American Unemployment

Past, Present, and Future

Frank Stricker

• Publisher: University of Illinois Press
• Year: 2020
• ISBN:
  9780252052033
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

The history of unemployment and concepts surrounding it remain a mystery to many Americans. Frank Stricker believes we need to understand this essential thread in our shared past. American Unemployment is an introduction for everyone that takes aim at misinformation, willful deceptions, and popular myths to set the record straight:

• Workers do not normally choose to be unemployed.
• In our current system, persistent unemployment is not an aberration. It is much more common than full employment, and the outcome of elite policy choices.
• Labor surpluses propped up by flawed unemployment numbers have helped to keep real wages stagnant for more than forty years.
• Prior to the New Deal and the era of big government, laissez-faire policies repeatedly led to depressions with heavy, even catastrophic, job losses.
• Undercounting the unemployed sabotages the creation of government job programs that can lead to more high-paying jobs and full employment.

Written for non-economists, American Unemployment is a history and primer on vital economic topics that also provides a roadmap to better jobs and economic security.

PART I

History Lessons: 1873–2018

CHAPTER 1

Discipline for the Unemployed;
Laissez-Faire for Business (1873–1920)

This chapter shows that during the foundational period of modern American capitalism, depressions were frequent, unemployment was common, and poverty rates probably fell. The federal government was, mostly, the accomplice of capital rather than of workers. Federal officials intervened to quash strikes but not to counteract depressions or to create a system of unemployment benefits. The chapter starts with a sketch of two big ideas that limited federal action for the working class and rationalized harsh measures used by charity organizations to control the unemployed and other poor people.

Unemployment and Its Deniers

Although economic growth over the whole period covered by this chapter was often strong, it was frequently interrupted by severe depressions. Average real incomes increased 48 percent between 1890 and 1915, but averages can be deceptive. Millions stayed poor and a relative handful became fabulously rich. Many immigrants did better than in the old country, and poverty rates for the whole population were inching down, but the average working-class family was often on the edge. When Louise More studied a sample of two hundred working-class families in New York City in 1903–1905, she found that the average family income was $851 (about $19,200 of purchasing power in our time). She estimated that working-class families needed $800 for the basics, so half of her families were poor or nearly so. More believed that low wages and unemployment were significant causes of family poverty.

There was a lot of unemployment in this half century. Major depressions in the 1870s, 1890s, 1908, and 1913–1915, and small dips in between. In times of depression, suffering was widespread and cities swarmed with people who had no income, no home, and not much public or private aid. Governments did little to stimulate job creation; this was the dream world of modern libertarian free-marketers.1

The economic system often failed, but powerful business, political, and intellectual interests resisted fundamental reforms. Two big ideas helped them justify harsh policies. The first one was simple: most people, and especially the poor and the unemployed, were of weak character. Giving them economic aid encouraged laziness and other bad traits, so charity reformers strove to limit material aid. They believed that the unemployed and poor people needed instruction, regulation, and, sometimes, in the case of homeless people, imprisonment.2

Another set of ideas bolstered the power of captains of industry and finance and limited public and private assistance to people who were victimized by unemployment and poverty; this was the economic model that many mainstream economists believed in. Here the idea was that capitalism tended always to work smoothly. Free markets produced more income and plenty of jobs. For the most part, government should stay out. Of course, there were exceptions to this laissez-faire dogma. Railroad builders accepted huge grants of land from the federal government, and all capitalists wanted government assistance at times, including federal troops to suppress strikers. But the theory was that an economy free of government interference worked best. Government must not intrude upon the market system by encouraging unions or passing wage laws or giving unemployed persons living expenses while they searched for work. Workers had to save for a rainy day. When out of a job, they just had to try harder to find another one. There were always jobs out there waiting to be filled.

