are passed by federal, state, and local governments that the American Bar Association says it can't eaven count all the laws currently in place.(S1)
Yet, despite this Leviathon of a government, people around the world are trying to enter the United States, where they expect to earn more money, possess more freedoms, and live in a more tolerant society. Every day, people are risking their lives to enter our great nation. Perhaps this big government is actually good for its citizens?
It is also an economy where the richest one percent of Americans controls around 35% of the nations wealth. How did that egalitarian, free society of Pilgrims because a nation of big government and powerfully wealthy people? Let's answer the government question first.
Perhaps surprisingly, the welfare state began with war-loving Prussians of the nineteenth century, who were ruled by a Kaiser (German, for "Caesar") and his Prime Minister, Otto von Bismarck (yes, that Bismarck). Even a Kaiser needed the support of his people, and Bismarck concluded the best way to win the people's loyalty was to give them money. Thus began a system of providing direct government payments to the poor, the elderly, and the unemployed. Bismarck had foresight, as he recognized the growing power of unions and socialists. He figured the they were becoming popular due to their promises to give people money, so he elected to take their power by fulfilling those promises himself. The Russian Tsars made no such efforts to help their people, and the Communists repaid the Tsars in 1917 by murdering Tsar Nicholas II and his family, thereby ending the Romanov dynasty that had lasted over 300 years. The Kaisers at least hung on until World War I.
Video 2—Bismarck Creates the Welfare State in 19th Century Germany
(Note: the bald guy is Prime Minister Bismarck)
(As depicted by 1974 mini-series Fall of Eagles)
(Watch and comment at Critical Commons)
As World War I ended, many nations ended their monarchy (or made the monarch irrelevant, as in the UK) and replaced it with a mixture of democracy, capitalism, and socialism. At times it stumbled (e.g., the Weimer Republic Germany) and did not always bring stability, but after the worldwide depression of the 1930's and World War II the free world adopted democratic governments overseeing a vast welfare state.
Figure 2—Humorous Excerpt from Stephen Colbert's Book America Again
 Colbert hitler.jpg)
At the same time Germany began its welfare state the Industrial Revolution was in full-steam. Many workers found themselves cramped together in factories, working in terrible conditions for low wages. Masses of workers toiled for a few very wealthy gentleman, who to the workers seemed more powerful than the U.S. President (and in many ways, they were). These capitalists did not feel themselves fortunate for their riches, but entitled to them, and felt little guilt for horrid working conditions in their factories. Even the middle class Americans tended to blame poverty on personal defects of the poor, rather than luck.
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Yet the belief persisted among many Americans that the needy, new poor and old poor alike, were personally culpable for their plight, sinners against the social order, reprobates and ne'er-do-wells, spongers, and bums with no legitimate claim on the public's sympathy.
—David M. Kenneddy. 1999. Freedom From Fear. Oxford University Press: NY, NY. Page 172.
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(B.1.b) Rising wages and rising labor unrest
These were the years when Karl Marx was still a new figure and becoming a champion of the poor and the working class. When observing the repugnant conditions in which the poor—let us not forget the children of the poor—worked it is easy to forget that the Industrial Revolution crushed some people but increased the wealth of the average person in Holland, Britain, and the U.S. At one point in his life Marx documented the trend in wages, expecting to find declining wages and use it as evidence of capitalism's failings. Instead, he discovered wages were rising! He kept this to himself, for it did not fit within his story of oppression,(N1) but increasing wages were a fact, and they continued to rise from the days of Marx until today.
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Average growth rates for about one and a half millennia before the Industrial Revolution are estimated to have been approximately zero, and, although there was undoubtedly some growth starting around the tenth century, it proceeded at a snail’s pace by modern standards. Even the most well-off consumers in pre-Industrial Revolution society had virtually no goods at their disposal that had not been available in ancient Rome…. In contrast, in the past 150 years, per capita incomes in a typical free-market economy have risen by amounts ranging from several hundred to several thousand percent.
—Baumol, William. 2002. The Free-Market Innovation Machine. Page 3.
