When Richard Nixon Met Karl Polanyi

30 Oct

In 1969, while he was working on Richard Nixon’s Family Assistance Plan, which would have guaranteed an income of $1600 plus $800 in food stamps to every family of four, Daniel Patrick Moynihan was deputized by Nixon to investigate the historical accuracy of one of Karl Polanyi’s claims in The Great Transformation.

Polanyi had argued that Britain’s Speenhamland system—like Nixon’s plan, it would have guaranteed an annual income to poor families, regardless of whether they worked or not—had the perverse effect of making the poor poorer. Reiterating claims made by Marx and Engels, Polanyi wrote that Speenhamland allowed, even encouraged, employers to hire workers at below-subsistence wages (the poor were guaranteed an income regardless of whether they worked). Because workers would start losing their income  supports once they earned more than a subsistence wage, and because employers were more than happy to have local parishes supplement or subsidize wages, Speenhamland effectively put a cap on wages. Productivity went down, and with it, poor rates and income supports.  The long-term result, said Polanyi, was increased immiseration among the poor.

Few people have attended to Polanyi’s caveat that had the working poor not been prohibited by the Anti-Combination Laws of 1799-1800 from organizing themselves they might have been able to reverse these effects. (Admittedly, that point only gets a passing mention in Polanyi’s chapters on Speenhamland.) Instead, his argument has been taken as Exhibit A of Albert Hirschman’s perversity thesis: policies designed to achieve positive ends, particularly when those ends relate to the poor, often produce the opposite of their aims. (Hirschman himself made a nod to these linkages.)

When Nixon began mooting his version of Speenhamland in the early part of 1969, talk of perversity (in all senses) was very much in the air. In mid-April, the economist Martin Anderson—then a White House staffer, but previously a devotee of Ayn Rand; Anderson has also been credited with bringing Alan Greenspan, another Randian, into government—prepared a report on the history of poor assistance, which was essentially little more than a series of extracts about Speenhamland from The Great Transformation.

So troubled was Nixon by this history that he had Moynihan personally undertake an assessment of Polanyi’s findings. Moynihan set his staff right to it, resulting in a team of bureaucrats surveying all the most up-to-date historical literature on Speenhamland.

As Fred Block and Margaret Somers—from whose wonderfully informative 2003 article in Politics & SocietyIn the Shadow of Speenhamland: Social Policy and the Old Poor Law” I have cribbed this story—concluded:

The Family Assistance Plan was ultimately defeated in the U.S. Senate but only after Richard Nixon had a conversation about the work of Karl Polanyi.

Update (12:30 pm)

There’s an ungated version of Block’s and Somers’ article here.

8 Responses to “When Richard Nixon Met Karl Polanyi”

  1. William Neil October 30, 2013 at 12:34 pm #

    Thanks for this very interesting story of intersecting minds and policy goals. I was unable, unfortunately to get to Block’s and Somers’ article because of the cost and my own financial situation as a member of the working poor, but I have been writing about Polanyi’s “Great Transformation” for several years now, and indeed, I think it is a central text to understanding our times.

    Let me try to make a connection between the whole Speenhamland system in the context of Polanyi’s broader purposes, and the way we view the Presidency of Richard Nixon as the last liberal or first conservative president.

    “The Great Transformation” is no easy read, despite passages of profound power and clarity. That’s because the book is a very scholarly one, not without muted polemical shadings, to be sure, but Polanyi goes out of his way to give the other side of the ideological battles of the 19th century a full hearing – the conservative side, in addition to his clear sympathy for the social democratic one that is building as the counterforce to the gold standard, balanced budgets and an earlier age of globalization and trade. And the horrors of early industrialization.

    The history of the treatment of the poor in England is a long and complex and controversial one and Polanyi tells it in great detail. The rural poor, the disappearance of the fabled “yeomanry” and the loss of independence in the “old agrarian” economy of England are the prelude to this story and Polanyi does not sentimentalize any aspect of it: England was at the forefront of scientific agriculture and agrarian efficiency for several centuries, and the small landowners and rural agrarian poor were under tremendous pressure as the fraught term “enclosure movement” shows. The rural poor had some of their best defenders in unlikely places – church and crown – against these powerful modernizing forces – this all before the rise of Industrialism. The English crown was wary of the great destabilizing potential of the rural changes under way, and sought to slow down and buffer the full implications.

