Patrick Newman on the Rise of the Corporatist State

[music] This is the Human Action podcast where we debunk the economic, political, and even cultural myths of the days. Here's [music] your host, Dr. Bob Murphy. Patrick, welcome to Human Action Podcast. Thanks for having me on. Well, we've we're covering here, folks, uh his new book, Cronyism, Rise of the Corporate Estate, 1849 to 1929, in case you weren't sure which years he was referring to. And so, I guess the the first thing is as we always ask in something like this is, you know, what what made you do this project, >> right? Um so, this is this is a um the second installment in a series. Back in 2019, Hunter Lewis asked if I would be interested in writing a book on the history of crony capitalism in the United States. And originally, I was going to go from like the founding of of of uh of Jamestown, right? So, the colonial era, all the way up through say 2019 or the present. And as I was working on it, I thought, well, sort of in classic Rothbart fashion, there was a lot to cover and it would actually be better suited to have multiple books. And the first book, Cronyism, Liberty Versus Power in Early America, 1607 to 1849, that that um that was released in 2021. And then this new book, Cronism, Rise of the Corporate Estate, 1849 to 1929, that was just released. And so basically moving progressing our way through history and getting up to the present. >> Okay. And I should also mention here you've got a forward by Thomas Sergeant Nobel Laurate and uh I didn't know he was a friend of the Austrians. So can you explain how that came to be? >> Yeah. So that was it was it was very interesting. He's he's been nothing but nice and helpful uh and very kind during this entire uh process really of of writing the book. He reached out to me uh I want to say it was the fall of 2022 around around then and he he reached out to me about the fifth volume of Conceived in Liberty and he had just got he said he had just gotten a copy and he was really interested. I had known he had cited Rothbart's the progressive era in a couple of publications. I know he liked Rothbart's analysis of World War I and he was sending this email about uh Conceived in Liberty, the the fifth volume that had come out in 2019 and he had mentioned that he had uh always found some of Rothbart's history very interesting and they had briefly corresponded in the 1980s and I had told him about the first Coroniism. He said he would pick up a copy. Then he he reached back out a couple months later, said he really liked it and he was really interested in the second book. And I was I was thrilled by this. He's like, "Oh, is it how's it going? And do you have a draft I could look at?" And it was re really nice. Really um very very kind and I I mustered up the courage to ask if he'd be interested in writing a forward and he said he'd be delighted to. And so yeah, that's how that's how it it it turned out. So um very very very thrilled about that. Yeah. Yeah. That's a pleasant surprise. Okay. It's like, you know, I was thinking you were going to say, "Oh, yeah, he's my uncle or something." But no, that's not what it was. [laughter] >> Yeah. >> Okay. Well, before we get because So, I think Patrick probably, as we chatted beforehand, I think probably I'll just go through and list some of the more uh provocative section headers and just have you give folks a taste of what's in this book. But before we dive into some of the particulars, just big picture, this might be unnecessary for most of our listeners, but in case other people come across this interview or whatever, uh, isn't it the case that libertarians are just big fans of big business? And that, you know, didn't Einran say big business is the most persecuted minority in America? And so I thought, you know, especially right-wing libertarian types, that whatever big business wants to do goes and government just should get out of the way. Isn't that Isn't that what we're for? Yeah. So, that's that's a I'm glad you brought that up because there's there's a lot of misconceptions with that. Whenever people hear you're like you're pro- free market or pro limited government, you say, "Oh, you just want big business to control everything." And and yeah, you bring up people bring up the old Randian analysis. And there's there's of course an element of truth to that in that as I discussed in the book there's lots of good things that big business does or that they bring to the table economies of scale uh so on and so forth. Uh but a lot of times big business they might preach the free market but in reality they support cronyism right which I define as basically policies that benefit special interests at the public's expense. So, a b big business will support subsidies. They'll support barriers to entry for smaller competitors. Uh they'll support uh regulations that benefit them but that stifle innovation, so on and so forth. And this is this is really more accurate. So, what we favor is we favor open competition, right? The free market. Uh we don't favor uh big business just like we don't favor small business and so on. We favor those uh entities that can actually survive and produce the goods and services that consumers value on the open market. >> Okay, great. Um and I probably goes without saying, but what do you mean by the term corporatist state? >> Yeah, so the the term corporatist state refers to the system of government sponsored cartels and monopolies, right? It's really you can think of it as protofascism. Fascism understood in the original term, right? But so under corporatism, the the government will