The Government Had Better Ideas for Fixing Income Inequality 100 Years Ago

Then, again.
Feb. 15 2012 6:50 AM

Radical Solutions to Economic Inequality

If only Americans today were as open-minded about leveling the playing field as we were 100 years ago.

120214_HIS_taft
William Howard Taft, 27th President of the United States and 10th Chief Justice of the United States.

United States Library of Congress

A century ago, in one of his last acts of office, President William Howard Taft attempted to solve the problem of inequality in America. In August 1912, on the cusp of a brutal third-place finish in the presidential election, he created a Commission on Industrial Relations to investigate “the general condition of labor in the principal industries.” Despite its fusty charge, the commission turned out to be one of the most sensational sideshows of the Progressive Era, a cross-country journey through the wilds of American class conflict. For three years, government commissioners traipsed from city to city asking capitalists, union organizers, and reformers what it was like to work in America, and whether the spoils of industry seemed to be distributed fairly among the rich and poor. 

The commission’s answer, released in a 1916 report, speaks volumes about the persistent dilemma of inequality in the United States, and about the intellectual timidity of today’s political responses. “Have the workers received a fair share of the enormous increase in wealth which has taken place in this country…?” the report demanded. “The answer is emphatically—No!”

Their numbers bore this out. According to the commission, the “Rich”—or top 2 percent—owned 60 percent of the nation’s wealth. By contrast, the “Poor”—or bottom 60 percent—owned just 5 percent of the wealth.

Today, after a century of ups and down, we’ve landed back at those extremes, give or take a few percentage points. But what’s striking about the commission’s report, read from a 21st-century perspective, is how limited our own debate about inequality seems by comparison. For the commission, inequality was a fundamental problem that threatened the entire fabric of American democracy. Today, by contrast, we’re busy debating whether a multimillionaire like Mitt Romney ought to pay a few more percentage points in federal taxes.

The driving force behind the commission’s creation in 1912 was, to put it bluntly, fear: If something wasn’t done, even tepid progressives agreed, the country was looking at a period of sustained social chaos, or worse. Evidence of a broken system seemed to be everywhere and went far beyond the sorts of peaceful protests and encampments that have roiled today’s 1 percent. On the West Coast, the Bridge and Structural Iron Workers were blowing up nonunion bridges and work sites. On the East Coast, the radical Industrial Workers of the World were actually winning strikes. In New York in 1914, thousands of people turned out for a rally in Union Square to mourn the deaths of three anarchists who had blown themselves up attempting to build a bomb aimed at John D. Rockefeller Jr., the country’s richest man.

To capture what this all looked like from the top, the commission turned to the words of Daniel Guggenheim, one of dozens of industrial titans asked to weigh in at its public hearings. In a decidedly un-Romney-esque concession, Guggenheim thanked his lucky stars that labor organizers and government reformers had stepped in to help where capitalism had failed. “If it is not for what has been done and what is being done,” he concluded, “we would have revolution in this country.”

The depth of violence and anxiety about class revolt is one of the most striking differences between then and now. What’s just as remarkable, though, is the commission’s willingness to engage a vast range of opinion on the subject. The “great men” of the day—Guggenheim, Rockefeller, Andrew Carnegie, Henry Ford—showed up to testify at commission hearings. But so did hundreds of reformers, organizers, and ordinary laborers, all invited to speak under official government auspices, and all with their own ideas about how to fix a broken system.

The most controversial witness was William D. “Big Bill” Haywood, general secretary of the IWW. Less than a decade earlier, Haywood had been on trial for conspiring to murder the governor of Idaho in the midst of a bitter union war. During his testimony in 1915, the commission listened patiently as Haywood explained that workers would continue to fight regardless of what the commission might do, and “of anything that capitalists and their shareholders and stockholders may say to the contrary.” Imagine the federal government inviting Noam Chomsky to weigh in on American class relations at an official hearing, throw in a murder charge and a series of mass revolts, and you have some idea of how just how ambitious the commission’s experiment in democracy really was.

Haywood’s testimony marked the high point of Americans’ willingness to entertain radical solutions to the inequality problem. By 1917, the country was at war; by 1918 Haywood was on trial for criticizing the draft. But what the commission did in its final report was radical in its own way. Despite divisions among its members, the commission insisted that the growing divide between rich and poor was more than an economic problem. Wealth inequality, the final report concluded, struck at the heart of American democracy, threatening to undermine the national ideal that hard work would bring just reward.

There is something almost quaint—but decidedly refreshing—about the commissioners’ blunt language. “Effective action by Congress is required…,” the report proclaimed, “to check the growth of an hereditary aristocracy, which is foreign to every conception of American Government and menacing to the welfare of the people and the existence of the Nation as a democracy.” Far from debating whether “corporations are people,” the commission took for granted that concentrations of corporate power were undemocratic, that gigantic fortunes “constitute a menace to the State,” and that it was the duty of government to restore a balance of power.

How did they plan to do it? The commission offered two chief solutions, neither one of which has won much of an airing in our latest rounds of debate. The first was an inheritance tax, aimed not at the fearless entrepreneur, but at his sons and daughters, who had done nothing to deserve a fortune. The second was increased support for union organizing, on the principle that workers deserved to elect their own representatives on the job just as they did in the government.

 Both of these ideas ultimately became law—the inheritance tax almost immediately, union organizing rights in fits and starts over the next few decades. Today, by contrast, we seem to be going in the opposite direction, with unions under attack and the so-called “death tax” all but moribund as a political issue.

The partisan stalemate in Washington suggests that situation is unlikely to change anytime soon. But today’s lawmakers could do worse than to follow the Industrial Commission’s broader example of democratic debate. The national conversation about inequality is already underway. The least they could do is listen.

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