Over 200 years ago, just as the excesses of British aristocracy were being banished from Boston’s shores, one of America’s founding fathers Thomas Jefferson warned of a “new aristocracy” which might one day come to control America under the name of democracy.
For those interested in the 2016 US election, and bemused in particular by the rise of Donald Trump, Jefferson’s warnings make for fascinating reading.
Thomas Jefferson was concerned by the rise of what he termed “our monied corporations which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country”. Jefferson hoped that his fellow democrats would “crush in its birth” this “new aristocracy”. He lamented that if they failed, then eventually this “new aristocracy” would rise to “rid[e] and rul[e] over the plundered ploughman and beggared yeomanry” under the name of democracy.
But Jefferson was not alone.
Alexander Hamilton, another founding father, warned of a new “spirit of speculation”. It was a “dangerous tumour” he wrote that if allowed develop unchecked would one day “rob the industrious of the fruits of their labour and… enable the idle and rapacious to live in ease and comfort at the expense of the better part of the community”. He called it “popular despotism” and insisted that it’s rise “must be corrected”.
Another founding father, James Madison worried of a comparable future. In that future, democratic government would be found “substituting the motive of private interest in place of public duty”, leading to “a real domination of the few under an apparent liberty of the many”. The drivers of this change in Madison’s view would be “[t]he stock-jobbers” who he wrote “will become the praetorian band of the Government, at once its tool and its tyrant; bribed by its largesses and overawing it by its clamours and combinations”.
On the other side of the Atlantic, during a similar period, Scottish philosopher and economist Adam Smith was also sharing his predictions.
Smith’s words should carry weight for those interested in capitalism, freedom and democracy on all sides of the political spectrum. Nobel prize winning economist Milton Friedman, who is an ideological pillar of modern liberalism, begins one of his more seminal works, Free to Choose, with great praise for Adam Smith. Smith is, Friedman concludes, the “father of modern economics”, and his book The Wealth of Nations a “masterpiece”. For any classical, quasi or neoliberal, Adam Smith’s words in Wealth of Nations are therefore worth some consideration.
Smith believed the existence of what he called “joint stock companies” was unreasonable except in exceptional circumstances where they can demonstrate “with the clearest evidence that the undertaking is of greater and more general utility than the greater part of common trades”. However, Smith later concluded that while corporations “are established for the public-spirited purpose of promoting some particular manufacture” they “can in other respects scarce ever fail to do more harm than good”.
In the long run, Smith concluded that “the interested sophistry of merchants and manufactures”, might come to overwhelm the benevolent aspirations of democrats everywhere and turn civil government into “civil government… instituted for the defence of the rich against the poor”.
Some decades later Alexis de Tocqueville, whom another ideological pillar of modern liberalism Frederick von Hayek considered one “of the greatest political thinkers”, made similar observations. De Tocqueville urged in his chef-d’oeuvre Democracy in America that any “friends of democracy should keep their eyes anxiously fixed” on “the manufacturing aristocracy which is growing up under our eyes”. De Tocqueville understood it to be “one of the harshest which has ever existed in the world”. Moreover, if allowed develop, it could plausibly be expected to lead to “a permanent inequality of conditions”, leading to “a real domination of the few under an apparent liberty of the many”, to borrow Madison’s words once more.
Milton Friedman wrote at length about the “relation between economic freedom and political freedom”, and was adamant that “historical evidence speaks with a single voice”. The founding fathers of the United States and of modern economics are part of that single voice. While many of their predictions were for the most part theoretical, those theories perhaps pass Friedman’s ultimate test of validity when applied to our modern democracies. Writing in 1966 in The Methodology of Positive Economics Friedman concluded that:
[T]heory is to be judged by its predictive power for the class of phenomena which it is intended to “explain.” Only factual evidence can show whether it is “right” or “wrong” or, better, tentatively “accepted” as valid or “rejected.” …the only relevant test of the validity of a hypothesis is comparison of its predictions with experience.
The experience of many in the western world today, in particular the squeezed middle, is that Jefferson’s “new aristocracy” has truly “become the praetorian band of the Government”. Trump, Farage and many others across the western world, both on the right and left, are reshaping politics by articulating people’s fears in a new language. In place of Jefferson’s “new aristocracy” is the 1%. In place of Madison’s “stock jobbers” is Wall Street. In place of what Adam Smith termed “the interested sophistry of merchants and manufactures” are the lobbyists both in the United States and Europe.
However, implicit in much of the recent commentary about the rise of the 1% and their role in shaping policy is the assumption that this phenomenon is something new or recent. It’s not. As the documentary record shows it has been forever both a feature and concern of democrats on both sides of the Atlantic. The only difference today perhaps is the extent to which our “new aristocracy” influences decisions that impact on all of our lives.
The question then for those interested in maintaining the promise of the founding fathers of modern democracy is to what extent you believe Trump or Farage or similar political voices are the answer to this “dangerous tumour”, this “new aristocracy”. If you don’t, the challenge then is to build or support voices that are the answer. As to do nothing at a moment of so much tumultuous change is to tacitly acquiesce to whatever happens next.
Some sources in particular order for those curious:
Friedman, Milton, “The Methodology of Positive Economics” In Essays In Positive Economics (Chicago: Univ. of Chicago Press, 1966)
Friedman, Milton & Rose, Free To Choose, (Avon, 1981)
Friedman, Milton, Capitalism and Democracy, (University of Chicago Press, 2002)
Werhane, Patricia, Adam Smith and His Legacy for Modern Capitalism, (Oxford University Press, 1991)
Smith, Adam, The Wealth of Nations, (Aberdeen University Press, 1904)
Sellers, Charles, The Market Revolution: Jacksonian America, 1815–1846, (New York: Oxford University Press, 1991)
Jennifer Nedelsky, Private Property and the Limits of American Constitutionalism: The Madisonian Framework and its Legacy, (University of Chicago Press, 1990)
Hayek, F.A., The Road to Serfdom, (Routledge Classics, 2002)
Tocqueville, Alexis de, Democracy in America, (Mentor Books, 1984)
Manley, John F., “American Liberalism and the Democratic Dream: Transcending the American Dream,” Policy Studies Review, Vol. 10, №1, Fall 1990