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Video 3—The Misery of the Industrial Revolution's Working Poor(B2)
(must use Internet Explorer)
(Watch the entire episode on YouTube)
The capitalists created a bounty of wealth never seen before, and the Middle Class was making noticeable gains in living standards, but factory workers really were treated like serfs. The video above gives insights into England's poor, but is also a valid description of the lives for many poor Americans. Some politicians saw opportunity in the poor and working folk, and began a new political movement based on the voting power of the lower and middle class. These politicians told the poor their poverty was caused by the greed of the rich. It was the rich people who rigged the game against them. No working person could ever get ahead when politicians were so rich they could write whatever laws the liked, and sometimes, didn't even have to stop for red lights!
Video 4—Jesse Lauriston Livermore Didn't Have to Stop for Red Lights!(C1)
(must use Internet Explorer)
(watch and comment at Critical Commons)
Meanwhile, the workplace became tense environment, as capitalists and workers developed a more intense dislike for one another. The workers united would be strong, but uniting was hard, as the factory owners used both manipulation and brute force to prevent them from unionizing. The workers experienced many failures in their attempt to exert political influence and to unionize. They persisted, almost entirely through democratic means—they were not Communists, after all. Even in the worst days of the Great Depression the U.S. Communist Party struggled to survive. The fear of revolution was present, and it was this fear that forced politicians to side more with the working class and less with the rich. So while extreme groups like fascists and communists held little direct influence, the fear that they might become more popular was real and earned the working class more political power. This fear almost became manifested in reality when the The Jungle and Bonus Army occupied National Mall in 1932 (see Video 5).
Video 5—The March of the Bonus Army
Around 43,000 veterans of World War I march on Capital Hill demanding their cash-payment redemption immediately, instead of the scheduled date of 1945. The depression was bad. Without some help in 1932 they stood little chance of surviving till 1945. They didn't just march, but they stayed, establishing tent cities and even small homes. Think of Occupy Wall Street in D.C., but on steroids. Americans sympathized with and the Bonus Army and the politicians feared them, rightly recognizing them to be the seeds of worker revolutions like the recent revolution in Russia. Once it became obvious they were not leaving without their money, the military entered to exile them from the the Mall. The Bonus Army didn't put up much resistance, but the lesson was clear: if the government did not respond more earnestly to the needs of the poor, the poor would force them to. The next time, they might even fight back against the military.
What is important to recognize about the March of the Bonus Army is that, until 1932, the working poor had been in violent conflict with capitalists for decades, but now the poor turned on the government. The March ended peacefully, but many of the struggles against the capitalists did not. Scenes from the movie Hoffa (see Video 6) are realistic depictions of worker struggles even decades before Jimmy Hoffa, and many strikes were far more violent.
From the turn of the century until World War II the steady increase in attention given by politicians towards the working poor is referred to as the the Progressive Movement, and it elected Teddy Roosevelt, Woodrow Wilson, and Franklin Roosevelt—politicians who were willing to oppose the wealthy. While the movement was fueled by many events, two are especially important for agricultural economics students to understand: the 1906 novel The Jungle and the Triangle Fire of 1911.
Video 6—The Labor-Capital Conflict as depicted in Hoffa
(must use Internet Explorer)
(watch and comment at Critical Commons)
Can you imagine a self-proclaimed socialist being elected Governor of California? It almost happened during the Great Depression, and the candidate was Upton Sinclair, whose fame can be traced to his 1906 novel, The Jungle. In this work of fiction Sinclair depicted the Chicago meatpacking industry as a place where the lives of ordinary people are chopped up much like the pigs they slaughtered, all for the benefit of a few rich men. The main characters are a family of Lithuanian immigrants who move to Chicago in search of good jobs, and find it at the packing plants. It goes downhill fast, and becomes a tear-jerker. In every page this family is tricked, oppressed, cornered, cheated, or intimidated by a consortium of businessmen and politicians. Profits in Chicago, the book suggests, are made only by oppressing the working class. The businessmen get away with this because they not only own the packing plants but the politicians and judges as well.
The Jungle is different from most books because its clear purpose is to promote socialism, but the reader isn't made aware of this until the end. Sinclair was a socialist and he wanted America to become socialist, too. Ostensibly the book is based on his journalistic work in Chicago, but it is almost certain that he greatly exaggerated the bad things he saw. It reflects some of the things he saw, but is nevertheless a work of fiction.
