A Review of Lawrence Goodwyn's Democratic Promise

@Jargoeauxgne 


Democratic Promise: The Populist Moment in America 

Lawrence Goodwyn 

 In the time of American history known as the Gilded Age, when the economy underwent a transformation of rapid growth and consolidation, while a remaining class of independent farmers struggled against the towering new structures of industry and finance, the Populist Movement emerged in an attempt to secure the policies and reforms necessary for that independent class to survive. It very nearly survived and succeeded but ultimately did not, and the story of those failures is both frustrating and painful. I expected Goodwyn's book to be about the entire swath of postbellum radical politics but it actually took a rather narrow scope: the agrarian political movement which arose and died from the mid-1880's to the mid-1890's, known as the Populists, which itself originated from the Farmer's Alliance movement which started in the late 1870's. There were other similar movements such as the Greenback party, which took place more in Yankee states and pursued an ethos which might be considered “Cathedral-like”, predictably meshing economic priorities (currency reform) with social ones (suffrage, electoral reform). No, Democratic Promise is about the Populist Party, which, in the beginning, was led and organized with focus, acuity and total commitment to the principle of economic reform (mainly currency reform), with the end goal being a class of small-holding farmers liberated from the liquidating and consolidating pressures of high finance. This book, is among other things, a glimpse of a uniquely American future that was forever lost to us. More importantly it was lost to them, and what's most crushing: it was lost more for reasons of cowardice, stupidity, ignorance, and betrayal than for the competence of opposing interests. This review is written in part out of innocent historical curiosity and interest, but also partly because anyone with an interest in political organization would benefit from learning the mistakes of the past. 

 To give some context for the time: silver was demonetized in 1873, and the monetary system of the time was molded by the National Bank Act, in which banking was divided into three tiers, the banks in subsequent tiers being made to use the notes from preceding tiers as a fraction of their reserves. In this way, currency could be made uniform across the country and responsive to changes in demand, smaller banks pyramiding note-issue off that of larger banks'. It also consolidated the country's monetary fate in the banks occupying this high tier, which by design excluded all banks not located in New York City. The normal M.O. for farmers in this period was to buy all the necessities of the job at the “furnishing man” and always on credit. In many cases the furnishing man did not offer the option to farmers to see the difference in ultimate price between buying in cash and buying on credit, or even the option to buy in cash at all; furnishing was always on credit. Thus, farmers were at the mercy of credit conditions at all times; when they restocked at the furnishing man, when they warehoused their goods come harvest, and as they paid off their mortgages. Most of the time, farmers would pledge their crop for credit at the store, and when harvest came and it wasn't enough to pay off the debts, they would simply sink deeper and deeper into debt, until “the Man” would come to own their land. 

The Populist Moment began as a cooperative movement in Texas, Kansas and other spots around the South, although the real ideological core of it all was in Texas and centered around a man named Charles Macune. In the beginning, they were adamant that the movement, called “The Farmer's Alliance” was not to be a political one but a purely economic one in which farmers got together, educated each other, and found ways to get around the extortionate system of middle-manning and usury. In some ways they actually succeeded, as when they pooled their resources to buy the materials and means necessary for jute sacks, which were used to package their harvests. They bought the raw jute from foreigners and bought the machinery for making sacks and got around the “Jute Trust” as they call it, providing a tangible benefit for all the members of the Farmer's Alliance. But as time went on and as their understanding both of economic theory and of the emergence of a hierarchical economic system centered around the big banks of the country, they realized that there was no way forward other than through political solutions. What catalyzed this realization was when Charles Macune went around the country, to different banks in neighboring states, looking for a deal where the Farmer's Alliance would be floated the credit to warehouse its members' crops itself, rather than going through the middlemen, who paid them the one liquidation harvest-time price but sold at the normalized year-round price and made a killing. Macune's efforts to find a deal at any bank were thwarted as, apparently, a circular had been sent through the banking system advising against patronizing any radical “anarchistic” movements such as the Farmer's Alliance. Evidently they had kicked up enough of a fuss to warn the commercial interests surrounding them to prepare themselves and had found out the hard way that mere collective self-help would be identified by banks and middlemen as unacceptable; the yeomen class retaining anything more than the minimum value of their product necessary for reproduction (and oftentimes less than that) was unacceptable to the commercial and financial interests latched onto American agriculture. Macune returned to the Texas Farmer's Alliance organization and spread the word that no non-political solutions remained for them. He would go to his grave a firm believer that the Populists should not start a third party but instead work within the Democratic party to orient it towards currency reform. He was also the main currency theorist of the movement and provided its fundamental pillar of economic reform: the Sub-Treasury Plan.

