They spawned the 1 percent: How Washington and Lincoln explain inequality today

The competing economic visions of our two most famous presidents have big implications for the middle class today

Published November 17, 2013 4:00PM (EST)


George Washington, our first president, and Abraham Lincoln, our 16th, are the twin icons of that office. Their portraits are side by side in our wallets, in our change purses and on classroom walls during Presidents’ Day observances. Yet they represent different visions of an American economic order, differences that persist to this day. Washington stood for a system in which one man enriches himself by skimming off the excess value of his underlings’ work. Lincoln stood for the principle that every worker is entitled to the full value of his own labor. Call it the battle between Washingtonomics and Lincolnomics. From the founding of this country up until the Civil War, Washington’s order was dominant. It’s been dominant in our era, too, ever since Washington’s native South regained control of the federal government in the 1970s.

If you want to understand why the United States has never achieved the same level of economic equality as other industrialized nations, you have to look back at Washington’s life and career. And then you have to look back even further, to Washington’s ancestors, who settled Virginia. You’ll find that inequality was one of this nation’s founding principles.

In his socio-historical study "Albion’s Seed: Four British Folkways in America," David Hackett Fischer argued that American slavery did not result in a stratified society, but was established in order to create one. The early Virginia settlers were the second and third sons of aristocratic families in the south and west of England, and they intended to enjoy in the New World the lifestyle that primogeniture had denied them on their fathers’ manors in the Old. At first, they tried to enslave the Natives. When that failed, they imported Africans.

"Virginia’s ruling elite … required an underclass that would remain firmly fixed in its condition of subordination,” Fischer wrote. “The culture of the English countryside could not be reproduced in the New World without this rural proletariat.”

From its origins in America’s first colony, this aristocratic system spread throughout the entire South. Its success could be found “in the small and very powerful class of landed gentry, in the large majority of landless tenants and laborers, in the minority status of its middle class, in the general level of wealth inequality (Gini ratios of .60 to .75), in the magnitude of poverty and in the degradation of the poor.”

As a result of the Virginians’ social engineering, the United States became a colonial nation in which a European elite has traditionally dominated a combination of indigenous people and descendants of Africans imported to work as slaves. We’re a first-world country and a third-world country, coexisting within the same borders.

In Denmark -- the quintessential European social democracy, whose 5 million ethnically homogenous citizens consider themselves members of a single tribe -- the Gini ratio is 24. (The Gini ratio is a measurement of a nation’s wealth distribution, with 0 being perfect equality and 100 being all the money in one man’s hands.) The U.S.’s Gini ratio is 45, putting us in the same league as Mexico (48.3), Venezuela (44.8), and Jamaica (45.5) -- other colonial nations where white settlers and planters have lorded it over a darker-skinned workforce.

No one benefited from the top-heavy economic structure of colonial Virginia more than George Washington. Washington was a country squire who rode to hounds, danced at cotillions and ordered china and fashionable breeches from London. By the end of his life, he was master of 277 slaves, on whose backs he built the fortune that enabled him to serve as commander in chief of the Continental Army, and then president. Washington was one of the wealthiest men in the United States, and is still the wealthiest man ever to hold the presidency.

Washington envisioned an end to slavery, and an industrial future for America, but a man with his feudal, agrarian outlook would never have prospered in such a nation.

Abraham Lincoln’s entire life was shaped by disagreements with the Southern planter class, to which Washington and most of our early presidents belonged. When Lincoln was 7 years old, his family moved from Kentucky to Indiana to escape the fate of the small farmer squeezed between planter and slave. Lincoln’s father eventually settled on a 120-acre farm near Charleston, Ill., where he raised corn and chickens. Despite his popular image as the Railsplitter, Lincoln hated the rustic life, and moved to Springfield, where he became a respectable, but not wealthy, lawyer. His two-story house on Eighth Street would not look out of place in a modern suburb.

In Lincoln’s home territory of Central Illinois, many voters hated slavery and African-Americans for the same reason: because both plantation owners and free African-Americans undercut the price of white labor. Lincoln belonged to a middle class of independent professionals and tradesmen that was growing in the North, but was incompatible with the plantation society in the South, and he knew how to appeal to its anxieties.

During his campaigns for the Senate and the presidency, Lincoln argued that African-Americans deserved economic, but not social, equality. In his debates with Sen. Stephen A. Douglas, Lincoln declared that he did not believe African-Americans should be allowed to vote, or serve on juries, or hold office, or marry whites. He did believe that African-Americans had as much right to the fruits of their own labor as whites, that slavery was “a form of theft,” and that a society divided into permanent classes of masters and servants was doomed to medieval stagnation, because workers would have no motivation to better themselves. At the bottom of Lincoln’s moralizing was this message to white voters: If the black man can be made to work for nothing, so can you.

In an 1859 speech to the Wisconsin State Agricultural Society, Lincoln went beyond condemning masters’ exploitation of their slaves, and criticized the very concept of purchasing another’s labor. To Lincoln, the idea that one man should be in the permanent employ of another -- even for wages -- was at the root of the justification for slavery. He said:

By some it is assumed that labor is available only in connection with capital--that nobody labors, unless somebody else owning capital, somehow, by the use of it, induces him to do it. Having assumed this, they proceed to consider whether it is best that capital shall hire laborers, and thus induce them to work by their own consent, or buy them, and drive them to it, without their consent. Having proceeded so far, they naturally conclude that all laborers are necessarily either hired laborers, or slaves.

