February 2026 Economic Theory Part V – Application of the dichotomy (Conservative and Radical) -David Kowalski

Disclaimer: These words are the author’s personal views and do not reflect the Labor Guild’s opinion.

For those of you who have taken economic courses, I am willing to bet not many of you have heard it in this fashion. It is certainly not traditional. My major in college was Labor Studies and Law Work. I am not an economist, nor do I profess to be an expert in the field. However, I have become intrigued with economic theories and have how they have actually been applied in society. As you can see from my writing, I have done considerable research regarding the subject. To be clear, I was and always have been a blue collared working guy. That for the better part of my life I turned wrenches and screwdrivers. Much of what I have shared with you has come from my own empirical evidence, as I have seen it applied over my lifetime. The point being, I am trying to give you a vision of the world through a different lens that, in my life, changed the way I view the world. I don’t know if you will share the same epiphany that I have had but I do hope it will encourage you to think, appreciate and apply it within your thought process.

So, let’s begin. The Industrial Revolution is defined in two stages: Textiles, water wheel, and the use of machinery with inter-changeable parts and the production of iron. The second portion came with the development of the steam engine, the Bessemer Furnace, which produced large amounts of steel. Along with Robert Fulton’s steam engine that came around 1798. The textile mill wheels were spinning. Corporations were on a short leash; unions were on a shorter leash. Where, if a court determined your union conspired (or organized) for good, it was legal, then you could organize. If the court found that your union conspired (organized) for evil, then you could not have a union. Legal issues concerning unions were adjudicated as criminal acts and a trial commenced and a verdict handed down. The process was cumbersome.

The focus of business, government, courts and unions was and still is, focused on the economy and the movement of goods and services (commerce). The protection of “commerce” and the inheritance of “property rights law” as adopted from Britain begins to come together in this period as business breaks out of the governmental harness.

We are most familiar with the two major depressions in recent times. The Great Depression of the 1930’s and the most recent too big to fail depression of 2008 which took 18 months to recover from. In both cases caused by unscrupulous lenders, investors and regulators. Would you be surprised to know that between 1800 and 1900 there were five recessions (back then they called them panics)? By 1900, America had seen five economic depressions, all similar in that they included a combination of: Speculation of either real estate or stock, a drop in commodity prices of cotton and wheat, instability of the currency due to paper money not backed by silver or gold, along with its fluctuation in price depending on its supply. Over speculation in railroads. European depression which slowed the flow of capital investment money to the U.S. All of which led to a crash of business, bank foreclosures or a crash of the stock market and a rise in unemployment. The Panic of 1819-1821 was the first time Americans were introduced to a business cycle where they saw the boom and bust that is inherent in a capitalist model. Yes, I said inherent. Today, estimates indicates that historically, the U.S. has experienced an economic downturn every 4 to 6 years. I am not going to go into the details of each of these depressions (panics) but I did want to make you aware of them.

America was quickly moving from the horse drawn agricultural economy to the industrial model. Robert Fulton’s steam engine enhanced water and rail transportation. In fact, railroads were so over-built, expenses could not be covered by revenues and by1895 there were over 70,000 miles of train tracks West of the Mississippi.

The rise of railroads delivering ore to the huge developing steel mills producing steel for construction and the supply of immigrants into the country gave way to voluminous amounts of cheap labor that was purchased for less than life sustaining wages. Which of course sets the stage for class conflict. I find it remarkable that the country developed so quickly and so vastly in just 30 years after the Civil War. There was certainly a time of crowning achievement for capitalism. It was also a time of bloody labor disputes for labor, as they began the process of organizing with a rise of anarchy. Most European workers were familiar with Socialism and did not see it as a threat and where they could not earn enough to feed their families felt the only way they could get a fair wage, was to take over the means of production and revolt. A shining example of Marx’s idea of “Dialectic materialism”.

With business thriving, corporations were ready to stretch out of their restricted model. Where capitalism was still unbridled it returned mega fortunes for the owners of these industries and by the 1870’s until the early 1900’s we enter what was called “The Gilded Age”. The term “robber baron” came out of this period, meaning businessmen making fortunes by questionable and or criminal means. When t he wealth of Industrialists like John D. Rockefeller, Cornelius Vanderbilt, Henry Ford, and Andrew Carnegie are money gurus like Musk, Gates and Bezos , it is not even close they were dwarfs compared to their predecessors .

I would like to introduce you to someone I don’t believe you have ever heard of. His name is Thomas Scott, a station manager for the Pennsylvania Railroad and he was their “borer”. Defined as an executive who was paid to bribe and or buy regulators and elected officials. (A predecessor to the lobbyist). The significance of Scott’s work cannot be overstated. His work enhanced the structure of capitalism and influence of corporations to a degree that both Adam Smith and Karl Marx could never have foreseen or imagined. He was also the mentor to Andrew Carnegie.

Beginning with literally back-room politics, Scott listened to proceedings and oversaw the debate of the Pennsylvania State Legislature from an adjacent room where he directed and wrote the law that revoked the railroad’s tonnage tax. The public was enraged, when made aware of the law’s full effect, made attempts to appeal the law but found it impossible to do; for the law was actually, a contract between the legislature and the railroad and needed the consent of both parties for re-peal. The heat had become so hot that Lincoln asked Secretary of War, Edwin Stanton to place him on special business in Washington, to get him out of town.  

