The Indispensable Enemy,
Johnson Launches a War,
The Politics of Special Privilege,
The Monopoly Economy
excerpted from the book
The Politics of Misrule in America
by Walter Karp
Franklin Square Press, 1993, paper
[originally published - 1973]
The Indispensable Enemy
When the 1936 elections were over, Franklin Roosevelt and his
Administration stood at a unique pinnacle of power and promise.
The President's victory was so great it overrode all sectional
distinctions; in only two of the forty-eight states did he fail
to win a plurality of the vote. Moreover, his victory was not
a merely personal one. The voters that year sent 331 Democrats
to the House of Representatives and 76 Democrats to the Senate,
reducing the Republican contingent in the new Congress to an impotent
rump. That reform of a broad and democratic kind would soon be
forthcoming few people had cause to doubt. Although Roosevelt
had offered no detailed program during the course of his campaign,
he had expressed Populist sentiments which Americans had not heard
in high places in many long years.
What happened shortly after the 1936 elections
is well known. The apparently invincible President suddenly found
himself blocked at every turn. An overwhelming Democratic majority,
seemingly eager to follow his lead, split into warring factions;
a coalition of Southern Bourbons and obstructionist Republicans,
although numbering together no more than some 130 members, swiftly
seized the legislative helm and blocked virtually all further
reform. At the very height of its power and prestige, the New
Deal came to a dead stop in one of the most remarkable reversals
in American history.
Twenty-eight years later, another Democratic
President, Lyndon Johnson, won a landslide election victory and
found himself with yet another Congress dominated by lopsided
Democratic majorities; 295 Democrats in the House, 68 Democrats
in the Senate. He, too, had promised broad and sweeping reforms,
among them no less a goal than a "war to end poverty"
as well as a turning away from distracting foreign entanglements:
he would not commit "American boys to fighting a war that
I think ought to be fought by the boys of Asia to help protect
their own land." Behind the President's evident wish to take
care of the "unfinished business of the nation" lay,
in fact, a great deal of unfinished business. Since the end of
the New Deal in 1937 there had scarcely been a single major reform
enacted in twenty-eight years-one-sixth the entire history of
this Republic. During that period the Southern Bourbon-Republican
coalition, which had arisen phoenix-like in 1937, had dominated
Congress. It had frustrated Truman and Kennedy with apparent ease.
It had subjected the Eisenhower Administration to the most muted
criticism. It had given its full approval to just two major public
policies since l938-national defense and a forward foreign policy.
'What happened? A few months after the
election, Johnson's "Great Society" was deep in an Asian
war; after a brief spate of trumpery legislation-the "poverty
program," for example-Congress became balky and unmanageable.
In 1966, Johnson's great legislative majorities were reduced and
the Great Society was dead, the victim of the Vietnam War. Another
reform President, another landslide election, another landslide
Congress, another stunning reversal.
... there is a political reason for a reform President frustrating
his own pledged reforms. It is none other than the ruling political
principle in modern American politics-the preservation of party
power, that power whose sole foundation is organization control
of the political parties.
... the essential and inherent danger
to party power is independent political ambition, the presence
in public life and public office of men who ignore the interests
and defy the dictates of party bosses and oligarchies. To preserve
their power, party organizations must try constantly to eliminate
the political condition that breeds independent ambition. That
condition, in general, is the free political activity of the citizens
themselves, their own efforts to act in their own behalf, to bring
into the public arena issues that interest them and to encourage
their activity the independent ambition of public men. The political
activity of the citizenry, whether within or without the major
parties, whether it be as local as a village election, is always
a danger to organization control of parties, and precisely because
it strengthens independent ambition. There is in this Republic,
however, one great wellspring animating citizens to act in their
own behalf: their own understanding that by means of politics
and government what is wrong can be righted and what is ill can
be cured. In a word, political hope.
