The Market as Hero, The Government as Villain

(extracted and adapted from National Lies by Charles Churchyard)

In 1819, as America was proceeding down what it assumed to be the road to democratic utopia, it hit a very large bump. A financial panic led to a national depression that lasted for years. Men lost their jobs, their businesses, and their homes. Cries of anguish and accusations of blame rose in a crescendo. All this distress resulted, not in any repudiation of Americans' characteristically naive, idealistic principles, but in the very opposite. Popular polemics repeated again and again that the agents responsible for the economic downturn were “complex” and “artificial” and that the remedy was a return to the “simple” and “natural.”

The American imagination
...has often dreamed of
sending a Mr. Smith to

Banks were the chief target of the public’s anger. They issued paper money that lost its value, they foreclosed on debts, and they were often guilty of reckless and at times illegal practices (“wildcat banking,” as it was commonly called). Inflamed prejudice pictured the villains as unscrupulous, sophisticated men who employed the recondite intricacies of finance to cheat ordinary, honest, hard-working people. Voices of protest demanded the institution of simpler banking practices (including the abolition of paper money), which would supposedly prevent such fraud.

The fears and the accusations did not stop at this point but extended further. Since state legislatures chartered banks, and the federal government had established the national Bank of the United States (the BUS), public opinion viewed government as implicated in the cause of the nation’s distress and in fact as the principal instrument of wrongdoing. Injury combined with paranoia to produce the belief that conspiracies of wealthy and powerful men were at work in the land. Influencing legislatures to grant them favorable banking charters was only one, though the most blatant, of their underhanded practices. They were said to be corrupting and subverting the very institutions of government, so as to gain for themselves more wealth and power on a permanent basis.

The popular conviction that democracy itself was in danger found a scapegoat in the Masonic lodges. As a secret society of affluent and politically prominent men, Masonry was an obvious suspect. In 1826, the killing of a former Mason who had threatened to reveal secrets and the subsequent failure of the courts to bring the perpetrators to justice sparked public outrage. If such an organization was capable of frustrating the judicial system in a case of murder, it must have been guilty of countless other nefarious schemes and practices. Anti-Masonic groups began to organize and publish newspapers. When they found that the existing political parties avoided them, they formed their own party and held state and later national conventions. They elected Anti-Masonic governors in Vermont and Pennsylvania and even ran candidates for president.

The market...does
not give everyone
a scratch start or
distribute prizes
with a fair and
impartial hand.

Although the Anti-Masons were rivals of the Jacksonians, the two parties sprang from the same fears and employed the same idealistic logic and rhetoric. Both believed that affluent and powerful men had contrived by complex and clandestine machinations to use government as a means of securing economic benefits for themselves. If they could be stopped and their artificial advantages destroyed, the natural functioning of economic life would revive. Good times would return, and there would be opportunities for everyone to thrive and get rich.

For many people, Andrew Jackson was the hero who would save the day. A simple man of the people and a son of the natural West, he would ride into town, root out the corruption, and restore government to its proper and salutary form (a sequence of events that has been revived many times in the American imagination, which has often dreamed of sending a Mr. Smith to Washington). As president, Jackson played his assigned role with convincing success. He found a plausible scapegoat in the Bank of the United States, and his destruction of the BUS monster was at least as reassuring to the public as the closing of Masonic lodges—probably even more so.

— ♦ —

The popular agitation of the 1820s and 1830s vindicated one of the most significant and familiar manifestations of American idealism—a faith in the free market, which forms the basis of economic individualism[ 1 ] and which comprises two basic tenets. First, the market rewards and punishes individuals according to their merits. If a man is an efficient worker, he achieves economic success; if he is not, he fails. Like Americans in general, then and now, the Jacksonians and Anti-Masons believed in equality of opportunity, but not at all in equality of results. In their view, a person who was more productive than his neighbor should and would, under normal circumstances, receive higher economic returns. What they objected to was any attempt to cheat the natural justice of the market by contriving unnatural, artificial, and thus unfair advantages (such as perpetrating financial fraud or obtaining favors from government).

The unfortunate
are told that
their unhappy
fate is their
own fault.

