How to Revive Progressive-Era Economics for the New Gilded Age

How to Revive Progressive-Era Economics for the New Gilded Age

How to Revive Progressive-Era Economics for the New Gilded Age

How do we fight concentrations of private corporate power? By studying how they did it last time.


Since its founding in 1865, The Nation has been a home for writers instigating, reporting on and arguing about struggles for social and economic justice. We have held fast to our “Nation Ideals”— from racial justice to feminism, from a fair economy to civil liberties, from environmental sustainability to peace and disarmament—throughout our 150-year history. During our anniversary year, will highlight one Nation Ideal every month or two. We’ll celebrate by asking prominent contemporary Nation voices to read and respond to important pieces from our archive. This month we are celebrating a fair economy for all.

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The past year or so has seen an increasingly urgent debate about economic inequality. But the term itself is often used imprecisely, as shorthand for a wider array of problems. It refers most obviously to disparities of income, but also to growing divides of economic security and opportunity and to the rise of new forms of concentrated private power. From debates over net neutrality to anxiety over too-big-to-fail financial institutions, the pathologies of the current economy are not just a reflection of impersonal “market forces” unequally distributing the fruits of progress and growth. Rather, they are the products of the particular forms of private power that increasingly shape access to vital goods, services, and opportunities.

In this moment of crisis and ferment in progressive economics, we can find clues for how to understand and address the problems of economic inequality and private power by looking back at a particular moment in American history not very dissimilar to our own. A century ago, during the Progressive Era (roughly from the 1880s to the 1920s), writers in The Nation were struggling with many of the same concerns we face today: a rapidly changing economy marked by widespread dislocation and insecurity, and the rise of mega-corporations and threatening new forms of concentrated corporate power, from big financiers to railroad barons to Standard Oil. Out of this period of upheaval emerged a distinctive tradition of progressive economics, primarily focused on a deep commitment to freedom and democracy. It is this ethos that we should recover today.

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One of the overriding concerns for early-20th-century thinkers was the problem of concentrated private power, exemplified by the dominance of railroad corporations and trusts. The problem was political as well as economic: the dominance of a few individuals over critical industries gave them a dangerous degree of control over the government. In effect, private concentrations of power represented a usurpation of popular sovereignty, shifting power from the people to the economic elite.

Amos Pinchot, a prominent New York lawyer and progressive reformer who had been a key adviser to former president and Progressive Party reformer Theodore Roosevelt, expressed precisely this concern in an essay in The Nation in 1923:

We have watched the balance of power gradually shift from the hands of the public into those of an industro-financial hierarchy composed of a few hundred persons, representing our trusts, railroads, banks, and insurance companies.… We cannot accept their control of the country as either inevitable or beneficial. To change this control, to relocate power, is the paramount problem of the people of the United States.

For Pinchot—and his school of progressive reform—the problem was that these economic elites, through their control of key industries on which most individuals and businesses depended, enabled the establishment of monopoly, concentrated wealth, and reduced economic opportunity and competition. More importantly, they corrupted the political process by leveraging their wealth to purchase legislators and parties and to skew the formation of public and expert opinion in the press and in universities. As Pinchot wrote, “With its accumulated wealth, [the economic elite] takes charge of the agencies that form public opinion, and with public opinion properly manipulated, it dictates the action of the various agencies of government, thus accomplishing an undemocratic end through a seemingly democratic procedure.”

Economic inequality and concentrated wealth was thus also a frontal assault on the ideal of democracy itself. Overcoming this challenge would require more than mitigating the effects of private power through economic policies, Pinchot wrote in The Nation; it would require a reallocation of power over the economy itself:

Some time, somehow, the liberals of America must unite their forces, now engaged in a hundred separate little wars against the effects and abuses of concentrated power, and make a concerted attack upon the power itself. If they do not, they may as well acknowledge the defeat, not only of liberalism, but of democratic government as well.

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But what would such a reallocation of economic power look like? To contest the rise of such threatening concentrations of power and wealth, Progressive Era thinkers turned to government itself. For them, government offered an institutional mechanism to empower the public to engage in more stringent oversight and control of these core industries—to reclaim the sovereignty that wealth had seized.

Progressive reformers were prolific in their experimentation with new forms of state oversight and economic regulation. This was the era of the “trust-busters” like Woodrow Wilson and Teddy Roosevelt, the establishment of the Federal Trade Commission and the passage of statutes to make economic concentrations illegal. But it was also the era of widespread creation of public utilities, publicly owned or chartered corporations that were given authority over the management, production and distribution of certain necessary goods and services. From transportation to milk to finance, states and municipalities created public utilities to regulate a wide range of industries. These experiments with public oversight shared a common premise: not that industry should be state-owned as a matter of principle, but rather that industries providing basic necessities upon which many depended, and in which concentrated private control threatened equal access, ought to be regulated by public oversight as a way to ensure equal economic opportunity for all.

