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Paul Krugman’s Intellectual Great-Grandfather

Thursday, May 31, 2012

You’ve probably never heard of Walter Weyl, but he invented the role of liberal economics popularizer. His literary descendants include Stuart Chase, John Kenneth Galbraith, Paul Samuelson, and Paul Krugman.

Consider these arguments: The richest 1 percent of Americans are getting richer and more powerful every year. The 1 percent dominates the economy in an unhealthy way. The only way to solve this problem of increasing income inequality is to tax and redistribute the incomes of the rich in ways that benefit the national interest and not just the privileged few.

Is this a summary of a recent column by Paul Krugman? No. Substitute “the plutocracy” for “the 1 percent,” and you’ll accurately describe the ideas of Walter Weyl, the most important Progressive thinker you’ve never heard of.

Walter Weyl was Paul Krugman’s intellectual great-grandfather. He invented the role of liberal economics popularizer. His literary descendants include Stuart Chase, John Kenneth Galbraith, Paul Samuelson, and Paul Krugman.

This year is the centennial of Weyl’s major work, The New Democracy. Weyl’s book is long out of print, but the arguments he advanced against the wealthy and in favor of a larger, more intrusive state are still being used today, even if the people who make these arguments have forgotten their creator.

His solution to what he saw as wasteful consumer spending was to have government regulate consumption as well as production.

Walter Weyl was born in Philadelphia in 1873. His friends and family remembered him as someone who was quiet, polite, and very intelligent. He entered Philadelphia’s Central High School at 13 and did so well that the school’s principal exercised a rarely used power and awarded Weyl a high school diploma that was also a bachelor’s degree from the University of Pennsylvania. In fact, Weyl went straight from high school to graduate work at the Wharton School.

Weyl spent a few years on fellowships in Germany. He was so thrifty that he came back to America having spent his grant money down to the last quarter, which he used for a shave and a tip. He graduated from Wharton with a Ph.D. in 1897, and spent the next decade trying to figure out what to do with his life. He worked for a year at the Treasury Department churning out economic reports, but found that boring, and quit the government.

Weyl then became a political organizer, and spent a year ghostwriting a book for United Mine Workers President John Mitchell. The book, Organized Labor, was published in 1903, and foreshadowed many of the arguments Weyl later made in The New Democracy.

In 1906, Weyl had a brief encounter with fame as one of the organizers for a dinner honoring author Maxim Gorky, who was in the United States raising money for Russian communists. The dinner featured many eminent Americans, most notably Mark Twain. (Twain wasn’t a socialist, but the socialists liked him for his eminence and because Twain loved to question authority.) One attendee, top Hearst editorial writer Arthur Brisbane, was so moved by Gorky’s speech that he spent the evening dictating an editorial urging his readers to back the Bolsheviks.

In Weyl’s telling, this conspicuous consumption generated fear and envy in the middle class, who wasted their money on products they didn’t need and couldn’t afford.

In 1907, Weyl married Bertha Poole and settled on a small farm in Woodstock, New York. He began to turn out article after article on economic and social issues. For The Outlook, Weyl wrote a series of fictionalized portraits of immigrants, as a way of illustrating the problems newcomers to America faced. For The Atlantic Monthly and the North American Review, Weyl warned about the declining French birth rate, fretting that it was dropping so dramatically that France would become depopulated unless it were to admit more immigrants.

In 1911, relatives of Weyl’s wife set up a trust fund to enable Weyl to write a book without laboring under the uncertainty of a freelancer’s fluctuating income. This money enabled Weyl to finish The New Democracy, which he published in 1912.

The villains of Weyl’s book are what we would call “the 1 percent” and he called “the plutocracy.” The plutocrats, Weyl believed, were largely responsible for the problems of our country. They controlled the government through the use of their wealth to control political campaigns. The rich also manipulated the press through their advertising dollars and because they controlled the newspaper chains that increasingly dominated the American media.

The rich also dominated the lower classes through their lavish spending on luxury products (strawberries in January! French chauffeurs!) that were far beyond the means of the middle class. In Weyl’s telling, this conspicuous consumption generated fear and envy in the middle class, who wasted their money on products they didn’t need and couldn’t afford. As a result, the typical middle-class worker felt like a failure because he would never make as much money as Andrew Carnegie or John D. Rockefeller.

“Our over-moneyed neighbors cause a relative deflation of our personalities,” Weyl wrote. “A two-thousand-dollar-a-year man need not spend like a Gould or a Guggenheim. Everywhere, however, we meet the millionaire’s good and evil works, and we seem to resent the one as much as the other. Our jogging horses are passed by their high-power automobiles. We are obliged to take their dust.”