Second, the market, employing Adam Smith’s “invisible hand,” translates individual ambition into collective benefit by requiring customer satisfaction as a condition of economic success. If one is to make money, he must sell something that others consider worth buying. From this perspective, profit becomes, not a mark of greed, but a measure of service, and American businessmen have always insisted on regarding it as such. Doing well by doing good is the watchword of these sturdy practitioners of enlightened self-interest. Their loud idealism is something that foreign observers have often noticed, and the more honest and discerning among them have not been able to dismiss it as mere hypocrisy.

As a foundation of economic individualism, the belief in the beneficence of the free market has inspired Americans to great efforts of productivity. The problem with the market, as with individualism, is the distance separating faith from reality. The first principle of free market ideology (rewards according to individual merits) runs up against the fact that people do not enter life or the market as equals; the advantages and disadvantages of social class apply in both. All the efforts of the Anti-Masons and the Jacksonians or of various subsequent reformers did not change this fundamental truth.

Prompted by the promises of economic individualism, many persons of humble origin have saved their money until they believed they had enough to start a small business. Most of them then met with disappointment, either losing both their investment and their business or else struggling along, making as little or less in profits compared to their wages as manual employees. The market, they discovered, does not give everyone a scratch start or distribute prizes with a fair and impartial hand. A turn of the business cycle from good times to bad, for example, brings ruin to the entrepreneur of slender means: he will most likely be driven out of business. For the established businessman with deep pockets, however, the same situation can prove highly advantageous: he may pick up some great bargains from the bankruptcies of the vulnerable.

“The world
is governed
too much.”

Defenders of the market often employ the second principle of their ideology (the invisible hand) to explain and excuse financial downturns and other such misfortunes as necessary and beneficial for the long-term health of the economy. However true this may be, it is no more satisfactory a justification to unfortunate individuals than is the knowledge that their vain efforts to better their economic condition have nevertheless contributed to the general wealth and progress of the nation.

At this point, self-deception, which disguises the realities of life from those who believe in the principles of individualism, steps in to disguise the inequities of the market from its naively devout participants. The unfortunate are told that their unhappy fate is their own fault. During the 1990s, for example, laid-off executives of middle age, who found themselves sinking from the upper-middle to the lower-middle class (and sometimes lower), were blamed for not anticipating and embracing change. Even in their present situation, they could recover from their loss by assuming a positive and flexible attitude. What seemed like a disaster could be an opportunity for occupational and personal growth. If they would only seek out new kinds of work, they could become more efficient and valuable workers, as well as better human beings. The best-seller Who Moved My Cheese? (1998) preached this line of effrontery in the form of a concise and cute parable. Americans have difficulty resisting such arguments because, as believers in the doctrine of individualism, they are resolutely certain that they control their own destiny; so when things go wrong, they logically have only themselves to blame.

The cheese rationale is not always entirely convincing, especially in those cases when the economic debacle results from obvious fraud, as in the case of Enron in 2001. Confronted with such embarrassments, apologists of free enterprise respond by pointing to the very fact that business malefaction has been exposed and proclaiming this as evidence that “the market works; it corrects itself.” But the fact remains that employees, investors, and consumers have been cheated and that they usually receive nothing like adequate compensation, often no compensation at all. And fraud persists. There is no evidence that the natural tendencies of the free market are reducing it to smaller dimensions. When it is uncovered in one place, it thrives elsewhere. After all, the white-collar crime one hears about is the kind that is gross and flagrant enough to be detected. In its more subtle and nimble forms it flourishes unnoticed.

“The appearance of
character” would
“make the state

When confronted with the undeniable failings of the free market, its defenders fall back on lame excuses: Yes, the market isn’t perfect, but it works most of the time. Besides, it’s the best there is; the alternatives (socialism, a planned economy, or any other collectivist option) would be worse. All this may well be true, but it is not good enough. The prospect of eventual collective benefit is not an adequate source of sufficient motivation for the individual. If Americans are to continue working with their customary energetic enthusiasm, they must not perceive the market as unfair and capricious. They need to believe that its winners deserve their success and its losers deserve their failure, that it rewards, not luck and low cunning, but admirable human qualities. To maintain such a faith, people must possess or acquire a voluntary blindness to the realities of the market. Self-deception is not an easy act to perform, combining as it does the roles of both perpetrator and victim, but in this case the task has been made much easier by the identification of a plausible scapegoat.