The very opposite condition, the condition
safest for party power, is public apathy, gratitude for small
favors and a deep general sense of the futility of politics. Yet
there is nothing natural about political apathy, futility and
mean gratitude. What lies behind them is not "human nature"
but the citizens' belief that politics and government can do little
to better the conditions of life; the belief that they are ruled
not by the men whom they have entrusted with their power but by
circumstances and historical "forces," by anything and
everything that is out of human control; the belief that public
abuses and inequities are somehow inevitable and must be endured
because they cannot be cured.
The condition of public apathy and futility,
however, is swiftly undone by reform and even by the convincing
promise of reform. Every beneficial law reminds the citizenry
anew that the government-which is their government-can help them
remove evils and better the conditions of life. Every law which
remedies an abuse reminds the citizenry anew that other abuses
can be remedied as well. Every beneficial law rips the cover of
inevitability from public inequities and rouses the people from
apathy. Reform in America does not bring passive contentment to
the citizenry. It inspires active hope.
... What is more, the national party that
enacts the reforms does not benefit at all by the hope its reforms
arouse. Far from it. The reforming party would find itself, among
other things, attracting active citizens, ambitious men and hopeful
idealists to every tight little political club of the party in
every town and district and neighborhood. Such local incursions
of the citizenry (which do not have to be great in size so long
as they occur in many places at once would seriously threaten
and even destroy organization control of local parties. The reform
party would gain in strength and election victories, but the party
bosses would endanger their own power. This they have no intention
of doing voluntarily. It is precisely to avert this fundamental
danger that both major parties in America have a reform wing and
an obstructionist wing; the one to promise, the other to betray.
... the creation of what political observer Marvin Gelfand has
termed "the indispensable enemy," the opposition required
to prevent you from doing what you must appear to want done.
Johnson Launches a War
I have tried to show both by general considerations and by several
examples)that the grass-roots political activity of the citizenry
is a sharp threat to party power. I have shown too that landslide
Congressional majorities pose a threat to party power and I have
shown in the specific cause of Franklin Roosevelt what a President
who represents the party oligarchs will do to avert a major danger
to their interests. Consider the situation which Johnson and the
party oligarchs faced in 1964.
Long before election day it was clear
that Johnson would win a signal victory over the egregious Barry
Goldwater, whom the Republican oligarchy nominated with every
intention of sending him to defeat. Johnson was certain to have
the public hopes of the nation, reviving after so many years,
focused directly on his second Administration. Indeed hopes had
crystallized around him from the moment Kennedy was shot, and
he dared not blast them until he was safely nominated and elected,
for he had been deeply distrusted by liberal Democrats and the
country at large.* He was certain to have strong legislative majorities
to enable him to fulfill those hopes. He was certain to face the
first important grass-roots citizens' movement in thirty years,
namely the democratic movement arising from and centered upon
the black people's struggle for civil and political equality.
The dangers this movement posed can scarcely be exaggerated. Not
only were its numbers great and its membership varied, not only
was it going from strength to strength and from success to success,
it was, most importantly, one that united citizens around a republican
principle and armed them with the authority of the Constitution
itself. Neither an elite nor a mob, neither "left wing"
nor "right wing" but a genuine coalition of free citizens,
from sharecroppers to Back Bay ladies, the civil-rights movement
was giving the Republic back its voice in the affairs of the nation.
Party power, in short, faced its first major peril since 1936
and Johnson was assuredly a faithful party servant. Before he
had become President through Kennedy's assassination he did not
even have a fake reputation as a reformer. It was no secret that
he had been the servant and beneficiary of the Bourbon wing of
the Texas party. It was no secret that the Senate Democratic oligarchy
had made him Majority Leader because it needed his superb parliamentary
skills to ride herd on the Senate Democrats. It was no secret
that as Majority Leader he had continually stifled reformers in
the Senate and muffled their opposition to the Eisenhower Administration.
