[Paleopsych] Atlantic: Benjamin M. Friedman: Meltdown: A Case Study

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Benjamin M. Friedman: Meltdown: A Case Study
The Altantic, 5.7-8

[First, the summary from CHE:

http://chronicle.com/prm/daily/2005/06/2005062401j.htm
Friday, June 24, 2005

    A glance at the July/August issue of The Atlantic Monthly: How hard
    times put democratic values at risk

    America's democratic values could be at risk if it experiences an
    extended economic downturn, writes Benjamin M. Friedman, an economics
    professor at Harvard University.

    History shows that intolerance and repression often accompany economic
    decline, he writes. While the "most familiar example is the rise of
    Nazism in Germany, following that country's economic chaos in the
    1920s" and the worldwide Great Depression of the 1930s, there are many
    instances in American history in which "declining incomes over an
    extended period have undermined the nation's tolerance and threatened
    citizens' freedoms," he notes.

    Take the Populist Era of the 1880s and 1890s, for instance. As the
    economy faltered and wages fell, racism and anti-Semitism spread, and
    the government passed laws to keep out immigrants and to segregate
    blacks from whites, Mr. Friedman writes.

    In the 1920s, when "slow growth together with widening inequality
    halted improvements in living standards for many Americans," the
    "upshot was the revival of the Ku Klux Klan, the tightest and most
    discriminatory immigration restrictions in the nation's history, and
    the elimination of both federal and state laws designed to protect
    women and children," he writes.

    Economic prosperity "is in many ways the wellspring from which
    democracy and civil society flow," Mr. Friedman argues. "We should be
    fully cognizant," he concludes, "of the risks to our values and
    liberties if that nourishing source runs dry."

    The article, "Meltdown: A Case Study," is drawn from Mr. Friedman's
    forthcoming book, The Moral Consequences of Economic Growth, to be
    published by Knopf in October. The article is available online at
    [54]http://www.theatlantic.com/doc/200507/friedman

    --Gabriela Montell

-----------------

Benjamin M. Friedman: Meltdown: A Case Study
The Altantic, 5.7-8

What America a century ago can teach us about the moral consequences of
economic decline

Would it really be so bad if living standards in the United States
stagnated — or even declined somewhat — for a decade or two? It might well
be worse than most people imagine. History suggests that the quality of
our democracy — more fundamentally, the moral character of American
society — would be at risk if we experienced a many-year downturn. As the
distinguished economic historian Alexander Gerschenkron once observed,
even a country with a long democratic history can become a "democracy
without democrats." Merely being rich is no bar to a society's retreat
into rigidity and intolerance once enough of its citizens sense that they
are no longer getting ahead.

American history includes several episodes in which stagnating or
declining incomes over an extended period have undermined the nation's
tolerance and threatened citizens' freedoms. One that is especially vivid,
and that touched many aspects of American life that remain contentious
today, occurred during the Populist era, toward the end of the nineteenth
century — roughly from 1880 through the middle of the 1890s.

For a decade and a half after the Civil War, economic growth was largely
exuberant, society optimistic, and social progress undeniable. But all
that changed over the next fifteen years, beginning with a faltering
economy. From 1880 to 1890 Americans' real per capita income grew on
average by just 0.4 percent a year (versus almost four percent in the
1870s). Then, after a few strong years at the start of the 1890s, the
economy collapsed altogether. A severe banking panic set off a steep
downturn, widely known at the time as the Great Depression. By the end of
1893,000 banks and 15,000 other businesses, including several major
railroads, were bankrupt. Prices, especially farm prices, had been falling
even when the economy was growing strongly. Now the declines became
ruinous. Wheat dropped from an average price of $1.12 a bushel in the
early 1870s to fifty cents or less in the mid-1890s, and corn went from
forty-eight cents a bushel to twenty-one.

By the early 1890s farmers in some western states were burning (heir
nearly worthless corn for fuel. By 1895 per capita income had fallen below
the level it had reached fifteen years earlier.

Popular discontent followed economic distress. In 1892 labor action
against the Carnegie Steel plant in Homestead, Pennsylvania, sparked an
armed battle between striking workers and company-hired Pinkerton forces,
leaving sixteen dead and more than ISO wounded. Two years later a strike
against the Pullman Sleeping Car Company led President Grover Cleveland to
call in the Army to protect the railroads. At the same time, hundreds of
unemployed men, led by Ohio businessman Jacob Coxey (the group was known
as "Coxey's Army"), marched on Washington to demand federal assistance.
Altogether, during the course of 1894 seventeen such "industrial armies"
marched on the capital.

But economic concerns did not manifest themselves only, or even primarily,
in labor marches and job riots; they soured many aspects of American
society. As wages fell and unemployment rose, fearful citizens sought to
close the country to newcomers — particularly from areas other than
northwestern Europe. The new Statue of Liberty (completed in 1886) may
have proclaimed America's welcome to the world's "huddled masses" and
"wretched refuse," but such popular magazines of the day as Harper's and
The Atlantic Monthly were full of ethnic jokes and slurs. Beginning in the
1880s hard times catalyzed a movement to tighten immigration standards. In
1882, after riots protesting the use of Chinese labor for railroad
construction, Congress barred Chinese immigrants entirely. All other
immigrants were subject to a head tax. Some states adopted legislation
prohibiting certain noncitizens from acquiring land.

