The polarized political environment in America is not unusual. What makes the current situation so incredible is the comparison to what came before.
After World War II the United States experienced a prolonged period of relative political calm. While disagreement was rife, there was a sense of compatibility between the opposing political parties. A few Republicans were more liberal than some Democrats and a few Democrats were more conservative than a few Republicans. It was a world where liberal Republicans and conservative Democrats existed.
That started to change in the 1970s and blew full force as the 1980s arrived. The reasons are varied, but not the topic of today’s discussion. We are interested in the history of polarized politics and how it affected wealth. The goal is to learn from the past so we can better position ourselves for success in the toxic environment we find ourselves.
Politics is always a dangerous topic to cover. And it might not have an immediate connection with money or wealth. But experience (with heavy doses of research) reveals politics indeed has plenty to do with wealth and wealth creation or destruction. Polarized politics has visited America before and in much worse circumstances.
We will address politics first, then personal finances.
History of Polarized Politics
There is no exact count as to how many Founding Fathers the U.S. had. Some say there were 7, others 10. The Constitutional Convention had 55 delegates.
Regardless the number of Founding Fathers, there are several points worth noting about their behavior. First, they were all men of the landed class. In other words, the Founding Fathers were men with at least a modest amount of wealth in real estate. This isn’t the most politically correct situation by today’s standards. But we can (or at least should) agree this group of men did a pretty good job at nation-building.
Many Founding Fathers owned slaves. Benjamin Franklin had to dance around the subject when he was the American agent in London for the colonies. The British found it ironic Americans wanted freedom while holding tight to slavery.
Storing crops was more difficult in those days so it was common to store the excess corn crop as whisky. Consumption of alcohol was high in the 18th century. Bad water also encourage more alcohol consumption. It is no exaggeration to say the men who brought America to life were inebriated much of the time. While not drunkards by the standard of the time, some might be surprised how much work these men accomplished with the blood alcohol level they regularly had.
We only have time to discuss one Founding Father at length; we will touch on several others for reference. Since Ben Franklin is a leading Founding Father he will make a prime example for our discussion.
Much of the polarization of modern politics revolves around the identity politics of the left and the conservative ideas of the alt-right. There isn’t a single Founding Father who wouldn’t be nauseous over the current national dialog. Or would there?
Conservative Franklin: To the chagrin of the left, most Founding Fathers were decidedly conservative. Before President Reagan, Benjamin Franklin had his own version of trickle-down economics. Franklin believed the more money the rich had the more it percolated down to the poor. Franklin stated the”rich do not work for one another…” The rich, according to Franklin, spent their money on the poor buying the goods and services they produced. (Benjamin Franklin: An American Life by: Walter Isaacson; Simon & Schuster; 2003; pages 267-8.)
Welfare and Social Security: Franklin also warned against the welfare state. He wrote welfare had unintended consequences and promoted laziness. Modern ears may find this palatable, but Franklin went further. “I fear the giving mankind a dependence on anything for support in age or sickness, besides industry and frugality during his youth and health, tends to flatter our natural indolence, to encourage idleness and prodigality, and thereby to promote and increase poverty, the very evil it was intended to cure.” (Italics mine.)
What Franklin was saying is you either work or deserve to starve, even in old age or during illness. Social Security is something Franklin would probably not approve of. If you lacked the necessary frugality and industriousness during the vigor of youth, you serve as a living example to those who consider such sloth.
Minimum Wage: Franklin also disagreed with the minimum wage. By artificially raising wages Franklin felt it would overprice goods destined for foreign markets.
All these positions place Franklin decidedly to the right of center. But was he really cold-hearted? Did Franklin believe people should be allowed to suffer?
While conservative readers might be licking their lips by now, the liberal folks will have something to cheer shortly.
Liberal Franklin: Benjamin Franklin had a balanced political stance. In some ways he could be called a liberal Republican by today’s measures. Franklin had no problem with taxes as long as they were coupled with representation. His lack of debate against the Stamp Act of 1765 is indicative of his political position. Only when there was a serious backlash back home did Franklin give us our first political spin campaign to right his reputation.
Policies should encourage hard work, according to Franklin. He felt hard-working people lucky enough to achieve wealth (became rich) had an obligation to serve the community. These duties should improve the lot of the community, providing for a prosperous middle class. Those in genuine need (people suffering illness before they had time to work for their keep, children and widows, et cetera) were the responsibility of the wealthy. Today we might consider many welfare programs as serving this need in a much larger population than existed in 18th century America.