They further assume that whoever is once a hired laborer, is fatally fixed in that condition for life; and thence again, that his condition is as bad as, or worse, than that of a slave. This is the ‘mud-sill’ theory. But another class of reasoners hold the opinion that there is no such relation between capital and labor, as assumed; and that there is no such thing as a freeman being fatally fixed for life, on the condition of a hired laborer, that both these assumptions are false, and all inferences from them groundless. They hold that labor is prior to, and independent of, capital; that, in fact, capital is the fruit of labor, and could never have existed if labor had not first existed--that labor can exist without capital, but that capital could never have existed without labor. Hence they hold that labor is the superior--greatly the superior of capital.

As president, Lincoln oversaw a war that destroyed the power of the Southern plantation owners with whom he had so long quarreled. His victory lasted just over 100 years, until the Southern states regained control of the federal government, and began reimposing Washington’s aristocratic way of life on the nation. To understand the difference between Lincolnomics and Washingtonomics, let’s consider two of the most successful businessmen of the 20th century: Henry Ford and Sam Walton. Ford falls into the Lincolnian tradition, Walton into the Washingtonian.

Born in what is now Detroit during the Civil War, Ford understood the value of an economically empowered workforce. He turned traditional economic assumptions upside down by treating laborers not as commodities, but potential customers. Before Ford, planters and industrialists had profited by paying the lowest possible wages and charging the highest possible prices. Ford doubled his employees’ wages, to $5 a day, and used assembly-line efficiencies to produce cars they could afford to buy. His philosophy, which came to be known as Fordism, was fundamental to the development of the modern middle class. And although Ford resisted labor unions, once the United Auto Workers was forced on him by two Lincolnian politicians -- President Franklin D. Roosevelt and Michigan Gov. Murray Van Wagoner -- he granted it the most generous contract of any automaker, even allowing dues check-offs and the closed shop.

Sam Walton built his business on a plantation model with which Washington would have been familiar. The merchant opened his first Wal-Marts in Arkansas, Oklahoma and Missouri, paying wages that were low even for a region accustomed to extremes of wealth. He started his cashiers at 50 cents an hour -- half the minimum wage -- on the grounds that the law applied only to businesses with 50 employees or more, and each of his stores was more lightly staffed than that. Wal-Mart cashiers got raises only when the Labor Department stepped in. Like Washington’s tobacco plantation, Walton’s stores were labor-intensive operations that could only turn a profit if workers were bargained down to the lowest possible nickel. Walton’s product was low prices, which were possible only if his workers earned low wages. Undistracted by war or politics, Walton did Washington better, becoming the wealthiest man in America, with a fortune of $20 billion -- the surplus he skimmed off the labor of 1.1 million employees. Wal-Mart also became the largest employer in the U.S., displacing General Motors, which practiced Fordism on an even larger scale than Ford.

“It is doubtful Wal-Mart would have met similar success in an earlier period of American economic history, or in a different social and political environment,” wrote Jeff Madrick in "Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present." “Labor laws were increasingly poorly enforced in this era, starting with the Reagan administration. The number of government labor inspectors was not increased even as the nation’s workforce grew vastly in number … Across the nation, a rapidly growing number of workers were illegally fired when they tried to organize fellow workers into unions. Congress also deliberately kept the minimum wage down, raising it rarely, so it fell compared to inflation.”

Actually, the economic deregulation that would help make Sam Walton a multibillionaire began one president earlier, under Jimmy Carter. Carter, the son of a moderately prosperous peanut farmer whose land was worked by sharecroppers, was the first Southerner to win the presidency in his own right since Zachary Taylor. His election began a three-decade period during which every president either hailed from a Southern state or, in Ronald Reagan’s case, was elected with strong Southern support. George Washington’s region had returned to power, and that return brought political support for the stratified society that has existed in the South since the Father of Our Country’s day. As Michael Lind wrote here on Salon, “for generations Southern economic policymakers have sought to secure a lucrative second-tier role for the South in the national and world economies, as a supplier of commodities like cotton and oil and gas and a source of cheap labor for footloose corporations. This strategy of specializing in commodities and cheap labor is intended to enrich the Southern oligarchy. It doesn’t enrich the majority of Southerners, white, black or brown, but it is not intended to. Contrary to what is often said, the ‘original sin’ of the South is not slavery, or even racism. It is cheap, powerless labor.”

For a long time, that was a regional economic strategy, but once the South recaptured the federal government, it attempted to spread that ethos throughout the entire nation -- with great success, as evidenced by today’s weak labor laws and lagging minimum wages. Wal-Mart could not have broken out of its cradle in Dixie and become the nation’s dominant retailer without those policies. Even Indiana and Michigan, once-reliable redoubts of free labor, recently became right-to-work states, putting themselves on the same page as every member of the old Confederacy.

The core principle of Lincoln’s political career (as opposed to his presidency) was preventing the spread of slavery into the territories and the Northern states, where it would undermine free labor. If we accept Lind’s argument about low-wage economic policies, we should be as determined as Lincoln to confine them to their native region. Or better yet, stamp them out altogether, as we did slavery. Because they are threatening the existence of a middle class.

The time may be right, too. Barack Obama is the first president elected from a Northern, industrial state since John F. Kennedy. From Lincoln’s own Illinois, in fact. Much has been made of that fact that Obama fulfilled the advances in racial equality that Lincoln began. But Lincoln didn’t free the slaves with the idea that one of them would become president. He gave them their freedom to prevent their unpaid labor from undercutting the middle class. That’s another aspect of Lincoln’s legacy Obama can fulfill.

By Edward McClelland

Edward McClelland is the author of "Nothin' But Blue Skies: The Heyday, Hard Times and Hopes of America's Industrial Heartland." Follow him on Twitter at @tedmcclelland.

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