Fusion Populists

The modern GOP is full of populists, but they have some important differences from their historical predecessors

Mary Lease once said that farmers “should raise more hell and less corn.” And, to paraphrase the great President Ronald Reagan, I did not hear her say that in person.

Much is made of the new GOP “populism,” which indeed has many elements of the 1800s populist movement in its DNA. Who could forget William Jennings Bryant’s “Cross of Gold” speech, or figures such as Lease or Big Bill Hayward?

But it is historically inaccurate to compare modern Republican populists to the party of the 1800s. First and foremost, the populists of the late 1800s—-who eventually formed the Populist Party and fielded a presidential candidate in 1892 and which came out of the Farmers’ Alliance—-above all favored two main policies, both focused on farmers. First, they wanted inflation. This is key: the chief gripe of the farmers after the Civil War was that due to a long-term, worldwide deflation, Their mortgages were becoming more and more expensive in real dollars. A farmer who borrowed $1000 for a farm found he would be paying back $1200 or more even after interest. And falling prices meant his crops brought less at market. Sure his seed and implements cost less, but that dang mortgage bill was the stickler.

America’s banking system was not set up to help. Due to the National Bank and Currency Act, small private “state” bankers—-who, prior to the 1863 could print their own money (yes, you heard that right: banks prior to 1863 could print their own currency backed by gold or silver)—-were driven out of business by a 10% tax on all bank notes that didn’t come from “National” banks (i.e., banks chartered by the federal government.

In theory, “National Bank Notes” were to fill the void, but they didn’t. There simply weren’t enough national banks to print enough currency and they had to always buy bonds from Uncle Sam to back the money (instead of gold or silver). This resulted in a 30-year shortage of money. “There’s no money in Kansas” exclaimed one newspaper of the day. It’s interesting there was not a shortage of banks, but a shortage of banks that had the authority to print money.

And this shortage was worst in the South and West. Hence, the Farmers’ Alliance and then the Populists clamored for inflation. First they supported several “Greenback” laws that would have just had the federal gubment print more Civil War era “Greenbacks” that were not backed by gold or silver. However, they were legal tender, meaning businesses and vendors had to accept them in payment for goods and services. (It says so right on the money).

The Greenback bills never passed. So the populists, even prior to the party, began to support “free silver.” American silver miners had been finding rich new silver veins and shipping the metal to the Comptroller of the Currency to be minted. But the United States was on a gold standard. The only real denominator was an ounce of gold. Everything else was valued in terms of gold, including silver which was set at 16 ounces of silver for one ounce of gold (“16:1”). The problem arose when silver began to stream in a much higher rates, almost 17:1. Of course, the gubment only accepted silver at what it was really worth, 17 ounces to “buy” one ounce of gold.

Here is where the populists veered way off to the left. They wanted more silver to be minted into coins (fine) but they tried to force the gubment to artificially keep the price of silver high—-at 16:1. Again, they wanted to have one silver dollar left over after a purchase of a gold dollar for 16 silver dollars. They wanted inflation.

Republicans of the day ran on “hard money.” The GOP was the party of business, and business hated inflation. Back then, it was harder to simply pass along the added inflationary “hit.”

The whole silver movement came to a head with arguably the worst single law in American history, the Sherman Silver Purchase Act (named for Ohio Republican John Sherman), in which the gubment promised to buy all the available mined silver, but instead of paying 16:1, as is typical, the gubment engaged in a half-assed move: it would pay 16 1/2: 1. This satisfied neither the “hard money” businessmen who wanted no change (i.e., 17:1), nor the “Free and unlimited silver at 16:1” crowd.

What the Sherman Silver Purchase Act did do was create a massive dysfunction in the markets. Any speculator worth his salt could grab 17 silver coins, turn them in for a gold dollar, and have $.50 left over.

EVERY. SINGLE. TIME.

Foreign arbitragers and domestic speculators flooded the exchanges with silver. Silver flowed into the U.S., but gold flowed out in massive quantities. Why was this a problem? Because the United States of America ONLY had gold as a “reserve currency,” not silver! Banks teetered on collapse within weeks. Meanwhile, silver’s price crashed, from $1.16 per ounce when the Act was passed to just $.60 in 1894. Typically, the government had screwed up with a half-measure and brought on a recession. Congress hustled to repeal the Sherman Silver Purchase Act, but the gold reserves were so badly damaged that it took a massive private loan from banker J.P. Morgan to literally save the country.

Put another way, in 1894 the banks bailed out the gubment.

The final dance in this money minuet came in 1896 when William Jennings Bryan, running as a Democrat (not a Populist) lost to “hard-money” William McKinley.

*****

Another key difference between populists then and now was that the populists then trusted the government. They petitioned both state and federal governments to not only control the rates set by railroads and grain elevators, but actually sought government ownership of them. These objectives found a much more sympathetic ear among the “Progressive” Republicans such as Theodore Roosevelt and William Howard Taft, who engaged in massive trust-busting, rate-setting, and business bashing. There is no question the monopolies of the day were no longer competitive, but the regulations (such as another law from our old pal Sherman, the Antitrust Act) were so horribly worded that literally a business could be in violation of the law for cutting prices too much (“predatory pricing”), too little (“price gouging”), or keeping them the same as other competitors (“collusion”). The Supreme Court finally threw up its hands trying to actually define what constituted a violation of “in restraint of trade” and applied the labels “good trust/bad trust” big business.

Oh, and this irony? The Court, seeking to reduce the power of “trusts,” actually increased the overall power of big business by prompting companies to abandon the trust model created by John D. Rockefeller and to instead adopt a “vertical combination” wherein a business bought up all elements of the production process so it controlled its product from beginning to end.

*****

So where does that leave modern “populist” Republicans? Unlike their predecessors, they are strong opponents of easy money and inflation. Indeed, some of the more famous such as Ron Paul ardently advocated a return to the gold standard, which someone such as William McKinley would have cheered. If anything, modern populists are the absolute enemy of loose money, whether it involves “student loan forgiveness” or calls to “audit the Fed.”

Modern Republican populists are a little more divided on the issue of regulation of big business. The free-market wing prefers no regulation at all, but those arguments are crumbling as it is shown that there is simply no way for a new competitor to challenge a Microsoft, a Google, or a Facebook, let alone so-called “news” outlets such as NBC, MSNBC, or MSN. There is a growing, perhaps majority view now that populist-style regulation is necessary. The problem however, is that few modern Republicans trust the gubment to do it right.

*****

In areas such as involvement in foreign wars, however, the new populist Republicans are much more in tune with their ancestors. This presents a major point of division between traditional Cold War Republicans and the newer breed that sees Bretton Woods and its worldwide market protected by the U.S. Navy has come to an end. These new “Fusion Populists” have therefore eliminated one of the worst, most socialist elements of the populists (their affinity for inflation via gubment money), resurrected their concerns about the need for regulation of big business, and started to don their anti-war robes. It may well be the winning coalition of issues that propels the Republicans for the next 30 years.

Larry Schweikart

Rock drummer

Film maker

NYTimes #1 bestselling author

Political pundit

For even more truth-based current events, politics, and history content + resources, check out my VIP membership below

https://www.wildworldofhistory.com/vip