He was the beneficiary and servant of the national Democratic
machine and that machine was in peril in 1964, imperiled by what
Johnson had spent his whole Senate career obstructing, namely
reform. 'When the elections were over, the peril had become greater
yet. At the sight of lopsided Democratic majorities in Congress'-295
Representatives, 68 Senators-hopes for reform ran high, and the
civil-rights movement was more clamorous, more extensive, more
determined than ever. The presumption is strong, therefore, that
Johnson prepared for war in 1964 because he knew this would happen
and that he launched it in 1965 because it did happen. The presumption
is strong, that is, that Johnson launched the Vietnam War because
he hoped the war would kill reform, that it would split and then
reduce his Democratic majorities, that it would distract the citizenry
from domestic concerns, that it would kill a grass-roots republican
movement, that it would provide the means to suppress dissenters
and insurgents in the name of wartime unity.
That the Vietnam War in fact put an end
to Johnson's promised struggle for "liberty and abundance"
there can be no doubt. Johnson's ability to pass reform legislation
scarcely lasted six months, and most of the measures enacted were
either trumpery or poorly enforced. By the summer of 1965 Congress
was already balky. In September the apparently invincible President
suffered his first "defeat" in Congress on his proposal
for self-government for the capital city. In October the House
voted against appropriating money for a rent-subsidy measure it
had enacted in June. There was a war on and, perforce, Congressional
leaders had to call a halt to further "experimentation."
After mid-1965, as Wicker points out, there would be no more Great
Society speeches from Lyndon Baines Johnson. In the 1966 elections,
Republicans gained forty-seven House seats and the danger of reform
was once again averted.
That Johnson knew this would be the result
of his war can hardly be doubted. Throughout modern political
history, rulers have started wars to suppress dissent and distract
their subjects. War had certainly done this for Woodrow Wilson
in 1917, mere war talk had done this for Roosevelt after 1937-as
Johnson certainly knew. He himself told his advisers that he would
lose support if he sent American troops to Vietnam. To suppose
that Johnson sincerely believed that he could have a major war
and major reforms is absurd. It is certain that Johnson launched
the war in full knowledge that it would achieve the political
results it so swiftly achieved.
Johnson had been the enemy of reform throughout
his career; he launched a war that thwarted reform when reform
was imminent. The conclusion, it seems to me, is difficult to
avoid, and again I must refer to Lincoln's House-Divided speech
in drawing it. We cannot know for certain, but we find it impossible
not to believe that Johnson launched a bloody, brutal and needless
war in Vietnam to thwart reform, to kill his Great Society, to
reduce his landslide majorities, to stifle a grass-roots political
movement, to blast political hope and protect the party oligarchs
in yet another moment of political peril.
Why then has America been in Vietnam?
Because the party oligarchs, through their elected representatives,
control the government of the United States and use their control
of the government in order to maintain themselves and their power.
The protection of party power is no trivial matter of patronage
and endorsements. It determines the actions of government throughout
almost the entire range of government. It has shaped the most
decisive events in our recent history: the defeat of a seemingly
triumphant reform movement in 1937; the waging of a bloody and
unjust war in Vietnam. Because of party power, Congress has been
rigged and rerigged so that the enemies of reform control legislation
and prevent the nation's highest representative assembly from
representing those who elect its members. The blighting of public
hope through the prevention of reform, however, is but one aspect
of the oligarchs' unremitting effort to retain their great power.
The party oligarchs are by no means wed merely to the status quo.
To preserve their power, the collusive and self-serving party
oligarchs actively promote in every way they can every kind of
corruption, degradation and special privilege that strengthens
their hand and stifles the citizenry.
The Politics of Special Privilege
Men rightly recognize the abuse of power in America. They ( see
billions wasted yearly to sustain a bloated military establishment
while millions are begrudged for the most ordinary amenities.
They see poverty maintained in the midst of unparalleled wealth
and wars declared for the most farfetched reasons. They see bureaucracy
expand while public services decay. They see a thousand obstacles
impede the simplest improvements while gross / betrayals of the
public trust are accomplished in a trice.
