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This piece explains something about the progressive era and market capitalism that I did not know. Perhaps you didn’t either?

(To read more of Jack’s informative articles, subscribe to his weekly “To The Point News”) 

Written by Dr. Jack Wheeler
Friday, 29 July 2011

Benjamin Disraeli (1804-1881), one of Victorian England’s most prominent Prime Ministers (1868/1874-1880), once commented to a friend:  “There are two things that the public should never be allowed to see how they are made:  sausage and the law.”

We are witnesses today of just how immortally trenchant Disraeli was back in the 19th century.  For in truth, observing our politicians handling the current “debt crisis” is a far more repulsive sight than the inside of a sausage factory.

Yet if Disraeli were here now, he’d smile sardonically and remind us that (he was fluent in French) plus ça change, plus c’est la même chose – the more things change, the more they stay the same.

Disraeli led Britain while America was entering the Progressive Era, that golden age of the birth of government regulatory control over “robber baron” big business, ushered in by the creation of the ICC, the Interstate Commerce Commission, in 1887 by President Grover Cleveland.

The ICC’s stated purpose was to eliminate “rate discrimination” of the railroads.  The actual purpose was to ruin James J. Hill’s Great Northern Railway, which was out-competing other transcontinental railroads.  The latter couldn’t compete with Hill fairly, so they bribed the government to create the ICC and hamstring him.

It turns out that the Progressive Era wasn’t run by crusading left-wing champions of the poor and exploited – it was run by the big businesses and industries being regulated, for the purpose of blocking competition from small businesses and budding new industries.

It was a socialist historian who discovered this by doing the hard archival research to fully document it.  His name is Gabriel Kolko, and his book, The Triumph of Conservatism, is revelatory.

Socialist or no, Kolko provides overwhelming evidence and repeated examples, from the ICC to the Food and Drug Act to the Federal Reserve, showing that:

“The essential purpose and goal of any measure of importance in the Progressive Era was not merely endorsed by key representatives of businesses involved; rather such bills were first proposed by them.”

The Federal Reserve, e.g., was created by big bankers to freeze out competition from small banks.

Kolko calls this “political capitalism,” as opposed to “market capitalism.”  He’s evidently a socialist because he sees the latter everywhere compromised and conquered by the former.  Somehow he believes a government running everything would prevent this.  I don’t get it either, but his historical research is dead bang on.

In other words, political or crony capitalists like GE’s Jeff Imelt or those of Big Pharma have infested the American economy for a long time.  One reason Kolko smirkingly calls this a “conservative triumph” is that conservatives keep believing in the myth that big industries are advocates of real capitalism.

Thus his book is today revelatory for most conservatives, even though they’ve certainly had time to read it – Kolko wrote it in 1977.  There is, however, one group of conservatives who understand his message and are determined to put an end to political/crony capitalism:  the Tea Partiers.

I have spent the last week criss-crossing the country meeting with Tea Party leaders.  My jaunt was capped by a private dinner last night with three Congressmen at the home of one of them on Capitol Hill.  While I can’t quote any of these folks by name, here’s what they said.  First the Tea Party leaders.

“Say you’re the head of a family with an income of $250,000 a year – but you discover your expenses, thanks to free-loading relatives, are now $300,000.  Do you  cut expenses and dump the free-loaders, or do you insist on borrowing more?  We’re not talking rocket science here…”

“We (the Tea Parties) are engaged, as Dick Armey puts it, in a hostile takeover of the Republican Party.  The Washington Establishment Republicans hate us for it – look at McCain calling us ‘hobbits,’ or the sneers pouring out of George Will’s columns.  If we hold fast on this [block an increase to the debt ceiling], we’ll be much further along towards our goal…”

“We’re taking Rahm Emanuel’s advice to not let a crisis go to waste.  The debt ceiling is a real tipping point.  It is the best opportunity of our lifetimes to actually start reducing government instead of trying to slow down its acceleration.  We can’t waste this crisis!”

“Why didn’t Boehner stick with Cut, Cap & Balance?  The House passed it, Reid squashed it, so the ball is in Reid’s & Obama’s court to produce a bill on paper.  But Boehner blinked when they refused, and he comes up with this cockamamie plan that does nothing to reduce the debt.  No more blinking!”

