An industrial policy will mean wise regulation by independent experts? History tells otherwise.
Some of Gary Hart's "new ideas," like the former Democratic presidential candidate himself, seem on their way to becoming footnotes in American political history. But others, like the establishment of a "grand coalition" of economic and political leaders-representing both major political parties-who would unite to create greater governmental economic authority, are on display in this year's Democratic Party platform.
While many eyes are on vice-presidential nominee Geraldine Ferraro-the campaign season's big attention-getter-the party of the people is demanding appointment of an "economic cooperative council" and endorsing "industrial strategies to create a cooperative partnership of labor, capital and management." And the House Banking Committee already has endorsed legislation to create an economic council, which would include businessmen, labor leaders, and academicians.
The fashionable buzzword describing the notion of a single governmental economic authority had been, of course, "national industrial policy." Now, as the election campaigns gear up, Hart's "grand coalition" may become a front-runner among the linguistic candidates to popularize this latest version of central planning. But while the phrases in which the idea is couched may be of recent vintage, the idea itself, like many others in all the election-year rhetoric, is actually quite old-at least as old as Plato's Republic, with its ideal of "philosopher kings."
The reasons behind the popularity of such a Platonic concept in this notably Aristotelian age become more apparent if we compare the "grand coalition" idea not only to its predecessors among the ancient Greeks, but to its American ancestors, as well. After all, the United States Government Manual lists 57 such small-scale "grand coalitions"-bipartisan boards designed to oversee entire industries or activities and remove their particular attempts to pursue happiness from the supposedly dreary intervention of the populace and its elected representatives. These baby-grand coalitions are called "independent agencies."
Their charters vary widely and include everything from the trivia of the American Battle Monuments Commission to the judgments of the Federal Trade Commission or the Securities and Exchange Commission, which can make or break companies. But this bureaucratic Heinz 57 has two common denominators. First, all of these agencies are outside the ordinary executive-branch chain of command used to manage the Cabinet-level departments (State, Defense, etc.). Second, all of these agencies are more or less patterned after the first major independent agency, the Interstate Commerce Commission. The ICC was created almost 100 years ago, largely upon the suggestions of early public-relations "experts" whose views were similar in some ways to those of our latter-day speechwriters.
To understand the similarities, we need a quick look at the political economy of a century ago. The 1880s are sometimes looked back upon as a time of great national optimism and excitement concerning the industrial and mechanical advances that were becoming evident almost every year. Such reminiscences are correct, but economic advance also was accompanied by social pressure- and pressure created worry about the growth of the first genuinely national business enterprises. There especially was concern about the development of the "steel horses" and steel lines-the railroads-which provided the transportation base for America's rapid economic growth.
Into this thicket of worry swash-buckled the railroad entrepreneurs of the time, fulfilling societal needs by laying more track faster than anyone would have imagined possible a few years before and, through their efficiency, opening up new lands for small farmers and prairie immigrants. But they also raised concerns about a possible centralization of economic power. The railroad industry had grown fast, going from 30,000 miles of track during the Civil War to 141,000 miles in 1882. With such a great leap noticeable to all, the railroads quickly became the focal point for concern about rapid industrialization and the new organizational forms that accompanied it.
Naturally, the political and economic powers of the time attempted to make the new economic structure work to their advantage by obtaining special privileges from the state. For instance, some Chicago merchants became irate because they could not get special rates from the Chicago, Burlington and Northern line. Chicago businessman William H. Beebe told a Senate investigating committee that he did "not lean very much toward paternal legislation on the part of the Government," but felt that in this case, "regulation by a commission or by some other governmental agency would be beneficial." Similarly, when Pittsburgh merchants were unable to get a special deal from the railroads, the Pittsburgh Chamber of Commerce called for federal rail regulation.
Political pressure from those generally favoring statist solutions also grew during the 1880s. As labor upheavals resonated through the decade, with some demonstrations leading to violence, there were claims that the American flag was unraveling stripe by stripe, and only strong governmental hands could sew it together.
The initial response of railroad-industry leaders was not a principled defense of their business, but a series of not-so-subtle attempts to swing public sentiment to their side. William K. Acker man, president of Illinois Central, wrote to a colleague that increasing public attacks made it necessary for industry leaders to "manufacture public opinion' and he set about doing so by commissioning books and articles favorable to the rail industry, which would be published as independent pieces of analysis and scholarship. Political IOUs also were called in.
Other industry leaders provided free passes to newspapermen in return for favorable articles. Henry Ledyard, president of Michigan Central, noted that "the newspapers do, to a greater or lesser extent, mold public opinion," and he agreed with Norfolk and Western vice-president Frederick J. Kimball that "giving passes to newspapermen is about the cheapest form of advertising we can get."
Free passes were also given to many politicians, clergymen, and educators. But the strategy backfired. On some railroads, one critic complained, two-thirds of the passengers were paying higher rates so that one-third could ride free. The free-pass strategy mainly allowed railroad-industry critics to add to their list of complaints the industry's attempt to "bribe" the real or potential opposition.
A second railroad-industry strategy emerged: Do not fight the idea of government control over the railroad industry, but lobby the state legislatures to get favorable terms. This, however, turned out to be the worst of all possible worlds. Expressing his scorn of this strategy, Illinois Central president William Ackerman told his company treasurer that Illinois state senators "pass their nights in rollicking, will drink all you offer them, and make you any amount of wild promises, but their actions... give lie to the promise. In short, they are utterly unreliable."
With these false starts, the political mood became increasingly frustrating for the railroad executives. By 1886, the House of Representatives had passed a bill favoring legislative oversight of the railroads, and the Senate was holding hearings on rail regulation. Railroad executives were in desperate need of a new public-relations strategy. They found the basis for one in a "new idea" for governance then being discussed in academic and political circles and tried out in some of the states: the concept of a bipartisan governing council of wise men.