Capital Day, Part I: The Origins of Labor Day (Briefly)

In case it escaped your notice, yesterday was Labor Day. As you know (or maybe you didn't), Labor Day became a federal holiday in 1894, when the legislation was rushed through Congress following the Pullman Strike to pacify widespread anger over the government's handling of the strike. The first Monday in September was chosen, one, because Monday is traditionally the beginning of the workweek, and, two, September . . . well, it was handy. President Cleveland and Congress wanted to avoid identification with May Day, celebrated as "International Workers Day," and its association with socialism and anarchism in many countries.

October or November would have been better, being, respectively, five and six months from May 1, and thus about as far away from May Day as you could get. October already had Columbus Day, however, and November had Thanksgiving, and Congress wanted to spread out the holidays to avoid clustering them all together — and you don't want to gyp anybody by scheduling a holiday during August when people take their vacations.

From the perspective of the Just Third Way, the inauguration of Labor Day has a special significance. As regular readers of this blog are aware, the first Great Depression following the Panic of 1893 seems to have been made much worse than it should have been. This appears to have been caused by the declining incidence of capital ownership (remember — we include land and other natural resources as "capital" when they are used to produce marketable goods and services) among ordinary people, and the rise of the wage system as the determinant economic arrangement following what Frederick Jackson Turner called "the closing of the American frontier."

Consequently, when people whose dependency was solely on wages for their subsistence lost their jobs, they couldn't survive by (for instance) growing their own food and staving off the tax collector or the sheriff's deputies. A farmer could do that, while a small artisan might be able to hang on with a diminished customer base until things turned around, but the wage worker was completely out in the cold.

Of course, had the laid-off workers owned shares in the companies that employed them that didn't go bankrupt, they could have gotten something from dividends or, as a last-ditch, sold the shares, sort of like the cavalry eating the horses. This is what Judge Grosscup recommended a decade later to address the problem of the propertyless worker, and as Charles Morrison had, too, fifty years before (workers owning shares, not eating the horses). Those that depended on wages alone, however, were completely out of luck.

In response, we saw such things as "Coxey's Army" and various "workfare" programs and other measures in a number of cities. Detroit, for example, proposed that the unemployed be permitted to grow potatoes on vacant city land. The most common demand was that the federal government should inflate the currency (a 19th century version of "Quantitative Easing") and create jobs rebuilding roads and other infrastructure.

Having just spent a generation restoring the "faith and credit" of the United States government following the Civil War, however, Congress was reluctant to do anything that would debauch the currency and disrupt the newly restored parity with gold, since the 1870s virtually the global standard. (That's a long story we won't get into, involving the British sovereign, the Empire, the "New Coinage" of 1817, the "Six Weeks War," and the failure to develop India using silver following the Great Mutiny.)

Then came the Pullman Strike. It began as a wildcat strike in response to wage cuts resulting from economic conditions of the Great Depression. A large number of railroads had gone bankrupt, and the remaining roads were trying to retrench and avoid the same fate. Orders for new rolling stock decreased dramatically, and the Pullman Company cut wages, but refused to reduce rents on company-owned housing or prices at company-owned stores.

Railroad workers refused to switch (i.e., hitch and unhitch) Pullman cars in sympathy. Hiring of strikebreakers increased the level of hostility. It didn't help any that a large number of the strikebreakers were Black, who crossed picket lines out of fear that the racism expressed by the American Railway Union would shut them out of yet another labor market. The strike spread across the country. At its height the walkout involved an estimated quarter of a million workers in twenty-seven states.

Eugene Debs called for a peaceful meeting to obtain support for strikers at Blue Island, Illinois, but the meeting became violent. Houses were torched, and railroad property was damaged. In other areas, workers walked off the job, obstructed tracks, and threatened and attacked strikebreakers. More violence led to federal marshals and troops being called in under an injunction issued by Judges Peter S. Grosscup, later noted for his championing of worker ownership, and William A. Woods. Samuel Gompers accused Grosscup of being a stooge for the railroads. This is hardly likely as the railroads attempted to bribe Judge Grosscup by offering him a position as corporate counsel at "several times" his judicial salary, but were summarily rejected. Ultimately, 13 strikers died and 57 were wounded.

During the trial, the charges of conspiring to obstruct the U.S. mail were dropped and reduced to violating the court's injunction barring union leaders from supporting the strike. Labor lore was to inflate the dropping of the mail and conspiracy charges into a plot to cheat defense attorney Clarence Darrow of a victory, Darrow contending that the federal government had no right to regulate intrastate commerce, state's rights trumping the federal government's right to regulate interstate commerce.

Debs was sentenced to six months in prison. During his sentence, Debs read the works of Karl Marx and became a socialist. In furtherance of a policy of appeasement of labor, Congress rushed through the new holiday.

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