But Weyl recognized that small purchases by tens of millions of middle-class Americans fueled economic growth. Compare the lives of the average American of 1911 with that of his parents or grandparents, Weyl wrote, and you’ll find a vast increase in the amount of stuff in the typical home. “Nowhere in the world is there so lavish (and often misdirected and perverse) an expenditure upon clothing, food, furniture, etc. as in the United States today. The enormous expansion in the use of electric cars, telephones, tobacco, beer, coffee, sugar, fresh fruits, fresh vegetables, canned goods, etc., indicates this change.”

Weyl recognized that small purchases by tens of millions of middle-class Americans fueled economic growth.

Moreover, Weyl understood that steadily rising incomes meant that most members of the middle class could afford small luxuries that made their lives better than their ancestors. Over 3.5 million Americans had telephones, for example: “one connection for every family in the United States. Street car riding for pleasure, city pleasure parks, summer vacations, the purchase of books, newspapers, and magazines, the enormous extension of the five-cent cigar, the democratization of watches, bicycles, cameras, carpets, etc. signify a change within the last half a century of the farthest reaching proportions.”

Weyl believed that such steady economic growth proved that Karl Marx, who famously predicted that capitalists would force workers to accept lower and lower wages until the revolution came, was wrong. Weyl thought Marxists were “absolute socialists” who believed in an “essentially religious” doctrine that taught “the vicarious atonement of all our economic sins by one class that bears the cross … It (Marxism) proclaimed a heaven on earth as opposed to a present hell. It presented to its believers a choice as absolute as that between good and evil, thus saving them the intolerable travail of an appraisal of reforms and half measures.”

But what Weyl wanted was what the Marxists wanted—an economy dominated by a strong and growing federal government. The one difference was that Weyl preferred—at the moment—to leave small businesses alone. “The goal of the democracy is a maximum of control with a minimum of regulation,” Weyl wrote. That meant severely regulating or nationalizing big businesses while leaving little ones comparatively free.

Weyl argued that the best way to establish government dominance of the economy was through gradual measures. Small steps in growing government, he argued, would ultimately result in a giant leap in state power. Going to owners of coal mines with the offer of a “merely nominal tax” on coal would ultimately result in the federal government dominating the energy industry. “A minimum tax on inheritances,” Weyl added, “contains the germ of a definite prohibition of insanely large accumulations.” The goal for socialists, Weyl wrote, “is progress step by step. It is progress by indirection. It is a successful flank attack, instead of a brave, but suicidal, frontal attack.”

Many of Weyl’s goals were ultimately achieved, such as tighter regulation of foods and drugs, and the establishment of national insurance “against sickness, accident, and invalidity,” which the next generation divided into unemployment insurance and Social Security.

What Weyl wanted was what the Marxists wanted—an economy dominated by a strong and growing federal government. The one difference was that Weyl preferred—at the moment—to leave small businesses alone.

In at least one case, future generations adopted Weyl’s methods. He called on the courts to interpret Article 1, Section 8 of the Constitution, which gives Congress the power “to pay the debts and provide for the common defense and general welfare of the United States,” as giving Congress unlimited power (instead of just the power to tax). A generation later, New Deal judges agreed with Weyl’s expansive interpretation of the General Welfare Clause, most notably in Helvering v. Davis, the case that determined that the Social Security Act was constitutional.

But other goals of Weyl’s were ignored. He wanted to criminalize early death, calling for mandatory inquests of anyone who died before age 60. His solution to what he saw as wasteful consumer spending was to have government regulate consumption as well as production. “There are women who are heterodox in religion, politics, and cooking, who nonetheless dare not wear a small hat when other women wear their hats large.” In Weyl’s world, women would only wear the hats that bureaucrats would allow them to buy.

Walter Weyl’s case for an endlessly expanding welfare state would be refined and developed by successive generations of writers. But the economic case for big government was first made in The New Democracy—a forgotten work that, on its centennial, should become better known.

Martin Morse Wooster, a former editor of The Wilson Quarterly and The American Enterprise, is writing a history of America between 1910-14.

FURTHER READING: Nick Schulz reveals “How the Progressives Almost Killed Football.” Michael M. Rosen says “Pity the Progressive.” Andrew G. Biggs asks “Is Social Security Middle-Class Welfare?” and “Can the Middle Class be Rebuilt?” Aparna Mathur explains “How Taxing the Rich Harms the Middle Class.” Bruce D. Meyer and James X. Sullivan discuss “The Material Well-Being of the Poor and Middle Class Since 1980.”

Image by Darren Wamboldt / Bergman Group

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