    The great detailed history Polanyi supplied about Speenhamland and the rural history before it had a large purpose: he was trying to show a society struggling with the massive task and implications of overturning its own economic and social organization on the way to what Polanyi maintains was the world’s first truly all inclusive labor market whose end goal was to supply cheap labor to the rising world of factories in the industrial midlands. The revolutionaries in this process were none other than the classical economists – and yes, Edmund Burke sides with cutting away the supports to the poor – so much for slow evolution and traditional society. So if we view Speenhamland as a confused stage in the crablike “progression” to the terrible world of the 1830’s and 1840’s for the displaced agricultural workers now moved into the intolerable conditions of the first industrial cities, we can better appreciate everyone’s struggling with deciphering an ideologically confused moment. The rural poor were now even poorer than they had been, and they had lost their previous social identity – they were “immigrants” in the full negative sense of the word, immigrants in a entirely new political economy, and they were at the very bottom rung.

    No wonder Speenhamland is a confused moment – for contemporaries and policy formulators as well, who would try to decipher its meaning centuries later. Polanyi’s point – this was a great revolution made by intellectual revolutionaries (or reactionaries, Cory can straighten us out on this point) – the classical economists – who even themselves underestimated what they had undertaken – this is, I believe the source of the near religious fanaticism surrounding the market which continues down to our own day, and we should credit the powerful language Polanyi uses to describe it – religious terms. In creating the world’s first labor market the “free marketeers” had to engage in a vast project of social engineering, scrapping the old poor laws and the later iterations like Speenhamland, were only the beginning of the project. The emotional intensity of the fight over the corn laws, the protection of native agriculture, was pursued, in the name of this new ideology, probably to the detriment of England’s own national self-interest, as later wars would reveal.

    Nixon. Rick Perlstein’s “Nixonland” – Nixon believed he was the one to manage the nation’s decline – yes decline, based on losing a great war and the devaluation of the dollar in August of 1971, a seminal event that we do not yet fully understand, but one which set in motion great financial and trade disruptions, and which supplied the rationale for more and more exotic financial derivatives to cope with fluctuating currencies and their implications. But he couldn’t speak publicly, or acknowledge that decline. Nixon who advanced the regulatory state even more than Lyndon Johnson….but who played the race card deeply with the Southern strategy and wanted to integrate democratic leaning white labor unions in order to undermine the New Deal consensus behind the Democratic Party.

    This is getting too long already, so I”ll leave readers with the suggestion that Nixon himself represented a torn transition figure between the failing New Deal coalition and the rise of a more self-conscious conservative movement which flowered after Reagan. Suggestive of the transition time of Speenhamland before England would dare to enact the full program of the radical classical economists. Nixon was very intense, mostly attributed to his psychological troubles and family background. And perhaps some attributable to the changes he saw himself presiding over. I’ll close with Polanyi’s description of “The Birth of the Liberal Creed,” of the birth of economic conservatism, that is, from the classical economists, from the very first paragraph of the chapter of that title:

    “Economic liberalism was the organizing principle of society engaged in creating a market system. Born as a mere penchant for nonbureaucratic methods, it evolved into a veritable faith in man’s secular salvation through a self-regulating market. Such fanaticism was the result of the sudden aggravation of the task it found itself committed to: the magnitude of the sufferings that had to be inflicted on innocent persons as well as the vast scope of the interlocking changes involved in the establishment of the new order. The liberal creed assumed its evangelical fervor only in response to the needs of a fully deployed market economy.”

  2. troy grant October 30, 2013 at 1:07 pm #

    We the People can’t outspend the Koch Bros. on an ongoing basis. Here is a way to beat them at their own game:

    Incorporate We the People and issue equal non-transferable shares of stock in trillions of dollars of our public treasure (public lands, mineral resources, public airwaves, etc.) to each citizen before other corporations privatize and glom it all. An equal share would be issued at birth, and the share would be equally distributed to the public upon death.
    The dividends we all accrue from leases of our public resources will end poverty in America. Stock in our public treasure would also save it from being privatized, stolen and destroyed, as the corporate oligarchy is doing. Our shares and their dividends could not be garnished or expropriated.

    As a private corporation, We the People Inc. will be able to hire and fire our management in yearly online stockholders meetings. Our equal shares will give each American an equal voice in our corporation. This is Direct Grassroots Democracy.

    We the People Inc. would be the largest, richest and most powerful private corporation consisting of 300 million Americans with an equal voice in its management. The Swiss just voted to give each citizen $2,800/mo. We can accomplish the same in this way.

    This stock issuance to every citizen would be welcome across party lines. Our dividends from the lease of our public treasure would be much higher than the Swiss stipend. So high in fact, that Americans could abolish taxation altogether and pay collectively for whatever goods and services our corporation decides to fund.

    Lets not hold our breath waiting for politicians to do this. We need to do it NOW before the oligarchy privatizes ALL our public treasure!