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It seemed as if every time you met a person from a new department, you heard of new swindles and new crimes. There was, for instance, a Lithuanian who was a cattle butcher for the plant where Marija had worked, which killed meat for canning only; and to hear this man describe the animals which came to his place would have been worthwhile for a Dante or a Zola. It seemed that they must have agencies all over the country, to hunt out old and crippled and diseased cattle to be canned. There were cattle which had been fed on "whisky-malt," the refuse of the breweries, and had become what the men called "steerly"— which means covered with boils. It was a nasty job killing these, for when you plunged your knife into them they would burst and splash foul-smelling stuff into your face; and when a man's sleeves were smeared with blood, and his hands steeped in it, how was he ever to wipe his face, or to clear his eyes so that he could see? It was stuff such as this that made the "embalmed beef" that had killed several times as many United States soldiers as all the bullets of the Spaniards; only the army beef, besides, was not fresh canned, it was old stuff that had been lying for years in the cellars.
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Worst of any, however, were the fertilizer men, and those who served in the cooking rooms. These people could not be shown to the visitor,— for the odor of a fertilizer man would scare any ordinary visitor at a hundred yards, and as for the other men, who worked in tank rooms full of steam, and in some of which there were open vats near the level of the floor, their peculiar trouble was that they fell into the vats; and when they were fished out, there was never enough of them left to be worth exhibiting,— sometimes they would be overlooked for days, till all but the bones of them had gone out to the world as Durham's Pure Leaf Lard!
We will never know the extent to which Sinclair exaggerated what he saw, but food contamination and adulteration was nothing new, and describing the many ways food processors sacrificed food quality for higher profits probably helped Sinclair establish credibility. Throughout history consumers suspected businesses misrepresented what they were selling. They knew wine was often watered down, that vegetables were often cooked in brass to make them appear greener, and that alum was added to bread to make it appear whiter.
For most of history these remained suspicions, but people were shocked to learn from Frederick Accum around 1820 that many of these "legends" were indeed true. Accum developed scientific methods for detecting adulterants in food and beverages, and he found adulterants almost everywhere he looked!(W2) These methods helped detect and thus prosecute people selling fraudulent foods, but at the time it was simply impossible to enforce the laws everywhere. People questioned the food they ate, but had to eat, and there was no way to tell who the honest and dishonest food producers were.
As Sinclair was reminding people about the many ways businesses commit fraud with little regard for human health he was also championing the idea of a bigger government, so one could see how this would make federal food safety laws more acceptable.
—Upton Sinclair. 1906. The Jungle.
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The book was a huge success, but not exactly in the way Sinclair planned. Americans may have agreed with the need for a more active government but they thought socialism was too extreme. What attracted Americans to the book was Sinclair's descriptions of how meatpacking plants were operated. Any time the packing plants could sacrifice nutrition and safety for larger profits, they did so. Sinclair even suggested that some foods contained human parts! For the first time, Americans became truly concerned about the food they were eating, for in The Jungle, packing plants cut every conceivable corner for a buck, and the food they sold was akin to poison. Instead of making money by providing value to others, they made money by harming people through the sale of unsafe food. The meatpackers got away with this because every policeman and every politician was under their control. In reaction to public concerns, President Theodore Roosevelt and Congress passed a series of food regulations that serve as the foundation to the food regulation system in place today.
For a better appreciation of the impact of Upton Sinclair without having to read a book, I encourage you to listen to this Planet Money podcast about lard .(P1)
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Theodore Roosevelt, to whom...Sinclair had sent copies of The Jungle, also read the novel with care. On March 9, he wrote to Sinclair, suggesting that he get in touch with his commissioner of corporations to discuss the charges he had made against the meatpackers...Roosevelt agreed entirely that action was needed to soften the pernicious effects of the arrogant and greedy meatpackers. But Sinclair was wrong about socialism.
—Arthur, Anthony. 1906. Radical Innocent: Upton Sinclair. Random House: NY, NY.
