Copyright by Mike O’Connor 2006 The Dissertation Committee for Mike O’Connor certifies that this is the approved version of the following dissertation: Democratic Capitalism in the United States Committee: Mark C. Smith, Supervisor Julia Mickenberg James Fishkin Daniel Bonevac H.W. Brands Gretchen Ritter Democratic Capitalism in the United States by Mike O’Connor, M.A., A.B. Dissertation Presented to the Faculty of the Graduate School of The University of Texas at Austin in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy The University of Texas at Austin December, 2006 Acknowledgements From the moment that I knew I wanted to write on democratic capitalism, Mark Smith, my dissertation supervisor, encouraged this unwieldy project. Without his enthusiasm, knowledge and constructive criticism this dissertation would most likely never have come to fruition at all. The other members of my dissertation committee— Dan Bonevac, H.W. Brands, Gretchen Ritter, Julia Mickenberg and James Fishkin—have all offered valuable feedback that have made this dissertation much better than it might otherwise have been, and that will help as I revise it in the future. Though Steve Hoelscher may not know it, I have long been inspired by the interest he has shown in this project, and Janet Davis, another member of the UT American Studies faculty, has been consistently generous with her time over the years. Allison Perlman has been my close friend since we entered graduate school together almost nine years ago. Her wide range of knowledge and incessant curiosity make her an excellent colleague, while her supportive nature, personal insight and goofy sense of humor have been of even greater value in helping me navigate the shallow waters of the non-academic aspects of my life. In my many years in this program, it has been my pleasure to make the acquaintance of many other students whose presence has made the time spent writing this dissertation more pleasant. John Balz was one of the few students I met in American iv Studies with an academic interest in politics. Amy Ware is simply one of my favorite people. Tony Fassi, a true friend, read most of this manuscript. John Haddad, Jonathan Davis, Joel Dinerstein, Matt Hedstrom, Bill Bush and Bill Fagelson were all more senior students who helped me make my way toward the Ph.D., and I might not have made it this far without their input and advice. My entering class in the graduate program in American Studies was the last one to take the required introductory course with Robert Crunden before his untimely death. Though I only knew him for one short semester, the influence of “Crunden” on my subsequent education and scholarship has been disproportionately significant. During the 2004-05 academic year, I was the recipient of a University Continuing Fellowship from the University of Texas at Austin. The generous stipend made it infinitely easier to complete this dissertation. I thank the Graduate School for making the award, and the Department of American Studies for nominating me for it. A great deal of this dissertation was written at Austin Java on Barton Springs Road in Austin. Crystal Hoffman and the rest of the staff there were always friendly and helpful, providing great food and an environment conducive to writing, as well as some respite from the solitude often imposed by that same writing. Lastly, Sophie the dog entered my life in 2003, right around the time I began seriously writing. For always giving me an incentive to come home, I thank her especially. v Democratic Capitalism in the United States Publication No._____________ Mike O’Connor, Ph.D. The University of Texas at Austin, 2006 Supervisor: Mark C. Smith Though democracy and capitalism are both central to American identity, they admit of a deep and often unnoticed philosophical contradiction. The capitalist ideal of the distribution of goods through market mechanisms is incompatible with the democratic notion that the will of the people, as expressed through the political process, should carry the day. Yet the history of the simultaneous affirmation of these ideas in the United States reveals widespread prosperity, relative stability and broad assent. In order to address the divergence between theory and practice in this area, this dissertation offers a new theoretical and historical understanding of American democratic capitalism. Applying the American pragmatism of philosopher Richard Rorty to the problem of democratic capitalism yields the conclusion that its solution is to be found not in a philosophical analysis of the meanings of its component terms, but in an historical investigation of their construction. Such an examination reveals that Americans of different historical periods have expressed substantially dissimilar economic and political requirements, and the nation’s democratic capitalism should not be understood as a seamless celebration of political and economic freedom. Instead, it is a uniquely vi democratic project in which the people retain onto themselves the prerogative of defining the parameters of economic success. From one era to another, a country’s citizenry can hold varied expectations of its economy—from providing jobs to winning wars. Harnessing the nation’s production and distribution to specific projects, however, often compromises the commercial freedom that is the hallmark of the market system. In the face of these continually shifting economic goals, the nation’s political thinkers have generally sought to adapt the meaning of capitalism to the exigencies of the day, rather than reject the doctrine entirely. Thus the intellectual history of democratic capitalism in the United States is one of continual reformulation. Considering three case studies in which political thinkers or actors have, in response to the national mood, articulated or re-imagined the function of the nation’s economy, the dissertation argues that U.S. political economy, at both the theoretical and historical level, has been more democratic than capitalist. vii Table of Contents Chapter One: Democracy and Capitalism ..............................................................1 “A Lawyer for Capitalism”.............................................................................1 What is Capitalism Really? ............................................................................4 The Essential Tension of American Democracy ............................................9 Democracy Versus Capitalism .....................................................................17 Democratic Capitalism .................................................................................26 Chapter Two: The Limits of Liberalism...............................................................32 What is Liberalism?......................................................................................35 Liberalism in the United States.....................................................................44 Political Epistemology..................................................................................48 The Human Serpent ......................................................................................52 Pragmatism and Relativism ..........................................................................59 Pragmatism and Democracy.........................................................................63 Chapter Three: Republican Capitalism.................................................................73 What Was Republicanism?...........................................................................77 Republican Economics .................................................................................87 The Developing Tensions.............................................................................95 Hamilton’s Financial “System” ....................................................................97 The Report on Manufactures and Its Implications .....................................112 Reception and Significance of the Report ..................................................125 Chapter Four: Democratic Capitalism in the Jacksonian Era.............................134 What Was Jacksonianism? .........................................................................136 Jacksonian Democracy ...............................................................................147 The Market Revolution...............................................................................155 Hard Money................................................................................................166 The Independent Treasury Act ...................................................................175 viii Chapter Five: Corporate Theory as Gilded Age Democratic Capitalism...........190 What Is a Corporation?...............................................................................194 Antebellum Understandings of the Corporation.........................................205 “Privileges or Immunities” .........................................................................212 “We Are All of the Opinion That It Does”.................................................228 Santa Clara in the Gilded Age ...................................................................238 Consequences of the Property Conception.................................................243 Conclusion: The Twentieth Century....................................................................251 Notes....................................................................................................................264