Key ideas: Published in 1915. “Beard defines the early period of American governance in terms of the conflict between agrarianism and fluid [i.e. debt-based financial system] capital that dominated the campaign for the ratification of the Constitution. He traces this dispute across three decades into its manifestations as Federalism versus Republicanism and later into Federalism and Jeffersonian Democracy.” (From introduction)
To speak more precisely, the contest over the Constitution was not primarily a war over abstract political ideals, such as state’s rights and centralization, but over concrete economic issues, and the political division which accompanied it was substantially along the lines of the interests affected — the financiers, public creditors, traders, commercial men, manufacturers, and allied groups, centering mainly in the larger seaboard towns, being chief among the advocates of the Constitution, and the farmers, particularly in the inland regions, and the debtors being chief among its opponents.
That other considerations, such as the necessity for stronger national defence, entered into the campaign is, of course, admitted, but with all due allowances, it may be truly said that the Constitution was a product of a struggle between capitalistic and agrarian interests.
Alexander Hamilton, the first Secretary of the Treasury under the new system. He had been a member of the Convention which drafted the Constitution. He was intimately associated with the leaders in the movement for ratification. He shared in the preparation of that magnificent polemic, The Federalist. But above all, he was, as Secretary of the Treasury, in full possession of the names of those who funded continental and state securities after the Constitution was adopted.
No one in all the United States, therefore, had such excellent opportunities to know the real forces which determined the constitutional conflict.
More thana decade after the conflict over the Constitution, when many of the great actors in that drama had passed away, and there had been ample time and opportunity to reflect deeply upon the nature and causes of that struggle, Chief Justice Marshall described it, in effect, though not in exact terms, as a war between mercantile, financial, and capitalistic interests generally, on the one hand, and the agrarian and debtor interests, on the other.
Half a century later, Hildreth, …, came to substantially identical conclusions. He declared that
In most of the towns and cities, and seats of trade and mechanical industry, the friends of the Constitution formed a very decided majority. Much was hoped from the organization of a vigorous national government and the exercise of extensive powers vested in it for the regulation of commerce.
In North Carolina and Rhode Island, the states which first rejected the Constitution, Hildreth continued, the trouble was the state paper money which destroyed the rights of creditors.
In Massachusetts he found the “‘weight of talent, wealth, and influence” on the Federal side. In Virginia, the opponents of the Constitution included many of the great planters and “the backwoods population almost universally,’’ and the opposition of the planters was to be, in part, ascribed to the fear of having to pay their debts due to British merchants in case the Constitution went into effect. In New York it was the City and the southern counties, not the interior agricultural regions, that’supported the new scheme of national government…
In his life of his grandfather, the President, Mr. Adams, who enjoyed the unrivalled advantage of having access to documents closed to all his contemporaries, represented the adoption of the fundamental law of the United States as a triumph of property over the propertyless..
The social disorder which preceded the federal Convention of 1787, Mr. Adams attributed to
“the upheaving of the poorest classes to throw off all law of debtor and creditor,” and the Convention itself, he declared, ’was the work of commercial people in the seaport towns, of the planters of the slaveholding states, of the officers of the revolutionary army, and the property holders everywhere. …
That among the opponents of the Constitution are to be ranked a great majority of those who had most strenuously fought the battle of independence of Great Britain is certain. …
Among the federalists, it is true, were to be found a large body of the patriots of the Revolution, almost all the general officers who survived the war, and a great number of the substantial citizens along the line of the seaboard towns and populous regions, all of whom had heartily sympathized in the policy of resistance.
But these could never have succeeded in effecting the establishment of the Constitution, had they not received the active and steady codperation of all that was left in America of attachment to the mother country, as well as of the moneyed interest, which ever points to strong government as surely as the needle to the pole.”
That which representative men of the eighteenth century definitely understood, and Hildreth implied in a somewhat rambling fashion was completely demonstrated by Profes- sor O. G. Libby in his study of the Geographical Distribution of the Vote on the Constitution in the Thirteen States:
the support for the Constitution came from the centres of capitalistic interest. and the opposition came from the agrarians and those burdened with debts.
To adduce further evidence in support of Professor Libby’s thesis is merely to add documentation to that which has been satisfactorily established.”
Inasmuch as the country was sharply divided over the ratification of the Constitution, and along fairly definite economic lines, it is natural to assume that these divisions did not disappear when the new government began to carry out the specific policies which had been implied in the language of the instrument and clearly seen by many as necessary corollaries to its adoption.
It was hardly to have been expected that the bitter animosities which had been aroused by that contest could be smoothed away at once and that men who had just been engaged in an angry political quarrel could join in fraternal greetings on the following morning….
Nevertheless, two careful students, Professor Bassett and Professor Libby, have recently given their support to the proposition that the political alignments which ensued over the ratification of the Constitution were not carried over into Washington’s administrations but disappeared when the instrument was actually adopted.
Professor Bassett informs us that “the Federalist party of 1787-1788 was not the same as the Federalists of 1791:
the former embraced all those who desired to save the country from the chaos of the government under the Articles of Confederation; the latter included those who supported Hamilton in his plans for conducting the affairs of the country.
Many who acted with Hamilton in 1788 were not with him three years later; but this does not mean that if the old problems had to be faced again such men would be opposed to their former position.
The problems of 1791 were new problems; they had to do, not with union or chaos, but with two clearly defined lines of internal policy.
After the completion of the ratification of the Constitution in 1788, anti-Federalism died because its raison d’étre was gone. Although a few threats were made later to dissolve the Union, notably by Massachusetts when it seemed that assumption was defeated, such a policy received no serious support from any considerable number of men.”
This is a strong statement and it is so fundamental for the purposes of the study before us that it deserves the most careful and critical examination.
A part of it is highly speculative, to say the least. We are informed that the constitutional Federalists were not identical with the Federalists of 1791, and that the later Federalists in- cluded in their ranks only those who supported Hamilton. Of course the statistical materials for demonstrating such a proposition — which rests of course upon facts susceptible of enumeration — are not forthcoming, and indeed cannot, from the nature of our records, ever be forthcoming in any adequate manner.
But letting the statement stand, we may ask: ‘Were not those who supported Hamilton’s fiscal measures drawn almost wholly from ‘those who desired to save the country from the chaos of government under the Articles of Confederation’?”
Again we may ask: “Tid not those who were opposed to saving the country from chaos constitute the bulk of the party that opposed Hamilton’s measures?” It might be possible, therefore, by one interpretation to accept Professor Bassett’s dictum on this point and yet hold that the party division over the ratification of the Constitution formed, in the main, the basis of the division into Federalist and Republican after 1789.
Finally, serious objection may be justly taken to the state- ment that the problems of 1791 were “new problems.’’
On the contrary, they were exactly the problems which had been raised during the conflict over ratification:
the adjustment of the federal and state debts, the regulation of commerce, the enforcement of the terms of the British treaty, the settle- ment of land titles in Virginia and other Southern states, the payments of debt due principally in the South to British creditors, the establishment of the currency on a sound basis, and the restraint of the states in their attacks on property.
Men divided during ratification because they knew that the adoption of the Constitution meant in a general way the settlement of these [see above] momentous matters, and after the new government was inaugurated men divided over the concrete measures which expressed the principles laid down in the Constitution.
After all, principles must find their embodiment in certain men or groups of men, and the question in 1791 was practically the same as in 1787: “Who shall rule and how?”
Hamilton knew this, Washington knew it, the wisest men of the time knew it, and that accounts for their extreme solicitude about the election of the “proper” persons to form the living expression of the new instrument of government.
Abraham Baldwin, of Georgia, a signer of the Constitution, …, voted against the assumption of state debts, but’ it cannot be discovered whether he voted for or against the general proposition to fund the continental debt at face value, for there is no record of the votes on that matter.
Baldwin was in the opposition from the beginning and remained a consistent Republican until his death.
Richard Bassett, of Delaware, a signer of the Constitution, …, voted for the Judiciary Act although he is recorded against the funding bill. e was chief justice of the court of common pleas in his state from 1793 to 1799 and in the latter year he was elected as a Federalist to the office of governor.
Gunning Bedford, of Delaware, a signer of the Constitution, was appointed to a federal district judgeship by Washington and remained on the bench until his death. Bedford was a zealous Federalist….
Alexander Hamilton, of New York, a signer of the Constitution, was a member of the ratifying convention in his state, and did more than any other member to wring the approval of the new instrument from delegates practically instructed by their constituents to vote against it.
Hamilton was appointed first Secretary of the Treasury by Washington and held that office until all of the great fiscal measures associated with his name were firmly established.
He was employed by the government in 1796 to defend the con- - stitutionality of the carriage tax when it was assailed by Virginia Republicans. He was called to the service of the nation in 1798, when war with France was impending, and in the stirring battle of 1800 he was the most trusted leader and adviser in the Federalist party.