The explosion of public utilities in the early decades of the 20th century created a robust discourse in progressive economic circles. As Guido Marx, a Stanford University professor of mechanical engineering and leading voice among progressive-minded academics, wrote in these pages in 1931, public utilities represented a “partnership between capital and the public,” wherein the government provided support in the form of franchises in exchange for transparency, fair prices, and equal access.

While this public utility approach offered a way to restore social control through public oversight, it is worth noting that for Progressive Era thinkers public regulation was not in opposition to free enterprise and competitive markets, but rather was necessary to preserve fair competition and to ensure that the market economy remained consistent with individual and collective freedom. The appeal to public utilities was most compelling only for those industries that “by their very nature require the right of eminent domain,” Guido Marx wrote—enterprises that, in other words, controlled basic elements of the nation’s physical and economic infrastructure (such as railroads, transit, finance), and could only do so as a result of an original grant of franchise from the state itself. This grant was, in effect, “an alienation of sovereignty” that improperly conveyed to private elites the power to tax and to control access to those goods through their control over production, pricing, and distribution. Certain industries were therefore special, deserving of more aggressive public oversight, Marx thought:

All those enterprises which, dealing with essentials of modern existence, require the more or less exclusive use of the public property for their operation, and are thereby naturally sovereign in character, should be publicly owned and operated. And this because all other means of economic control for the general welfare exercised by legislatures, courts, or commissions have proved inadequate to protect the public at large—in brief the state sovereign—against the evasions, exactions, and anti-social actions of highly organized, controlling groups operating under the dominant motive of private profit.

A year later, a Yale law professor and economist named Walton H. Hamilton described in The Nation a complementary idea: a “sliding scale” that would differentiate among industries and require appropriately varying levels of public oversight depending on their public importance. Like other Progressive legal thinkers of the era, Hamilton divided the economy into three segments: industries that produce “non-essentials” and could be left to market forces; those like coal and steel that were characterized by “distinctive groups of customers”—clear segments of the population like workers, producers, and consumers—in which undue private power could be checked by organizing and empowering these groups to bargain collectively with one another; and, finally, industries like railroads and electrical power that were “linked with all the activities of the economic order” and therefore “demand large social oversight,” whether by outright public ownership or by the stringent regulation of an administrative commission.

At the far end of this sliding scale there might be industries that were so powerful and so in need of oversight that they might require outright public ownership. Indeed, many Progressive reformers experimented with the “municipalization” of key sectors like electricity production and water, thereby founding the first public utilities. But, by and large, Progressive reformers used arguments like Hamilton’s to distinguish themselves from the more radical strands of American socialism. For Progressive reformers, the central goal was accountability and oversight, but they also saw the need to balance oversight with maintaining efficiency of actual production. In practice, these thinkers saw the need to make context-specific judgments about the degree of public oversight and ownership on an industry-by-industry basis, rather than advocating outright nationalization across the board.

Yet even as Progressives separated themselves from socialists of the 1920s, the radicalism of their own solution—the public utility and oversight model—should not be understated. Consider the different configurations of private power in foundational sectors today. We might advocate for renewed public oversight over the airline industry and over Internet giants like Google or Uber. But in other sectors the balance of considerations might suggest a more aggressive attempt to create public or quasi-public utilities, as in the recent debate over Net Neutrality and the call for imposing “common carrier” obligations on telecom firms, or the push for more aggressive control over too-big-to-fail financial firms, or the movement in some states to recreate public banking to provide basic financial and public investment services. The Progressive Era ended almost a century ago, but we are still busy getting back to where they left off.

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These essays from The Nation are indicative of a broader Progressive Era approach to economics, one that is worth remembering in today’s “New Gilded Age” of economic inequality, declining opportunity, and increasing insecurity. Responding to the first Gilded Age, these Progressive Era thinkers, while quite diverse in many ways, shared a common set of commitments. They believed that inequality was not merely an economic problem to be solved but a political imbalance to correct, and they turned to the state, to the public itself, to hold private power accountable. Importantly, they saw this move not as an appeal to top-down monolithic government power, but rather as a way to restore popular sovereignty, made real through state institutions like regulatory commissions and public utilities. In other words, the goal was to restore democratic control over these private actors; the means were to create state institutions like utilities and regulatory agencies.

The precise mechanisms and institutions that emerged from this ferment were matters of great debate and divergent opinion, even among Progressives. But these commitments helped fuel a remarkable period of innovation and experimentation in economic policymaking, while creating an intellectual framework that situated policy in a broader moral commitment to democracy and equality.

Today we face a similar moment of upheaval and intellectual ferment. Economic inequality and concentrations of private power are all once again at the forefront of national debate. We cannot overcome these challenges by rote application of Progressive Era policies. But we can draw from this earlier ethos a moral vision and experimentalist ethos. Building a progressive economy today will require more than just a narrow focus on economic growth and income. It will require the rebuilding of a moral critique of private power, a constructive commitment to democratic values and the creativity to experiment to make these values real.

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