At the extreme, there was a social Darwinian version of the two big ideas. Government and charities must not interfere with the winnowing process that resulted in the survival of the fittest. Out of the competitive struggle, the fittest rose to positions of leadership and the least fit fell by the wayside. That was how it was meant to be. Yale sociology professor and social Darwinist William Graham Sumner said, “a drunkard in the gutter is just where he ought to be. Nature is working away at him to get him out of the way.”3

Though Sumner’s rhetoric was extreme, his biases were not unusual. There were major depressions in the late 1800s and plenty of evidence in most cities of high unemployment between depressions. One might have concluded that there was something outside the minds and wills of unemployed people causing unemployment. But many mainstream economists at home and abroad virtually denied the reality of unemployment. Some economists in America and in England believed as an act of faith that capitalism normally provided full employment. Many “denied or minimized the existence of involuntary unemployment, except perhaps as a transitory phenomenon that could be cured by lower wages.” Unemployment, they argued, often owed to laziness, intemperance, ignorance, incompetence, and other bad traits and behaviors. The antidote to unemployment was not government spending or government job programs but Christian teachings, which would make the jobless person improve his character and make him a more valuable worker.

In the late 1800s and early 1900s, more economists began to challenge laissez-faire dogma and the comforting economic model that supported it. They would eventually come to understand that depressions occurred periodically because of the inner workings of the system and through no fault of the unemployed. Some economists and business leaders too came to understand that production could outpace consumer incomes and cause an economic decline that had nothing to do with how virtuous workers were. A corollary of new views that planted responsibility in the economy was that unemployed persons deserved government assistance—money, jobs, job search assistance, or something else. In this liberal minority were Richard Ely, John Commons, Charles Tuttle, and Wesley Mitchell. But most leaders of the profession and a majority of economists in America and in England were in denial about the fact that full employment was a rarity. They continued to assume that the economy tended toward full employment, barring unusual occurrences. The British economist H. Stanley Jevons, in “The Causes of Unemployment” (1909), claimed that what looked like unemployment resulted from three causes: a school system that turned out unemployable children; trade unions that made wages too high; and solar activity that affected agriculture and caused trade fluctuations.

One of the most admired economists in the Anglo-American world, Alfred Marshall, started from the view that the economy moved always toward full employment. The depression of the 1890s affected his view as it did other economists, but not so much. In 1903 he distinguished between cyclical depressions, like that of the 1890s, which were occasional and would become less frequent in the future as people learned to save money in good times, and something more important, which he called “systemic” unemployment. You might think the latter term meant something intrinsic to the economy, but Marshall was talking about people who could not or would not work. He labeled systemic unemployment a disease and thought it could be cured not by fixing job markets or the economy but by deurbanization and by kind but severe discipline of the culprits who refused to work. This is the kind of thing that came from the man who brought the neo to neoclassical economics by inventing something called marginal utility. Marginal utility did not make Marshall more realistic about unemployment.4

Outside the economics profession, there was plenty of opposition to capitalist economics and stingy charity practices in the late 1800s. A more realistic and generous view of the poor and the unemployed was promoted by labor-liberals and socialists like Eugene Debs, unemployed workers who demanded government work programs, unionists like Terrence Powderly, settlement house workers including Jane Addams, liberal Protestant leaders including George Herron, and progressive writers such as Henry George, Edward Bellamy, and Henry Demarest Lloyd. Many of these people were the left-wing and smaller fraction of the professional-intellectual class. They argued that the unemployed and the poor were not the cause of their own conditions. Low wages, technological change, depressions, and capitalism itself were the causes. It seemed to follow that if the main reasons for unemployment were large and impersonal, then solutions should not be about mending individuals but about fixing the economy and government, for example, with unions, public works, unemployment insurance, and even socialism.

Labor-liberals gained knowledge and numbers over fifty years of economic turbulence, but they had slight impact on government policy and legislation. Workers battled capitalists, and more intellectuals came to believe that poverty and unemployment was due to bad systems rather than bad people. But labor-liberals faced a mostly capitalist press, a reactionary Supreme Court, and a conservative majority in the professional-intellectual class. Unions increased their numbers, but even after an organizing surge, they covered just 7 percent of workers in 1915. Conservative intellectuals and professionals continued to wield influence through hundreds of papers, magazines, pulpits, universities, and charitable enterprises. They believed that capitalist institutions were sound and that the unemployed were defective. Many continued to believe that workers were poor because they were weak, ignorant, and even “depraved.” Some considered that people who lacked income were predestined by God to fail. They lectured needy people on how to live on less while natural economic events took their course; they blamed working-class protest on communism and other foreign doctrines, not genuine grievances.5