During his life Hamil- ton’s devotion to the Federalist principles which he early espoused never weakened, and he met his unhappy death at the hands of a political opponent, Aaron Burr, whose lack of skill in intrigue prevented him from becoming the first Republican President….
James Madison, of Virginia, a signer of the Constitution, labored valiantly in the Virginia convention for its ratification. He would have been elected to the first United States Senate had it not been for the Anti-Federalist opposition to him in the state legislature. Under the circumstances he was compelled to be content with an election to the House of Representatives.
As is well known, he turned very early against Hamilton and his policies; he fought for a discrimination between the original holders of securities and the speculative purchasers ; he opposed the assumption of state debts; and he soon became an avowed partisan of Jefferson.…
George Washington, of Virginia, a signer of the Constitution, although not a member of the state convention, materially aided by his extensive correspondence in the work of ratification. He was elected first President under the Constitution and did more than any one else to reconcile a portion of the opposition to the new order.
Moreover, Jefferson confessed his ignorance of financial questions and was far from being an avowed opponent of all of Hamilton’s fiscal policies in the beginning.
To say, therefore, that Hamilton and Jefferson entertained in 1789 clearly diver-~ gent views which Washington, for non-partisan reasons, desired to have represented in his administration is without foundation.
We may readily admit with Professor Libby ? that Washington’s desire to keep both Jefferson and Hamilton after their serious differences had arisen was an evidence of his desire to ’mollify and soften the harshness of factional animosity,” but that of course does not mean that Washington took a middle ground between his belligerent Secretaries. In reality, he did not at any time assume a “nonpartisan” position with regard to the clashing views of Jefferson and Hamilton. On the contrary he indorsed practically every one of the latter’s administrative policies, defended him against the attacks of his enemies, and in the end retained him in office while allowing the disgruntled Secretary of State to retire to the seclusion of his Virginia estate.
Therefore, it may be said that as to every one of the great economic measures which the Constitution was designed to effectuate and which were necessary to the es- tablishment of the new system, Washington was never non-partisan — in any sense in which that vague phrase may be reasonably construed.
The measures of the new government furnished them with plenty of political ammunition, and it was not necessary for them to assume the unnecessary burden of overthrowing the Constitution itself.
Certainly there was no hope of securing converts to the Republican cause from among the friends of the Constitution, if they continued to pose as the party of opposition to the fundamental law itself.
law itself. With extraordinary cleverness which can, nevertheless, be quickly penetrated by any one who knows the history of the period, Republican writers claimed the Constitution for themselves and denounced, as open and flagrant violations of that instrument, the very measures which had the support of nearly every member of the constitutional Convention, who found a place in the new government, —as if the unnatural fathers had destroyed their own progeny.
No better illustration could be found of the way in which the Republicans turned the Constitution to their own advantage and declared its original purposes to be their own purposes than in John Taylor’s Inquiry into the Principles and Tendencies of Certain Measures published in 1794.
Throughout this pamphlet, he assumed that the entire fiscal system was contrary to the letter and spirit of the fundamental law drafted in 1787.
In other words, Taylor had the moral courage to declare in print that the men who framed the Constitution did not know what their intentions were at the time and afterward violated persistently and consistently their own instrument of government when called upon to put it into practical operation.
In very truth, continued Callender, the federal Constitu- tion has been “crammed down the gullet of America… . The ‘government of your own choice’ met with long and violent resistance to its adoption.
In Virginia it was carried by eighty-nine votes against seventy-nine. From ten to thirty of the majority have long since repented of their vote. … In Massachusetts, the federal question was carried by an hundred and eighty-seven votes against an. hundred and sixty-eight. Georgia was poor and help- less… . In New York, the Constitution was accepted by thirty voices against twenty-five; in Rhode Island by a majority of two. In North Carolina it was at first rejected by a large majority.
Hence it follows that the new govern- ment was only preferred by a part of the people.
On this account, Mr. Washington hath since declared that the federal constitution should not have been adopted/ For, in his farewell letter of September 17, 1796, he remarks that ‘the constitution which at any time exists, till exchanged by an explicit act of the whole people, is sacredly obligatory upon all.’
In Virginia, this Constitution met not only with violent, but with at least equiponderant opposition. In all the other states the people were greatly divided.
All the atrocious artifices common at an ordinary election were exerted in support of it….
That the federal system had been embraced by the whole people never was, nor could be pretended. Yet the first federal Congress met, in defiance of the constitution then existing and of the sacred obligation referred to by Mr. Washington.
They met on the ruins of the old confederation, and sacrificed a variety of rights hitherto held as inviolable. They met when out of the thirteen states eleven only had acceded to the Union.…
On March 3, 1789, when the first Congress assembled, they bore about them every feature that corresponds with the definition of tractors, as just quoted from Mr. Washington himself…
The farewell address conveys an explicit censure not only upon the new government, but likewise upon the American revolution; for that was accomplished by a part of the people, in despite of the rest, and in breach of what is called the British constitution. By his own ac- count, therefore, Mr. Washington has been twice a traitor. He first renounced the king of England, and thereafter the old confederation.”
This “treasonable” work by a minority, this formation of the Constitution in the teeth of public opinion, Callender declared to have been, in a large part, the wicked deed of the security holders.
“The new Constitution,” he exclaimed, ’had been in a great measure established by the influence and activity of the traders in these certificates.”
In this contest between the friends and enemies of the Constitution, Jefferson occupied a position of peculiar advantage. He had been in Paris when the Constitution was framed and adopted.
He had approved parts of the instrument and disapproved other parts so that he could, with some show of justification, be claimed as a friend or an enemy.
In fact, Jefferson refused to be classed either as Federalist or an Anti-Federalist in the spring of 1789, declaring that if he could not go to heaven except with a party he would not go at all.
’Therefore I protest to you,” he wrote to Hopkinson, ’“’I am not of the party of federalists. But I am much further from that of the Antifederalists.
I approved from the first moment of the great mass of what is in the new constitution, the consolidation of the government, the organization into executive, legislative, and judiciary, the subdivision of the legislative, the happy compromise of interests between the great and little states by the different manner of voting in the different houses, the voting by persons instead of states, the qualified negative on laws given to the executive, which however I should have liked better if associated with the judiciary as in New York, and the power of taxation.
I thought at first that the latter might have been limited. A little reflection soon convinced me that it ought not to be.”
The points of objection urged by Jefferson were the want of a bill of rights to secure in- dividual liberty “against the legislative as well as the execu- tive, branches of the government,’ and the perpetual reéligibility of the President.
The student of political psychology will, therefore, find it extremely interesting to discover that the first President elected by the Republicans could, with equal justice, be claimed as an opponent or a friend of the Constitution at the time of its formation and adoption.
To make it a mere lawful instrument of government, it was necessary to secure the ratification of at least nine states. Even with ratification, the battle was not half won.
All depended upon the character of the men who filled the offices and determined the policies and measures of the new government. The clauses of the Constitution were on their face somewhat uncertain promises of a system to be created. The full potentialities were only understood by the bold spirits in the secret assembly that framed it — those who opposed it on economic grounds only roughly divined the precise powers which could be exercised under the new instrument.
The Constitution did not even go into effect when Wash- ington was inaugurated first President. The wisest men knew that it was only a figment of the imagination then.
It did not go into effect until the economic measures which its adoption implied were put upon the statute books and carried into execution — not until the debt was funded and adjusted, finances put on a sound basis, revenue laws put into force, commerce and manufacturing encouraged, a land policy forged out, and a national judicial system estab- lished, bringing federal law to the door of every litigant: seeking his rights under the Constitution….
Then it was that the process of government under the Constitution began to be realized. Then it was discovered, as Madison said, who was to govern the country.
’As the period is now rapidly approaching which must decide the fate of the new Constitution, as to the manner of its being carried into execution and probably as to its usefulness, it is not wonderful that we should all feel an unusual degree of anxiety on the occasion. I must acknowledge that my fears have been greatly alarmed, but still I am not without hopes….
There will however be no room for the advocates of the Constitution to relax in their exertions; for if they should be lulled into security, appointments of antifederal men may probably take place; and consequences which you so justly dread be realized.’
t cannot be considered as a compliment to say that on your acceptance of the office of President the success of the new government in its commencement may materially depend. Your agency and influence will be not less important in pre- serving it from the future attacks of its enemies than they have been in recommending it in the first instance to the adoption of the people. Independent of all considerations drawn from this source, the point of light in which you stand at home and abroad will make an infinite difference in the respectability with which the government will begin its operations in the alternative of your being or not being at the head of it. I forbear to urge considerations which might have a more personal application. What I have said will suffice for the inferences I mean to draw.
