A New Hamiltonianism
An Interview with Michael Lind
June 13, 2012
Jun 13, 2012
13 Min read time
In Land of Promise, Michael Lind argues that America’s political economy has historically oscillated between two schools of thought: Hamiltonians and Jeffersonians.
In Land of Promise, Michael Lind argues that America’s political economy has historically oscillated between two schools of thought: Hamiltonians, who believe in a strong federal government to shepherd the economy, and Jeffersonians, who believe in restricted government and a free market of small-scale producers. While it’s tempting to say each school has contributed in its own constructive way, Lind claims that would be wrong: “What is good about the American economy is largely the result of the Hamiltonian developmental tradition.” To cure our current economic malaise, Lind offers a series of progressive policy proposals to usher in a new era of Hamiltonianism.
John Stoehr: A central claim of your book is that the active role of the federal government is crucial to American economic progress. But the opposed view, that “government is the problem,” is currently ascendant. Why?
Michael Lind: In Land of Promise, I emphasize that ever since Alexander Hamilton, the first Treasury Secretary, battled Thomas Jefferson, the first Secretary of State, in George Washington’s cabinet, there has been a clash over whether the federal government should act in the economy as the coach (the Hamiltonian view) or as the umpire (the standard Jeffersonian view, if not always of Jefferson himself). Americans need to be reminded that we do not need to look abroad for a compelling alternative to the Jeffersonian orthodoxy of the past generation.
In 1981, President Reagan asserted: “Government is not the solution to our problem; government is the problem.” President Clinton ratified that statement in his 1997 State of the Union message: “The era of big government is over . . .” Although each qualified his statement, their words encouraged the consensus that government is unlikely to do anything effectively and that the smaller the government, the more likely it is to be effective.
Whether coming from Republicans or Democrats, this is pure Jeffersonian ideology. And it is dangerous nonsense. America’s commercial and military competitors are nations that have far fewer qualms about using government to promote their goals and that view government and the market as partners in a common project of national development. At home, the future of the economy depends on public investments in R&D and infrastructure by the federal government as well as state and local governments. And the most efficient parts of the American safety net are those that are purely federal, like Social Security and Medicare, not crippled and dysfunctional federal-state hybrids like Medicaid.
JS: Are we in one of those “key moments in American history” you mention in the book, in which “forces invoking the rhetoric of producerist capitalism have defeated proponents of developmental capitalism”? If so, what models are there to get out of it?
ML: My argument is that periods of Hamiltonian nation-building and rebuilding, like the 1790s–1820s, 1860s–1890s and 1930s–1960s, are followed by periods of Jeffersonian backlash, including the 1830s–1860s, the 1900s–1930s, and the 1970s–present. The neo-Jeffersonians trim back accomplishments of the previous Hamiltonian generation—national banking, emancipation, New Deal social programs—but usually fail to repeal them. As a result, the U.S. progresses at a pace of two steps forward, one step back.
Politicians in eras of Jeffersonian backlash invoke the nostalgic and increasingly anachronistic ideal of a decentralized republic of small, self-reliant producers— small farmers, craftsmen, merchants and bankers. Because Jeffersonian producerist ideology prefers the self-employed to wage workers, who are seen as a dependent and potentially dangerous proletariat, politics in Jeffersonian eras tends to be unsympathetic to organized labor. The rhetoric of help for the self-employed is often deployed in the interest of economic elites, such as the Southern slaveowners of the antebellum era who pretended to support the common (white) man and the industrial tycoons of the misnamed Progressive era who used rags-to-riches stories to justify their status. Today, for some government purposes, a “small business” is defined as a firm with fewer than 500 employees, and many small business owners belong to the economic elite. According to the U.S. Census, in 2010 the average annual household income for small business owners was $109,000, which put them in the top fifth of the U.S. population.
It has always taken a profound crisis to bring a neo-Jeffersonian era to an end.
Unfortunately it has always taken a profound crisis like the Civil War or the Great Depression and World War II to bring a neo-Jeffersonian era to an end and to empower a new generation of leaders willing—or forced—to use federal power in a sweeping manner to renovate America’s institutions and economy.
JS: We live in a time, as you say, dominated by the neo-Jeffersonians. Government is only good when it’s limited and merely umpires the rules of the game. What has to happen for this to turn around? How bad must the economy be?
ML: Like many others, I expected the Great Recession to discredit the previous generation’s policymakers and theorists to a greater extent than it has. One reason is the sheer institutional power of the bubble-enriched financial sector elite in the parties, the press, and the think tanks. Another reason, paradoxically, is the success of the New Deal. Unemployment insurance programs, by preventing soup-kitchen lines, have masked the severity of the unemployment crisis. And policymakers such as Federal Reserve Chairman Ben Bernanke have learned not to repeat the monetary policy mistakes of the Great Depression, at the price of cushioning the severity of the Great Recession, at least for the rich and upper-middle classes.
