March 21st, 2012

1912 = 2012; so many things change yet stay the same

These posts aren’t usually on subjects unrelated to stocks and the market but I just couldn’t resist this one.  I’m working my way through the last of Edmund Morris’ monumental biographical trilogy of Theodore Roosevelt called Colonel Roosevelt.  If you haven’t read much about our 36th president then you can’t possibly understand much about what made the world we live in today.  In many ways the two periods are nothing alike but when it came to the political, economic and international scene there are interesting similarities.

There probably aren’t many history professors and teachers assigning the following project to their pupils: “Compare the similarities and differences between 1912 and 2012” but, if I taught such a course, I certainly would.

This morning’s NYTimes business section included and article entitled “Inequality Undermines Democracy” which stated:

The gap between the rich and the rest has been much wider in the United States than in other developed nationsfor decades….. Our tolerance for a widening income gap may be ebbing, however. Since Occupy Wall Street and kindred movements highlighted the issue, the chasm between the rich and ordinary workers has become a crucial talking point in the Democratic Party’s arsenal. In a speech in Osawatomie, Kan., last December, President Obama underscored how “the rungs of the ladder of opportunity had grown farther and farther apart, and the middle class has shrunk.”

…..a growing share of Americans have lost faith in their ability to get ahead. We have accepted income inequality in the past partly because of the belief that capitalism can’t work without it. If entrepreneurs invest and workers improve their skills to improve their lot in life, a government that heavily taxed the rich to give to the poor could destroy that incentive and stymie economic growth that benefits everybody…..Evidence is mounting, however, that inequality itself is obstructing Americans’ shot at a better life.

That was written today but it could just as easily have been written 100 years ago, in 1912, when the country was going through a similar argument about social and economic equality.  At the time, it was Theodore Roosevelt who, like the Tea Party of today, was disenchanted with the way the Republican Party led by his successor, Howard Taft, was pulling the country back from his Progressive programs.  During his eight years in office he had promised more progressive (read “liberal”) reforms to come.  A battle for the nomination of the Republican Party to run against the Democrat Woodrow Wilson ensued between Taft and the “progressive” Roosevelt.

Predating Obama’s trip this year, Roosevelt traveled to Osawatomie, KS in the summer of 1910 to set the stage for that nomination battle by delivering a historic speech.  He argued that one of the central issues of the government was protection of human welfare and property rights.  That 1910 Osawatomie speech later became the basis for his 1912 break from the Republican Party and formation of his Bull Moose Progressive Party.  In it he said that human welfare was more important than property rights and that only a powerful federal government could regulate the economy and guarantee social justice.  A President can only succeed in making his economic agenda successful, he believed, if he makes the protection of human welfare his highest priority.

[Interestingly, Osawatomie might also lay claim to being the “birthplace” of the Civil War since it was where John Brown led his first anti-slavery massacre in 1856 followed by his raid at Harper’s Ferry in 1859 and the start of the Civil War in 1860.  Immediately before the Civil War, Kansas was the battleground of the effort to prevent the expansion of slavery and, in that battle, a main terminus of the underground railway for fugative slaves from the South.]

Key elements of Roosevelt’s New Democracy speech were (from Wikipedia).  It’s amazing how many of those issues are the ones still we debate today in one form or another:

  • A National Health Service to include all existing government medical agencies.
  • Social insurance to provide for the elderly, the unemployed, and the disabled.
  • Limited injunctions in strikes.
  • A minimum wage law for women.
  • An eight hour workday.
  • A federal securities commission.
  • Farm relief.
  • Workers’ compensation for work-related injuries.
  • An inheritance tax.
  • A Constitutional amendment to allow a Federal income tax.
  • Women’s suffrage.
  • Direct election of Senators.
  • Primary elections for state and federal nominations.
  • Strict limits and disclosure requirements on political campaign contributions.
  • Registration of lobbyists.
  • Recording and publication of Congressional committee proceedings.

We often incorrectly believe that the issues facing us are new and, at times, appear insurmountable.  But all we need do is, like in stock charting, to look at history and see that what is happening today follow from and follow patterns like events in the past.  If we understand that history and those patterns we are likely to make better decisions today.

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  • Mo

    Osawatomie was also the name of a publication of the Weather Underground, headed by Bill Ayres and Bernadine Dohrn, in the 1970’s.  There are those on the Right who believe it was no coincidence that Osowatomie was chosen by Obama for a speech in which he talked about “fairness” and what some would say was class warfare. Or it could just be that Obama had a moment he thought he was in the same vein as TR or wanted to milk the symbolism. 

    However, I think your point is well-taken.  In fact, there have been lines from the Admin and from its supporters that no one has ever faced crises like Obama inherited, and there was Biden’s risible line just the other day about how the plan to kill Osama was “the most audacious on 500 years”. 

    We survived the American Revolution, the burning of the White House in 1812, a horrible Civil War that killed 3/4ths of a million people and devastated over half the country.  We had other terrible economic times;  the Great Depression, of course.  The insane stagflation of the 70’s.  World War 2, the Cold War…it goes on and on.  It’s never been a piece-of-cake though we had times where things were much better than others.  I think it’s just a reflection of human nature.  Life is not easy! 

    This is a different time, though.  I know, never say “it’s different this time”, but I think we have a problem not present, say, during the Great Depression.  We had a different mentality, and it’s that inner process, the culture in which we leave, that will determine if we survive.  Has there been a time since the Civil War with a more dysfunctional Legislature? With the entitlement mentality?  With many (not all) children being taught revisionist history  in schools? 

    I’m not sure it’s the same. 

    I look at how Hollywood supported the war effort in the 40’s.  Now?  It made anti-war anti-government movie after movie, though one bombed after the other. 

    Did we think the Soviet Union would disintegrate?  It came relatively quickly and with not much warning.  We have trillions in debt and no one is doing much about it, besides talking Marxist rhetoric about “shared sacrifice” (while there is nothing wrong with shared responsiblity…I believe in charity and helping and that community makes a huge difference.  But “shared sacrifice” is code for “let’s raise taxes on the 250,000 dollar earners” and that’s ALL it is.  Utter garbage when repeated 6 times in 3 minutes by a White House adviser being interviewed on CNBC). 

    Our problems might be the same, but TR didn’t have the value of having lived through years of enforced “progressivism”.  What sounded good has not always turned out so well.  Even if some of the programs have helped…and I would argue against almost all of them, including the much-vaunted Social Security, as it is in present form…but even if they helped, can’t be paid for in the long run. 

    The Soviet Union lasted 70 years.  I don’t mean to compare it to us…we still have vestiges of a free market left.  We never went through the depravity of a full-blown totalitarianism. But Hayek was right, ultimately, there are too many facets of “progressivism” that rely on coercion and central planning and are doomed to fail;  we are on that road to serfdom.  But I would agree we still have time to change things around.  The country that brought more innovation and freedom to the world than any other in human history has to learn the lessons it once taught and lived by.  Else, we end up as a version of the failed Sov Union or more apt, Argentina. 

  • Mo

    BTW, you have been ultimately RIGHT about the direction of this market, and you’ve been right for quite a while on it.  I might not be long-run too optimistic, but that has nothing to do with the stock market timing.  You are doing a great job!