First. In a matter so essential to the well-being of society as the prosperity of a newly instituted government, a citizen of so much consequence as yourself to its success has no option but to lend his services if called for. Permit me to say that it would be inglorious in such a situation not to hazard the glory, however great, which he might have previously acquired.
Secondly. Your signature to the proposed system pledges your judgment for its being such a one as, upon the whole, was worthy of the public approbation. If it should miscarry (as men commonly decide from success, or the want of it), the blame will, in all probability, be laid on the system itself, and the framers of it will have to en- counter the disrepute of having brought about a revolution in government, without substituting anything that was worthy of the effort. They pulled down one Utopia, it will be said, to build up another.
This view of the subject, if I mistake not, my dear sir, will suggest to your mind greater hazard to that fame, which must and ought to be dear to you, in refusing your future aid to the system than in affording it. I will only add that, in my estimate of the matter, that aid is indispensable.
THE important measures of the new government, com- posed as it was so largely of leading members from the Philadelphia Convention, may be justly regarded as the first fruits in the fulfilment of the promises of the Constitution.
The Senate was, as we have seen, practically controlled by men who had helped to draft that instrument, nd a num- ber of significant bills, such as the measure creating the federal judicial system, the Bank act, and the final amend- ment to the funding bill, originated in that chamber.
The executive department, so far as domestic affairs were con- cerned, was likewise dominated by members of the Conven- tion: Washington, Hamilton, and Randolph.
As soon as he [Jefferson] came to understand Hamilton’s capitalistic system, Jefferson regretted his action in the matter of the assumption of state debts, for he wrote to Washington on September 2, 1792, as follows:
I was duped into [helping Hamilton pass the funding bill] by the Secretary of the Treasury, and made a tool for forwarding his schemes, not then sufficiently understood by me; and of all the errors of my political life, this has occasioned me the deepest regret.
That I have utterly, in my private conversations, disapproved of thesystem of the Secretary of the Treasury, I acknowledge and avow; and this was not merely a speculative difference.
His system flowed from principles adverse to liberty, and was calculated to undermine and demolish the Republic, by creating an influence of his department over the members of the Legislature.
I saw this influence actually produced, and its first fruits to be the establishment of the great outlines of his project by the votes of the very persons who, having swallowed his bait, were laying themselves out to profit by his plans; and that had these persons withdrawn, as those interested in a question ever should, the vote of the disinterested majority was clearly the reverse of what they made it.
These were no longer the votes then of the representatives of the people, but of deserters from the rights and interests of the people; nd it was impossible to consider their decisions, which had nothing in view but to enrich themselves, as the measures of the fair majority, which ought always to be respected.
If what was actually doing begat uneasiness in those who wished for virtuous government, what was further proposed was not less threatening to the friends of the Constitution. For, in a report on the subject of manufactures (still to be acted upon), it was expressly assumed that the general government has a right to exercise all the powers which may be for the general welfare, that is to say, all the legitimate powers of government.”
In the Anas, Jefferson enumerated the funding and Bank measures and the control of the Treasury Department over the members of the legislature as the reasons for his an- tagonism to the administration.
’Here then,” he says, “was the real ground of the opposition which was made to the course of administration. Its object was to preserve the legislature pure and independent of the executive, to estrain the administration to republican forms and prin- ciples, and not permit the constitution to be construed into a monarchy, and to be warped, in practice, into all the principles and pollutions of their favorite English model.
Nor was this an opposition to General Washington … He was not aware of the drift, or of the effect of Hamilton’s schemes.
Unversed in financial projects and’ calculations and budgets, his approbation of them was bottomed on his confidence in the man.
But Hamilton was not only a monarchist, but for a monarchy bottomed on corruption.”
Jefferson’s remedy for the evils introduced by the Federal- ists was to establish the supremacy of the agricultural interest over the “stock jobbers.”
Fortunately this is not a difficult task, for the measures which he proposed are known to all and celebrated in the annals of finance, and the economic basis of them all is carefully explained in his famous reports.2, The measures included:
A funding of the entire debt, principal and interest, at face value instead of on a basis of discrimination between the original subscribers to the debt and the speculators and secondary purchasers.
The assumption of the state debts by the national government, on the basis of funding at face value, thus immensely increasing the national debt.
The establishment of a national bank, three-fourths of whose stock was composed of subscriptions in the recently funded six per cent securities then bearing interest and one-fourth in specie. It appears that only a small part of the specie was actually paid in by the stockholders, and that the bank stock was in fact based almost entirely upon the funded government securities which were thus given an additional value and made the partial basis for an issue of bank notes to be loaned. The note issues were limited to not more than $10,000,000 in excess of the deposits.
The employment of the power to lay customs duties in such a manner as to protect and encourage American manufacture and commerce — those branches of American enterprise most dependent for their activities upon an ample supply of fluid capital. By the protection of American manufacturing and commerce, furthermore, the demand for fluid capital was to be increased and the value of the said capital in the hands of the holders immensely improved.
The disposal of the public lands in large as well as small quantities and the acceptance of public securities bearing six per cent interest in payment therefor, as well as gold or silver.
Sinking fund provisions enabling the federal government to assist the security holders in buoying up the public credit by purchasing securities in the market from time to time. In advocating this plan of partial debt redemption, Hamilton was under no delusion about a debt paying itself. It was not designed to enable the government to buy its debt at the lowest figure but to permit government intervention to sustain the value of the public stock, that is, to sustain the augmentation of fluid capital.…
In other words, Hamilton’s measures provided for underwriting the depreciated and instable public securities at face value by assuring payment of the interest and principal by the federal government, and then for using about one-eighth of them as the capital of a national bank—empowered to issue notes.
The bank notes were further underwritten by the promise of the federal government to receive them for all payments due that government.
The upshot of the whole procedure, from an economic point of view, was the transformation of well-nigh worthless public paper into substantial fluid capital to be employed in commerce, manufacturing, and the development of Western lands.
It was not merely the payment of the debt that Hamilton had in mind; on the contrary the sharp stimulation of capitalism — banking, commerce, and manufactures — was an equally fundamental part of his system.
This augmentation of fluid capital by government fiat based upon a promise to pay interest and principal at stipulated periods was exactly the task to which Hamilton set himself, and he constantly employed its advantage to the country as an argument in support of his respective propositions.
First among the advantages of a bank, he [Hamilton] placed,
the augmentation of the active or productive capital of a country.
Gold and silver, when they are employed merely as the. instruments of exchange and alienation, have been not improperly denominated dead stock; but when deposited in banks, to become the basis of a paper circulation, which takes their character and place, as the signs or representa- tives of value, they then acquire life, or in other words an active and productive quality…
It is a well-established fact that banks in good credit can circulate a far greater sum than the actual quantum of their capital in gold and silver. [Hamilton is talking about franctional reserve banking.]
The extent of the possible excess seems indeterminate; though it has been conjecturedly stated at the proportions of two and three to one.
In March 2020, US got rid of the reserve banking requirements:
“As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.” (federalreserve.gov)The combination of a portion of the public debt in the formation of the capital [of the Bank] is the principal thing of which an explanation is requisite.
The chief object of this is to enable the creation [italics author’s] of a capital sufficiently large to be the basis of an extensive circulation, and an adequate security for it.
As has been elsewhere remarked, the original plan of the Bank of North America contemplated a capital of ten millions of dollars which is certainly not too broad a foundation for the extensive operations to which a national bank is destined.
But to collect such a sum in this country, in gold and silver, into one depository, may, without hesitation, be pronounced impracticable. Hence the necessity of an auxiliary, which the public debt at once presents.
This part of the fund will always be ready to come in aid of the specie…. The quarter-yearly receipts of interest will also be an actual addition to the specie fund, during the intervals between them and the half-yearly dividends of profits.
The objection to combining land with specie, resulting from their not being generally in possession of the same persons, does not apply to the debt, which will always be found in considerable quantity among the moneyed. and trading people.
The debt composing part of the capital, besides its collateral effect in enabling the bank to extend its operations and consequently to enlarge its profits, will produce a direct annual revenue of six per centum from the Government, which will enter into the half-yearly dividends received by the stockholders.
When the present price of the public debt is considered, and the effect which its conversion into bank stock, incorporated with a specie fund, would, in all probability, have to accelerate its rise to the proper point, it will easily be discovered that the operation presents, in its outset, a very considerable advantage to those who may become subseribers; and from the influence which that rise would have on the general mass of the debt, a proportional benefit to all the public creditors, and in a sense which has been more than once adverted to, to the community at large.
In his Report on Manufactures, in December, 1791, […] Hamilton concluded with evident pleasure:
It is satisfactory to have good grounds of assurance that there are domestic sources, of themselves adequate to it. It happens that there is a species of capital, actually existing in the United States, which relieves from all inquietude, on the score of the want of capital. This is the funded debt.