say cartilize the steel industry, right? The government will cartilize the steel workers. The government's going to cartilize the railroad industry, the railroad workers. Uh the government's going to have, you know, intellectuals are going to band together. Basically, all these trade associations and so on are all going to be given various government privileges. And instead of them all interacting freely as they would on the free market, right, open pricing, competition, and so on, you instead have this entirely regulated and cartilized environment. So corporatism was always advocated as kind of being in the middle between the free market, the quote dog eat dog less afair and then the um the the the uh conf confiscatory or revolutionary socialism. Right? So that's the corporatist state. It was created in the early 1900s and of course there's still large elements of that in the world today. Okay. Um perhaps one more clarification or you know common misconception as we go through here. It's funny that especially like you know in terms of this history in the the mid to late 1800s. It's not the case that oh yeah the party of free markets and limited government intervention in business are the Republicans and it's those darn Democrats that are always you know trying to meddle and getting and you know and tinker with the money and whatnot. >> Yeah, exactly. That is a a common misconception. I'm glad you brought that up. One of the things I discussed in the first book was that really when it comes to say a pro- free market or pro- libertarian party, the closest that we'd get we got to sort of a mass movement party I would say was the Jonian Democrats when you actually look at the policies they passed. >> And then there were elements of that that continued throughout the post civil war era particularly like the Bourban Democrats, people like Grover Cleveland and and so on. Um, but the Republicans were really kind of the mercantalist pro-American system uh party. They could be pro big business, but they were pro- protective tariffs, pro- subsidies, pro beneficial regulations to Wall Street and so on. They were not the party of of the free market as what's often kind of um imagined in sort of their lore, right? It's just not true. >> Yeah. And Jackson in particular, of course, folks, not only, you know, he famously killed the Second Bank of the United States, but also literally paid off the federal debt. >> It gets to be clear, not just not just balanced the budget, but actually paid off the debt. So, yeah, there you go. >> Exactly. The Jonians, they they got rid of the bank, they got rid of protective tariffs, they decreased government spending, they paid off the debt, they deregulated on the state level. There's lots of interesting things uh to to to to look at. So, of course, there are some good Republicans in in American history, but by and large, when we say that the Republican party was the party of big business. It was not free markets. It was it was the party of cronyism. >> Mhm. Okay. So, you you use the phrase here that was one of the things I want to ask you as we go through the you know the contents here. You say um during this period of 1849 to 1861, one of the section titles is return of the American system. So, and and I people have been talking about that. I I don't know if it's on your radar, Patrick, but like a lot of Trump officials are referring, you know, to the the Hamiltonian economics and stuff like that. So, can you explain what what is this American system? What does that mean? >> Yeah. So, there's there's a lot of relevance to this now. I I never thought you'd have a president talk about the federal budget in the 1880s anymore. You know, I know Trump was talking about this when he was running for office, and I was just thinking, "Oh, wow. I I know about that." Uh so the the American system uh there there's a common thread in in basically in in the um in early American history that runs from Alexander Hamilton, our first secretary of the treasury to Henry Clay, a prominent senator from Kentucky to Abraham Lincoln, of course the first Republican president uh and president during the Civil War. And there were of course differences between them, but they all basically advocated this uh the these policies at the federal level that one increase the power of the federal government, but they um uh they they they would basically in inject the federal government into the economy. So common thread was you have tariffs, right? Henry Clay and Abraham Lincoln were especially big fans of protective tariffs to stimulate domestic manufacturing, protect workers and so on. You have some sort of federal uh involvement in in the um in in the sphere of money whether through a bank a central bank or through a quasi central banking system. Uh and then you have some sort of what was known as internal improvements which is the the federal government would try to stimulate um the construction of transportation uh you know networks and so on whether through originally roads and canals up through railroads in the Lincoln administration. And we do hear about this more and more in in modern uh parliament as Republicans sort of even drop the free market rhetoric and they say, "Well, we need we need protective tariffs uh because this is what led to America's industrialization in um in the 1800s and this is how we bring back manufacturing." Never mind that the beginning of America's industrial revolution in the 1850s occurred during an era of low tariffs, the Walker uh tariff of 1846, which got rid of protection uh protectionism basically. Um and then they say, well, you