There are also a few things we might find appalling in Franklin’s behavior even in the Age of President Trump.
The Un-family Man: Franklin left his wife and children to serve as colonial agent in London for the Thirteen American Colonies. Even when opportunity arose, he chose to stay in London or travel to Scotland and Paris, even as his wife’s health failed. Ask John Edwards how that helped his political career. Even the King found this behavior strange when he inquired as to why Franklin remained in England in 1774 when Franklin had no more duties there.
Womanizer: We can forgive Franklin for many of his political positions due to the age he lived in. His position on slavery softened over the years, but as Isaacson reports, Franklin used the qualifier “in time” in letters he wrote. He knew slavery wasn’t a workable prospect, buy also kicked the can down the road.
Modern eyes are ears will be most disturbed by Franklin’s behavior towards women. The list of affairs and potential affairs is long. Need I remind you Franklin was married with children during many of these flirtations.
History records Benjamin Franklin enjoyed the company of women more than men when it came to social gatherings. The flirtations weren’t always innocent and the women not always unattached. There is a crude sketch by Charles Willson Peale of a scene he walked in on of Franklin kissing Polly Stevenson, the daughter of Margaret Stevenson (Franklin’s landlady). It is possible Franklin befriended Polly’s mother for the purpose of spending time with Polly. Mary “Polly” Stevenson was 18 years old at the time Peale accidentally walked in on the kissing scene. But there is also a story of Franklin in a flirtatious conversation with Polly when she was 11 years old discussing her desire to be with an older man Franklin’s age.
Final Notes on Franklin: I spent a fair bit of time on Benjamin Franklin for a few reasons. Franklin is a Founding Father and certainly one of the most important and influential of the Founding Fathers.
He was a man with all the failings and shortcomings of men. His humor was crude at times, as we see when he recommended to the Royal Academy of Brussels that they should study the causes and cures for farts. It is unlikely Franklin was faithful to his wife and was distant to his family often. He even missed his only daughters wedding.
Franklin had strong political beliefs that would have toppled normal men. He didn’t suffer such a fate because he never held a high office. He was more a grandfather and guiding hand in the creation process of the United States. His role was certainly instrumental, but he managed to avoid the polarization politics brings once high office is held. Even Washington faced real criticism for the first time as president.
Another benefit of reviewing Benjamin Franklin is he shows us the world and human nature when the United States was just a dream and there were only American colonies as part of the British Crown.
If we fault Franklin for his short-comings that many current political leaders share, then we espouse the notion that Franklin should not have been allowed to do his work of nation-building. Such opinions at minimum presuppose the right of the United States to exist or at least ever to come into existence.
It is a truism of the ages: The worst of human nature can lead us to greatness.
Maybe we should be more open to human failings if we aspire towards a better tomorrow.
We will cover the next actors with less detail as they all share similar traits we find so disqualifying.
Thomas Jefferson is also a Founding Father of the United States. He wasn’t the biggest fan of slavery and history assumes he treated with slaves with dignity and respect. (How else could we remember a man as great as Jefferson and his contribution to our morals, values and standards.)
Jefferson also served as the third president of the U.S. That said, Jefferson did own slaves regardless his dialog on the subject. Over 100 years after the abolition of slavery in this country we still feel the scar it has left. The black community more than any other.
To make matter worse, Jefferson had a child with at least one of his slaves. In a modern era where people in authority are criminally liable for sexual activity with someone under their authority, this seems like a serious offense. Yet it happened and we seem unmoved by the act. Maybe time does heal every wound. Or not!
For all Thomas Jefferson gave this nation, he was still a man with failings. Failings we would consider criminal in the current environment. If modern rules were applied Jefferson would never have been president and his work may never have been created. How a man with such concerning behavior gave us rules to live by is hard to understand. But once again, the greatest of us tend to have the greatest failings, too.
President Andrew Jackson
President Andrew Jackson did more to define and solidify federalism than any other president. But could a man of such accomplishment be endowed with faults?
Polarized politics were at their worst in Jackson’s day. Jackson won the popular vote three times and the presidency twice. He also gave Native Americans the Trail of Tears.