The effect of a funded debt, as a species of capital, has been noticed upon a former occasion; but a more particular elucidation of the point seems to be required, by the stress which is here laid upon it…
Public funds answer the purpose of capital from the estimation in which they are usually held by moneyed men; and, consequently, from the ease and dispatch with which they can be turned into money.
This capacity of prompt convertibility into money, causes a transfer of stock to be, in a great number of cases, equivalent to a payment in coin…
Hence in a sound and settled state of public funds, a man possessed of a sum in them, can embrace any scheme of business which offers, with as much confidence as if he were possessed of an equal sum in coin.
It requires no very subtle analysis to discover that the immediate beneficiaries of these various proposals by the Secretary of the Treasury [Numilton] were the holders of public securities and capitalists generally.
A study of the Treasury Books and the records of finance of the period indicates that the great capitalists were also large holders of public securities.
Furthermore, in those days, there was not the sharp division between the capitalist and entrepreneur which has since appeared, but the two functions were more often exercised by the same person.
The immediate bene- ficiaries of Hamilton’s plans were therefore the security- holding capitalists who were quite generally merchants, traders, shippers, and manufacturers.…
However, the debt-burdened agrarians who had fought the Constitution to the bitter end, would have preferred the augmentation of the fluid capital in the form of state emissions of paper money, but that door was temporarily closed by a constitu- tional prohibition that was not beaten down until the days of the states rights Supreme Court under Chief Justice Taney.
In his first Report on Public Credit, he anticipated this, and sought to parry criticism from that quarter by showing how agriculture was to become an indirect beneficiary from the augmentation of fluid capital.
he effect which the funding of the public debt on right principles would have upon landed property, is one of the circumstances attending such an arrangement which has been least adverted to, though it deserves the most particular attention.
The present depreciated state of that species of property is a serious calamity. The value of cultivated lands in most of the states has fallen, since the Revolution, from twenty-five to fifty per cent. In those further south, the decrease is still more considerable.
Indeed, if the representations continually received from that quarter may be credited, lands there will command no price which may not be deemed an almost total sacrifice.
This decrease in the value of lands ought, in a great measure, to be attributed to the scarcity of money; consequently whatever produces an augmentation of the moneyed capital of the country, must have a proportional effect in raising that value….
This, of course, is not true. Any quantity of money in society is “optimal” (Rothbard). What matters is mot quantity of money but its purchasing power.
An increase in quantity of money does increase the prices of goods but at the same time reduces the purchasing power of each unit of money.
“Augmentation of fluid capital” (creating money out of thin air) in plain language is called counterfeiting. The only group of society (it’s a tiny group) that benefits form this is the counterfeiters themselves and people close to them. Everyone else gets poorer.The proprietors of lands would not only feel the benefit of this increase in the value of their property and of a more prompt and better sale, when they had occasion to sell, but the necessity of selling would be itself greatly diminished. As the same cause would contribute to the facility of loans, there is reason to believe that such of them as are indebted, would be able, through that resource, to satisfy their more urgent creditors.
This Hamilton frankly acknowledged in the Reports just cited, although, of course, he declined to put them in antagonism to the agrarian sections of the population. It seems correct, therefore, to place the beneficiaries of the new fiscal system in the following order:
Direct beneficiaries: security-holding capitalists.
Indirect beneficiaries: trading, commercial, and manufacturing entrepreneurs in need of capital.
Incidental beneficiaries: land-owning farmers.
As to Hamilton’s solicitude for the first group there can be no doubt. The justice of their claims he eloquently pleaded on all appropriate occasions, and the necessity of drawing their support to the new government was ever present in the foreground or the background of his arguments.
His first great Report dealt, of course, with their interests and the ways and means of meeting them.
In establishing the national bank he planned for such an extensive use of the public debt that a decided advantage was certain to accrue to the holders of securities;
and in his Report on Manufactures he explained at length how the development of industries would create a demand for the employment of the debt for the double purpose of capital and securities.
To his belief in the justice of their claims, he added the knowledge that they had “had a considerable agency in promoting the adoption of the new Constitution,” and could be counted upon as pillars of the new system.!
In all his public and private papers it is abundantly evident that he was deeply aware of the relation between the bene- ficiaries of his fiscal system and the stability, credit, and permanence of the federal government.
In his first Ree port on Public Credit, he declared that one of the purposes of a properly established fiscal system was “to cement more closely the union of the States.”
In support of the proposal to assume state debts he said:
If all the public creditors receive their dues from one source, distributed with an equal hand, their interests will be the same.
And, having the same interests, they will unite in support of the fiscal arrangements of the Government…
These circumstances combined, will ensure to the revenue laws a more ready and more satisfactory execution.
In his elaborate defence of the funding system which he prepared but did not publish, Hamilton explained that the improper adjustment of the debt would have been “a severe blow to the security of property,” and have alienated from the federal government both the public creditors who had so ardently aided in its establishment, and also allied property interests which formed a no less secure bulwark for the national system.
Hamilton’s measures were primarily capitalistic in charac- ter as opposed to agrarian and that they constituted a distinct bid to the financial, commercial, and manufacturing classes to give their confidence and support to the govern- ment in return for a policy well calculated to advance their interests.
He knew that the government could not stand if its sole basis was the platonic support of genial well- wishers.
He knew that it had been created in response to interested demands and not out of any fine-spun theories of political science.
On January 14, the document was laid before the House, and.after a fortnight’s delay it was taken up for consideration.
On that day there was outstanding against the United States and the several commonwealths within the Union a total domestic debt of something like $60,000,000 — an amount equal in many states to the total value of all the money on hand and at interest. [And a foreign debt of about $10,000,000.]
The holders of this paper, particularly of the continental securities, were anxiously looking to the new government for a funding arrangement that would meet all public obligations at their nominal or face value.
A considerable portion of this paper — in some states certainly from one-half to three-fourths — had passed from the hands of the original possessors at rates ranging from one-twentieth to one-sixth of its face value.
When the members of Congress took up Hamilton’s Report on Public Credit, they found proposed no mere device for the payment of the debts of the United States, but a complete funding system, contemplating a certain degree of permanency in the debt, and above all the utilization of it to increase the fluid capital of the country for the purpose of promoting trade, manufactures, operations. in finance, and agriculture.
The latter saw that actual capital could not be increased by a fiat of the government and they believed that the fluid capital which Hamilton’s fiscal system was to call into being was merely a claim to the fruits of toil on the land, vested by legal action in the hands of the capitalistic classes and realized through taxation. # Opposition to Hamilton’s plan. Jackson: The funding of the debt will occasion enormous taxes for the payment of the interest.
The debate had not gone far before Hamilton’s whole theory that a large funded debt, an extensive augmentation of fluid capital, and the stimulation of industries, meant a diffusion of prosperity throughout the nation was warmly - attacked by his opponents.
“Gentlemen may come forward, perhaps, and tell me,” he said, “that funding the public debt will increase the circulating medium of the country, by means of its transferable quality; but this is denied by the best.informed men.
The funding of the debt will occasion enormous taxes for the payment of the interest.
These taxes will bear heavily both on agriculture and commerce.
It will be charging the active and industrious citizen, who pays his share of the taxes, to pay the indolent and idle creditor who receives them, to be spent and wasted in the course of the year, without any hope of future reproduction; for the new capital which they acquire must have existed in the country before, and must have been employed, as all capitals are, in maintaining productive labor.
Thus the honest, hard working part of the community will promote the ease and luxury of men of wealth; such a system may benefit large cities, like Philadelphia and New York, but the remote parts of the continent will not feel the invigorating warmth of the American treasury; in the proportion that it benefits one, it will depress another.
Let us endeavor to discover whether there is an absolute necessity for adopting a funding system or not. If there is no such necessity; a short time will make it apparent; and let it be remembered what funds the United States possess in the Western Territory. The disposal of those lands may perhaps supersede the necessity of establishing a permanent system of taxation.”
This was the main point of the opposition; namely, that, while claims to property might be augmented in the hands of individuals by the inflation of capital, real wealth, which was the product of land and labor, could not be increased thereby.
Jackson:
We learn from Blackstone,” he said, “that the reason for establishing a national debt, was in order to support a system of foreign politics, and to establish the new succession at the Revolution; because it was deemed expedient to create a new interest, called the moneyed interest, in favor of the Prince of Orange, in opposition to the landed interest, which was supposed to be generally in favor of the King, who had abdicated the throne.
I hope there is no such reason existing here; our Government, I trust, is firmly established without the assistance of stockjobbers.
We ought to reign universally in the hearts of our fellow citizens, on account of the salutary tendency of our measures to promote the general welfare, and not depend upon the support of a party, who have no other cause to esteem us but because we realize their golden dreams of unlooked for success.”