know, the federal government's got to get involved in promoting infrastructure and so on. Again, never mind that the railroads uh that the Lincoln administration subsidized were very inefficient and they did not actually stimulate growth. The industrial revolution uh occurred before and after the civil war largely due to market forces and so on. So basically myths, old myths die hard. uh and it's I think it's no surprise that we're we're hearing some of these policies being advocated again uh simply just due to not really understanding the history but then also there are of course various special interests that want these types of policies both past and present. Yeah. And on that narrow point about, you know, people who are nowadays supporting tariffs and pointing to, you know, like look at last time we relied on tariffs and one of my points was, well, right, but back then look at federal spending and you could get by with just funding the federal government largely through tariffs. They, you know, for large, you know, except for the Civil War, then not till later, they didn't have a federal income tax. And so yeah, if you if it's on the table, we'll cut federal spending and just get rid of the income tax now and just fund everything through across the board tariffs and stick it to the Chinese or okay, I would take that deal. But it's not because taxing Americans on imports makes us wealthier. It's because the income tax is awful and federal spending at this level is awful. So anyway, that's my take on that stuff. >> Yeah. Yeah. Exactly. I mean if look I would support protect I would support tariffs for revenue if government was 5% of GDP right you know mass massive drop and of course I think you know I had high hopes for Doge but that turned out to be a doge and pony show [laughter] and of course the federal government continues to spend and yeah we've raised money through tariffs but just you know the government just continues to spend and so it's we we we we're looking back at history thinking that we can get some sort of magic panacea we have for of course some of our very serious uh budget problems right now. >> Can you um again just I'm going through here. So you've got Wall Street central. So part three is the corporist era 1897 to 1929. Chapter 6 is Wall Street central bank and you've got the creature from Jackal Island. Can you speak a bit you know what's your coverage of that scenario or episode? Yeah. So, um I think the so when it comes to the corporate estate, um basically business and other interest groups were lobbying for the creation of cartels and monopolies, right? Restrictions on competitors or to, you know, so they could increase their own market share and they were you could get you could get a government sponsored cartel or monopoly through a variety of means. Um the the [clears throat] main way that these uh interest groups were lobbying for the creation of these cartels and monopolies was through a regulatory commission, right? Something that would the that would um be created at the federal level and it would regulate prices, product control, entry, something like this, right? It depended on the specific industry and and and this was both for business and for workers, right? Workers, you know, wanted government sponsored unions and so on. So throughout the progressive era, what was called the progressive era, we see like an enhanced interstate commerce commission, uh we see the federal trade commission, uh we see regulation of food and drugs, uh we also see the creation of the Federal Reserve system. And I think out of all the regulatory commissions that were created during this period and out of all of the quote cronyism or regulatory capture to use a specific term, I think the primary example of corporatism and the most successful example was the creation of the Federal Reserve system, right? uh which was basically uh an an attempt by Wall Street to create a government sponsored cartel that would uh enhance certain aspects of their business. We could get into this uh known as banker's balances, but also to help Wall Street finance internationally to make the dollar a world reserve currency, which was something a lot of Wall Street uh uh uh bankers wanted. And so the creature from Jackal Island, uh that's a uh that's that's of course taken from G. Edward Griffin's book, right, which is something a book I read very long time ago. And it's it's a great title and it's a classic sort of in in this um in this field. And I think it's I think it's true that yeah, the Federal Reserve was a creature from uh Jackal Island, right? This small uh island off the coast of of of Georgia. You saw a lot of uh Wall Street bankers. They they had a little pow-wow. Actually, not really a lot, just like a select few uh in the fall of 20 uh excuse me, the fall of 1910. And they basically ironed out a plan to create uh a central banking system that in most respects basically became the Federal Reserve system. And basically then I analyzed the history of the Fed through World War I and the 1920s and the the the evidence is very clear that Wall Street kind of controlled the Fed during this time period. >> Mhm. So ironically if I mean because ostensibly one of the reasons of course you know was the panic of 1907 and oh look at JP Morgan's rescuing everybody. can't have our financial system dependent on, you know, the the good pleasure of one guy in the private sector. And so why don't we go ahead and get a public institution and yet it was co-opted and controlled by those private bankers anyway. So it's it's not like you're getting around in a sense giving them