— ♦ —

When those who were caught in the depression of the 1820s began to voice their complaints, they quickly discovered a villain—the government. Despite the minimal size of the American state in that era, people agreed that it had become too big and too powerful. It accomplished little good and did much evil. Conniving men with wealth and influence were using it to advance their own interests at the expense of the public. If it were reduced, these villains would lose their means of illicit self-aggrandizement. At the same time, by eliminating the artificial and obstructive interference of government in the dealings of men, the natural and beneficent tendencies of human nature would be able to emerge and flourish. This theme was repeated again and again by Jacksonians, Anti-Masons, and other would-be reformers of the age. Some of them speculated that natural harmonies would eventually take control to such a degree as to leave little or no place for government.

Contemporaries responded favorably, even enthusiastically, to such talk. Emerson, who had no affection for the Jacksonians (he called them the “rank rabble party”), applauded the motto of their political newspaper: “The world is governed too much.” He himself declared that “the growth of the individual” would counteract the abuses of government, and finally “the appearance of character” would “make the state unnecessary.” Presumably, it would “wither away,” as the Marxists later predicted. So strong was the current of antigovernment sentiment that even the Whig Party, which in practice favored government-sponsored projects, adopted the Jacksonians’ rhetoric and used it to attack “King Andrew” for abusing and enlarging the powers of the presidency.

Government has become
America’s all-purpose
scapegoat, whipping boy,
and devil.

Since those times, the American people have maintained a remarkable hostility toward government. It is not just that they regard bureaucrats as drones at best and blunderers at worst, or that they think of politicians as low and corrupt. That would account for only contempt and anger, and the public’s negative feelings go deeper, reaching the level of hatred and loathing. They believe that government is responsible for inflicting significant harm and real damage on society.

In accord with this conviction, government has become American’s all-purpose scapegoat, whipping boy, and devil. Whenever anything goes wrong, the natural, automatic, and immediate reaction is to blame government. Pondering the difficulties that young people at the bottom of society have in growing up, a journalist reached the following conclusion: “I blame the government.” When a huge abstract sculpture was removed from Federal Plaza in Manhattan because people objected to it, its creator did not blame the unsophisticated and philistine public; he blamed the government. When challenged as to the accuracy of a movie on the assassination of John F. Kennedy, the filmmaker replied, “Even if I am totally wrong [as to the actual facts].... I am essentially right because I am depicting the Evil, with a capital ‘E,’ of government.”

Antigovernment sentiment is especially strong on the political right. It is the one thing—perhaps the only thing—that the various factions have in common, and it comes in several varieties. There are the practical businessmen, who oppose government regulations as an unjustified interference with their individual freedom to make money. There are the ideologues (the libertarians in particular) for whom the state is the enemy. According to them, it is guilty of causing every major bad thing that has ever happened to the country, including economic depressions. It should be reduced to an absolute minimum, and individuals should be allowed to roam free, guided by the natural harmonies of the free market. Many people find these ideas attractive and idealistic, if impractical and unrealistic.

Fellow travelers of
the right, as one
might call them...

Finally there are the fringe groups. They do not hate government because it has injured them personally; they begin with hatred and then contrive rationalizations for it. Their paranoia is directed, not so much at the local or the state as at the federal level, with which they have the least contact. Its very remoteness and unfamiliarity stimulates their fantasies. During the Cold War, fanatics claimed that Communism had taken over Washington, D. C. After the Soviet Union collapsed, they found new reasons to justify their terror and loathing of the feds. And they have continued to join rural militias, stockpile guns, and occasionally leave bombs at government offices.

Although such behavior is characteristic of a very small number of people, they enjoy a certain degree of sympathy among ordinary conservatives, similar to that which Communists used to enjoy among ordinary liberals in the 1930s. Fellow travelers of the right, as one might call them, are not difficult to find. The respectable and conventional suburban businessman with an extensive gun collection for sport shooting and for possible defense against robbers and other intruders often fantasizes using the weaponry against the agents of a federal government gone out of control.