Instead of focusing on Jackson’s flaws, I want to refocus on our topic: political polarization.
People today think the things said and done are the worst ever. Wrong! People had no problem Jackson killed a man in a duel, he was also hated enough to be the first president to have an assignation attempt on his life.
He married his wife before she was legally divorced from her husband. As you can imagine, adversaries made hay of this knowledge. They hounded Jackson and his family to the point of murder.
The political campaign of 1828 was brutal. The fight contained numerous ad hominem attacks. This isn’t so different from modern times. The difference was how the attacks also dragged Jackson’s wife, Rachel, into the fight.
Rachel Jackson started to suffer from what we would call today anxiety and depression. The stress became so acute it lead to a heart attack that killed her. Jackson never forgave his enemies for murdering Rachel. We have no way of knowing if the stress caused her death, but Jackson didn’t care. He blamed his enemies and hated them to then end for what they had done.
If you think politics are polarized today, you might want to read up on President Jackson. Few political leaders in the U.S. experienced such an assault in attaining office.
President Abraham Lincoln
Most Americans hold President Lincoln in high regard. They hold views of Lincoln as a moral and honest man. He freed the slaves so he must be good, right? He also preserved a nation rent in two by political division. Never before or since has our nation been so politically divided. There is nothing in the current dialog we can compare to the division our nation faced and underwent in those days of the early 1860s.
These are not the worst of times. Our nation weathered far more serious problems than a misogynist Trump. Need I remind you the great Abraham Lincoln consorted with prostitutes while married. Yeah, great leaders are riddled with flaws. Perhaps the flaws are what make them great.
Yes, I digress. It is political division that most concerns us. Except, all the discourse on said divisions seem to revolve around moralistic behavior.
Before we finish with the Supreme Court and discussing the personal finance implications, we turn to FDR, the hero of the left.
FDR also had serious flaws when it came to women. He also had an affair. (It starts to sound like a nervous tick after a while.)
The Great Depression was the issue of the age when Roosevelt took office. You would think after the economic crisis the Republicans presided over, the Democrats would have unchallenged rule. You should think again.
Before World War II became an issue, FDR had a New Deal. There was only one problem. Republicans packed the Supreme Court for years and the Court kept knocking down his programs.
Roosevelt had an idea. If the Justices wouldn’t retire so he could nominate his own choices friendly to his programs, he would expand the Supreme Court so he would have vacancies to fill.
This struck Republicans a very wrong. And what do you know, even Democrats felt it was a power grab by FDR. FDR’s own party denied him the ability to expand the number of justices on the Supreme Court for political reasons. Talk about political polarization! Yes, it happens even within parties. Even worse than we see today.
There is always the temptation to think this is the worst time EVER! Rarely are such thoughts true.
Brett Kavanaugh’s nomination to the Supreme Court by President Trump signals the worst ever injustice in the history of the U.S. But is it?
There is already talk of impeaching Justice Kavanaugh. Some have warned this would set a bad precedent and has never happened before. And that is a lie!
Here is a quick rundown of notable Supreme Court dramas.
Removed from Office: Supreme Court justice John Rutledge was removed from the court by the Senate in 1795. Yes, 1795! Rutledge’s wife died in 1792 and he didn’t take it well. His mind deteriorated to the point where there was no other choice.
The same year Justice John Blair suffered from such severe headaches he was unable to continue. Rather than have the Senate remove him, he resigned.
Assassination: Justice Stephen Johnson Field was nearly assassinated in 1889 by a California State Supreme Court justice in a confusing story of divorce, alimony and a lost case.
Antisemitism: The Supreme Court had a justice so hated not a single member of the court attended his funeral. Justice James Clark McReynolds was a very vocal anti-Semite. In 1916 the Jewish justice, Louis Brandeis, joined the Court. McReynolds left the room every time Brandeis started to speak.
Racism: Justice Hugo Black belonged to the Ku Klux Klan prior to taking the bench.
There are stories of bribes and other nefarious behavior by Supreme Court justices. Justice Kavanaugh may still resign or face impeachment by the Senate at some point in the future. Regardless, we sometimes wrongly assume the Supreme Court, the final arbiter of law, rule and justice in our nation, is free from political polarization. Unfortunately, the Supreme Court is just as liable to the shortcomings of human nature as any group.
With the groundwork on political polarization in place, we now turn to the impact polarization has on personal finances, wealth and money.