more power than they would have had in a free and open market. >> Yeah. Yeah, definitely. Um people people assume that before the Fed there was something known as the money trust, right? Now the term trust refers to a specific type of of business organization but people were just using the tr the term trust uh as like a synonymous with big business. So you had the beef trust, you had the steel trust, you had uh the money trust, right? And you had these big businessmen and doing something nefarious, right? Of course exploiting the public and they're able to uh monopolize markets, right? Become the, you know, the dominant player. And when you actually look at the evidence, and this is something that originally came from the historian Gabriel Koko in the triumph of conservatism, it's that these companies um their market shares were actually declining before the uh the progressive era, right? Before the the corporatist era, as I call it. And this is true for the money trust. Uh, you look at Wall Street's share of deposits relative to what were known as other central reserve cities, which at the time was Chicago and St. Louis. Wall Street share of bankers balances, which were deposit accounts kept in Wall Street that actually belonged not to individual depositors, but to other commercial banks. And those market shares were declining. They were they were going down before the Federal Reserve. And actually they went up after the Federal Reserve. >> So the Federal Reserve didn't weaken the money trust. The Federal Reserve strengthened the money trust. That's just that's just the honest evidence when you when when you look at the historical record. >> Yeah. And also one of the you know to be a lender of last resort is one of the standard functions of a central bank. And it's like well who is that helping? It's private banks that got caught with their pants down you know and they oh yeah they were acting too recklessly. That's why they need a lender of last resort. So, it's not obvious why if you know you're trying to discipline those bankers and keep them honest, why you want to create a lender of last resort to, you know, be waiting in the wings to rescue them when they >> uh like, oh, you guys getting caught in another liquidity crunch. Um, okay. Well, you you've been talking about the trust and I did want to ask you that. So, I'm sure everybody that grew up in the United States and is my age or within 10 years, one way or the other, received some version of this in grade school or or high school perhaps that Yeah. It used to be, you get a little this folks, it used to be that the government let big business do whatever the heck they wanted. There were these massive trusts that just controlled everything. So like a few rich people just bought out all these different companies and just integrated into one entity. And uh thank goodness guys like Teddy Roosevelt came along and and you know smashed that stuff up and you know broke things down so that at least the government was the the biggest force you know the big the biggest kid on the block and you know could could have some regulation and things because otherwise you know we can't have a democracy with such concentrated power and so thank goodness you know and and maybe in more recent times things have gone too far but I mean back then there definitely was a a rationale for that and and hey this is always the Trump card they play if everything was fine Then why did the public clamor for it? Right? In other words, the progressive era, the reason they pushed through all those reforms is because people wanted them. And so there must have been abuses. Otherwise, why would people ask for something that they didn't need? So Trump card, what do you say, Mr. Libertarian? >> Yeah. Yeah. It is a classic um like one of the classic lessons, right, you learn in an American history class is that okay, before the progressive era, big business, they were exploiting the public. They were exploiting workers through unsafe, you know, working conditions. They were causing business cycles. They were leading, you know, causing pollution. They were basically doing everything bad, you know, that you could possibly imagine. And then you needed the the government to clean things up and these these these earthwile reformers and so on. Um the the [clears throat] reality is different, right? and in that of course there were reformers who were against big business but as I try to show in the book they were really allied with other interest groups um but a lot of times business big business advocated for these policies and the reason why the public ended up supporting them and this is something that's very important it has a lot of relevance to today is that business allied with intellectuals right big business worked with intellectuals to craft public interest justifications for their various policies. Right? So in the case of the Federal Reserve, Wall Street said we needed we need a central bank to prevent you know the business cycle from reoccurring such as the panic of 1907 like you mentioned. Never mind that that panic was in a sense caused by the problems in the national banking system as were all of the other panics in uh you know the past you know couple of decades before that. And it's the it's the propaganda game, right? So, a special interest group basically hires intellectuals and the intellectuals will say, "Oh, this policy uh is is is going to benefit the public." And in return, the special interest group, you know, pays the intellectuals, they get a nice job somewhere, they get funding for research, uh so on and so forth. And this