... party organizations do wield great political power, for they
control most of the nation's elected officials. It is the party
oligarchs who provide our oligarchy-approved Presidents, Congressional
leaders, Congressional committee satraps and most of our governors
and state legislative leaders. It is the party oligarchs who groom
the promising young politicians and provide the government with
its elder statesmen. It is the party oligarchs who can now decide,
for the most part, what issues will appear in the public arena.
... party organizations will use their
political power to maintain their political power, will make momentous
public decisions-will send men to their death-in order to do so
in moments of peril. It remains to show that party power is perpetually
and radically imperiled in this Republic, that the oligarchs'
self-serving under these conditions abundantly accounts for the
grave abuses of power in America; that to understand why things
happen as they do in our times we must look precisely where the
prevailing political ideology tells us not to look: at the party
The central fact about the American party
system is simply this, that party power is power usurped from
a self-governing citizenry, for it consists precisely in the ability
of the party oligarchs to hold the citizens' elected representatives
in thrall. From that fact of usurpation and what must be done
to secure it, all the compelling reasons that underlie party politics
ultimately spring. Because party power is usurped power it is
great in proportion as the citizen's public voice is weak. Like
two protagonists on a seesaw, the one cannot flourish save at
the other's expense. Whatever strengthens self-government ...
weakens party power; whatever muffles the voice of the citizenry
strengthens party power. That power and the liberty of self-governing
citizens are inherently at odds. The capacity of free men to enter
politics freely, to bring easily into the public arena issues
of concern to them, to keep the avenues to public office and public
renown open to other than party organizations, is, at one and
the same time, the condition of republican self-government and
a dire threat to the party organizations. In short, the radical
and perpetual danger to the party system in America is the exercise
of political liberty.
Yet the party oligarchs cannot destroy
the essential conditions of political liberty, for these derive
from and are secured by our republican foundations themselves.
The party oligarchs cannot disenfranchise the citizenry (though
they might if they could-witness the disenfranchisement of black
people and poor whites in the Southern states); they can impair
but they cannot destroy the right to free speech, a free press,
the right to assemble, to petition and to all other constitutional
immunities that secure against usurping government officials the
citizen's permanent capacity to act in his own behalf. They can
impair but they cannot destroy the Federal separation of powers,
the autonomy of state governments, the local politics of self-governing
communities, all the great constitutional forms and municipal
liberties which make it difficult in this Republic-and in this
Republic only-for any usurpers to monopolize politics entirely.
The party oligarchs cannot destroy the essential conditions of
political liberty because it would be suicidal for them to do
so. The foundations of the Republic are the sole source of all
legitimate authority; adherence to constituted forms is the sole
reason Congressional enactments have the force of law and any
elective office any authority at all. Were the foundations fragmented
everything would crumble, including the party system itself.
The abiding strategy of American party
politics is set by this inescapable condition. Unable to destroy
the perilous forms of political liberty, the party oligarchs can
only try-have no choice but to try-to empty those forms of substance,
to reduce in any way feasible the ability of the citizens and
the willingness of the citizens to act for themselves. It was,
said Lincoln, the essential task of free men to uphold and enhance
equal political liberty, to see that it is "familiar to all,
and reverenced by all, constantly looked to, constantly labored
for, and even though never perfectly attained, constantly approximated."
It has been the abiding bipartisan principle of the party oligarchs
to do the very opposite, to suppress whatever enhances liberty
and to promote whatever weakens it. The grave abuses of power
in America are the results of (that unremitting effort) an effort
to despoil what cannot be destroyed, an effort which might well
be called the Hamiltonian tradition in America, after the first
man of power in the Republic who tried to establish a permanent
oligarchy in the teeth of political liberty.
The first and primary abuse of power which
follows from that central effort is the oligarchs' favoring of
special interests in general and their creation of the monopoly
economy in particular.
The reason for both is rooted in a political
truth first boldly applied in America by Alexander Hamilton himself-that
a political oligarchy could survive in this Republic only if it
could bring into its camp a substantial portion of the wealth
and social influence existing in society at large.