But I wouldn’t count out more radical responses to the Great Recession in the years ahead. The U.S. recovery is weak, Europe is in crisis and China’s obsolete export-oriented economy may be headed for a slow crash. If the Great Recession turns into a lost decade or even a lost generation, support for alternatives to the present system will grow and influence politicians, against their own inclinations in many cases. It is worth recalling that both Lincoln and Franklin Roosevelt, who were both chosen because they were viewed as moderate compromise candidates, were radicalized by the pressure of events. No matter who is elected president this year, the debate may be quite different a few years from now.
JS: How does your analysis apply to the last 40 years?
ML: Right on schedule, the heroic Hamiltonian projects of national reconstruction that began with the New Deal and lasted through World War II and the Great Society program and the Civil Rights Revolution were followed by a generation-long backlash led by nostalgic Jeffersonian reactionaries. The first was Jimmy Carter, a conservative Democrat who played the role of the Southern Jeffersonian country boy. He and his allies dismantled much of the New Deal in the name of deregulation, leaving his equally Jeffersonian successor Reagan little to deregulate. Neoliberal “New Democrats” such as Clinton, Obama, and Carter, have insisted that they are not “big government liberals” like FDR and LBJ. They have adopted conservative policies as their own: budget balancing rather than public investment in the case of Clinton, and subsidizing private health insurance instead of providing universal health care in the case of Obama. The agenda of today’s Republicans, based in the Jeffersonian heartlands of the South and West, is radically neo-Jeffersonian. If the federal government really is inherently inefficient, corrupt and tyrannical, then its functions should be delegated to the states or privatized.
JS: Two-thirds of the jobs in the US don’t require an education beyond high school and they also suffer from wage deflation. How do terms like producerist capitalism and developmental capitalism apply to the real needs of the American working class?
ML: None of the major parties in American history have been social democratic or labor parties, like those of Europe. Typically, the parties have represented the interests of different industries in different regions—industrial, agrarian, or financial. Similarly, the Hamiltonian and Jeffersonian traditions appeal to different kinds of businesses. Capital-intensive businesses in industries like railroads and manufacturing with increasing returns to scale tend to favor a strong federal government, to provide R&D and an integrated continental market with a common national infrastructure. Small, undercapitalized, labor-intensive businesses threatened by more efficient national and global enterprises have invoked Jeffersonian ideals to justify policies protecting small farms, small retailers, small distributors and small banks—in the interest, it should be noted, of local capitalists, not local majorities.
While Hamiltonian business elites have often been opposed to unions and pro-labor laws, the working class —defined as today’s majority of Americans who depend on wages for a living—is better off under Hamiltonian developmental capitalism than under Jeffersonian producer capitalism. While globalization weakens organized labor, it is still easier to unionize large national companies than hundreds or thousands of tiny independent businesses. And from the 1900s onward, private monopolies and oligopolies have been more willing to tolerate unions, because, unlike small businesses, their market power often allowed them to pass on the cost of wage premiums for unionized workers to consumers.
In the Jeffersonian system, wage-dependent proletarians are parasites, not producers, and the goal of Jeffersonian political economy is to turn proletarians into producers by giving them farms in the 19th century and encouraging them to start small businesses today. This is a cruel joke, in an economy in which fewer than one in 10 Americans are self-employed and fewer than two percent are farmers. To add insult to injury, modern Jeffersonians insist that workers employed by small business owners should not be protected by many federal workplace regulations. This unmasks the Jeffersonian project for what it is: a defense of the privileges of what Marxists might call the local "petty bourgeoisie" against large-scale managerial capitalism and state capitalism. For these reasons, the vision of an alliance between small farmers and small business owners and wage earners, from William Jennings Bryan to Willie Nelson, has usually failed, even if the New Deal for a time included both farmers and unions in its coalition.
JS: What's the difference, historically speaking, between socialism (not the Red Scare kind) and developmentalism in the United States? Is it rhetorical, substantive, or both?
ML: What I am calling developmental capitalism, in both its American and foreign versions, is not socialist. Democratic socialism, in both its non-Marxist and revisionist Marxist versions, has been inspired by the moral view that it is wrong for individuals, alone or in conjunction with others, to own things like factories and mines and transportation systems. American developmental capitalism in the Hamiltonian tradition, particularly in its modern Rooseveltian version, views a mixed economy as the instrument of the sovereign people, but takes a purely pragmatic approach to the methods used. Should a utility be privately-owned and publicly-regulated or socialized? Is the development of a particular new technology best promoted by incentives to private investors, direct public investment, tax-favored nonprofit activity or public-private collaboration? Should infrastructure investments be paid for by borrowing money from the rich and foreign sovereign wealth funds or by current appropriations funded by current taxation? Should the safety net take the form of vouchers to purchase private goods, like food stamps, or tax-based transfer payments, like Social Security? These are matters of prudence, not of principle.