 Many historians of this era quizzically refer to the Sub-Treasury Plan as a mere means of getting the credit necessary to farmers to warehouse their goods and thus obviate the aforementioned “Two Price System” - the warehouser buying all the crops at rock-bottom harvest prices while selling them off at a normalized year-round price - which so much robbed them of the fruits of their labor. The Sub-Treasury Plan was in fact a total reformulation of the country's currency system. As many banking school advocates put forward, the expedience of the system of privately created credits is that the money supply expands in response to changes in growth and population. The result of the Sub-Treasury Plan would be not only to provide the credit to farmers to store and sell off their own crops at cooperatively-owned Farmer's Alliance warehouses, but would also be an injection of currency into the economy at a low interest rate and at quantities the banks were unwilling to supply. The policy proposed that enough currency be provided such that the price level would triple. The Sub-Treasury Plan, mislabeled by historians not understanding the nature of our currency system, was not an agricultural reform, it was a reform at the most fundamental level of economy, meant to obviate the need for private creditors to supply both credit and money to the economy. We say “both credit and money” here with the understanding that they were, and are now, not separate from each other in actuality, but that they are conceptually distinct and have different economic functions as such. The Sub-Treasury Plan understood the illegitimacy of the banking system at root and sought to place it with a rational system of monetary expansion bypassing the private interests. This plan became the basis for the Omaha Platform, which became the People's Party official policy platform in 1892, which called for currency reform, utilities nationalization, immigration restrictions, labor laws and electoral reform; a comprehensive program of political economy to excise economic rents and increase the value of labor. 

The Sub-Treasury Plan, as proposed by Texas Allianceman and currency theorist Harry Tracy, had two planks: the land loan plank and the warehouse and elevator plank. Both were to be administered through 'sub-treasuries', extensions of the U.S. Treasury operating kind of like post offices but as banks+warehouses+grain-elevators, in each county of the country whose average annual production of commodities for the past two years was at least $500,000 dollars – agricultural hubs, essentially. Land loans of 80% of the land value, on properties of 200 acres of less would be extended to farmers, up to a maximum of $3000. The loans would mature after 50 years, be legal tender and carry a maximum interest rate of 2%. As for the warehousing plank of the plan, farmers could obtain credit for 80% at 1% interest on the commodities they brought to market come harvest, which would be stored at sub-treasury warehouses and grain elevators. These loans would mature after 12 months and also be legal tender. After a year the loan plus storage charges, insurance and pro-rated shares of other operating expenses had to be paid to the sub-treasuries. The purpose of the land loans was to increase volume of money in circulation to $50 per capita, while the commodity loans' purpose was to stabilize short-term commodity prices by allowing farmers to “middleman” their own crop and “prevent the congestion of money in cities and to make the volume of money adjust itself to the demands of business at all times and places.” We note here that agriculture as a share of American employment was by this point still significant and it is thus not too much of an overstatement to take agricultural credit demand as a proxy for demand in general. It's also worth noting that the system of private created credits has always rested on the defense that it allows the money supply to expand in response to the increasing needs of commerce, the implication being that alternative systems whereby the money supply is expanded via public means would be by fiat and thus cause miscoordinations between demand and supply of money. We see here that the Sub-Treasury Plan is one instantiation of the principle of publicly-supplied money that provides adequate money supply at next-to-no-cost (what most called “at-cost”, meaning at the cost of administration and accounting, legitimate labor costs in the business of lending) and in response to shifts in demand. As a final note, we see that the Sub-Treasury Plan had no provision for the elimination of privately-created bank-monies and we might speculate that, at a time when the main concern was inadequate money supply, eliminating monies from circulation was a lesser priority and not worth the criticisms of socialism it would invariably draw. 

When they set off to become a political party, there was little agreement internally on what would be done. Party fathers such as Macune wanted it to stay strictly within the Democratic party, others such as Jerry Simpson, William Peffer, William Lamb and Alonzo Wardall wanted it to become its own party. After a string of failures in which populists pushed Democrats to carry their platform, pushed them into electoral victory and saw the Democrat candidates turn around and throw away the platform, they realized that a 3rd party was the only option. Democrats like James Hogg or Benjamin Tillman gladly accepted the enthusiasm of agrarian ire but were both ignorant and contemptuous of Populist enthusiasm. In the case of the former, he railed on about the farmers' problems but offered no solution, in the case of the latter he actually endorsed the Sub-Treasury Plan in public speeches and then did nothing once inaugurated. The Populists came to realize that only people who had taken the time to understand the monetary system, and who shared in the misery of the bankrupt farmer, would understand the importance of the Omaha Platform, and stick to it no matter what. Populism became a 3rd party movement, once again, out of necessity. 