By allying wealth to oligarchic rule, the oligarchs would have
money at their disposal for all the varied political ends that
money can serve. For Hamilton, perhaps, this was less important
than it is for the present-day party oligarchs. For them its importance
is great. Party organizations it is worth repeating, have no binding
authority over their members; party bosses have no legal power
to command and party members no compulsion to obey. American party
organizations are, in Walter Bagehot's phrase, "jobbery parties"
of self-seeking individuals. What renders party members submissive
to party oligarchs in the end is the expectation of reward for
loyalty and the fear of reprisal for independence. By commanding
a substantial portion of the nation's political money, party organizations
can dispense it abundantly to those who have proven their fealty
and withhold it from elected officials who have proven themselves
dangerous to the organization's interests. Whether the wealth
takes the form of campaign funds or such equivalents as lucrative
sinecures, legal fees, consultant positions, insider business
deals and the like, the ability of party oligarchs to disburse
it as they choose among party members adds greatly to the arsenal
of rewards and punishments without which a party boss would be
the boss of nothing but a handful of clerks and cronies.
... in late 1 969 ... the two party syndicates openly united against
the peace movement. As soon as they did so the movement's supply
of philanthropic money dried up with extraordinary rapidity. Under
present-day party power, few wealthy philanthropists will support
for long what both party organizations are determined to crush.
... the wielders, or would-be wielders,
of oligarchic power do not automatically have the wealth and influence
of the wealthy at their disposal. They must take active steps
to bring wealth and influence into their political camp. The means
of doing so are probably as old as politics itself. The wielders
of corrupt power must make wealth and influence dependent on special
privilege, must make corrupt privilege the very source and foundation
of wealth and influence. The political reason for this is clear.
'Whatever form a special privilege takes, whether it be a private
monopoly, an unjust subsidy, a loophole in the tax laws or any
other politically created source of unearned wealth, a special
privilege is a privilege granted at the expense of the many. It
can be safely dispensed-and protected-only by those whose power
is unaccountable to the many. In a free republic it can only be
dispensed and protected by those who wield power usurped the citizenry.
Privileged special interests do not exact the privileges they
enjoy, they are given special privileges because the dispensers
of privilege find it politically useful to dispense it. There
is only one special interest in this Republic which enjoys political
power and that is the party oligarchy itself.
The most important point about the politics
of special privilege is that it is a policy of active corruption,
a policy which requires for its success that the sources of wealth
and influence be made as directly dependent on corrupt privilege
as possible. This is well illustrated by the policies of Hamilton,
who tried to ally to his political faction what he called the
"considerate" people, chiefly affluent city merchants.
At the time, many of them were fearful that extended political
liberty would put their fortunes at hazard. Fearful though they
were, however, Hamilton knew that the bare promise to protect
them from the depredations of the have-nots would not render the
"considerate" subservient to oligarchy. A merely passive
policy would not provide them with a sufficient stake in corrupt
political power, and since their fears were essentially ill founded,
they would soon lose what stake they had. Knowing this, Hamilton
proceeded to carry out at enormous political risk policies which
actively bestowed on the "considerate" new corrupt windfalls
at the common expense-by redeeming at face value, for example,
government bonds which the "considerate," i.e., speculators,
had purchased at one-tenth the price; by giving them shares in
monopoly enterprise through the creation of a privately owned
Bank of the United States, and so on. It was by virtually creating
privileged wealth for them that Hamilton hoped to render the "considerate"
the permanent allies of a permanent oligarchy. To put it in moral
terms, Hamilton tried by his policies to engender and satisfy
active greed as the buttress of oligarchic power. The party oligarchs,
his sole true heirs, do the same thing for the same reason.
It is understood by those who depend on corrupt privilege-whether
oil magnates or numbers runners-that the dispensers of favor expect
payment in return, since what they dispense they can always withhold,
or dispense to a rival. That is the tacit threat and there is
exceedingly little that the threatened interest can do except
pay. To fight against the party oligarchs is impossible for a
privileged interest, for who else but the party oligarchs can
protect corrupt privilege at all?