is really a more accurate um understanding of of what actually occurred uh back in the day. And this type of history isn't understood. And it's unfortunate because the the common narrative is still pre prevalent. And even though people might not learn about it or read history as much, they still have this basic understanding that, oh yeah, well, we need an FDA because without an FDA, you know, people were putting poison in medicine or we need a central bank because, yeah, didn't I learn one time that, you know, before the Federal Reserve, we had all these panics and these really long depressions and so on and so forth. And so, it's once again, old myths die hard. And that's why it's important to actually talk about the real story of what happened. Mhm. So, another one just to keep, you know, piggyback on that train of thought is, uh, I think many of us, again, at least people close to my age, uh, we had to read The Jungle by Upton Sinclair and you're reading it and it's just, wow, they used to just, you know, the meat packing industry just used to be disgusting and they would just throw rats and human fingers and all kinds of stuff into the ground beef back then. And how could anyone possibly be against the federal government coming in and just setting some basic decent standards? The kind of thing where if private business hadn't been living, you know, isn't going to live up to those standards, then they should be regulated. And if you're saying, oh, they would do it anyway through market forces and competition. Okay. Well, it doesn't hurt then to just lay on just in case, you know, some bare minimum standard. You know, the government's not saying they're not allowed to be safer than what we're talking about. There's basic minimum standards. How how could anybody be against something like that, >> right? Yeah, that's another classic uh that's another classic one in in the the jungle uh which is really a turgid book. It's it's it's very bloated. It's hard to it's hard to work through, but if I guess we we had to suffer suffer through it from an older >> generation. Sorry to interrupt you, but what's funny about that is the author was like a a socialist, right? And and I think there's some famous quote to about I might not be getting it verbatim but like something he was hoping it was going to inspire you know a socialist revolution or whatever and it did it just inspired regulations and he said something like I was hoping to change their hearts and said I turned their stomachs or something like I aim for the heart but I hit the stomach, right? because he wanted to he wanted to really talk more about the working conditions and like you know the struggle for the proletariat so you know of of the proletariat so to speak but in reality what people cared about was oh my god there's something wrong with our food right and he had said that he visited the the the meat packing facilities in in Chicago and all this stuff and he had found all these abuses and in reality he he lied he he visited like one time on a guided tour and then he spoke to, you know, two people who talk to two other people, right? You know, one of those things. And and yeah, the the the the beef trust is is this is fascinating because people always say, "Oh, well, big business isn't doesn't do anything good." Um, but at least on the free market, I would say they can do lots of good things. So, the Chicago Meat Packers, guys like Armor and Company, Swift and Company, really, those were the two major uh companies, they actually improved uh health uh standards, right? Because before, back in the day, you would kill a a cow in a in a in like a small butchering facility and then you'd only use half the carcass and then the carcass would be rotting out in the forest or you'd dump it in the river and that wasn't good. And what the beef trust did is that they totally revolutionized how meat is processed. And they used what was known as a dis a disassembly line. So instead of having one butcher just chop up bunch of cows, you have one guy, his job, he was the knocker, right? He had to take a sledgehammer, hit the cow, and the other guy, you know, slit the cow open and so on. And Henry Ford, the apocryphal story is Henry Ford actually visited a meatacking facility and he said, "Oh, wow. They're doing this for meat. They're taking apart a cow. What if I What if I do this in reverse, right? I build a car through an assembly line instead of taking apart something through a uh a disassembly line. And the beef trust, they created all sorts of byproducts. Uh they innovated with canning and refrigerated beef. And this really improved uh the quality of meat. Of course, was it perfect to today's standards? No, of course not. just like what people are going to be eating in the year 2300 is they're going to look back at what we did and think that it was nauseating or something. Uh but the beef trust really did improve uh uh safety standards uh and health standards. Now did they want a monopoly or they wanted a you know to control the entire market share for for beef and pork? Absolutely. But they couldn't get it because there was always competition and they also had a lot of enemies. smaller slaughter house facilities, butcher facilities, foreign governments, lots of reformers who just didn't like how the beef trust was uh really trying to sort of squeeze out a penny out of every, you know, every uh animal they they they they chopped up like uh Philip Armor said, "We use everything but the squeal in a pig." And they thought that was just capitalist and so on. And so um along comes Upton Sinclair who was trying >> Can I stop you just for a second? Oh yeah, sure. Don't lose your train of thought. But what's funny on that point is I also have heard like people saying, "Oh, and the reason the Native Americans are so much more noble than the white man who comes is cuz when they would kill a buffalo, they would use every last little piece of it for all kinds of, you know, they would make, you know, skins and blah blah blah and jewel jewelry and and so it's Yeah. But yeah, when it's in the context of the meat packing plants using every last little thing, it's just like, oh yeah, that's capitalism for you, you know, to [laughter] squeeze everything they can out of the poor animal. So, >> exactly. And what's funny is that story about the Native Americans isn't actually really true. There's a book called the myth the myth of the ecological Indian and goes through this and talks about how actually they weren't really that big of conservationists. That was something that really came about, I think, through like Earth Day in the 1970s. And they uh there was a big predominant belief that of reincarnation, like you kill a you you shoot a deer and like seven of them are going to pop up, you know, you re respawn, so to speak. Uh but yeah, we think, oh yeah, well, the conservation that they practiced, which they really didn't, well, that was good. But of course, big business when they do that or the meatackers, that's exploitative. But long make a long story short, we could talk about this more, but Upton Sinclair thought he was writing this like anti- capitalist manifesto and instead the Beef Trust was able to do what I call defensively lobby, which was they they they got rid of the harmful uh features of the meat packing uh legislation that was going through Congress. Instead, they got this bill, this law, the Meat Inspection Act of 1906 that actually cartilized their markets and it made it a lot harder for smaller slaughter houses to compete. So, they went out of business and the next decade was really profitable for the beef trust, right? So, this just one of those revisionist >> uh narratives that the average person doesn't know anything about. >> Yeah. And maybe it's worth just I think you kind of touched on it earlier, but just to really spell it out for people in case they've never heard this concept before, but there is this uh notion that larger businesses, especially if they think regulation is coming, can kind of get in and steer it and make it such that at least it, you know, helps them relative to smaller upstarts. So an example would be like the Sarbain Oxley legislation that you know imposed all these extra accounting standards and things after there was some accounting scandals and you know behind the scenes you might think oh gez business wouldn't want more more ownorous regulations laid on them but actually like the big firms that were dominant in their respective industries other things equal that that would actually help them because they already have teams of accountants and whatnot and whole divisions that so it's not that it's easier for them to weather a burden ra as opposed to um you know, partnership or something. Two guys just working out of their living rooms that had this new company. If they all of a sudden get a bunch of new compliance standards laid on them, they have to outsource it to a CPA or like that that's going to be extra burdensome to them. So anyway, that's just in general this notion that oh, you know who really hates regulatory bills when they're going through Congress or big businesses. Like that's actually not the case. Often it's the big businesses lobbyists who are literally writing the legislation that's going to then regulate them. >> Yeah. Exactly. And and this happened in the past and in the present and and that the the idea of of compliance costs as as you were talking about is really important because it is on average easier for a big business to comply with regulations. They already have the facilities. They can hire a couple extra people. You know, one extra accountant. If you have a payroll of 200, you know, people or something, it's not a big deal. Um they can handle that better than a small company, right? one extra accountant for, you know, like five people, a five person company, that that can be a really big uh cost. And this is why it's it's it's easier for big business to get what they want uh because they can afford to have lobbyists or even a lobbying office in DC or in a state capital, right? Small company can't do that. They have to band together, but it's not it's not the same thing. and and and sometimes big business will use this rhetoric that they're pro- free market, but the truth is very often it's it's different. Now, of course, there's types of regulations they don't want, but they can always defensively lobby to sort of to intercept the football, so to speak, and to shape the bill so that it provides special privileges to them at the expense of their competitors and the public. >> Yeah. Maybe we just do one more uh excerpt here, Patrick, and then I'll just kind of pull back and let you give some concluding thoughts. But this what I'm going to be talking about is the American Medical Association. But the thing I want to highlight here, folks, is it it always struck me as ironic where if you ask the average person, you know, what what is it about like, you know, trusts or, you know, the the robber barons and stuff like that and vertical integration if they know that term, like what was what's the problem? and they say, "Oh, you know, these these big businesses, they just take over everything and they they