Four years later Al Smith easily won the nomination on the first ballot—but the old antagonisms resurfaced almost immediately. One Tennessee Democrat wrote to McAdoo that Smith planned to appeal “to the aliens, who feel that the older America, the America of Anglo-Saxon stock, is a hateful thing which must be overturned and humiliated; to the northern negroes, who lust for social equality and racial dominance; to the Catholics who have been made to believe that they are entitled to the White House, and to the Jews who likewise are to be instilled with the feeling that this is the time for God’s chosen people to chastise America yesteryear.” During the campaign the Ku Klux Klan stirred up anti-Catholic sentiment—Smith could see crosses burning as his train crossed Oklahoma. In an era when the South was normally solidly Democratic, Smith lost all the border states and five states of the old Confederacy.[10]
In short, during the Long Gilded Age—as in today’s America—cultural and racial divisions among those with shared common economic interests prevented the emergence of an effective political challenge to extreme economic inequality. The difference between then and now was that the divisions of the Long Gilded Age were significantly more extreme than they are today. At the same time there were fewer people, even among political leaders, with the vision to see beyond them. This, in turn, brings us to another feature of the Long Gilded Age: the intellectual dominance of conservative, antigovernment ideology.
The January 7, 1923, edition of the New York Times ran a special article under the banner headline GROWING NATIONAL TAX BURDENS AS MENACE TO NATIONAL WELFARE. The blurb continued, “Rates of Increase in Countries World Over Shown—Federal Taxes Per Capita in United States Six Times as High as Before War—Public Expenditures Big Jump.” The article conceded that most of the spending increase of the previous decade had been the result of World War I, but it warned ominously that “when the roaring of the guns ceased public expenditure still continued on a high scale. The result has been that heavy tax burdens remain an enormous drain on the resources of nations.” Notably, the piece was presented not as opinion but as news; it presented the results of a study by the National Industrial Conference Board on the evils of excessive taxation, with no suggestion that anyone might disagree with the study’s conclusion.
The reality behind the headline, by the way, was a rise in federal spending from 2 percent of GNP before the war to 4.7 percent afterward. Most of this increase was war related: even after the “roaring of the guns ceased,” there was wartime debt to be serviced and veterans’ benefits to be paid. Non-war-related spending had indeed risen, but only from 0.6 percent of GNP before the war to 0.9 percent afterward. And by the late 1920s, after a decade of renewed Republican political dominance, non-war-related spending as a percentage of GNP was back down almost to prewar levels.[11]
Today liberals complain about the success of movement conservatives in turning antigovernment ideology into conventional wisdom. This book will contain a fair amount of that kind of complaining in later chapters. In the Long Gilded Age, however, the tyranny of antigovernment ideology was far worse, and closer to the desired results of today’s conservative propagandists. It was an era in which respectable opinion simply assumed, as a matter of course, that taxation had devastating economic effects, that any effort to mitigate poverty and inequality was highly irresponsible, and that anyone who suggested that unmitigated capitalism was unjust and could be improved was a dangerous radical, contaminated by European ideas.
We shouldn’t ignore the fact that there were a fair number of genuinely dangerous radicals around. In particular there were surely far more communists and anarchists in America during the Long Gilded Age, particularly after the Russian Revolution, than there are today. There weren’t enough to make a revolution, but there were enough to give conservatives yet another stick with which to beat back reform. In 1919, after a bomb exploded in front of the home of A. Mitchell Palmer, the attorney general, the U.S. government began the infamous Palmer raids, arresting thousands suspected of radical activity. Like the paranoia that gripped the nation for a while after 9/11, the Red Scare after World War I had the incidental effect of discrediting or intimidating ordinary liberals, people who believed that capitalism could be made more just without being abolished. And there were few enough of those in any case.
This was a peculiarly American blind spot. As early as 1881 Bismarck described the rationale for what we would now call a welfare state, which he saw as a way to pacify the lower classes and secure the kaiser’s rule. The government, he said, “should cultivate the view also among the propertyless classes of the population, those who are the most numerous and the least educated, that the state is not only an institution of necessity but also one of welfare. By recognizable and direct advantages they must be led to look upon the state not as an agency devised solely for the protection of the better-situated classes of society but also as one serving their needs and interests.”[12] With Bismarck’s Germany leading the way, Europeans had begun to develop New Deal–like policies well before the U.S. political system was prepared to contemplate anything of the sort. In particular, Britain introduced a limited old-age insurance system in 1908 and a health insurance system in 1911.[13] Before World War I, Britain, Germany, and France—which developed its own distinctive early welfare state—were spending more on social programs, as a share of GDP, than the United States would until the late 1930s.
But in the United States the gospel of free enterprise remained dominant, so much so that it was one more factor crippling the Democratic Party. Al Smith’s defeat in 1928 owed a lot to bigotry. But the populists in his party had another big reason to be disillusioned: Smith’s first act after being nominated was, in effect, to declare his fealty to the ruling economic ideology. He chose as his campaign manager John J. Raskob, a Republican industrialist whose only apparent point of agreement with liberals was his opposition to Prohibition, and appointed four more millionaires to top campaign positions. During the campaign Smith actually tried to win business support by portraying Herbert Hoover as someone dangerously inclined to impose government regulations on business. In effect Smith ran as a Bourbon Democrat. Like earlier Bourbons he was financially competitive: The Democrats spent $5.3 million, compared with $6.3 million for the Republicans. But with nothing distinctive to offer, Smith suffered a crushing defeat.[14]
Smith receded further into conservative dogma as the years went by. In his doomed attempt to gain the 1932 Democratic nomination, he was the voice of business, the opponent of change and reform. H. L. Mencken, characteristically, summed it up most pithily: “His association with the rich has apparently wobbled him and changed him. He has become a golf player.”[15]
11.
Jacob Metzer, “How New Was the New Era? The Public Sector in the 1920s,”
12.
Quoted in David Khoudour-Casteras, “The Impact of Bismarck’s Social Legislation on German Emigration Before World War I” (photocopy, University of California, Berkeley, 2004).
13.
David M. Cutler and Richard Johnson, “The Birth and Growth of the Social-Insurance State: Explaining Old-age and Medical Insurance Across Countries,”