Newspaper and Television commentaries in the United States and Europe abound with references to “outbursts of populism” in United States as a stereotypically American response to economic crisis.1 Their story lines trivialize historic Populism in the U.S., both its substance and its contribution to financial regulation. American Agrarian movements arose in response to grievances rooted in pathologies of mature, weakly regulated capitalism. The agrarians had real grievances linked to rigidities of the gold standard and bank control of note issue, monopoly control of long distance transportation and crop storage, the use of the growing power of large firms to repress labor, and a rising cost of living due to growing monopolization and high tariffs. Most of the policy solutions demanded by late 19th century populism and its progressive era legatees were enacted in some form in the two spurts of regulation during the early 20th century (the progressive era and New Deal). There are indeed some commonalities between public criticism of capitalist greed in those periods and the present; but scorn for “populist outbursts” against the risks taken by greedy financiers who made billions while bringing financial ruin to the global economy distracts our attention from the destructive folly of those financial actors, and presumes that public outrage is unjustified and counter-productive.
In fact, it is neither. That such a small number of actors could wreck such havoc on the world is surely a cause for outrage among reasonable people around the globe. Recognition of error is essential for human learning and the evolution of institutions. It would be quite peculiar, and disturbing, if there were no wave of criticism in the face of such unethical and damaging conduct.
No American reform surge has occurred in absence of such public outrage. It was public offense over corporate malfeasance that gave us the 1887 Interstate Commerce Act, the 1890 Sherman Antitrust Act, the 1894 income tax law (and the 1913 Constitutional amendment needed to overcome Supreme Court objections), the 1913 Federal Reserve Act, the Child Labor Acts, the 1933-34 laws taking the dollar off gold, the 1934 Reciprocal Trade Agreements Act (which moved the nation away from the protectionist disaster of the Hawley-Smoot Tariff and toward trade expansion), the 1933 and 1934 Securities Acts, the 1933 Glass-Steagall Banking Act, the creation of the Federal Deposit Insurance Corporation in 1933, the 1938 Fair Labor Standards Act, and many other laws that served this country, and the world economic system quite well for many decades.
In Praise of Populism