The politics of special privilege is also
a policy of maximum corruption, for the more corrupt a privilege
is, the more dependent on corrupt power are its recipients, the
more readily cooperative they are. In consequence, when two privileged
interests conflict-as special interests will inevitably do-the
one which the oligarchs prefer to favor is the more corruptly
Because the politics of special privilege is a policy of active,
maximum corruption, it can only be carried out by means of two-party
collusion. There is no way for one party syndicate to dispense
corrupt privilege unless the other party syndicate agrees to connive
at it. Since the politics of special privilege helps usurpation
in general, the collusion, as always, springs up automatically
between the party hierarchies. Only intense public pressure or
the most glaring public scandal will prod one party oligarchy
into reluctantly attacking its partner. Historically, nothing
reveals the necessity for two-party collusion more graphically
than the swift ruin of Hamilton's grand design for oligarchy.
Lacking a fake opposition party organization to connive at his
bestowal of corrupt privilege, Hamilton had to face a large number
of free men hurt by and opposed to his policies. When a free coalition
against him was organized by Madison and Jefferson, the Hamilton
oligarchy crumbled forever. A durable one-party national oligarchy
is impossible in the American Republic. It takes two collusive
party syndicates to manage the inveterate abuse of power which
the usurpation of power requires.
... To avoid the suspicion of fundamental
collusion, the party oligarchs like to pretend, for example, that
the Democrats favor the trade unions while the Republicans favor
the corporations. Actually both parties favor and protect both
giant special interests. That the corporations are more likely
to finance the Republican hierarchy and the trade unions the Democratic
machine signifies nothing except a fair splitting of the loot;
neither party organization stands to gain if the other party organization
is impoverished. Before the trade unions became wealthy on a national
scale, privileged trusts and banking interests had the burden
of financing both party syndicates.
[The] continuing policy of active corruption ... is not carried
out by the party oligarchs through simple preference. Such an
active and continuing policy is absolutely necessary to oligarchic
power. The wielders of usurped party power must entangle all the
major sources of wealth in corrupt privilege and corrupt every
new source of wealth with new corrupt privilege, for otherwise
the politics of special privilege would be futile. It does little
good for the party oligarchs to command a large quantity of private
wealth and influence if a great deal of wealth and influence is
not under their command. In that case, they would have their auxiliary
supports, but so would those who oppose them. They would have
wealth at their disposal but they could not withhold it from free
politics. They would have social influence on their side, but
many channels of influence would not be so disposed, and if influence
is not uniform it is no influence at all. It is merely the clash
of articulated opinion and the public arena would remain free.
It would shed light without color, so to speak.
There is in modern times, however, only
one way to make all wealth-producing activity dependent on corrupt
privilege and beholden to corrupt power. That is to turn all wealth-producing
activity into monopoly enterprise. And that is the reason we have
a monopoly system today. It is the economy deliberately created
by the party oligarchs in the interests of oligarchic power.
The Monopoly Economy
Should an industry be monopolized by a single firm or a few collusive
firms-the typical condition today ...the most important single
fact about monopoly is that it depends absolutely on massive government
support and protection. What the government must protect a monopoly
from is competition. It must be protected from the incursion of
new firms into its field; it must be protected from outbreaks
of price competition within its field; it must be protected from
competition engendered by technical advances-(as J F Kennedy protected
AT&T's overseas communication monopoly by giving it control
of the communications satellite system developed by the government
at public expense. Every monopoly, for its survival as a monopoly,
depends on an enormous range of special privileges, privileges
involving corporation law, patent law, government regulation,
tax policy, monetary policy, tariff policy, antitrust policy and
so forth. All wealth derived from monopoly-and today there is
no great fortune which does not derive from monopoly enterprise-is
absolutely privileged wealth, for the market worth of any monopoly,
the value of its stocks and bonds, consists largely of the expectation
that it will remain a monopoly. This assurance only an irresponsible,
privilege-dispensing government can give.