Personal Finance in the World of Political Polarization
The lesson above clearly outlines a history of political polarization in the United States from before its inception until today. The luxury of self-pity falls on deaf ears when history is called into action. Things have been marching higher for a long time, as Steven Pinker notes in his landmark works: Enlightenment Now: The Case for Reason, Science, Humanism, and Progress and The Better Angels of Our Nature: Why Violence has Declined.
The Long March of Growing Wealth: Humans have lived on the Earth for a few hundred thousand years. We lived short lives back then and progress was slow. Life was dangerous. Basic shelter might have been a cave, tree or outcropping.
Then man (it might have been a women for all we know) discovered how to create and control fire. Cooking soon followed which improved life immensely. Cooked food was easier to digest and it killed pathogens. Life was still hard, but lives were made a bit easier with the discovery of fire.
Shelter improved slowly over the eons. Fire made the home warmer in cold climates. Still, disease and subsistence meant most lives were brutal and short.
The pace of human progress was painfully slow for the first several hundred thousand years. Rape, murder, war, disease and starvation were constant threats. Men died from injury and women in childbirth. When God informed Adam and Eve of their curse as they were kicked out of the Garden of Eden, he meant it. But curses have a shelf life.
Civilization: Somewhere back there, over 10,000 years ago, humans became civilized; congregating in cities, that is. This was another improvement. War was a constant threat, but now a larger group was needed to harm the community.
Health issues were the age old problem.
Fast Forward: The pace of improvement in the human condition keeps accelerating. First rudimentary shelters, then fire, now cities. A few lucky souls avoided disease and injury, living to an old age, even by modern standards.
Cities grew and slowly man discovered ways to alleviate medical afflictions. Many remedies were more harmful than helpful. Such is the nature of progress.
Money was invented and the ancient Greeks debated what money really was and how it worked. (Sapiens: A Brief History of Humankind) Over half of Jesus’ parables dealt with money or wealth. Life was improving at the fastest pace ever in history and it was slowly picking up steam.
China flourished in isolation from the West; Europe enjoyed the Pax Romana. It would be nearly the thirteen hundred years before mankind experienced the Pax Americana.
From the scientific advancements of Greek and Roman culture, mankind dropped into a Dark Ages. The path of progress is steady and up, but there are plenty of detours along the way. The line is not straight, but it leans ever more so upward every day.
1870: Something happened around 1870. The Dark Ages had long passed, the Renaissance morphed into an Age of Reason and science and discovery flourished. And most important, enough humans finally existed to hit a critical mass, causing an explosion of economic growth the world has never seen before.
As the graph above illustrates, economic growth was painfully slow until 1800 where we see a slight tilt north. In 1850 the Gross World Product turns decidedly higher and goes parabolic in the 20th Century.
The pace of wealth creation accelerated like never before. Things got better. A lot better! Really fast.
Pockets of suffering still exists. The 20th Century experienced two world wars, Stalin’s Russia and Mao’s famine. Many people suffered and died. But many more lived better and longer, too.
Inequality: The buzzword of the day is inequality. The rich seem to get richer while the poor get poorer. But is this really true?
Inequality still exists and surely always will as long as more than one human is alive. There has been an uptick in income and wealth inequality recently. Compared to historical norms we live is really good times.
The wealthiest people alive in 1930 rarely, if ever, had indoor plumbing. Today, with rare exception, we all enjoy indoor plumbing.
Medicine is even more widespread. Polio is a rare disease; small pox eradicated. While indoor plumbing eludes many in third-world (I hate that term) countries, modern medicine is brought in on a regular basis. Fewer women are dying in childbirth. Men have fewer dangerous jobs shortening their lives. Children live beyond infancy at a very high rate. These numbers have never been so generous ever in history. Things are as good as they’ve ever been, and believe it or not, it’s still getting better and better every day.
Walter Scheidel in his book, The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty -First Century outlines how inequality is on the decline and has been for a long time. Periodic catastrophes level the playing field immensely, but there seems to be a natural level of inequality. The good news is that everyone can have a significantly high standard of living even on the lower ends of the income distribution scale.
Optimism is the Best Financial Choice: If you have to make the call, always bet things will get better. For thousands of years things have been doing just that and at a rapid clip for over 100 years.
