The fascinating historical roots of the “Bailout” package

by Myles Spicer, 10/3/08 • Those who are interested in American history can find some incredibly fascinating roots imbedded in the “bailout” (or so called “recovery”) package now bumping through Congress. Roots which have historical significance in so many different, but relevant ways.

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On one hand we have the powerful concept of American’s feelings about self reliance. Ever since Ralph Waldo Emerson wrote his famous thesis by the same name, Americans like to think of themselves having that independent quality. Thus, the response of the conservative Republicans who oppose the bailout on these grounds, along with their corollary of a free market system that tells us “leave the market alone, and it will right itself.” In short…stay out of our business.

Extending this idea are the many historians who have written about the settling of the West in America, and the strong strain of individualism it engendered.
Also, the deep distrust of government in general likely going back to colonial times. Again, the idea of self reliance…rugged lifestyle…self protection…laissez faire…stay out of our business. (As an interesting aside, this is where the McCain/Palin theme of “Mavericks” is rooted.) It has been a strong influence in American history, though it conveniently ignores the fact that a lot of the West was settled by the Federal Homestead Act which gave the settlers land for pennies on the acre; defended them with Federal troops when needed; and later built Federal roads, dams and reclamation to help them manage. Nevertheless, the tradition has raised its head again in the bailout negotiations. Stay out of our business; stay out of our lives.

Liberals, on the other hand, have historical references to point to in support of their position to add more benefits to the “victims” (my term) of the financial fiasco as opposed to the corporations. In regard to property rights versus individual rights, certainly Thomas Jefferson would be their leading advocate. Among Jefferson’s more famous quotes on the subject was this:

“Societies that gave undue emphasis to protection of property could infringe on the peoples’ rights of life, liberty, and happiness”. According to Jefferson: “Whenever there is, in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so extended as to violate.”

And Benjamin Franklin who noted: ”Hence, the public has the rights of regulating Descents, and all other Conveyances of Property, and even of limiting the quantity and uses of it. All the property that is necessary to a man is his natural Right, which none may justly deprive him of, but all Property superfluous to such Purposes is the property of the Public who, by their Laws have created it and who may, by other Laws dispose of it.”

Thus, the Democrats, who have less compunction in allowing government to regulate commerce, seem to allow themselves to support a plan that rewards corporate America, so long as it benefits the “people” as well. A much easier philosophical leap for them (as evidenced by their proportionate votes).

Another historical force involved in the bailout package is the traditional American suspicion of East Coast financiers. Again, going to the settling of the West, as Americans developed new lands, they became increasingly suspicious – indeed hostile – to those East coast elite who benefited richly from financial manipulations. And while some of this resentment was geographical (again West vs. East), some was based on the increasing mal-distribution of wealth in the country; ending with the super-rich financial barons of the late 19th and early 20th centuries. This resentment was not hard to fire up – it actually had roots in the “moneychangers” in the Bible. So…we see it again today in the language of the bailout with constant references to: “Greedy Wall Street Executives”. Ironically, they are “greedy” because unfettered capitalism historically has had a bad habit of making the rich richer – a trend that has continued for enough years now to make it apparent, before a crisis has made us revisit the issue. Again, part of American history, as seen below.

Imbedded in the bailout discussions is the ebb and flow of American’s concept of capitalism, which has vacillated so frequently over our history. The free rein of the robber barons was a mantra of our capitalistic society, until Teddy Roosevelt stopped its abuse. Laissez faire came back in vogue during the Reagan years, with Milton Friedman’s Chicago School of Economics: only in a totally free market can capitalism reach it proper potential. American capitalism (as opposed to more regulated European capitalistic systems) resents oversight because it goes against the deep traditions of our early years of Individualism and keeping government out of our lives, as previously noted. Now that precise debate has again bubbled up to the top of our national dialog. Having said that, there is an old maxim that “corporations are Capitalists in good times…and Socialists when they are in trouble.” How perceptive. That maxim has come home to roost at this time and this place!

So, while this current crisis appears to be an economic and/or political issue, in reality it has its basis in deeply rooted philosophical and social aspects of American history. It is less about money, golden parachutes, mortgages, and bailouts than it is a debate on American historical perspectives. And that is what makes it so interesting, as well as crucial – it is a mosaic of history, ideology, traditions, and long held American values.