Around this time, the Silver Question started to occupy the spotlight in American politics. The effects of the Crime of '73 (demonetization of silver) were still sorely felt and many felt that re-monetization would bring an end to all the ills that had occurred since then. There was an attractive logic to it all: demonetization caused a shrink in the money supply, remonetization would bring it back up to snuff. Powerful political machines in Nevada and California started to spring up, with bimetallism (AKA the remonetization of silver) as the fundamental plank of their platforms. The problem here was that Silver would only address the issue of money supply under private currency, but it wouldn't address all the other issues. Silver, with its wealthy mining interest donors, started to suck wind out of the Populist movements' sails. Hordes of small-brained Americans with no time to understand the currency system but with plenty of appetite to go and get silver-rich instantly in the western states swarmed to the bimetallic political movements. As the populist movement grew as a political movement, it faced two connected key pressures. One was that it had grown faster than the cooperative movement, which was the basis of the community, good-will, mutual aid and education of the movement. Two was that there were so many newcomers who had little understanding of the Sub-Treasury Plan and the currency system who were even rising to power in Populist party positions in states afflicted with silver-mania, or just states which had a weak cooperative movement and thus weak lecture circuit. William Allen was one such as these: ignorant on the currency question, easily swayed by the silver argument, elected Senator of Nebraska by the Populist Party movement. His ignorance extended so far that at one party convention he accused the Omaha Platform people, that is to say the educated and committed segment of the population at the convention, of being shills for Wall Street. Too many dimwitted and confused people were allowed into the party and into the positions of authority, and once they arrived there, they sabotaged the platform. In 1894, Herman Taubeneck of Illinois, the party's national chairman, announced that the time had come to ditch the 'isms and the “wild theories” of the Omaha Platform. Goodwyn refers to figures such as these as part of a “Shadow Movement” within the party, which is to say, a movement of people who were never educated, never part of the cooperatives, and often only seeking their own self-interest or the interest of the silver magnates in latching on to the party. It was clear at this point that there was a crisis within the movement. 

Populism finally died when it decided to throw its support behind William Jennings Bryan, who elected for his Vice President a banker from Maine, instead of the faithful Populist Tom Watson, whom was promised in exchange for Populist support. Bryan, like many others in the shadow movement, had no understanding of the currency system, and simply rallied against Gold because, we might speculate, it played well with the crowd. Proposals based on economic theory did not play well with crowds because first they had to be educated, and this was all part of the painstaking process of the cooperative movement. Once the Populist Party had gotten big enough to attract people without first putting them through the process of the cooperative movement, whereby they would be inculturated and indoctrinated, it stepped too quickly, it accepted the popularity too willingly, and forgot to safeguard to things that made it both rational and successful in the first place. Populists put their support behind Bryan without having any leverage to make any demands of him after his hypothetical election; they simply trusted that he would understand the importance of the issue and act on it. Ultimately he never got the opportunity, but it's safe to say he would have failed in that commitment. They were eventually able to get Tom Watson of Georgia onto the Bryan ticket but it was too little too late. The energies of the party had been expended, sacrificing their base and their principles to make enough alliances and connections to rally up one climactic burst of political power for 1896. This can largely be blamed on the ignorant “Shadow Movement” people like William Allen and Herman Taubeneck. 

It's amazing how in American history grifters and frauds are omnipresent figures in grassroots politics. I don't suppose it's much different anywhere else but the parallels in populist history and contemporary dissident right history were uncanny. I think there are number of important lessons to be learned from this tale: one is that the success of the Populist's party was based on the cooperative movement, something that gave people a life, a source of help, a source of community and education and belonging. Once Populism became larger than the cooperative, it lost its integrity and its ability to ideologically police itself, which is essential. Two, connected with the former point, is that you cannot allow the wrong people to be in charge of your organizations. Obvious I know, and yet surprisingly it happens often enough that it bears repeating. Enough of the electoral successes of Populism were based on alliances with democrats or republicans such that the foundational plank of the party started to be called into question, especially as silver became more viable politically. A movement must accept a minimum of gifts from outside parties and vet its members ruthlessly if it is to achieve its original animating goals. Third is that you cannot make deals with other parties without the leverage to force them to give what they promised. If the deal is that you pay up front and get the goods later on, don't take it. This episode I think is instructive of organizational principles in general but especially of the principle that size means nothing if the original ideology is sacrificed. In the era of Trump, many are willing to trade away the things that matter in return for the sensation that “We are winning” and these are the people that need to be discarded. Bronze Age Pervert recently said something to the effect of: “Ignore ideology. We know who we are and we know who they are; that is all that's important now, that we fight them.” I would recommend against this. 

Fun fact: Tom Watson, who was a lawyer, was approached by the Frank family of Georgia (yes, that Frank family) to defend their son in the murder case. He declined.