“You don’t know to laugh or cry at the political incompetence of the Boehner Republicans.  The Dems have come up with nothing except more spending and more taxes, which is exactly what the rating agencies say will result in a downgrade. Yet somehow, the ‘crisis’ is owned by Boehner, not Reid and Obama, and unless the R’s capitulate, we suffer total economic chaos.  It is absolute crapola, and Boehner is like a deer in the headlights.  He may not be Speaker after this…”

I’ve come away this week convinced more than ever that the Tea Party movement is the greatest hope we have for America’s future.  Nobody runs it, it’s not hierarchical, it’s real-deal grass roots that’s driving the Libs, the Dems, and the Rinos crazy.

If you don’t already, I encourage you to check in frequently to the main Tea Party websites, such as Tea Party Patriots, Tea Party Express, Tea Party Nation, Americans for Prosperity, and FreedomWorks.

You’ll have to figure out which one, but the main office of one of these is a hive of Objectivists, with pictures of Ayn Rand on the walls – the coolest being a reworked Obama-Hope poster:

I felt right at home.

Now on to the Congressistas.  One is a powerful committee chairman who’s been around for many years, another is in his 5th term and increasingly influential, while the third is a Tea Party freshman.

The first said he was behind Boehner, for the only thing that matters is defeating Zero in 2012.  “We cannot accomplish anything until he is gone, so we must not do anything that will help him get re-elected.  That means now we must avoid getting blamed for this crisis.  So I’m voting Yes on Boehner’s plan.”

The second said he was voting No.  “What infuriates me is that the voters gave us the Majority in 2010 for one basic reason:  to get rid of ObamaCare.  And we won’t do it.

“We caved on the CR (the Continuing Resolution funding the federal government through 12/10/11 passed in April) by not zeroing out all ObamaCare implementation costs, we caved on the Ryan budget which also fails to eliminate ObamaCare, and now we are caving on Boehner’s plan, which makes even smaller front-loaded cuts than Ryan and leaves ObamaCare intact.

“Put in the elimination of ObamaCare – a full zeroing out starting right now – and I’ll vote to increase the debt ceiling.  That’s my price.”

Then the new guy spoke.  “When Speaker Boehner told me I had to ‘get my ass on line’ with this, I respectfully refrained from replying, ‘That’s what you need to do, sir.’  I’m very disappointed in one of our freshmen leaders Allen West, who has drunk the default kool-aid and says he’ll vote Yes.

“Chris Edwards over at Cato shows the Speaker’s ‘cuts’ are bogus, as they are from the CBO’s baseline which assumes constantly rising spending.  We all know that the only way to actually cut spending is to, as Edwards notes, abolish programs and agencies.  We were elected in 2010 to do this, and not raising the debt ceiling is our best chance.”

Then he gave a deep sigh.  “I have to tell you, however, that my real fear is that Obama wants a default and US credit downgrade.  A default would, of course, be deliberate, for we have an order of magnitude of revenue over what’s needed for debt service.

“The rating agencies have made it clear that unless action is taken to curb our deficits, they’ll downgrade our debt even if we raise the ceiling.  They’ll downgrade us because we raised the ceiling without such action.  My fear is that Obama wants the economic chaos and hyperinflation this would cause.  He means us harm, and this is his best chance to do it.

“So maybe Allen will vote for the Speaker because he knows this, because he knows Reid will never pass it, and then the Democrats can be more easily blamed for the ensuing market collapse.  Maybe.  I’m still sticking with No.”

It’s Friday morning now (7/29) and Capitol Hill remains snafu’ed over this latest crisis.  The Tea Party frosh are sticking to their guns.  And they have switched their attention away from Boehner to a guy named John Chambers.  He’s not a politician.  He runs Standard & Poor’s sovereign-ratings desk.

The Tea Party frosh are quoting him to everyone on the Hill – that a $4 trillion reduction in US debt depending on whether it is front-loaded or back-loaded, will only be a good down payment on a solution to stabilizing US government debt-to-GDP ratios.

Chambers wants real spending cuts now (front-loaded), not fairy dust cuts in an imaginary future (back-loaded).  There’s only one way to force this, say the Tea Party frosh, and that’s by not raising the debt ceiling.

Not raising the debt ceiling, they are arguing, is the only way to avoid a downgrade and a subsequent market meltdown.

Disraeli would have so enjoyed this cup of Tea Party tea.  But he wouldn’t be surprised if it ends up smelling like sausage.  He’d remind us that red herrings (like balanced budget amendments) emit a sausage odor, and that Capitol Hill (just like the British Parliament) is nothing but a sausage factory.

Can the Tea Party frosh change this?  Yes – but let’s keep Disraeli’s wisdom in mind.