The 1870s Depression, Unemployment Ideas, and the Middle Classes

From 1873 through 1877, Americans were shaken by their first modern depression. The depression was caused by international events that shrank the money supply and by business overinvestment, especially in railroads. We don’t have precise unemployment numbers, but we know that the homeless population and the number of free riders on the railroads soared in many places. New York City police stations were filthy, but they were crammed every night with unemployed homeless people. Because the homeless were allowed to stay just one night in any single station, they moved from station to station and were called “revolvers.”6

The unemployed demanded government assistance, and workers fought wage cuts. But many politicians, mainstream editors, and capitalists were unsympathetic. Sugar millionaire and New York City mayor William Havemeyer told protesters they had to save for a rainy day. Public works, one newspaper claimed, was “sheer unadulterated bosh.” Beggars belonged in jail. The unemployed had to be patient while natural laws took effect and wages fell. Those who could not be patient, wrote one journalist, should be swept off the earth by “yellow fever, cholera, or any other blessing.” In New York City’s Tompkins Square, the unemployed who were protesting for government work projects were beaten by mounted police. It was a scene that the New York Times found amusing. But sometimes the unemployed succeeded in getting help from local governments.7

Middle- and upper-middle-class Americans had nightmares about disorderly poor people, whether beggars on the corner or thousands of people demanding jobs and money. The rowdy working class threatened their security and comfort. Some who were affluent became radical reformers and focused on changing the economy, but many charity officials stayed hard-hearted, even in depressions. They responded to threats from below with policies that denied material aid but ramped up home visitations as a way to persuade poor people to behave properly. Some charity leaders pushed for tougher laws against vagrants. Officials of the New York Society for the Condition of the Poor deplored expressions of sympathy that came in the form of free meals and shelters for needy people. Such things demoralized the poor by encouraging them not to look for work. Charity Organization Societies supervised an army of volunteer “friendly visitors” who entered people’s homes and helped to determine whether people deserved assistance and what kind.

The charity reformers’ ideas were not completely new. Since the Protestant Reformation of the 1500s in western Europe, public policy made provision for material relief to needy people, but it was usually assumed that many poor people, especially able-bodied males, did not deserve help. If people were to receive aid, they had to demonstrate that they were really needy, and they did so by performing hard labor. Hence the spread of workhouses in England, a country where huge numbers of people were often without work and income. The workhouses degraded and debased their inhabitants, in part to guarantee that only the very needy would enter.

There were workhouses and poorhouses in America in the 1800s, but not enough, especially as industrial capitalism took off after the Civil War. Much of the work of social control was organized by charity organizations, through home visitations and, in extreme cases, the police. There was nothing new in the links between relief policy and extreme methods of discipline, but the charity reformers were organized and militant, and they often thought of themselves as the vanguard of a newly realistic and scientific approach to the poor, the homeless, and the unemployed. Interestingly, their campaign against material assistance occurred in a period when capitalists had vastly increased the amount of wealth held by the rich, so there was more money for wages and cash aid for people who had been pushed into poverty by low pay and unemployment.

Needy people were more likely to receive help from city governments and local political machines than from charity organizations. One-tenth of Brooklyn’s population was getting government aid in the depression of the 1870s, while a private New York charity organization hired fifty investigators to weed out unworthy applicants. It is not surprising that most applicants were judged to be undeserving, or that the few who received cash or vouchers had to perform hard labor.8

When the press, intellectuals, and charity reformers degraded the poor, they took some of the heat off millionaires like Andrew Carnegie and John D. Rockefeller. It is true that many middle- and upper-middle-class Americans worried about the immense power wielded by the robber barons, but it was easier to do something about poor people than about the barons. And some charity organizations depended on rich Americans for donations. So, conservative intellectuals and professionals frequently dehumanized the unemployed, and the depression of the 1870s seemed to unhinge them. The homeless, jobless person was “incorrigible,” “incurable,” and an “utterly depraved savage,” according to Yale professor Francis Wayland. Harsh measures were necessary. A gun company produced the “Tramp Terror,” a shotgun to use on tramps. The Chicago Tribune suggested that a little arsenic in food handouts at the back door would ...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Acknowledgments
• Introduction
• Part I: History Lessons: 1873–2018
• Part II: Real Numbers, Explanations, Remedies
• Notes
• Index
• Back Cover