The case of those who contended that the continental debt was largely fictitious was put most effectively and succinctly, perhaps, by Livermore, of New Hampshire, in the House of Representatives, on February 9, 1790.
He opened by pointing out the grave injustice which would be done by funding the foreign loans, from which the United States had received hard money, on the same basis as the domestic debt which represented a little real money and much depreciated paper.
’There is a great difference,” he said, “between the merits of that debt which was lent the United States in real coin, by disinterested persons, not concerned or benefited by the revolution, and at a low rate of interest, and those debts which have been accumulating upon the United States, at the rate of six per cent interest, and which were not incurred for efficient money lent, but for depreciated paper, or services done at exorbitant rates, or for goods or provisions supplied at more than their real worth, by those who received all the benefits arising from our change of condition…
It is very well known, — that those who sold goods or provisions for this circulating medium [loan office certificates], raised their prices from six to ten shillings at least….
There is as much reason that we should now consider these public securities in a depreciated state, as every holder of them has considered them from that time to this.
There was a period at which they were considered of no greater value than three or four shillings in the pound; at this day they are not at more than eight or ten.
If this, then, is the case, why should Congress put it upon the same footing as the foreign debt, for which they have received a hard dollar for every dollar they engaged to pay?
Could any possible wrong be done to those who hold the domestic debt, by estimating it at its current value?”
After the attempt to discriminate between original holders and assignees was defeated, the proposition to augment the national debt by about fifty per cent, through the assumption of the state debts came before Congress for consideration.
A Federalist champion, Fisher Ames, explained the advantages of the fiscal system in an astounding argument to the effect that the people were adding capital to their own possessions by self-denying taxation.
The debt,’ he said, “is to be considered, when funded, as an increase of active capital.
We have been often told that a public debt is not a blessing, but an evil.
We are not to compare a debt with no debt for it is a desirable thing to be free from debt; but the debt is already contracted, and we are to compare an unfunded fluctuating debt with a funded debt.
Such a debt as the latter may be comparatively a blessing, for it makes the capital transferable as well as the income.
We have but a small share of personal property; but this will make the very land and houses circulate. [!]
It is true it is an artificial capital formed by a charge upon every other capital, but it is also true, that it is formed by small savings in expense, and if the taxes were not to be laid, there would not be an increase of wealth at the end of a year equal to the debt or the interest of it.
A single cent in the price of an article cannot be said to impoverish the people, or to re- strain them from enjoying their usual habits of living. Indeed, it may tend in some degree to prevent excess, and to promote frugality, which will enrich the people.
But at the end of the year these almost imperceptible sums, by their union into one mass, acquire a new power. The whole may be said to have properties which did not belong to the separate parts.
The active circulation promoted by the debt will, in a considerable degree, compensate the burthen of paying taxes.
Those whose property is increased by possessing the debt will become greater consumers in proportion, and contribute largely to the revenue.”
On May 25, 1790, Ames took this point up at the close of a long speech, saying:
Little notice has been taken of the argument for assumption, which, if just, is entitled to a great deal. I mean that which has been urged to show that it will strengthen the Government. The answer given is, that instead of pecuniary influence, new powers are wanting to the Constitution.
What will the new powers avail us, if we suffer the Constitution to become a dead letter?…
Little topics of objection sink to nothing when it is allowed that the assumption will strengthen the Government….
Shall we make the union less strong than the people have intended to make it, by adopting the Constitution? And do not all agree that the assumption is not a neutral measure?
If its adoption will give strength to the union, its rejection will have a contrary effect… period of the debate, it is hardly possible for gentlemen to exercise impartiality.
They [the opposition] love their country, and mean to serve it; and I am sure they would shrink from the spectre of its misery which haunts us; they would not consent to undo the Constitution in practice, to realize the evils which were only apprehended under the Confederation, and which were prevented [from being remedied] by the total want of power in Congress.”
This use of the public debt and the public creditors to underwrite the Constitution and the federal government was by no means overlooked by the opposition. Stone of Maryland saw it very clearly.A strong binding force, exterior or interior,” he said, “is supposed essentially necessary to keep together a government like ours; and of all the bands of political connexion, perhaps there is none stronger than that which is formed by a uniform, compact, and efficacious chain or system of revenue.
A greater thought could not have been conceived by man; and its effect, I venture to predict, if adopted by us, and carried into execution, will prove to the Federal government walls of adamant, impregnable to any attempt upon its fabric or operations. I have viewed it with some degree of attention, and I see the subject rise into gigantic height….
I think, sir, wherever the property is, there will be the power. And if the general government has the payment of all the debts, it must, of course, have all the revenue; and if it possesses the whole revenue, it is equal, in other pe to the whole power.”In the third and last session, Congress took up the third of Hamilton’s great fiscal measures, the Bank bill
When at last the advocates of assumption were victorious by the dint of skilful negotiation,! Congress adjourned for a brief respite ; and then finally, in the third and last session, it took up the third of Hamilton’s great fiscal measures, the Bank bill…
The measure appears to have been pressed with singular zeal, for the Report of the Secretary of the Treasury was not made public until December 14, 1790, and, notwithstanding the intervening Holidays, an act to incorporate the Bank passed the Senate on January 20, 1791. The fact that we have no records of the discussions in the Senate for that period prevents our following the arguments on the bill, but the progress of the measure in the lower house may be easily traced.
The debate opened in the House of Representatives on the Bank bill on February 1, 1791, and it had hardly got under way before the old antagonism of. the agricultural to the capitalistic interests, which had dogged the steps of every fiscal measure proposed by the Secretary of the Treasury, made its appearance.
Jackson urged the unconstitutionality of the plan; called it a monopoly; such a one as contravenes the spirit of the Constitution; a monopoly of a very extraordinary nature; a monopoly of the public moneys for the benefit of the corporation to be created
Jackson declared that the bill in question was a piece of class legislation:
This plan of a National Bank is calculated to benefit a small part of the United States, the mercantile interest only; the farmers, the yeomanry, will derive no advantage from it; as the bank bills will not circulate to the extremities of the Union.
He said, he had never seen a bank bill in the state of Georgia, nor will they ever benefit the farmers of that state, or of New Hampshire….
He urged the unconstitutionality of the plan; called it a monopoly; such a one as contravenes the spirit of the Constitution; a monopoly of a very extraordinary nature; a monopoly of the public moneys for the benefit of the corporation to be created.
He then read several passages from the Federalist, which he said were directly contrary. to the assumption of the power proposed by the bill.Monopoly of a very extraordinary nature indeed! They stil have it and they will never give it away by choice. Private crypto-currency might be the only hope we (people) have… Stone, of Maryland, came to the support of Jackson:
Stone, of Maryland, came to the support of Jackson:
I say there is no necessity, there is no occasion, for this Bank. The states will institute banks which will answer every purpose. a distrust of the states is shown in every movement of Congress.
By this bill, a few stockholders may institute banks in particular states, to their aggrandizement and the oppression of others.
This bank will swallow up the state banks; it will raise in this country a moneyed interest at the devotion of the government; it may bribe both states and individuals.…
He said it is one of those sly and subtle movements which marched silently to its object; the vices of it were at first not palpable or obvious; but when the people saw a distinction of banks created — when they viewed with astonishment the train of wealth which followed individuals, whose sudden exaltation surprised even the pos- sessors—they would inquire how all this came about.
But, Gentlemen will say, upon emergencies the Bank will loan money [to the government].
We differ in opinion. I think when we want it most the bank will be most unable and unwilling to lend.
If we are in prosperity, we can borrow money almost anywhere; but in adversity, stockholders will avoid us with as much caution as any other capitalists.”
“Constitutionality grows out of expediency.”
Although some of the Federalists in the House deemed the question of constitutionality worthy of extended discussion, it appears that Smith, of South Carolina, was inclined to dismiss it on the practical ground that “constitutionality grows out of expediency.”
In fact, as long as they were in power the Federalists had no doubt about the “ constitutionality ” of their own measures.
The great Marshall was under no delusion about constitutional law as an exact science, and in a sentence which anticipated Mr. Justice Holmes’ famous dictum that subtle intuitions rather than articulate major premises decide concrete cases, he spoke of the controversy over the constitutionality of the Bank as follows:
he judgment is so much influenced by the wishes, the affections, and the general theories of those by whom any political proposition is decided that a contrariety of opinion on this great constitutional question ought to excite no surprise.”Hamilton, naturally enough, thought the Bank constitutional. Jefferson and Randolph took a stand against the constitutionality of the Bank.
The question of constitutionality which was so ardently discussed by members of Congress was no less earnestly considered by members of Washington’s cabinet, before whom it was laid for consideration and report.
Hamilton, naturally enough, thought the Bank constitutional and wrote his opinion in a document which has justly passed into history as one of the greatest of American state papers.