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When Sinclair reflected on his book he remarked, "I aimed at the public's heart and by accident hit its stomach." That is certainly the case. But it should also be said that when the Triangle Fire occurred (see next section), readers of The Jungle were not surprised that 146 women would die due to a factory owner's greed.
The misery of the working poor in The Jungle is felt by fictional characters, but their misery became real in the Triangle Fire of 1911.
(B.1.d) The 1911 Triangle Fire
Everyone knew factory owners were harsh towards their workers in 1911, but the extent to which they devalued workers' lives became especially obvious in the 1911 fire at the Triangle Shirtwaist Factory in New York. It was a large building where many garment workers put in long days at low-paying, menial jobs. On most days the job was tedious and boring, but not the day a fire started. When it did, there was a rush to escape. Some were able to escape through fire-escapes, elevators, or stairs, but some were unable to exit through doors because—in an effort to prevent worker theft—the factory owners had locked it. Trapped inside the factory, 146 garment workers died in what became the deadliest industrial accident in New York at the time.
Why did the owners place the workers' lives in jeopardy, locking them in an inferno to prevent minor theft (a theft probably motivated by severe poverty)? To make larger profits, was the answer by Americans, and that is what caused such severe anger. Outrage over these unnecessary deaths led to a series of regulations, but more importantly, a change in American's attitudes. This was a pivotal moment in American history, and it is so well-known that writers of The Simpsons made a parody of it, where Mr. Burns (the plant owner) saves a few dollars but not providing an emergency exit.
Video 7—The 1911 Triangle Shirtwaist Factory Fire (With a The Simpsons Parody)
(must use Internet Explorer)
(watch and comment at Critical Commons)
Many of our food safety laws began with Sinclair's The Jungle, and many of our worker safety laws began with the Triangle Fire. The number of labor regulations since then is remarkable (and to many people, excessive) but many countries today resemble the America of 1911. Anyone familiar with the Triangle Fire reflected upon it when they saw an almost identical tragedy take place in 2012 Bangledesh.
Video 8—The 2012 Garment Factory Fire in Banglesesh (From The Daily Show, November 11, 2012)
(must use Internet Explorer)
(watch and comment at Critical Commons)
The idea of cruel factory owners and oppressed factory workers is so well known that writers for It's Always Sunny In Philadelphia could easily make their own parody of it. It is easy to let the Triangle Fire digress into an argument between Republicans and Democrats on whether the employers were really greedy or just careless. Were they being especially cruel, or were they behaving just like all other employers, and even having trouble remaining profitable. This debate is really unnecessary though.
We have to ask ourselves, did the owners of the Triangle factory really make more money by locking the fire-escape door? No. Their factory burned down and they were sued. Had they treated their employees with more respect and kindness they would have become wealthier. This suggests we should not view the profit-motive as lacking of virtue—not always, at least. We should not confuse self-interest with selfishness, or foolishness. Often, the impulsive, greedy, and selfish are not really self-interested at all, for they harm themselves in their rapacious pursuit of wealth. If you want to be rich, don't rob banks, because on average crime does not pay.(E1)
Video 9—It's Always Sunny In Philadelphia Does a Parody of the Labor-Capital Conflicts of the Past
(must use Internet Explorer)
(watch and comment at Critical Commons)
The Triangle Fire was so important because it elevated the level of worker disgust with the capitalists and increased their willingness to fight employers for better treatment. It also earned workers the sympathy of the American public. In an effort to calm matters, Politicians sought to pass laws that workers would accept but wouldn't excessively harm employers. Thus began a steady stream of labor laws that eventually became one of the regular responsibilities of the federal governments. The laws have brought benefits, but are so vast that they may even be harming workers.
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The Triangle Fire and its aftermath had given powerful impetus to the progressive-era movement for governmental supervision of industry, and its lessons were seared into the minds of many New Dealers...Certainly the Triangle Fire episode shaped Frances Perkin's lifelong approach to such issues. It deepened her conviction that many employers, left to their own devices, could not be counted upon to deal squarely with their employees.
—David M. Kenneddy. 1999. Freedom From Fear. Oxford University Press: NY, NY. Page 270.