outlaw or they uh you know, do cutthroat competition or put their rivals out of business and then they have a captive market and they restrict output and raise prices, you know, that and that's the ostensible problem. That's why we got to come in and regulate them and we want to make sure that there's concentrate or competition. We don't want too much industry concentration and so on. But then there the things that are supposed to be good like labor unions and like the American Medical Association are literally cartel organizations that restrict output. And so here, let me just read this is from Patrick's book here. In the early 1900s, the American Medical Association entered the drive for pure food and drugs to reduce competition from patent medicines. It was no coincidence that the trade organization launched concurrent campaigns to hamper rival doctors and to capture research subsidies from the government. Of course, the AMA professed that its corporatist proposals, which reduced access to medical care and boosted doctor salaries, promoted the public wheel. As St. Louis doctor WG Moore boasted, quote, "If the American Medical Association be a trust, it is a good trust." End quote. So there, I mean, I I hadn't seen that quote before, but that was a great one where Wait a minute. I thought trusts were bad. Oh, no, no. If it's if the reason they're restrict, you know, if if the reason they can give, if the rational they can give for restricting output and making things more expensive is because we want to, you know, maintain minimum standards of quality for the public, well, then then they're the good guys. >> Yeah. Exactly. And and the the story of the doctors is is fascinating because they really don't come off they they they don't come off good when you actually look at the at the evidence. They were explicitly like we want to restrict competition. Uh we want to make it harder to get a license. We want to make it harder to set up a medical school. Uh we want to make it harder to graduate from medical school and so on. And and basically we only want the public to buy uh the you know the services of AMA doctors, right? Or what a lot of heterodox doctors called alipathic uh medicine. basically you have a problem, you go to a doctor, they're going to prescribe you a drug or some sort of painkilling um you know medicine, right? As opposed to uh homeopaths um which prescribe remedies or they would advocate you use certain types of things called remedies. Eclectics which is like herbal supplements. What's funny is even the doctors, even the AMA were against chiropractors and optometrists. That's another thing I found out like they didn't they didn't trust eye doctors or chiropractors. And that's just fascinating. And and and this is this is really important. I'm glad you mentioned that quote because a lot of times people will when confronted with well the government created a monopoly or they created a central bank that you know benefited a lot of insiders like Hamilton's Bank of the United States or you know or or railroad subsidies that went to you know the the ruling elites of the Union Pacific or the Central Pacific or so on they'll say yeah but it benefited the public >> right so you you had to have a big business that had all these privileges is because only they could do it. They were a natural monopoly, which is a technical econ term. It's like they they they benefited the public, right? Um and that's why when you're doing this type of research, this type of let's just say cronyism work, you have to show not only that a special interest benefited, but that also the public was hurt, right? and that the public wasn't benefited or didn't benefit, excuse me, despite all of the uh that's for lack of a better term, propaganda to the contrary. And and then in the case of the doctors, it's that yeah, it deprived lots of areas of of of doctors. And you look at the evidence and the amount of doctors specifically in rural areas really fell in medical care became increasingly out of reach. And it was because of the AMA's restrictionist drive that really in the 1910s and 1920s and so on, you saw all these calls for socialized health insurance, right? Or socialized medicine. Say, well, it's too expensive. We need to have just the government uh, you know, provide this. And the AMA was very against this unless they were adequately compensated. That's the long and short of, you know, the battle with with o over um uh government provided health insurance and and stuff like that. Uh but yeah, it's just another instance of you're always going to hear like at the end of the day for any government intervention, you're going to hear public interest, public interest, public interest. But the good historian or the good detective is, you know, shows it's cronyism, cronyism, cronyism. >> Yep. Uh and just on that folks, we'll I'll try to remember to put a link in the show notes page of this episode, but recently I was part of a panel from the Mises Institute. We went and presented at this event in New Hampshire talking all about Patrick the you know medical care and and what went wrong and is it gez free market doesn't work when it comes to healthcare and no that's not the issue. It just you know standard things like how come health insurance is tied to my job? You know, so I was making the point, you never say to someone, "Hey, we're going to go to this, you know, party over the weekend. You want to go?" Say, "No, I'm in between jobs right now. I don't have car insurance." Like, no one ever says that. But they can say, you know, "Oh, yeah, there was this elective surgery I was going