Jefferson and Randolph, both from Virginia and both later to be identified with the great agrarian party that was destined to sweep the Federalists out of power, took a firm stand against the constitutionality of the Bank.
The Secretary of State elaborated his views in a state paper which is fairly comparable in acumen and skilful arrangement to the brief which emanated from the Treasury. As Marshall remarked, the “wishes, the affections, and the general theories” of the contestants in logic had a “decided’ influence on their judgment.
Washington was convinced by Hamilton with whose economic policy he agreed in the main, and on February 25, 1791, he signed the act to incorporate the subscribers to the Bank of the United States. The last of Hamilton’s great fiscal devices was completed.
Jefferson. The great outlines of Hamilton’s system had been carried “by the votes of the very persons who, having swallowed his bait, were laying themselves out to profit by his plans”
In 1792, Jefferson became more specific. He declared that the great outlines of Hamilton’s system had been carried
“by the votes of the very persons who, having swallowed his bait, were laying themselves out to profit by his plans” ; and he added that “’had these persons withdrawn, as those interested in a question ever should, the vote of the disinterested majority was clearly the reverse of what they made it. These were no longer the votes then of the representatives of the people … and it was impossible to consider their decisions, which had nothing in view but to enrich themselves, as the measures of the fair majority, which ought always to be respected.”Jefferson’s systematic account of the affair: Hamilton’s financial system had two objects
Long afterward, in the calm evening of his life, Jefferson reduced to order some notes which he had made at the time on the funding process and prepared a systematic account of the affair and his part in them. This account runs as follows:
Hamilton’s financial system had two objects;
Ist, as a puzzle, to exclude popular understanding and inquiry;
2d, as a machine for the corruption of the legislature ;
for he avowed the opinion, that man could be governed by one of two motives only, force or interest; force, he observed, in this country, was out of the question, and the interests, therefore, of the members must be laid hold of, to keep the legislative in unison with the executive.
And with grief and shame it must be acknowledged that his machine was not without effect; that even in this, the birth of our government, some members were found sordid enough to bend their duty to their interests, and to look after personal rather than public good.
Tt is well known that during the war the greatest difficulty we encountered was the want of money or means to pay our soldiers who fought, or our farmers, manufacturers, and merchants who furnished the necessary supplies of food and clothing for them.
After the expedient of paper money had exhausted itself, certificates of debt were given to individual creditors, with assurance of payment so soon as the United States should be able.
But the distresses of these people often obliged them to part with these for the half, the fifth, or even a tenth of their value; and speculators had made a trade of cozening them from the holders by the most fraudulent practices, and persuasions that they never would be paid.
In the bill for funding and paying these, Hamilton made no difference between the original holders and the fraudulent purchasers of this paper.
Great and just repugnance arose at putting these two classes of creditors on the same footing, and great exertions were used to pay the former the full value, and to the latter, the price only which they had paid, with interest.
But this would have prevented the game which was to be played, and for which the minds of greedy members were already tutored and prepared.
When the trial of strength on these several efforts had indicated the form in which the bill would finally pass, this being known within doors sooner than without, and especially, than to those who were in distant parts of the union, the base scramble began.
Couriers and relay horses by land, and swift sailing pilot boats by sea, were flying in all directions. Active partners and agents were associated and employed in every state, town, and country neighborhood, and this paper was bought up at five shillings, and even as low as two shillings in the pound, before the holder knew that Congress had already provided for its redemption at par.
This game was over,! and another was on the carpet at the moment of my arrival; and to this I was most ignorantly and innocently made to hold the candle. This fiscal manceuyre is well known by the name of the assumption:
Independently of the debts of Congress, the States had during the War contracted separate and heavy debts; and Massachusetts particularly, in an absurd attempt, absurdly conducted, on the British post of Penobscott; and the more debt Hamilton could rake up, the more plunder for his mercenaries.
This money, whether wisely or foolishly spent, was pretended to have been spent for general purposes, and ought, therefore, to be paid from the general purse.
But it was objected, that nobody knew what these debts were, what their amount or what their proofs.
No matter, we will guess them to be twenty millions.
But of these twenty millions, we do not know how much should be reimbursed to one state, or how much to another. No matter; we will guess.
And so another scramble was set on foot among the several states and some got much, some little, some nothing.
But the main object was obtained, the phalanx of the Treasury was reinforced by additional recruits.
This measure produced the most bitter and angry contest ever known in Congress, before or since the union of the states. I arrived in the midst of it. But a stranger to the ground, a stranger to the actors in it, so long absent as to have lost all familiarity with the subject, and as yet unaware of its object, I took no concern init.
The great and trying question, however, was lost in the House of Representatives. So high were the feuds excited by this subject, that on its rejection business was suspended.
Congress met and adjourned from day to day without doing anything, the parties being too much out of temper to do business together.
The eastern members particularly, who, with Smith from South Carolina, were the principal gamblers in these scenes, threatened a secession and adissolution.
Hamilton was in despair. As I was going to the President’s one day, I met him in the street. He walked me backwards and forwards before the President’s door for half an hour. He painted pathetically the temper into which the legislature had been wrought; the disgust of those who were called the creditor states; the danger of the secession of their members, and the separation of the states.
He observed that the members of the administration ought to act in concert; that although this question was not of my department, yet a common duty should make it a common concern; that the President was the centre on which all administrative questions ultimately rested, and that all of us should rally around him, and support, with joint efforts, measures approved by him; and that the question having been lost by a small majority only, it was probable that an appeal from me to the judgment and discretion of some of my friends, might effect a change in the vote, and the machine of government, now suspended, might be again set into motion.
I told him that I was really a stranger to the whole subject; that not having yet informed myself of the system of finances adopted, I knew not how far this was a necessary sequence; that undoubtedly, if its rejection endangered a dissolution of our Union at this incipient stage, I should deem that the most unfortunate of all consequences, to avert which all partial and temporary evils should be yielded.
I proposed to him, however, to dine with me the next day, and I would invite another friend or two, bring them into conference together, and I thought it impossible that reasonable men, consulting together coolly, could fail, by some mutual sacrifices of opinion, to form a compromise which was to save the Union.
The discussion took place. I could take no part in it but an exhortatory one, because I was a stranger to the circumstances which should govern it.
But it was finally agreed that whatever importance had been attached to the rejection of this proposition, the preservation of the Union and of concord among the states was more important, and that therefore it would be better that the vote of rejection should be rescinded, to effect which, some members should change their votes.
But it was observed that this pill would be particularly bitter to the southern states, and that some concomitant measure should be adopted to sweeten it a little to them.
There had been before propositions to fix the seat of government either at Philadelphia or at Georgetown on the Potomac; and it was thought that by giving it to Philadelphia for ten years and to Georgetown permanently after-wards, this might, as an anodyne, calm in some degree the ferment which might be excited by the other measure alone. So two of the Potomac members (White and Lee, but White with a revulsion of stomach almost convulsive) agreed to change their votes, and Hamilton undertook to carry the other point.
In doing this, the influence he had established over the eastern members, with the agency of Robert Morris with those of the middle states, effected his side of the engagement; and so the Assumption was passed, and twenty millions of stock divided among favored states and thrown in as a pabulum to the stock-jobbing herd.
This added to the number of votaries to the Treasury, and made its chief the master of every vote in the legislature, which might give to the government the direction suited to his political views.
TI know well, and so must be understood, that nothing like a majority in Congress had yielded to this corruption. Far from it.
But a division, not very unequal, had already taken place in the honest part of that body, between the parties styled republican and federal.
The latter being monarchists in principle, adhered to Hamilton of course, as their leader in that principle, and this mercenary phalanx added to them, insured him always a majority in both Houses: so that the whole action of the legislature was now under the direction of the Treasury. Still the machine was not complete.
Still the machine was not complete. The effect of the funding system, and of the Assumption, would be temporary; it would be lost with the loss of the individual members whom it has enriched, and some engine of influence more permanent must be contrived, while these myrmidons were yet in place to carry it through all opposition.
This engine was the Bank of the United States.
All that history is known, so I shall say nothing aboutit. While the government remained at Philadelphia, a selection of members of both houses were constantly kept as directors who, on every question interesting to that institution, or to the views of the federal head, voted at the will of that head; and, together with the stock-holding members, could always make the federal vote that of the majority.
By this combination, legislative expositions were given to the Constitution, and all the administraive laws were shaped on the model of myaene and so passed.”
Jefferson was at great pains to impress his view [about Hamilton’s plan] upon the President
Although this full account of the affair was not written until long after the events related, it must not be thought that Jefferson kept his opinion concerning the methods of the funding group to himself during the transaction. On the contrary he was at great pains to impress his view upon the President.