JS: Even if America has flourished best when government, business, labor, and universities have worked together, is there still not some kind of worry about exploitation here? Has there ever been a time when prosperity was distributed equally?
ML: American Hamiltonian developmentalism has frequently worked wonders in providing the better life that advanced technology enables, while failing to address social injustice. Herbert Hoover and Franklin Roosevelt shared similar commitments to public investment and government-business cooperation, but Hoover denounced Roosevelt’s pro-labor reforms and social insurance policies as “socialism,” “communism,” and “fascism.”
Would-be progressives who court applause by denouncing both big government and big business may be populist, but they’re not progressive.
The one time in American history when inequality was lowest was the so-called Golden Age of the 1950s and 1960s. The elite was reconciled to the goal of sharing prosperity and promoting racial justice by the memory of Depression-era radicalism and the perceived need for national solidarity during the Cold War. In the absence of external threats and grassroots populist and radical challenges, the American elite can afford to become more selfish, even if it carries out a version of the developmental project. That is why I am a Hamiltonian of the left, not of the right. The gains from state-sponsored industrial growth need to be equitably shared, preferably by what Jacob Hacker calls “predistribution” in the form of higher wages and not redistribution alone.
JS: Anti-Obama forces have pledged $1 billion to defeat him. Has there been a time when oligarchs were so focused on maintaining the status quo before? If so, how were they defeated?
ML: If the premise of your question is that Romney represents the oligarchs while Obama represents the people, I don’t share your premise. Both Romney and Obama have been the candidates of Wall Street, within their own parties. Both are heirs to yesterday’s moderate Rockefeller Republicans; Obama has been called an Eisenhower Democrat. Obama’s health care reform is nothing more than a version of the Massachusetts plan signed by Romney as governor, even if Republican presidential primary politics have forced Romney to attack Obamacare. If Romney is elected, I suspect that the continuities between the Obama and Romney administrations would be more striking.
American politics has always been dominated by wealth, but only rarely have wealthy people from a single industry dominated politics as much as those from the financial industry dominate both parties today. I can only think of two examples: the Southern planters before the Civil War and the railroad tycoons in the 1860s and 1870s, before the rise of wealthy manufacturers in the late 19th century. The recent financialization of politics was made possible by the bubble economy. Over time, even without reform, the inflated financial share of the economy is likely to shrink, with influence shifting partly to economic elites in other sectors, including perhaps the energy sector and a partly-revived manufacturing sector. As a rule, ordinary Americans have been better off when rival economic elites are forced to compete for their votes than when a single industry supplies the donors and much of the personnel of both parties.
JS: I find your updating of Henry Clay’s American System, with a plan to protect infant industries (hopefully in a revive manufacturing sector), subsidize infrastructure development, and create lasting institutions like an infrastructure bank, fascinating. But how feasible is it? And how can progressives turn this into a political message?
ML: The progressive wing of the Democratic party has already embraced most of the elements of what I describe as a new American system, on the model of Henry Clay’s: public investment banks, national infrastructure policy, and support for American manufacturing, as well as public R&D. The opposition comes from Republicans and Wall Street Democrats, who want all of these public functions to be privatized and carried out by for-profit corporations benefiting from taxpayer subsidies in the form of “incentives” such as tax credits. Left-Hamiltonianism is not against public-private collaboration, but it does not support the crony capitalism and asset-stripping agenda of the bipartisan American rentier oligarchy. What Michael Hudson calls the privatized "tollbooth economy" is not Hamiltonianism, nor is it Jeffersonianism; it is neo-feudalism.
Like any other successful movement in a democracy, progressives need to have popular appeal. But I don’t think that they can be populist in the Jefferson-Jackson-William Jennings Bryan sense. There is a difference between social democratic egalitarianism, which emphasizes high wages for the wage-earning majority and universal social insurance for the elderly, children, sick and disabled, and Jeffersonian populism, with its vision of the self-reliant yeoman farmer or small business owner. Progressives should favor big, simple, universal programs like Social Security in the realm of social insurance. And there is no reason for progressives to take the side of inefficient small businesses and farms against larger enterprises in industries with increasing returns to scale or network effects. Would-be progressive populists who find they get applause by denouncing both big government and big business may be populist, but they’re not progressive.
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June 13, 2012
13 Min read time