#78 The American Political System (The End of Laissez-Faire part 1)

Author’s note:

This series of blogposts will be my paraphrased notes on a lecture given by Murray Rothbard called “The American Economy and the End of Laissez Faire“. This means the post will contain some word for word transcriptions of Rothbard’s words and some editorializing and rephrasing of my own. I will not distinguish between the two.


How the government intervenes and what are the causes & consequences of this intervention.
Most historians, when dealing with issues of history, create for themselves a record of it. Who did what. “In 1886 the interstate commerce commission was passed”. But this is not dealing with the economic consequences of those events.

Most people do not understand economic history because most economists dont know any history and most historians don’t know any economics.

There is also a third area which very few deal in, which is why these interventions were passed in the first place. Why do they come about? What are the motivations involved?

When these historians talk about the Federal government, they deal with the presidents and members of his cabinet. They taught about executive politicians as if they dropped onto the earth from outer space. They are often examined in a vacuum with no regard for their past relationships, associations, or previous historical dealings.

“Joe Zilch becomes president in this year, he does some things for around 8 years, and then he leaves”.

And that’s the implicit assumption of most historical records. They don’t say who these people were before they became powerful government employees or what they were doing before or what they do after. These people had personal lives outside of the small amounts of time they spent in dutiful service to the Federal government.

If you examine the lives of these people both before and after their time in government, you can more easily synchronize their legislative actions with their personal motives and relationships.

We will deal primarily between 1870 (the middle of the American Civil War) and World War 2.

There is something called new political history, that is, analyzing why people of certain demographics tend to vote in certain ways.

American Political History
We tend to think of political parties when thinking about why people vote the way that they do, but political history tends to be more than just that. There are party systems that will last for 30-50 years and then the nature of those parties change abruptly into new systems. The problem is that in the moment it’s often difficult to discern when a party shift is occurring. This is often best done in hindsight where one has the advantage of examining a more contextually complete picture of history. There are approximately 6 party systems in American political history.

Typically the United States is structured in a 2 party system. Partly because of the way it’s political system is structured (electoral laws), large coalitions are required to fund political agencies. Although, occasionally there is a 3rd party in American politics that are relevant to the contextual examination of history.

1st party system:
Federalists (Pro Britain. Pro Federal Government. A strong advocate of Federal spending and Federal power, Central banks, Federal Government economic and war intervention)
Democrat Republicans (Pro France. State’s rights. Small Federal Government. A strong advocate of economic austerity, little to no government intervention and a minimized tax burden, Laissez-Faire, Free Banking, non interventionists)

1.5 party system:
A very unique time in history. The Federalists essentially died out politically after the war of 1812 (America’s second war with Britain), they were considered traitors among most Americans for a variety of reasons I won’t expand on too much here because it’s outside of the scope of this history. This was known as the era of good feelings.

2nd party system :
Whigs (successors of the Federalists, with some exceptions)
Democrats (successors of the Democratic Republicans, with some exceptions)

3rd party system:
Even though the names of the modern political parties have no changes since the late 1800s, the political system changed in 1896 to something very different to what it was prior to the turn of the 20th century.

4th party system:
The change in this political system was largely marked by the New Deal era of Federal government changes and changes to Federal banking in the Wilson adminstration. There were widespread banking and economic regulatory changes to the ways in which the Federal government could oversee finance and commerce. The United States was never the same as it once was after this time period.

5th party system:
Marked by the end of the New Deal era policy making and the lead up into WW2, this political period is marked by the post war Bretton woods era of the United States.

6th party system:
Period following the end of the Bretton Woods agreement. Or the end of the international gold standard banking agreement.

It seems to me that we are presently entering a new 7th party era, but that is beyond the scope of this present discussion.

The 3rd party American political system was very closely fought between the two political parties of the day. There was almost no period where the Republicans won both the houses of congress and the presidency. The 4th party system was a period of political dominance by the Republicans (with the exception of Woodrow Wilson). The 5th party system had a democratic dominance. And the 6th party system has been very confused with a lot of floating independent voters and a mix of wins between the two political parties.

In all of the 19th century, American political parties were fiercely ideological. Parties were not just ways of getting into political office and receiving pay-outs.  They were strictly organized around principles of ideology, and these principles were zealously enforced.

In the present era of politics, parties have sought to meander politically towards the center of the overton window in order to win the floating independent vote, which is quite different than the days of past American political systems. There was no floating, independent vote. Nearly everyone was strictly aligned on their side of the political aisle and there were very few independent voters. Supporters were staunchly aligned with their ideologies that were represented by respective political parties.

Voters expected their nominees to staunchly adhere to their principles. No democrat would go out and vote for a republican because they waffled towards the political center and vice versa. In other words, political candidates had to fiercely represent their ideological baselines in order to bring out the vote. Most races were incredibly close and a small number of voters could make a difference in elections.

As a result, the American political landscape was much more exciting. People were aware of the political discussions of the day and they understood them thoroughly. It can be very difficult to suss out ideological differences between political parties in the more modern 6th and 7th political systems because they are appealing to an independent majority.

Past political parties were important to individuals because they represented a way for Americans to get involved directly in politics in ways which would not be rapidly transcended by special interest groups. Voters knew (or preferred to believe) that their delegates were representing their ideological interests to a T.

The Federalists, the Whigs, and the Republicans up and through the 3rd party system were all based on a similar ideological structure (with some certain differences).

The 19th century marked a huge amount of interest in economic political questions. Everybody and their brother wrote pamphlets about banking and money. Why was everybody interested in economics then, and why does it seem like hardly anyone is interested in economics today? It is very difficult to get the modern man interested in economics (present company excluded), so why was the 19th century man so interested?

The answer is found in an examination of American ethno-religious history.

Read Part 2 of this series

A fierce Canadian goose aggressively defending his tower.