I said [to Washington], wrote Jefferson, in 1792, “that the two great complaints were, that the national debt was unnecessarily increased, and that it had furnished the means of corrupting both branches of the legislature;
that he must know and everybody knew, there was a considerable squadron in both, whose votes were devoted to the paper and stock jobbing interest, that the names of a weighty number were known, and several others suspected on good grounds.
That on examining the votes of these men, they would be found uniformly for every Treasury measure and that as most of these measures had been carried by small majorities, they were carried by these very votes.
That, therefore, it was a cause of just uneasiness when we saw a legislature legislating for their own interests, in opposition of those of the people.
He said not a word on the corruption of the legislature, but took up the other point, defended the Assumption, and argued that it had not increased the debt, for that all of it was honest debt.”
<.blockquote>
Corruption of the government from day one! It could never be any other way, though. The “lure of publich plunder” is too great… At a later date, Jefferson again brought up the matter in a private conversation with President Washington and of this © conference, he wrote:
I confirmed him [Washington] in the fact of the great discontents to the South, that they were grounded on seeing that their judgments and interests were sacrificed to those of the Eastern states on every occn. and their belief that it was the effect of a corrupt squadron of voters in Congress at the command of the Treasury, and they see that if the votes of those members who had an in- terest distinct from and contrary to the general interest of their constts they should have been, the laws would have been the reverse of what they are in all the great questions.’The list of Senators who vote FOR the funding (assumption) bill who were security holders
The funding bill with the assumption amendment was carried in the Senate on July 21, where the Treasury had its most dependable vote.
Three days later the motion of Jackson, of Georgia, to disagree with the Senate amendment, was defeated by a vote of thirty-two to twentynine.
It is this vote which is analyzed below.
Yeas:
- Langdon, New Hampshire
- Strong and Dalton, Massachusetts
- Ellsworth and Johnson, Connecticut
- King and Schuyler, New York
- Paterson and Elmer, New Jersey
- Read, Delaware
- Carroll, Maryland
- Butler and Izard, Carolina [14]
Nays:
- Wingate, New Hampshire
- Foster and Stanton, Rhode Island
- Bassett, Delaware
- Maclay, Pennsylvania
- Henry, Maryland
- Johnston and Hawkins, North Carolina
- Lee and Walker, Virginia
- Few and Gunn, Georgia [12]
Of the fourteen Senators who voted in favor of the funding bill, with the assumption amendment, on July 21, 1790, at least ten, Langdon, Strong, Ellsworth, Johnson, King, Schuyler, Read, Morris, Charles Carroll, and Izard, appear upon the Treasury records as holders of public securities at the time of the funding process.
To this list Pierce Butler doubtless should be added. Those not found on the records are Dalton, of Massachusetts, and Elmer and Paterson, of New Jersey.
Of the twelve who voted against the funding bill on July 21, 1790, at least five, Maclay, Bassett, Johnston, Few, and R. H. Lee, were holders of public debt, but the holdings of Maclay, Bassett, and Few were trivial in amount. The names of seven Senators who voted against funding, Wingate, Stanton, Foster, Henry, Hawkins, Walker, and Gunn, were not found on the Treasury records.
A table built upon this data would run as follows:
Security holders:
- For the funding bill - 11
- Against the bill - 5
- Total - 16
Non-holders:
- For the funding bill - 3
- Against the bill - 7
- Total - 10
A study of the Treasury records shows that the Senators who held securities and voted for the funding bill were, with one or two exceptions, among the large holders of public paper, and that the Senators of the same class who voted against the bill (with the possible exception of Johnston of North Carolina) were among the minor holders.
The one conclusion which is indisputable, however, is that almost one-half of the members of the first House were security holders
This may account partially for the defeat which overwhelmed Madison’s proposal to discriminate between original holders and the speculative purchasers — thirty-six to thirteen.
This certainly justifies Jefferson’s assertion that had those actually interested in the outcome of the funding process withdrawn from voting on Hamilton’s proposals not a single one of them would have been carried.
But it should be observed that had the security holders abstained from voting on’ assumption, the decision of the matter would have been left to what Jefferson called “the agricultural representation,” speaking for the taxpayers on whom the burden of taxation for the support of public credit principally fell.
The great financial centres would have been left without any representation. Whether this would have been intrusting the delicate matter of public credit to purely ‘‘disinterested”’ representatives may be left to the imagination of the reader.
By way of conclusion, one is moved to conjecture what kind of government could have been established under the Constitution, if
By way of conclusion, one is moved to conjecture what kind of government could have been established under the Constitution, if there had been excluded from voting on the great fiscal measures all “interested” representatives, and the decision of such momentous issues had been left to those highly etherealized persons who “cherished the people” — and nothing more.
Taylor pamphlets. The Bank
In the operations of the Bank, Taylor saw arising a conflict between capitalism and labor.
A portion of the rich class of citizens are the proprietors of the device, whilst labour supports it. An annuity to a great amount is suddenly conjured up by law, which is received exclusively by the rich, that is the aristocracy.
Will it not make them richer? It is paid out of labour, and labour in all countries falls on the poor. Will it not make this class poorer?…
Banking in its best view is only a fraud whereby labour suffers the imposition of paying an interest upon the circulating medium; whereas if specie only were circulated, the medium would, in passing among the rich, often lie in the pockets of the aristocracy without gaining an interest. But the aristocracy, as cunning as rapacious, have contrived this device to inflict upon labour a tax, constantly working for their emolument….
Labour is deprived of its hard earned fruits. A portion of these is gotten from it and bestowed upon ease and affluence. The loss is the same, whether a daring robber extorts your property with his pistol at your breast or whether a midnight thief secretly filches it away.”
By the robbery of labor an aristocracy is being erected in the United States. It is true, the Constitution forbids titles of nobility, but a “money-ocracy”’ is far more to be feared than any “shadow titles.”
Which is most to be dreaded; titles without wealth, or exorbitant wealth with- out titles?
Have the words prince, lord, highness, or protector, a magical influence upon our minds, or can they lay a spell upon our exertions?… Whoare most to be dreaded, the nominal or real lords of America?
most to be dreaded, the nominal or real lords of America? It is evident that exorbitant wealth constitutes the substance and danger of aristocracy. Money in a state of civilization is power. If we execrate the shadow, what epithet is too hard for an administration, which is labouring to introduce the substance…
A democratic republic is endangered by an immense disproportion in wealth. In a state of nature, enormous strength possessed by one or several individuals would constitute a monarchy or an aristocracy — in a state of civilization similar consequences will result from enormous wealth….
The acquisitions of honest industry can seldom become dangerous to public or private happiness whereas the accumulations of fraud and violence constantly diminish both.…Therefore, said Taylor, the federal Constitution was flagrantly violated by the Federalists
Therefore, said Taylor, the federal Constitution was flagrantly violated by the Federalists. From the system flowed “the following infractions of the clearest constitutional principles”:
Members of Congress may vote for the erection of a gainful project and be the recezers of the gain.
They may impose a tax on the community or a part of it, and instead of sharing in the burthen share in the plunder.
The higher and more unnecessary the taxes and loans are, the more public money will be deposited in the bank and the greater will be the profit of the bank-members of Congress, who nevertheless vote for taxes and loans.
A member of Congress, debauched by a profitable banking interest ceases to be a citizen of the Union or an inhabitant of the state which chooses him, as to the purposes of the Constitution. He becomes a citizen and inhabitant of Carpenters Hall….
The Constitution aims at a real representation of the states in proportion to numbers, making no provision for members from corporations; and yet if the members of » this corporation keep their seats in Congress, it is moderate to state that it will be better represented than any state….
…. It would be better to allow the bank, members fin Congress] than to permit it to plunder the states of their several quotas.
It. was evidently designed, that the senate as judges of impeachments should be constitutionally preserved in a state of impartiality. Impeachments originate in the house of representatives, and the crimes to be restrained. by this process will mostly be comprised in a misapplication of public:money. But if those who are to inquire into such misapplications, to impeach, and to decide upon impeachments, may in consequence of banking and paper systems, be gainers by the misapplications, it is obvious that the check provided by this article of the Constitution upon a species of criminality, so dangerous as to have attracted the particular attention of a general convention is entirely defeated. If accomplices are to set enquiries on foot — to accuse and to decide, no prophetical spirit is necessary to foresee the decision….Bank directors, stock holders and a paper interest may be more likely by their judgments to disqualify honest patriots from holding ‘any office of honour, trust, or profit under the United States’ who shall obstruct peculations from public labour in any shape, than to remedy frauds favouring a moneyed interest in general, and accruing to their own emolument in particular.”