Race relations also deteriorated. In a spectacularly unfortunate
coincidence that would affect American history for decades, this period of
economic stagnation — the worst up to that time — set in just as
Reconstruction ended and the federal government finally withdrew its
troops from the defeated southern states. No one will ever know whether
the country's race relations, both in the South and elsewhere, would have
taken a different course had America enjoyed robust economic growth during
this period. In the event, the result was segregation by race in
practically every aspect of daily life, together with appalling racial
violence.

One reason for believing that economic frustrations contributed to the sad
history that followed is that although the former Confederate states
regained full political independence with the end of Reconstruction, in
1879, most of them did not begin to adopt what in time became pervasive
"Jim Crow" laws until the 1890s. By the end of that decade most southern
states had made it illegal for blacks to ride with whites in railroad
cars, and some had also segregated city streetcars and railroad-station
waiting rooms. The devices used to deny most black citizens their voting
rights — property and literacy requirements, poll taxes, and white-only
primaries — were likewise adopted mostly in the 1890s or after.

But the legal changes enacted during this period barely capture the racist
and anti-immigrant (and anti-Catholic, anti-Semitic, anti-ethnic)
sentiment of the time. The 1880s saw a rise in vigilante violence in rural
areas — not only lynchings in the former Confederacy but also beatings,
murders, and arson by such groups as the Bald Knobbers, in the Ozarks, and
the White Caps, in Kentucky and elsewhere. Such colorful populist figures
as "Pitchfork" Ben Tillman, who served as governor of South Carolina from
1890 to 1894 and then as a U.S. senator, and Tom Watson, a widely read
newspaperman who ran for vice president on the Populist ticket in 1896,
were outspoken white supremacists. Tillman publicly defended lynching,
called for the repeal of the Fifteenth Amendment (which had given the vote
to blacks), and advocated the use of force to disenfranchise blacks in the
meantime. Watson's speeches and editorials were regularly devoted to
sensational attacks on blacks. Catholics, Jews, and foreigners. The
American Protective Association, an anti-Catholic organization founded in
Iowa in 1887, spread rapidly once the 1893 depression began, and claimed
to have 2.5 million members nationwide by the mid-1890s. Anti-Semitic
propaganda was so common among Populists by 1896 that William Jennings
Bryan felt obliged to disavow it during his campaign for the presidency.

Steps that would have made America more democratic were not without
advocates during this period. Many Populists favored such measures as
direct primaries and the popular election of U.S. senators. Some also
favored women's suffrage. Bryan was a tireless advocate for all these
causes. Yet none of them advanced in the face of prolonged economic
stagnation. Meanwhile, the Supreme Court only made matters worse. In two
key decisions it effectively gutted the Civil Rights Act passed in 1875
(when economic growth was strong), declaring private racial segregation
and then segregation legislated by the states to be constitutionally
protected. Throughout the Populist era America's media, politics, and
legislation all lent support to cultural exclusion, societal rigidity, and
efforts to turn back the clock. These ultimately proved futile, hut for a
while they poisoned both politics and society. Openness toward the future,
faith in a better society for all, and support for the rights of
minorities were simply not the order of the day.

Economic weakness does not always produce social regress, of course:
history is not so deterministic. The depression of the 1930s led, for the
most part, to a reaffirmation of America's openness and generosity. But
that was atypical; the Populist era was more the norm.

When slow growth together with widening inequality halted improvements in
living standards for many Americans in the 1920s, the upshot was the
revival of the Ku Klux Klan (not just in the South — at the Klan's peak
perhaps one in ten white Protestant U.S. men was a member), the tightest
and most discriminatory immigration restrictions in the nation's history,
and the elimination of both federal and state laws designed to protect
women and children. Similar economic conditions in the 1970s and 1980s
provided the backdrop for another round of anti-immigrant agitation, the
rise of the right-wing militia movement, and incidents of politically
motivated domestic terrorism.

Not just in America but in the other Western democracies, too, history is
replete with instances in which a turn away from openness and tolerance,
often accompanied by a weakening of democratic institutions, has followed
economic stagnation. The most familiar example is the rise of Nazism in
Germany, following that country's economic chaos in the 1920s and then the
onset of worldwide depression in the early 1930s. But in Britain such
nasty episodes as the repression of the suffragette movement under
Asquith, the breaking of Lloyd George's promises to the returning World
War I veterans, and the bloody Fascist riots in London's East End all
occurred under severe economic distress. So did the ascension of the
extremist Boulangist movement in late-nineteenth-century France, and the
Action Française movement after World War 1. Conversely, in both America
and Europe fairness and tolerance have increased, and democratic
institutions have strengthened, mostly when the average citizen's standard
of living has been rising.

The reason is not hard to understand. When their living standards arc
rising, people do not view themselves, their fellow citizens, and their
society as a whole the way they do when those standards are stagnant or
falling. They are more trusting, more inclusive, and more open to change
when they view their future prospects and their children's with confidence
rather than anxiety or fear. Economic growth is not merely the enabler of
higher consumption; it is in many ways the wellspring from which democracy
and civil society flow. We should be fully cognizant of the risks 10 our
values and liberties if that nourishing source runs dry.

History is replete with instances in which a turn away from openness and
tolerance, often accompanied by a weakening of democratic institutions,
has followed economic stagnation.

This article is drawn from his forthcoming book, The Moral Consequences of
Economic Growth, to he published by Knopf in October.

~~~~~~~~
By Benjamin M. Friedman, Professor of economics at Harvard