Warren Buffett has a reputation as a master stock investor. People spend a lot of time dicing his decisions looking for the secret sauce. I can save you the time. Buffett is the most optimistic guy you’ll ever meet. Even his good friend Bill Gates acknowledges surprise by how upbeat Warren always is.
Buffett came out in support of Hilary Clinton in her bid for the presidency. When Donald Trump won many called it the end of America and probably the world. A bit dramatic, I think. Buffett made it clear America has the “secret sauce” when it comes to economic growth and that America will do just fine even with Trump as president. I personally think the human race has a bottle of that patented sauce.
Yes, some people have it bad. Cancer might not feel like a time to be optimistic. But this isn’t about the individual level. We are talking humanity here. As a whole things are chugging higher all the time with only periodic setbacks.
The stock market reflects these facts. In the U.S. the stock market has powered higher decade after decade. Even the Great Depression is a minor speed bump when the charts are viewed over large time periods. It looked scary up close and personal. Then, a few decades later it looks like a minor dimple on the chart.
The 1987 stock market crash is the same story. The Dow dropped 22.6% in one day. The decline requires you squint your eyes to make it out now.
To the Future and Beyond: Life is good and getting better! Calls for the “end of the world” have been with us from the beginning of time. It’s a story that sells, but never delivers.
The future is bright. Today isn’t so bad either!
America and the world will have challenges ahead. That doesn’t mean optimism is wrong or dead! It is only an acknowledgement of reality. Every challenge will be confronted and re-challenged as we boldly go where no species has gone before.
Back to Politics: I know, I know. We never had a president like Trump. True.
We never had a Founding Father like Franklin either. How could such a womanizer, a masher, be allowed to engage in nation-building after the things he did.
And a president who fathered a child with his slave! How will the nation survive?
And don’t forget the evil of the Trail of Tears, a duel and murder and the death of a president’s wife.
A Civil War didn’t slow us down. A great president with massive flaws sewed the nation back together.
FDR tried to manipulate the Supreme Court to no avail. Talking of the Supreme Court, these are the people who gave us Dred Scott! These flawed men (most of them were men) did something wonderful as a whole. As bad as they were, their flaws made us stronger, more vibrant.
Politics is NOT more polarized than ever before. The First Lady is miffed, but not dead or even scuffed.
Never lose faith. Optimism is always the best choice. Things are good and getting better. We live longer and better lives. Economic and personal wealth is at sky high levels and rocketing higher! And any decline in the markets is a correction soon to be followed by greater heights!
It’s not a Dream; Success is Real: I’ve been around long enough to personally hear many of the doomsayers. They fall by the wayside every time. Yes, much of the Western world in more polarized than it has been for many decades. Let me remind you of the above chart. From 1850 to 1900 the U.S. exploded higher economically. During this time we experienced the Civil War and what many in the south thought was the end of the world, the freeing of the slaves.
Not only didn’t the world end when we took the moral high ground, we excelled. But we had to experience the debauchery and evil of slavery to propel us from the ignorance. We certainly don’t want to go back. It will require vigilance to retain our hard fought gains.
This is not the End: In recent times we were told the U.S. was caput because a womanizer like Clinton was president. Did anyone take the time to research Franklin and Jefferson? Caput! I think not!
Then Bush was a sign of the End Days. Nope! President George W. Bush proved to have human failings, but we did fine.
President Obama was the worst. I had clients who came into my office saying their life’s mission was to prevent Obama from getting a second term. What a waste of time! The economy grew, the stock market was up and America and the world did great after a serious economic debacle.
And now we have the hated President Trump. Many tears have been shed. The Supreme Court is forever tainted (unless you read few history books where you’ll discover it was always tainted). I’m not a fan of Trump. I disagree with many of his policies. But not all! An honest person will find issues where agreement exists. Who doesn’t like lower taxes? We can debate who gets how much and the fairness of taxes, but com’on! I also agree with more infrastructure spending. I’m against tariffs which are nothing more than a tax on consumers. Call it a quasi value added tax, if you will.
The Beginning: In the darkest hours of World War II, Winston Churchill gave encouragement to the British people as Nazi bombs decimated London. His immortal words are as vital today as they were then as we worry ourselves sick over geopolitical events. His words are a reminder things always get better and setbacks are only temporary.
Now this is not the end.
It is not even the beginning of the end.
But it is, perhaps, the end of the beginning.
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