“each of the two previous periods . . . was accompanied by arnpohtical revolt of the middle class, war, and led to the emergencernof a major new political partv.”rnBoth prior periods ended with the middle class regaining politicalrnpower in the country. The middle class was then able tornfashion economic policies that restored its prosperity. ThernBrst period of declining living standards (1804-1821) led to therncollapse of the Federalists and the rise of the Jacksonian Democrats.rnThe Tariffs of 1828 and 1832 protected domestic industryrnand contributed to the industrialization of the North.rnJackson’s supporters were the pre-industrial middle class—rnthe country’s small capitalists, farmers, skilled craftsmen, andrnmechanics; his opponents were the v’ealthy “moneyed interests.”rnHamilton’s moneyed interests had, by this time, securedrnfrom government various monopolies and privileges, allowingrnthem to run banks, bridges, turnpikes, railroads, andrnferries. Jackson’s small capitalists wanted government to stoprnmaking special deals with privileged groups.rnFreedom, the Jeffersonian principle, andrneconomic growth, the Repubhcan principle,rncame together as the American dream. Thernenergies released by freedom created growthrnand gave substance to the belief in an everexpandingrnpie. In the absence of an expandingrnpie, politics is bound to focus on therndistribution of the wealth that alreadyrnexists, a dismal zero-sum game.rnThe second period of decline (1852-1882) led to the collapsernof the Whigs and the rise of the Republican Party. Thernoverarching Republican vision was the creation of the Americanrnmarket—a tariff-free trade zone of unprecedented sizernand resources. The Republicans maintained the Union byrnforce to prevent the free-trade South from attaching itself tornthe European economy. Lincoln, who thought of himself asrnmiddle class, said that the people he most admired were “thernattorney in the country town; the merchant at the crossroadsrnstore; the farmer who toils all day.” After the Civil War, thernRepublicans, although basically a party of Hamiltonian-NewrnYork bankers, were able to form a coalition with the middlernclass. The basis of the coalition was that both the bankersrnand the middle class agreed that the country’s future dependedrnon extensive railroad construction, which would tierntogether the American market. The New York bankers explainedrnthat the country had to go back on the gold standard,rnbecause foreign bankers would not otherwise loan the fundsrnneeded to build the railroads, l b implement the gold standard,rnit was necessary to redeem Civil War greenbacks. The redemptionrn(1866-1879) was intentionally deflationary. It actedrnas a heavy tax on Midwestern farmers, who had borrowedrncheap dollars to buy their farms and who now had to repayrnwith dear ones. Nevertheless, the farmers and the rest of thernmiddle class deemed it advantageous to support the bankers inrncreating the American market. And they were right. In 1865rnthere were 35,000 miles of railroad in operation; in 1887 therernwere 157,000 miles. The country’s population in 1870 wasrn38 million; by 1890, 63 million. By 1890 the United States wasrnthe wealthiest country in the wodd. The Republican visionrnwas so well realized that it kept the party in power, with smallrninterruptions, from 1860 to 1932.rnThe party changed as it went along. After the Civil War, thernmen who created this great wealth lost a sense of commitmentrnto the rest of the country. The Progressive movement,rnled by Theodore Roosevelt, was a middle-class reaction to therndistortions created by the success of industrialization. Thernmiddle class believed that both the extremes of wealth andrnpoverty and the war raging between capital and labor wouldrnsooner or later destroy the country. Roosevelt said that Republicanrnlaissez faire policv “is thoroughly vicious”; the workerrnis not “an industrial asset to be allowed to drift or to bernput at the mercy of the exploiter,” and he cannot toleraternthe low wages that “mean the sacrifice of both individual andrnfamily life and morals to the industrial machinery.” Rooseveltrnproposed to regulate capitalism by enforcing antitrustrnlaws, outlawing child labor, improving working conditions,rnlimiting hours, enacting health and inspections laws, and preservingrnthe country’s natural resources. Roosevelt worked arncompromise between democracy and capital that operatedrnefficientiv until the I960’s.rnAmericans, because of our consistently rising standard ofrnlix’ing, believed, like F. Scott Fitzgerald’s Gatsby, in “the greenrnlight,” a future that will fulfill all promises. Freedom, the Jeffersonianrnprinciple, and economic growth, the Republicanrnprinciple, came together as the American dream. The energiesrnreleased by freedom created growth and gave substance to thernbelief in an ever-expanding pie. In the absence of an expandingrnpie, politics is bound to focus on the distribution ofrnthe wealth that already exists, a dismal zero-sum game.rnThe Republican majority collapsed when the party led therncountry into the Great Depression. The Democrats created arnnew majority party composed of three groups: the South, intellectuals,rnand working-class Catholics. The New Deal disnrantledrnthe old Jeffersonian government based on cheeks andrnbalances and the separation of powers. The forms of the oldrngovernment—federal, state, executive, legislative, and judicialrn—were retained, but they became operating parts of a singlernHamiltonian mechanism that used all its powers to solverneconomic problems. The Hamiltonian-Ncw Deal governmentrnwas able to tax, spend, inflate the currency, and regulaternbusiness and individual activity to any extent it thought necessary.rnGovernment could spend the country’s income—rnwhat used to be called its social product—to accomplish itsrngoals. Government also began running deficits and issuingrndebt so that it could spend the future’s social product as well.rnLater, the Hamiltonian government directed its energies towardrnsolving what it considered social and moral problems.rnIncreasingly, the country’s operating rules were imposed fromrnthe top down, rather than from the bottom up.rnThe question today is where the third period of decliningrnmiddle-class living standards (1972 to present) will end. Theyrncan continue to diminish because of Hamiltonian-like policies,rnor they can turn around with a return to Jefferson’s faith in therncommon man. Can a democracy so debt-ridden even bernsaed? Will the middle class end up on top or isolated and dcstrorned? The answer is hardly clear. ^rn22/CHRONICLESrnrnrn