... To prevent competition from breaking
out within a monopolized industry due to competition within a
related industry, the oligarchs make sure that the basic industries-power
and transport-on which the monopolists depend are themselves organized
monopolistically. This task the oligarchs accomplish through the
Federal regulatory agencies, which have become, contrary to their
professed purpose, "protectors of industry against the rigors
of competition, particularly price competition" ...
... It is just because monopoly is absolutely
dependent on special privilege that the party oligarchs first
created and today sustain monopoly, for all the wealth in the
country that derives from monopoly wealth is privileged wealth,
wealth allied to those who can dispense and protect special privilege.
This is the reason Theodore Roosevelt saved the U.S. Steel Corporation
from financial ruin in 1907 by secretly helping it to buy out
a competitor; this is the reason the party oligarchs saved the
Standard Oil monopoly from independent rivals by passing oil legislation
in the 1930s that "amounted," according to Baran and
Sweezy, "to government enforcement of monopoly prices."
This is the reason Franklin Roosevelt set up the NRA to enforce
price-fixing when the panic-stricken monopolists were crumbling
under the pressure of their perennial nemesis - price competition
By supporting policies that destroy competition
and foster monopoly, the party oligarchs not only transform wealth
into privileged wealth, they accomplish at the same time another
fundamental goal of oligarchic politics: the creation of private
power, hidden from unaccountable to the citizenry.
... It is obvious ... that those who wield
party power, or would consolidate party power, have compelling
political reasons of their own to foster monopoly and no political
reason of their own to sustain an economy of small competing producers.
We should expect to find in the history of monopoly capitalism
the oligarchs' determined effort to engender monopoly and destroy
competition-and that is what we do find. We should expect to find
that effort strenuously opposed by the great majority of Americans-and
that too we find. What we will not find is what conventional history
tells us to look for, namely the "triumph of laissez-faire,"
for the history of the formation of monopoly capitalism is history
of deliberate government intervention to further monopoly.
... what the majority of Americans once
clearly understood-that behind every monopoly stands the government
and, by extension, the party bosses. The notion that the monopoly
system developed through autonomous economic processes is an ideological
... the majority of large American corporations
did not grow; they were created by outside promoters - J. P. Morgan
preeminently - through consolidation. Though varying greatly in
detail, the basic operation consisted of a promoter financing
a new corporation-a trust or holding company-through which he
would buy several competing firms and place them under central
financial control. The U.S. Steel Corporation, which consolidated
more than one hundred steel firms, is a classic example of combination.
There is ... one agency that can assure future monopoly profits,
namely the wielders of usurped political power, for every monopoly
is absolutely dependent on corrupt privilege for survival. The
act of combination cannot take place, ten J. P. Morgans could
not make it take place, unless all parties concerned were convinced
that the wielders of political power would guarantee that monopoly
by every possible means ...
If the political powers wanted to block
a particular combination, no major public action would have been
required. The mere whisper of their antipathy to that combination
need only pass along Wall Street and the combination could not
be effected; sellers would not sell, investors would not invest.
The financial "colossi" of Wall Street could no more
combine an industry in defiance of the government than water can
flow uphill by itself.
... economic combination would not have comeabout if, among other
measures, the ruling oligarchs had not deliberately altered the
corporation laws to facilitate combination. In both the common
law and early Supreme Court decisions, a corporation was essentially
an association created and authorized by the state for the purpose
of accomplishing some public good-the building of a road, a canal
and the like. Legalizing a holding corporation meant chartering
corporate entities whose sole purpose was to gain financial control
over other corporations. This is not only not a public good -
the antitrust law virtually defined it as a public evil-it does
not serve a public purpose. Combination, however, was the purpose
of the oligarchs, which is why they altered state corporation
laws to help achieve it.
