Apart from revolution, what do George Washington, John Adams, Thomas Jefferson, Alexander Hamilton and many other Founding Fathers have in common? They were all opposed to great concentrations of wealth. This is why they championed policies that would build America's middle-class while moderating excessive wealth accumulation that threatened the democratic spirit. The goal - in the words of James Madison - was to "reduce extreme wealth towards a state of mediocrity, and raise indigents towards a state of comfort."
To build America's middle-class they had to make sure that if people worked hard the fruits of their labor would not be gobbled up by some new kind of aristocratic or feudal lord. A strong middle-class was viewed as essential for a strong democracy, which meant that public schools, public libraries, public roads, and public land would be made available to those who were simply looking for a chance.
The stagnant but noble airs of aristocracy in Europe would be replaced with the dynamic and aggressive environment inspired by opportunity for all in America (to be sure, slaves and women would have to wait, but that's another story).
How would the Founding Fathers go about creating opportunity for all in their new society? They and their successors would make land available, create a progressive tax systems (especially taxing unproductive and stagnant wealth), and set the framework for public policies that would build a strong middle class.
PUBLIC POLICIES GUIDE THE INVISIBLE HAND: The specter of European feudalism haunted the Founding Fathers so much they enacted Land Ordinance laws that made land available in smaller tracts and on favorable terms. The idea was that if the people who worked the land could own it that American democracy would be strengthened by those who had a stake in the system. As Hernan de Soto wrote in The Mystery of Capital, instead of using land to preserve an old economic order the Founding Fathers would use land policies "as a tool for creating a new one."
PROGRESSIVE TAXES: The Founding Fathers understood that the great inequalities that existed in Europe were the result of inherited wealth, hereditary political power, aristocratic land transfers, and the unequal treatment of market players who were forced to operate in an abusive mercantile economic system. Feudal land rights and the lives of protected leisure were viewed as corrosive to the larger goals of America. Because concentrated power was seen as incompatible with the new ideals of the American experience the Founding Fathers pushed for a progressive tax system that would discourage stagnant and unproductive wealth.
HOW TO TAX THE RICH: Adam Smith, the intellectual godfather of modern capitalism, believed that extra tolls should be charged on luxury carriages using roads or crossing bridges. Why? Smith believed "the indolence and vanity" of the rich should be made to pay larger societal goals. As well, as I pointed out in my book, James Madison saw a problem with moneyed interests dividing society and advocated the "regulation of these various and interfering interests." Regulating divisive commercial interests, rather than a free hand to do as they pleased, was viewed as the key to maintaining balance and opportunities in America.
Put another way, invisible hands and market players alone did not build America.
Indeed, an interventionist state is what helped give America its first vibrant middle-class, the yeoman farmer. The blue-collar working class built around state supported industrialization, and a service class built around social wage earners in the post-war era, were the next two great middle-classes of America.
And none of this was an accident.
As David Cay Johnston tells us the Founding Fathers were adamant about making sure that the moral justification of capitalism (if you work hard you will have the chance to get ahead) would be built around removing obstacles and creating opportunities for those on the lower rungs of society. Perhaps more importantly, the Founding Fathers were clear that if the state was going to make great wealth creation possible (and it has) that the state had a right to tax and redistribute that wealth so others could also have a shot at the American Dream.
Specifically, David Cay Johnston reminds us that George Washington wrote that those who were frugal and industrious would find opportunities in America. But he was equally convinced that America would:
"not be less advantageous to the happiness of the lowest class of people, because of the equal distribution of property."The second president, John Adams feared both monopoly and a business class born out of inequality. He believed this would create a system of subordination where "the rich and the proud" would wield political and economic power that would:
"destroy all the equality and liberty, with the consent and acclamations of the people themselves."James Madison, the primary author of the Constitution saw inequality as an evil too, and believed that government should work to prevent:
"an immoderate, and especially unmerited, accumulation of riches."Madison would later write that the goal of government was not to help the rich and powerful (a sentiment embraced by Adam Smith, who loathed the idea of the state helping those with resources). Writing later in life, when he was pessimistic about America's ability to survive, Madison wrote that government should work "for the greatest happiness of the greatest number."
The Founding Fathers understood that democracy would become lifeless if economic inequality grew to the point that strong moneyed interests could strangle the life out of political equality. They believed that the job of the state was to remove the obstacles that had stifled opportunity in the old world. This is what inspired U.S. presidents from Abraham Lincoln through FDR.
Put another way, what we're seeing today in America - especially with growing inequality and excessive favorable legislation for Wall Street - is not what the Founding Fathers had in mind.
- Mark
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