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The Americans With Disabilities Act sets so many rules on how employers treat disabled people that employers are going out of their way not to hire disabled people. In fact, according to Mr. Stossel (video below) less disabled people were employed after the Act passed than before. Let's be clear, the Act certainly helped some disabled people, and may provide more benefits than costs, but if an employer believes they might be sued if they hired a disabled person (for example, by unintentionally not meeting every single rule of the Act) they are less inclined to hire the disabled, even if the employer is herself disabled. Just because a government intends to help a group doesn't mean they do help the group.
Video 10—John Stossel on the Americans With Disabilities Act
(Note: this video is meant to provide a perspective, and is not meant to suggest that Dr. Norwood
agrees with Mr. Stossel.)
The Progressive movement was not limited to America. Throughout Europe revolutionaries demanded bigger governments. They went by the terms social democrats, socialists, communists, and the like. This desire for government help went too far in some countries, resulting in totalitarian governments: Hitler in Germany and Mussolini in Italy. In Russia, they first toppled then killed their Tsar, replacing him with the Bolsheviks, ushering in a Communist system that would remain until 1991.
Americans did not follow Europe into the extreme, as the Progressive Movement continued to work within the confines of the American Republic, preserving the American democratic system while also accommodating a much larger federal government. Socialists like Upton Sinclair and his numerous European counterparts wanted a centrally planned economy, where a strong federal government made many of the decisions about what America would produce, how it would produce it, where the goods would be distributed, and how much each person was paid. Russia, Germany, and Italy certainly attempted such an economy, but America preserved its decentralized economic system even when that system led to persistent unemployment rates of 20%. Americans did not necessarily yearn for big government; they mainly wanted a government big enough to protect them from [what they thought were oppressive] businesses, and a little more security in their lives.
Like America, other countries experienced a Progressive Movement but stayed a free country. Labor unions came to dominate sectors of England and France, but government still needed the blessing from its citizenry to act. In America, the Progressive Movement was tempered, allowing Americans to preserve their individual rights. This is perhaps due to our Bill of Rights, which makes the conveyance of complete power to a few politicians difficult. Still, the Progressives' influence was undeniable, and would eventually be manifested in FDR's New Deal, and later, Lyndon Johnson's Great Society.
To what extent is labor oppressed today? Obviously opinions vary, but labor in slaughtering houses is still much as they were in The Jungle. Many agribusiness students today work for corporations that operate factories and manage unskilled labor. They will have to deal with laborers who feel oppressed and stubborn unions who wish to help them. I encourage students interested in labor issues to first read The Jungle, and then listen to this podcast from The Story about two workers in a modern chicken plant. The Triangle Fire happened a century ago but labor disputes, like the poor, will always be with us. Those who want an almost unbelievable story of modern-day slavery in Florida citrus fields should see this other podcast from The Story. An excerpt of the transcript is as follows.
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Conan [host]: ...And, Amy, when we say slavery, the image that comes to most of our minds is, you know Antebellum cotton plantations. Is this the same kind of thing?
Ms. Williams [guest]: Not entirely. They're not cotton plantations. They are sometimes citrus groves or tomato fields. The most recent high profile case was of a group of 12 or so men who were taken by their captors to harvest tomatoes in the fields of South Florida. What it does have in common with the Antebellum pictures is that, certainly, a lot of these cases involve debt bondage. But this particular case involved all of the mechanisms of restraint and abuse that we associate with pre-Civil War slavery (unintelligible).
Conan [host]: Chains, that sort of thing?
Ms. Williams [guest]: Yeah. Chains, they were shackled to posts. They were beaten. They were locked up at night in quarters, essentially U-haul trucks with no bathrooms, so they had to use the corners. Sometimes, their captors made them fight each other - all of - and certainly this, coupled with an insurmountable debt. The way that they escaped, finally, was one man noticed that the truck had a little piece of rust and he could see some light through it. So he punched his way out, squeezed out and made his way to safety.
Conan [host]: And were the employers arrested
Ms. Williams [guest]: Yes, they certainly were. And they were prosecuted in federal court here...
—The Story. December 10, 2012. "Indentured Servitude Persists in Florida's Fields." National Public Radio. Accessed December 6, 2012 at http://www.npr.org/templates/story/story.php?storyId=120576412.
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