The political left is more ambiguous about government than the right. Liberals, radicals, and social reformers of all sorts have used, or tried to use, the powers of government to bring about desired change. And they have often been frustrated when their intended beneficiaries—the workers, the disadvantaged, the ordinary people of America—persist in identifying bureaucrats and politicians, instead of capitalists and bosses, as the villains. But even the left has antigovernment tendencies with very deep roots. It has been opposed to the abuses of power and the powerful for much longer and with much more sincerity than the right. American notions about the basic goodness of mankind and the underlying harmony of nature are more intimately implanted in the soul of the left than in that of the right. From the Industrial Workers of the World (IWW or Wobblies) in the 1900s to the New Left in the 1960s, American radicalism has favored anarchy and liberation as its immediate and ultimate goal, rather than political discipline and the creation of a workers’ state.

Government is not
becoming smaller;
in fact the reverse
has been happening.

People on the left often criticize “big government” while at the same time using it to advance their social programs (tax-and-spend liberals denouncing the Washington bureaucracy). But this kind of contradiction is not to be found entirely or even chiefly on their side of the political fence. With nonchalant fatuity, a conservative columnist averred, “Government should be less intrusive, more modest. Except when it should be the reverse.” That is to say: except when it is promoting causes that he and those like him favor (such as suppressing pornography).

Corporations regularly denounce government interference in the market, then run to Washington for help when they get in financial trouble. The head of the U. S. Chamber of Commerce drew a distinction between businesses getting government to protect them from the effects of “their follies and their errors” (which he opposed) and businesses going to government to find “cooperative ways to resolve problems” (which he approved). In actual practice, it would probably be difficult to distinguish between the two situations, unless of course the latter refers to one’s own business and the former to the businesses of others.

Such inconsistencies are a result of the antigovernment impulse encountering the reality of government in the modern world. Government is not becoming smaller; in fact, the reverse has been happening. As society becomes increasingly complex, government is increasingly called upon to intervene and sort things out. The same people who condemn government in the abstract have no hesitation in resorting to it when a specific situation arises which they have difficulty handling. Being aware of both the public’s need and its aversion, partisans of whatever stripe use government or attack it, depending on whether they think the one tactic or the other will gain them an advantage.

In the boldest and most
blithe instance of self-
contradiction, politicians
themselves often denounce

Both right and left have accused each other of “legislating morality” and have declared that “you can’t legislate against prejudice.” The real objection is not to government exceeding its proper function but to the particular morality or prejudice in question. Neither side has any problem with legislating the kind of morality it supports or banning the kind of prejudices it dislikes. By decrying the government’s intrusion into the intimacies of private life, the left has managed to defeat the right’s efforts to prohibit abortions. Using the same argument, the right has managed to defeat the left’s efforts to fund abortions for the poor.

In the boldest and most blithe instance of self-contradiction, politicians themselves often denounce government. It is in fact one of the oldest electoral tactics in the country. Tocqueville observed that there was no surer way of wooing the voters than by fulminating against the expansion of federal power. Politicians ever since have struck this pose and mouthed its rhetoric. One of the most successful of them was Ronald Reagan, who asserted repeatedly that government was not the solution to problems, it was the source of problems. In 1994, a government officer in Montgomery County, Maryland, proposed dropping the word “government” from official usage because it had become so highly pejorative. Of course, all this verbosity has done nothing to change practical realities and actual tendencies. Under Reagan, as under his predecessors and successors, the federal bureaucracy grew and its regulations multiplied.

Despite its persistent futility and stubborn fatuity, the popular animus against government shows no sign of abating, and that is just as well, for it serves as a stout pillar holding up the public’s faith in both the market in particular and naive idealism in general. If one is to believe that nature, mankind, and free enterprise are good, something else must be responsible for the bad things that occur from time to time. Hence the need for a scapegoat, and government has filled this role with notable and repeated success, whatever shortcomings there may have been in the other services it has performed.

source of the above:

Charles Churchyard. National Lies: The Truth About American Values. Ch. 3.

Faith in the beneficence of the free market is a expression of national optimism and idealism. Chapter three cites other examples and analyzes their characteristics and tendencies under the general rubric of “panglossianism.”

some additional topics in chapter three:

[ 1 ] For the concept of “economic individualism,” see the excerpt entitled “American Individualism and Emerson, Its Champion.”