Scott became a Colonel and major player in moving troops throughout the war. By the time the war ended Scott was “the man” when it came to railroads. His vision to rebuild railroads in the South and expansion to the West, slowed when Southerners were aware Yankee money was in the mix. They feared that money may be used to colonize the South.

Scott went back to the Pennsylvania Legislature and convinced them to ease restrictions on the Pennsylvania Railroad to set in motion the basic formulation for a “holding company” in order, to purchase other railroads. Specifically, he managed to persuade the legislature into allowing corporations to buy stocks in other corporations and thereby established the “holding company”. This allowed the purchase of railroads by a holding company without revealing the owners, a group of nameless, faceless, stockholders. The development of the holding company allowed these new corporations to be exempt from the other state’s laws they operated in. For instance: Where the charter was granted in Pennsylvania, other state laws could not be used to regulate their charter, basically circumventing any local or state restrictions governing corporations (steroids for corporations). Hence, started the competition between the states, as to which state was the friendliest to corporations to “charter” in. Delaware became the winner of that joust, being the most favorable to corporations and where the most corporations are chartered, even today. This is the opposite of what our founding fathers wanted; they gave the power of creating corporations to the state for more strict regulations not more.

The “Holding Company” was and is still the favored drug for capitalism. It acts as a mother company that has the ability to buy other smaller companies and keeps it protected under its wing. In Thomas Scott’s case, buying enough shares to take over the interest and operation of the railroads operating in the South and West and placing them within his Holding company. When challenged, their charter, authorized in Pennsylvania, opponents had little recourse. If a Holding Company owns 100% of another’s stock, it is considered a wholly owned subsidiary. That was the catalyst that cleared the way for monopolies to exist. “Lasses-faire” (hands off regulating the economy) the market will seek its own level of equilibrium. However, it didn’t. This vehicle gave license for monopolies to proliferate. Hence, began the growth of obscene wealth as workers could barely afford to live. Child labor flourished, immigrants pitted against one another as the black workers served as strike breakers.

Now for the Conservative view of economics during this time. The capitalist model was working perfectly, with no restrictions for the rich, just as it had since its inception. They owned everything. Industries allies, elected and appointed officials that authorized the use of automatic weapons to be used on strikers, supported air reconnaissance of striking workers, hired security agencies to declare war and massacre strikers as they wore National Guard uniforms, as in the case of the Ludlow Massacre, in Colorado. Along with a steady dose of militias and federal troops; an allied Supreme Court that nullified the Clayton Act that was signed into law to separate labor from the Sherman Act. The Sherman Act which was designed to break up monopolies was used against Labor when, Attorney General Richard Olney, ordered U.S. mail to be loaded in railroad cars during the Pulman Strike (the bloodiest of its time in 1894), so the government could invoke the interstate commerce clause of the Sherman Act. It was used specifically to prosecute unions and their leaders.

One affective tool of the government and Industrialist was called the “civil injunction” which was cheaper and less time consuming than the alternative court trial to convict unions. Again, coming from English property rights law. Its premise is to: empower a judge to intervene and force a party (the union) to cease its activity in order to maintain the status quo, regardless as to whether or not it is fair or legal. What did matter were the owners and their rights, in their dealings with their property and their commerce. With its strong roots in the sanctity of property rights law, there was not an area the injunction could not reach. It also established the use of “yellow dog contracts”. Meaning, a contract where workers were compelled to sign a contract that prohibited them from becoming a member of a union, as a condition of employment.

Now for the Liberal view of economics during this time. Fredrik Engels and Karl Marx were right. Capitalists owned everything, their money purchased power, influence and control and workers had nowhere to turn. It seemed that every avenue had been cut off. It was only then when workers struggled for a fair living wage, did they become mean, brutish and nasty as Marx predicted. Workers simply needed a bigger slice of the profit, which the owners refused to give. Our struggle has always been and is, today, come down to, what a product costs to produce and the price it is sold for, and of course, how those profits are distributed.

Remember when I said people organize around societal need? That is exactly what workers were doing as we saw the rise in anarchist movements. Workers believed the only way to get a fair shake was to wrestle the means of production away from the captains of industry to the workers. After the Pulman Strike we see the rise of Socialist, and the Socialist Democratic Party begin and then the “Wobblies” come into play. Their formal name was the Industrial Workers of the World. Yes, and it was, an anarchist organization, along with the influence of the Communist. It is important to note that without these radical organizations, there would not be a labor movement in this country. Capitalism wants control of all aspects of their business, and unions have acted as a barrier to balance their dominance. This is why unions continue to be such a threat to capitalism and why socialism is so vigorously demonized and why it is so important for capitalism to ensure its demise.

I told you earlier that corporations were the guilds younger siblings and after the establishment of the first corporation, changed their name from societal need and or necessity, to profit maximization. Job one for a corporation is to establish a profit and job two is to maximize that profit.

I have given you both the Conservative and Liberal economic theories. I have also given you proof of how each model was applied in this country. In many of my papers I state.  

“Those who do not heed the lessons of history are destined to repeat them.” However, I do believe that one of those reasons we do repeat our mistakes is because we have not been taught them. And that is why I wrote this piece. Next time, I will talk about why Labor Law came about and its effect on the economy.