Lessons from America’s populist past
A DECADE HAS PASSED SINCE DONALD TRUMP WAS FIRST ELECTED PRESIDENT AND BRITAIN VOTED TO LEAVE THE EUROPEAN UNION.
While 2016 has been labelled populist Year Zero in the West, history suggests otherwise. Here, we explore past populist movements in the US to understand their causes and their consequences, and to cast light on contemporary political tides.
ALEXANDER JOHNSTONE
Assistant Fund Manager
OLDER THAN ARISTOTLE
The current political climate may feel alien to many in the West. But, as those quotations show, populism is nothing new. Rather, it has been a recurrent feature since the dawn of democracy. In the fourth century BC, Aristotle decried a form of democracy where “demagogues make the decrees of the people override the laws, by referring all things to the popular assembly.”
Despite its prevalence, the concept is notoriously difficult to define. That’s little surprise given its many guises, from authoritarian regimes in Europe via left wing governments in Latin America to various incarnations in Asia.
All have one thing in common: populist leaders claim to represent the people against the enemies of the people – whoever they may be. This theme of conflict between the people and their enemies echoes throughout US political history. While the Declaration of Independence rejected British rule, it arguably created a representative democracy dominated by another narrow elite: the economic royalists.
Here, we attempt to shed some light on contemporary political and economic forces across the West by looking at three historical populist movements within the US: Andrew Jackson’s presidency of the 1830s; the Populist Party movement in the late 19th century; and the aftermath of the Wall Street Crash in the 1930s.
“This theme of conflict between the people and their enemies echoes throughout US political history.”
LET THE PEOPLE RULE
Jacksonian democracy was the first recognisably populist movement in the US. The seventh president promoted himself as a humble frontiersman standing up to the ‘elite capture’ of politics by the East Coast political class.1
Before becoming president, Jackson championed the expansion of suffrage by eliminating property requirements for white male voters. In office, he removed swathes of federal officials he viewed as entrenched, declaring that “no one man has any more intrinsic right to official station than another.”
Most famously, Jackson vetoed the recharter of the Second Bank of the United States, a forerunner of the Federal Reserve, claiming it served the interest of “a few hundred of our own citizens, chiefly of the richest class.” Deposits were redistributed to state-chartered banks with which Jackson had relationships. These ‘pet banks’ invested heavily in infrastructure and development projects, with minimal federal oversight. The rapid expansion of credit and speculative investment contributed to the 1837 economic crash and subsequent depression, which blighted his successor’s presidency.2
True to his re-election slogan ‘Let the people rule’, Jackson extended voting rights and allowed western expansion for frontier settlers, albeit to the detriment of Native American communities. But popular rule for Jackson also meant strengthening his executive power through the presidential veto – and weakening any institutions which constrained that power.
DISRUPTIVE FORCES
The Populist Party movement – like many before and since – was a response to disruption. American farmers had suffered an agricultural depression since the 1870s, hit by two deflationary forces: mechanisation and international competition.
Immigration had been rising for decades. By 1890, nearly 15% of the population had been born outside the US, still a record high.3 Although most immigrants had come from Europe, anti-Chinese sentiment burgeoned in western states, culminating in the 1882 Chinese Exclusion Act, which suspended immigration from China for ten years.
The Populist Party’s political agenda called for direct democracy. At the time, senators were selected by state legislatures. The Populists lobbied for their election by popular vote (this was not introduced until 1913). They also campaigned for ‘initiatives and referendums’ to let citizens propose legislation and vote on issues directly (first adopted in 1898 by South Dakota).
Economically, they opposed the gold standard – where every dollar is backed by a fixed amount of gold bullion – for benefiting the elite (creditors) over the ordinary people (debtors). Instead, they campaigned for the free coinage of silver to expand the currency supply, which would generate inflation and alleviate pressure on indebted farmers.
Democrat William J Bryan emerged as the Populists’ figurehead. He was known for speeches pitting the “struggling masses” against the “idle holders of idle capital”. However, Bryan’s 1896 presidential campaign against Republican William McKinley was unsuccessful, and this populist episode ran out of steam.
THE PATRICIAN POPULIST
Populist forces reawakened after the 1929 Wall Street Crash. Inequality had increased throughout the 1920s. The crash and a string of bank failures then caused unemployment to spiral, plunging the US into a deep depression. Huey Long – the flamboyant left wing governor of Louisiana – was elected to the Senate in 1930, calling for a radical programme of redistribution.