Even where consolidation was not the basis
of monopoly, the role of corrupt government was indispensable
since most noncombination monopolies were monopolies based on
the oligarchs' corruption of patent law. A temporary patent monopoly
is granted by constitutional provision to encourage the application
and diffusion of new knowledge-a temporary privilege for the common
good. In a series of decisions after 1896, a corrupt judiciary
completely subverted this constitutional purpose and began transforming
a temporary privilege into a virtual property right and consequently
the basis of a permanent corporate monopoly. In 1908, when the
Supreme Court upheld the right of a patent holder to suppress
a particular patent, all links with the Constitution were severed;
a provision set down to encourage invention had virtually become
a private right to bury one. Finding judges with that kind of
brazen effrontery is one of the abiding tasks of the party oligarchs.
According to Arthur Burns, author of the
classic 1936 treatise The Decline of Competition, the new corporation
laws and the corrupted patent laws were two of the three main
factors in the creation of monopoly capitalism. The third factor,
according to Burns, was the oligarchs' use of the antitrust laws,
not to break up combinations in restraint of trade but to prevent
small firms from trying to break monopoly combinations, which
suggests in itself the lawless lengths to which the party oligarchs
have gone to further monopolization. None of Burns' three major
factors are economic; each was a political act intended to produce
an economic result, namely monopolization. The chief role which
"laissez-faire" played in all this was that when the
citizenry demanded government intervention to undo the results
of the oligarchs' intervention, the were met with laissez-faire
arguments out the impropriety of intervention.
Another political factor in the formation
of monopoly was the raising of protective tariff barriers, which
had the effect of fostering monopoly in competitive industries.
This economic effect of protection was not widely recognized by
politicians until the 1880s, a decade when American industry as
a whole no longer needed protection from foreign competition.
At that very moment, the Republican party oligarchs raised the
now unnecessary tariffs higher than ever before and kept them
that way for forty years, helped by the traditional low-tariff
Democrats, who soon began to ease their opposition to protection.
By 1913, when they controlled the central government under Wilson,
the Democrats made only pro forma efforts to eliminate the protective
system. High tariffs, a partisan issue when it reflected sectional
interests, became effectively bipartisan when its monopoly-fostering
effects made it useful to both party hierarchies.
Behind all the many acts of government designed to foster monopoly
was the essential precondition for consolidation and monopoly:
the concentration of surplus wealth in the hands of a few speculators
and promoters. This, too, did not come about through any autonomous
economic process. For the most part, it was deliberately and swiftly
accomplished by sweeping government edict, through the chartering
of railway corporations. The story of the railways is familiar
by now. The government state or Federal, would give a corporation
gotten up by a railway promoter a charter to build a road. Along
with the charter, the lawmakers would give the promoter enormous
tracts of public land, large grants of public money and guarantees
of additional help. With these extraordinary bonanzas in hand-the
original corporation usually having no assets of its own except
bribe money for the legislature-the promoters would then sell
millions of dollars' worth of stock to investors, thus converting
public wealth into private wealth, much of it lodged in their
hands. Overnight, the railway promoters became richer than Americans
had previously dreamed possible.
... between the Civil War and World War
I, half the wealth invested in American industry was invested
in the railways. More significantly, it was a political act of
bestowing special privilege and of concentrating wealth by means
of corrupt privilege that probably has no parallel in history.
It was largely by dispensing windfall privilege on such a lavish
scale (and "taxing" the recipients in money and services)
that party organizations in state after state gained ascendancy
over state parties and politics. That would-be party bosses could
dispense such corrupting privilege before securing corrupt power
was due to one essential fact-railway building, initially, was
universally popular. By the time Americans realized what had been
done-it took only a few years-party regulars had already gained
... corrupt government stands behind every American monopoly and
every great American fortune. Without intervention and encouragement
of the party oligarchs, monopolization could not have taken place;
without the protection of oligarchic power, no monopoly would
survive even today. For all its far-reaching consequences, the
monopoly system is no more, essentially, than the monumental culmination
of the politics of special privilege.