  3. Glenn October 30, 2013 at 2:42 pm #

    Not unlike: “And because employers were more than happy to have local parishes supplement or subsidize wages…”

    From http://www.cnn.com/2013/10/29/opinion/temple-hidden-fast-food-taxes/

    “In reality, whether you eat the fries or not, fast-food companies such as McDonald’s actually shift billions of dollars in hidden costs onto taxpayers every year. How? These costs flow directly from their business model of low wages, nonexistent benefits and limited work hours, which force millions of fast-food workers to rely on public assistance to afford basic necessities such as food and health care.

    To see this business model in action, take a look inside the employee break room at many McDonald’s restaurants, where you might find a poster displaying information for a 1-800 “McResource” hotline designed to offer counseling to employees who need financial, housing, child care or other help.”

    • Glenn October 30, 2013 at 2:49 pm #

      Is the private sector able to amass great wealth without government subsidies?

      http://www.huffingtonpost.com/2011/09/22/farm-subsidies-junk-food_n_975711.html

      “According to the study, a whopping $17 billion of the total $260 billion the government spent subsidizing agriculture went to just four common food addititives: corn syrup, high fructose corn syrup, corn starch and soy oils. By comparison, the government spent just $261 million subsidizing apples, and far less still supporting fruits and vegetables, like spinach, broccoli and blueberries, that public health experts say encourage better health. To put things in perspective, the PIRG study said that, if the government had given taxpayers the subsidies instead of the farmers, each one would have been given $7.36 to spend on junk food and just 11 cents to spend on apples a year. This is a key factor that makes junk food more expensive than healthy food — and, by extension, that makes many Americans obese.”

      And with this subsidy comes greater burdens on Medicaid.

  4. Benjamin David Steele October 30, 2013 at 4:53 pm #

    This is an issues of basic income:

    http://en.wikipedia.org/wiki/Basic_income#Examples_of_implementation

    Canada did an experiment along these lines and it turned out successful, but for some reason was hushed up or ignored at the time. Despite its success, Canada never again repeated it.

    http://en.wikipedia.org/wiki/Mincome

    http://www.dominionpaper.ca/articles/4100

    • Glenn October 30, 2013 at 11:56 pm #

      Robespierre’s maxim is incorporated into the reactionary operation of the counter-revolutionary hierarchy.

      The terror of being without is used by the few to extort virtue from the many and inspires self-disciplined responses to the perceived desires of the master.

      Humane treatment negates the terror of facing the lack of housing, medical care, education for children, etc, but to what end for the master? Many people I know find it necessary to work only for employer supplied health insurance.

  5. P.M.Lawrence November 1, 2013 at 9:01 pm #

    Polanyi had argued that Britain’s Speenhamland system—like Nixon’s plan, it would have guaranteed an annual income to poor families, regardless of whether they worked or not—had the perverse effect of making the poor poorer.

    This is highly misleading; it suggests that Nixon’s plan would have had the same perverse effect. However, it was materially different in the following ways, that would have prevented that:-

    – The Speenhamland System had a 100% benefit withdrawal rate with increases in beneficiaries’ separate real incomes, but Nixon’s plan only had a roughly 67% benefit withdrawal rate (per the Passell and Ross material linked in the first sentence of this post).

    – The Speenhamland System provided full sufficiency by the standards of its time and place, but Nixon’s plan only provided “[not] much of an income: $1,600 for a family of four plus $800 in food stamps”, less than full sufficiency by the standards of its time and place (per the Passell and Ross material); that left incentives to earn more at the bottom, to provide a top up income.

    The crucial thing is that:-

    – Some levels and withdrawal rates of guaranteed separate income provide sufficiency, so a proportion of beneficiaries do not work; there is a net drain.

    – Some levels and withdrawal rates of guaranteed separate income just fail to provide sufficiency, so practically all beneficiaries have to work to achieve sufficiency, but as they only need a top up income they can price themselves into adequate work and there is a net gain over the Vagrancy Costs of having unsupported poor people around, even after netting off the costs of funding the approach.

    – Some levels and withdrawal rates of guaranteed separate income provide much less than sufficiency, so many beneficiaries need enough further work to achieve sufficiency but not enough of them can price themselves into it, and there are still some of the Vagrancy Costs of having unsupported poor people around; there is a net drain.

    The Speenhamland System fell into the first of these categories and Nixon’s plan fell into the second. It is not a valid criticism that Nixon’s plan fell short of adequacy in itself; that was an essential part of what was needed to make it effective and sustainable. (Here, I have not addressed transitional issues and some special cases at the margins, but this is broadly accurate. However, the Negative Payroll Tax approach of Professors Swales and Phelps bypasses many of the transitional issues, particularly the problem of net outgoings of funds until things pick up.)

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