Franklin D Roosevelt was a product of the US elite, born into a wealthy New York family that had already spawned one president. He wanted to “save our system”, not uproot it. Yet he embraced redistribution through progressive taxation and a significant increase in government spending. He also employed populist rhetoric, winning his 1932 campaign with the promise of a New Deal for “the forgotten man at the bottom of the economic pyramid.” FDR’s victory was vociferously welcomed by Senator Long.
Some of FDR’s tactics came direct from the populist playbook. He tried to increase the Supreme Court’s size so he could obtain a majority by appointing judges sympathetic to his agenda of establishing minimum wage laws. Although Roosevelt failed to expand their number, the judges eventually approved the 1938 Fair Labor Standards Act, which governs employment standards to this day.
But the New Deal was not radical enough for Long and other prominent populists. In response to their criticism, FDR introduced further reforms, including the 1935 Revenue Act, which the Republicans dubbed the ‘soak the rich’ tax.
PAST EPISODES, PRESENT PARALLELS
The causes of these historical episodes of populism resonate today: increased economic inequality; disruption caused by globalisation, migration and technological change; and perceived elite capture preventing direct democracy and economic redistribution. In addition, they share three characteristics, which may also sound familiar.
The first is rhetoric. Populists tend to use emotive language to set themselves apart from the elite and appeal directly to the electorate – often exploiting new forms of communication and media. During his campaign, Bryan took advantage of the new railway network to deliver over 600 speeches nationwide, meanwhile telegraphing the scripts to national newspapers. Roosevelt used radio ‘fireside chats’ to reach millions of US households, just as today’s populists use social media.
Secondly, populist leaders tend to espouse economic redistribution, through spending or regulation. Jackson justified his veto of the Second Bank on the grounds that a decentralised system would provide more credit to ordinary people. The Populist Party opposed the gold standard because it favoured the economic elite. Roosevelt’s policies massively increased the role of government.
Finally, populists favour direct over representative democracy, because they distrust elites and institutions. Jackson aggressively wielded the presidential veto to expand his power over Congress. The Populist Party campaigned to submit important votes to the electorate via referendums. FDR issued 3,726 executive orders over his 12 years in office, introducing some New Deal programmes without congressional approval. The current US administration is the only other in history to match FDR’s rate of issuance.4 The distrust of institutions is evident in Jackson’s use of vetoes and FDR’s attempt to reshape the Supreme Court. The parallels with the current administration’s treatment of the Federal Reserve and courts are evident.
“The issues facing Western governments today strongly resemble those during the 1930s.”
IT WAS THE BEST OF TIMES…
As we have seen, populist movements tend to signal the breakdown of the existing order. And the surge in populism in recent years clearly stems from growing distrust of the social and economic ruling consensus. Today’s populist leaders have pointed to central banks’ response to the global financial crisis, to the influence of multinational corporations on global trade rules, and to technocrats enforcing greater economic integration in Europe.
Populist agendas promise radical change. This makes social and economic outcomes more uncertain, engendering political and market volatility. However, their record on delivering effective, lasting reform is checkered. Sometimes, their efforts are counterproductive – just think of Jackson’s Second Bank veto. In its most damaging form, populism flouts restraints on its authority, merging legislative and executive powers, eroding the independence of the judiciary and restricting the freedom of expression and media.
However, populism has played a significant role in shaping the US political system – and sometimes for the better. Political commentator Henry Olsen noted in 2010 that America has “a distinct form of populism that, far from threatening to destroy the republic, has at crucial moments helped to balance and rejuvenate it.”5
Is it controversial to suggest that directly electing US Senators and Representatives was a positive step for American democracy? Or even that introducing minimum wage laws in the 1930s helped counter the Great Depression?
The issues facing Western governments today strongly resemble those during the 1930s and, to a lesser extent, the 1830s and 1890s. We would do well to learn from past populist movements to understand those of the present. ⬤
1 Acemoglu, Egorov and Sonin (2013), A Political Theory of Populism 2 richmondfed.org 3 US Census Bureau 4 presidency.ucsb.edu 5 Olsen (2010), Populism, American Style
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