From Laissez-Faire to Interventionaism and the Positive State

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					             Transition from Classical Liberalism to Corporate-Liberalism 2

Excerpted from: Kenneth M. Dolbeare and Michael S. Cummings, “Introduction: Key
Concepts in American Political Thought,” in Dolbeare and Cummings, eds. American
Political Thought (Washington,, DC: Congressional Quarterly Press, 2004) pp. 324-327.

The many calls for specific reforms made by muckrakers and other Progressive elements
merged with the fear of the much smaller anarchist and socialist movements to generate
significant momentum for the ideas that some forms of change were necessary and
desirable. But the scope of change and its enduring implications for the rise of an
interventionist government (ultimately, the “positive” or purposeful as well as powerful
state) would probably not have occurred had it not been for the active cooperation of the
largest corporations and banks. In a painstakingly documented study of this period,
historian Gabriel Kolko has shown how the needs of corporations and banks for
economic stability, an end to destructive competition, and a greater voice in
governmental policy led to support for a number of the regulatory reforms passed by
Theodore Roosevelt and Woodrow Wilson administrations. The role of these elite
groups was obscured at the time, of course, by the loud opposition mounted by smaller,
localized businesses and other defenders of the status quo.

Pressures for some kind of reform that would give the national government power to
manage parts of the private economy thus emanated from many sources. But such
national public policies would clearly have violated the long-established principle of
laissez-faire, reaffirmed so decisively only as recently as 1896 and 1900. Pragmatic
American policymakers would probably have gone ahead in any event, but the “New
Nationalism” of Roosevelt and the “New Freedom” of Wilson both received their
ideological justification from the publication in 1909 of Herbert Croly’s The Promise of
American Life. Roosevelt’s debt was explicit and acknowledged. Wilson’s was clearer in
practice than in rhetoric. What Croly caught and expressed was what was “in the air” at
the time. His actual impact is less important than the way in which his work symbolizes
the change taking place in liberalism during this era.

Croly’s problem was that of early twentieth-century liberalism and in some respects of
liberalism today: can a system resting on individualism, contract, and property rights act
purposefully and comprehensively enough to control excesses in the use of great
accumulations of private economic power or to alleviate other social ills? Those key
values tend to hold governmental action to interstitial, limited policies in cases where it
is shown to be absolutely necessary. But would it not then be timely and suffieicient to
do more than temporarily patch up the most extreme dislocations to attack the
fundamental causes to prevent them from generating greater problems that existed. Croly
argued, would run aground against the residue of Jeffersonian individualism and limited
government. Thus liberalism was boxed in between problematic conditions, on the one
hand, and a self-limiting set of inhibitions against use of government, on the other.

Croly’s solution was an explicit synthesis of the traditional Hamiltonian and Jeffersonian
positions. He shared Hamilton’s willingness to assume responsibility for achieving

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             Transition from Classical Liberalism to Corporate-Liberalism 2

specific goals through the use of government, and he converted Hamilton’s purposes into
the broader one of a prosperous economy managed by an intelligent and public-spirited
government. But he also endorsed Jefferson’s concern for the individual’s attainment
and for the general social and economic betterment of all members of the society. Croly
proposed to harmonize these two sets of goals through the deliberate employment of
government as the agent of the people for the purpose of realizing a “morally and socially
desirable distribution of wealth.” This proposal meant that the long-range goals would be
defined and basic policy directions set through popular decision-making processes; then
public officials would use the posers of government in whatever ways necessary to
accomplish those ends. It also emphatically meant the end of limited government and
laissez-faire inhibitions on the part of the government. Croly was convinced that the
conditions in the economy were such as to make concentration of capital and certain
monopolies inevitable, desirable , and efficient; for him the point was not to break them
up but to enable them to be managed for maximum public benefit. He believed that
continued individual self-serving in the context of the time would create intolerable
conditions in which disparities of wealth and opportunity would destroy all sense of
community and all hope for widespread realization of the American promise. He saw his
proposals as uniting the nationalist vision f Hamilton with the democratic commitment of
Jefferson to raise the possibility of a new era of social and economic achievement.

Croly’s argument gave liberalism a new rationale for the interventionist use of
government but preserved liberalism’s individualist core, its commitment to property
rights, and its other traditional goals of individual freedom and equality. In so doing, he
set of a debate that continues to this day between 1890’s-style liberals, who insist on
lasses-faire and limited government (and are sometimes called conservatives for that
reason), and modern, or “welfare,” liberals, who in their desire to use government to
manage the economy and serve other social goals, have supported repeated and sustained
governmental interventions, Both sides, of course, retain commitments to individualism,
property, freedom, and equality in this context.

What makes Croly so fascinating as a watershed figure in American political thought is
the uneasy compromise contained within his synthesis. The Jeffersonian side would
preserve the democratic emphasis on government’s managing the economy in the public
interest. It is this side that has gioven the Progressive Era the image of being a period of
democratic reform and that has led to understanding the American system as one of
welfare liberalism, in which the needs of individuals are served by their democratically
controlled government, But the Hamiltonian side would emphasize government serving
different ends-those of business and finance, or corporate-liberalism. From this side,
today’s corporations and banks would in time have gained dominating influence over the
action of the national government, particularly those of the executive branch, and the idea
of democratic control would have been a convenient umbrella under which they could
work their private will.

Is Croly a modern liberal or a contemporary Hamiltonian conservative? Probably he is
some of each. In his day, and in most subsequent understanding, he was viewed as the
father of modern liberalism. But inherent in the structures and priorities that he helped to

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             Transition from Classical Liberalism to Corporate-Liberalism 2

justify are tendencies toward the few using power at the expense of the many. These
tendencies are present in Croly, as they are in the new liberalism he helped to evolve, and
it is the actions-in-context of the subsequent thinkers and policymakers that have (or will
have) determined the eventual outcome.

Which side of Croly’s synthesis would come to dominate in later years? Clearly these
has been another, modern round in the struggle between Jefferson and Hamilton, one
profoundly influenced by the increasing scale of organization and by the demands that
international responsibilities and domestic crises have placed on the political economy.
In the crucial implementing years of the new liberalism-during the Wilson and Franklin
Roosevelt administrations-war and depression played no small part. In both cases the
tradition and rhetoric were Jeffersonian. The practice was reformist but sensitive to the
needs of business and open to its participation. A case can certainly be made that the
consequences more often than not were Hamiltonian.

The practical implementation of Croly’s philosophical synthesis of Hamilton and
Jefferson and revision of liberalism occurred in the political programs of the following
two decades, which built the positive state and shaped the remainder of the twentieth
century. Woodrow Wilson was as good a Progressive as Theodore Roosevelt, and
Franklin Roosevelt was the best of them all. The rhetoric of Jefferson and the practice of
Hamilton live on today as a result.

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