to get, but I'm in between jobs right now, so I can't cuz I don't have health insurance." Like that's so and and lo and behold it's not lazy fair capitalism to explain you know what the heck happened with healthcare in the United States and why is it so screwy that it's you know strings of government interventions and then oh that caused this problem and then they came in and did more intervention that caused this problem and blah blah blah blah blah. So and then everyone says oh that's why you can't have market provided healthcare. >> Yeah. Yeah. Yeah. It's the only it's the only industry you go to a doctor's office and you don't ask about the price. Yeah. >> You just say yeah all right. Yeah. Just let me know my shirt. you know, just Oh, yeah. >> or or and if you do ask about the price, they won't tell you. And they'll say, "We'll tell you once you've already bought it, then we'll tell you how much it is." >> And that's not even hyperbole. That's literally what they what the deal is, >> right? Right. It's ridiculous. It's ridiculous. But yeah, and and but we always hear, oh, well, and again, health insurance or the the the medical field, this is really big. I mean, this is what the government like this is what all of our entitlements are are geared around basically. And this is uh this is huge. But we hear in especially in the modern era, oh well, you know, you got to have Medicare, you got to have Medicaid, you got to have these licensing standards for doctors, so on and so forth. It's public interest. Public interest. But as you as as as you just discussed, it's just not true. >> Okay. Well, we got time here for one more question for me to give to you, I'll I'll keep it pretty open-ended here. Is there as you did the research for this and we're writing it, what's the one thing that either like surprised you or that you think, you know what, even Austro libertarians don't know about this and and they need to they need to know about? >> It's a good question. I I guess I'd have to I have to think about that. I mean to go through some of the more colorful anecdotes. Um I found I discovered that I guess a lot of railroad lobbyists um or rather a lot of railroad companies they would use seductive female lobbyesses as they were known to sort of persuade politicians which I just think is interesting. Mhm. >> Um uh tax account or accountants were very were a very important interest group behind the income tax in the development of the income tax which is really surprise surprise right. Um and I guess what probably the most interesting thing I would say is the end of the book talks about um uh World War I and how Wall Street was very big in getting the uh the the the the United States in the World War I. But what's quite interesting is that out of the two major financial investment banks or investment banks in the country that were behind the Federal Reserve system, JP Morgan and Company and Lo and Company, there's actually a bit of a split between them uh with with regards to um uh getting into World War I. JP Morgan was very interested in getting the United States in the World War I because they were lending tremendous amounts of money to the British in into the French governments and of course if they couldn't pay uh JP Morgan and company then they'd be ruined. So they wanted the United States to get involved into basically pick up the tab. Uh but Kun Loen company was a very prominent German Jewish investment bank and they were actually very pro-Germany >> and Paul Warberg who was one of the founders behind the Federal Reserve and he currently sat on the Federal Reserve board. He was actually trying to keep the Federal Reserve from printing money during World War I a little bit or or trying to tried to get the United States to stay out of the war. And that was because Kun loben company was very pro pro-German, right? They were all German uh immigrants and they were also against uh Russia because of the thesar and some of his uh he was seen as anti-semitic and it's just interesting because JP Morgan and company of course won out. But that's just a side story that people don't really know about that I discuss in the book and it's a provides a bit more nuance to the traditional uh story I guess you could say of of Wall Street in World War I. Yeah. I guess if his two goals, Kunan Lo's two goals were had the stay out of the World War and had the Fed not print too much that he failed on both after that. >> Yeah. Yeah. Ex. Exactly. And then he, you know, he left. He he was very pro having the Fed basically print money before World War I and after World War I. Paul Warberg, right? So in in after World War I, he sets up his own accept what's known as an acceptance bank so the Federal Reserve could buy those. But it's just it's an interesting story, right? He tried but in World War I, but he lost, right? >> Yeah. >> Okay. Well, that's Well, thanks. That's a good anecdote. So, folks, we've been talking with Patrick Newman about his new book, Cronyism: Rise of the Corporate Estate, 1849 to 1929 specifically. Uh, you can get that, of course, at the Mises Bookstore. We'll put a link in the show notes page, but it's it's available. Uh, Patrick, thanks so much for writing the book and coming on here to talk about it. >> Yeah, thanks so much for for having me and for this great discussion, and I hope it people find it helpful. So, [music] uh, it was a pleasure to be on. Thanks. Thanks everybody for tuning in. See you next time. Check back next [music] week for a new episode of the Human Action podcast. In the meantime, you can find more content like this on mises.org. [music]