Patrick Newman discusses his new book, Cronyism: Rise of the Corporate State, 1849–1929, the second installment in a series that began with Cronyism: Liberty Versus Power in Early America, 1607–1849 (2021), and which carries a foreword by Nobel laureate Thomas Sargent. His thesis is that big business, far from being victimized by government during this era, actively lobbied for tariffs, subsidies, regulatory commissions, and cartels that benefited special interests at the public’s expense, with the Federal Reserve standing as the most successful example of corporatism. Newman argues that the standard grade-school narrative of noble progressive reformers taming predatory trusts is backwards: business allied with paid intellectuals to craft “public interest” justifications for policies that crushed smaller competitors and hurt consumers.
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The American System and the tariff myth: The Hamilton–Clay–Lincoln program of protective tariffs, central banking, and federally subsidized “internal improvements” is being revived by Trump officials, but Newman notes America’s industrial revolution began in the 1850s under the low-tariff Walker Tariff of 1846, and Lincoln’s subsidized railroads were inefficient and did not drive growth. He argues the Republicans were the party of mercantilist cronyism, while the Jacksonian and Bourbon Democrats — Jackson killed the Second Bank and paid off the entire federal debt — were the closest thing to a free-market party.
The Federal Reserve as Wall Street’s cartel: The Fed grew out of a plan drafted by a select group of Wall Street bankers at Jekyll Island in the fall of 1910, designed to enhance bankers’ balances and make the dollar a world reserve currency. Citing Gabriel Kolko’s work, Newman says Wall Street’s share of deposits relative to Chicago and St. Louis was declining before the Fed and rose afterward — the Fed strengthened the “money trust” it was supposedly created to curb.
The Jungle and the Beef Trust: Upton Sinclair fabricated his exposé of Chicago meatpacking (he visited once on a guided tour), and packers like Armour and Swift had actually improved health standards through the disassembly line, canning, and refrigeration. The Beef Trust “defensively lobbied” to shape the Meat Inspection Act of 1906, which cartelized the market, drove smaller slaughterhouses out of business, and made the following decade highly profitable for the major packers.
The AMA as a “good trust”: In the early 1900s the American Medical Association campaigned to restrict medical licenses, medical schools, and rival practitioners (homeopaths, eclectics, even chiropractors and optometrists), reducing doctor supply — especially in rural areas — and boosting doctor salaries. St. Louis doctor W.G. Moore openly boasted, “If the American Medical Association be a trust, it is a good trust,” and the resulting cost explosion fueled calls for socialized health insurance in the 1910s–1920s.
Wall Street’s split over World War I: J.P. Morgan and Company pushed for U.S. entry into WWI because it had lent enormous sums to Britain and France and faced ruin if they defaulted, while Kuhn, Loeb — a German-Jewish investment bank — was pro-German and anti-Tsarist, with Fed co-founder Paul Warburg trying to restrain wartime money printing and keep America out. Morgan won; Newman also notes railroads used “seductive female lobbyesses” and that accountants were a key interest group behind the income tax.