Callender’s Key to the Six Per Cent Cabinet, published in 1798
Key to the Six Per Cent Cabinet, published in 1798, Callender fell upon the Federalist party, charging its leaders with having corrupted the country and cloaked their proceedings in ostentatious patriotism and unctuous piety. He carried the argument to its extreme length and declared the funding process to be nothing but a scheme for enriching those who were, as members of Congress, actually creating the system.
In recom- mending an excise on spirits Hamilton seems to have been anxious, for many reasons, to avoid a direct tax on lands
In recommending an excise on spirits Hamilton seems to have been anxious, for many reasons, to avoid a direct tax on lands.
It has become an acknowledged truth,” he said, ’’that, in the operation of those [excise] taxes, every species of capital and industry contribute their proportion to the revenue, and consequently, that, as far as they can be made substitutes for taxes on lands, they serve to exempt them from an un-— due share of the public burden. An undue share of the public burden in the form of taxes on property (robbery) was to come later… As soon as the excise measure was taken up in the House, Jackson, of Georgia, the leader of the opposition to the funding bills, renewed his assaults on the fiscal system and bitterly attacked the excise as an auxiliary to it.
He set out to show that the tax was odious, unequal, unpopular, and oppressive…
Jackson then sketched the history of excises in England:
He said that they had always been considered by the people of that country as an odious tax, from the time of Oliver Cromwell to the present day; even Blackstone, a high prerogative lawyer, had reprobated them.
He said, he hoped this country would take warning by the experience of the people of Great Britain, and not sacrifice their liberties by wantonly contracting debts which would render it necessary to burthen the people by such taxes as would swallow up their privileges; … and by an indication of several particulars he showed its unequal operation in the southern states.
It will deprive the mass of the people of almost the only luxury they enjoy, that of distilled spirits.” Parker, of Virginia, warmly seconded Jackson and warned his colleagues that the excise tax would ’“convulse the government.”In spite of the opposition from the Southern delegates particularly, the bill passed the House on January 25, by a large majority
It appeared to be necessary to sustain the public credit, for without the additional revenue the interest on the debt could not be paid.
Same old story… On September 1, 1792, Hamilton wrote to Washington that it was time to assume a different tone
On September 1, 1792, Hamilton wrote to Washington that the continued opposition to the law in the western survey district of that state gave the affair a more serious aspect than it had hitherto worn and called for vigorous and decisive measures on the part of the government.
He declared that enough moderation had been shown and that it was time to assume a different tone, for otherwise the well-disposed part of the community would think the executive wanting in decision and vigor. From that time forward the opposition grew in organization and determination.
The administration shortly afterward decided upon the sharp prosecution of the distillers who refused to register and pay the tax.
Indictments were found against a considerable number and an attempt of the United States marshal to serve the warrants in the summer of 1794 led to an armed resistance in which several were killed and wounded.
“The State is fundamentally an anti-social institution, fundamentally criminal. The idea that the State originated to serve any kind of social purpose is completely unhistorical. It originated in conquest and confiscation - that is to say, in crime” (The Criminality of The State, Albert Nock)
For more, see books tagged: Conquest and subjugation - the genesis of the StateThe militia of the western counties was sum- moned by the revolutionary leaders and threats were made to the effect that they would not only defend them- selves but also establish an independent state.
At first, the insurrectionists confined their operations to what they called ’legal measures designed to obstruct the operation of the law,” that is, to meetings, resolutions, and protests; and their leaders disclaimed any intention of resorting to violence. In the spirit of the American Revolution, they proposed non-intercourse and passive resistance.
Who provoked open violence and how far the resistance to the law would have gone if the armed forces of the fed- eral government had not been called out have always been matters of controversy. ..
Adams’ system of pliticla science
Adams’ system of political science may be summed up in the following manner :
Society is divided into contending classes, of which the most important and striking are the gentlemen and common people, or to speak in economic terms, the rich and the poor.
The passion for the acquisition of property or the augmentation of already acquired property is so great as to override considerations arising out of religious or moral sentiments.
Inevitably the rich will labor to increase their riches at the expense of the poor, and if unchecked, will probably, on account of their superior ingenuity and wisdom, absorb nearly all of the wealth of the country.
Out of the contest for economic goods arise great political contests in society, particularly between the rich and the poor. Such contests have ended for the most part in the poor committing themselves to an absolute monarch to secure protection against the predatory rich.
The other possible outcome of the contest is the spoliation of the rich by the poor, and this is what happens in a simple democracy where the majority, unchecked by other than moral considerations, is permitted to rule.
Liberty, that is, the preservation of the right of the poor against further spoliation and the rich against attacks by communistic levellers, depends entirely upon the maintenance of order and the status quo.
Moral and religious considerations or mere theoretical notions about freedom, however widely entertained, are not sufficient to maintain liberty against the assaults of the contending factions.
Therefore, the constitution must embody in it a repre. sentation of the rich and poor as distinct orders; and a terttum quid in the form of an independent executive holding for as long a term as possible should be introduced as a check on both the contending classes. Finally, an inde. pendent judiciary should be established as a check on all the other branches and subject to removal only by the coéperation of the representatives of the two contending classes, from whose ambitions dangerous attacks on liberty and property may be expected.
Important ground of difference between Adams and Hamilton in matters of public policy
Such being the practical views of Adams, it is not difficult to discover an important ground of difference between him and Hamilton in matters of public policy.
The former feared the rich almost as much as the poor, believing that they were as prone to use the government in spoliation as the latter.
Hamilton does not seem to have regarded the rich as a danger to the state. On the contrary, he viewed the rich and well born as the safest depositaries of public power, although he advocated the admission of the propertyless to a speaking voice in the government.
Adams did not view the conflict as a struggle between personalty and real property owners but between the rich and poor, although in his classification most of the farmers and petty tradesmen were placed in the latter category.
Hamilton was essentially the spokesman of the commercial and financial classes.
Adams had the courage of his convictions and wrote out with great labor and pains his disbelief in simple direct popular rule
In an age when most of the political writings exalted popular sovereignty and flattered the people, Adams had the courage of his convictions and wrote out with great labor and pains his disbelief in simple direct popular rule. What many other statesmen before and since have said privately, Adams published in a laboriously systematic form.
Only one other man of the period expressed similar political doctrines with equal clarity, and that was the man whom Jefferson selected to succeed him in the presidency —James Madison, author of Number Ten of The Federalist, — but Madison announced his views anonymously.
John Taylor, of Caroline county, Virginia, who may be called the philosopher and statesman of agrarianism
During his legislative career, he wrote powerful Anti-Federalist tracts which must have seriously disconcerted the opposition, and during his later years he carefully worked into a somewhat coherent philosophy the preconceptions upon which he had based his program of practical action.
This system of politics, embraced in a weighty volume of 636 pages, was published at Fredericksburg in 1814. It bears the title of An Inquiry into the Principles and Policy of the Government of the United States.
Taylor holds that the older aristocracies, clergy and feudal lords, were begotten of fear of the gods and military conquest, in a word, by exploitation, not by thrift and savings
At the outset of his plea for a republic based upon substantial equality, Taylor is compelled to face Adams’ fundamental proposition that such a system of government is impossible because the sources of inequality “are founded in the constitution of nature,’ and cannot be eradicated, no matter what institutional devices are invented.
The Virginia author does not: shrink from the task of meeting this formidable dogma which looks like an axiom in mathematics. He simply denies its validity.
He will not admit that the great differences in wealth, the abysmal division into rich and poor, are historically the product of the industry of the few and the sloth of the many.
On the contrary, he holds that the older aristocracies, clergy and feudal lords, were begotten of fear of the gods and military conquest [p. 27], in a word, by exploitation, not by thrift and savings.
Oppenheimer later showed that this was, in fact, the origin of the State. The State can have originated in one and one way only, through conquest and economic exploitation. See The State by Oppenheimer. Feudal institutions built upon this class foundation are therefore not schemes of government devised to protect the accumulations springing from the exercise of primitive virtues, but mere juristic justifications of a status quo, originally established by craft and material forces.
New aristocracy, built upon modern fiscal and banking institutions
… Adams overlooks the real sources of danger to American republicanism, namely, a capitalistic aristocracy of “paper and patronage, more numerous, more burdensome, unexposed to public jealousy by the badge of title, and not too honorable or high spirited to use and serve executive power, for the sake of pillaging the people [p. 15].”
This new aristocracy, built upon modern fiscal and banking institutions, has abandoned
reliance on the monopoly of virtue, renown and abilities, and resorted wholly to a monopoly of wealth, by the system of paper and patronage. Modern taxes and frauds to collect money, and not ancient authors, will therefore afford the best evidence of its present character.Paper and patronage are an infallible source of oppression and hatred in society
Paper and patronage are an infallible source of oppression and hatred in society.
Human conception is unable to nvent a scheme, more capable of afflicting mankind with these evils, than that of paper and patronage.
It divides a nation into two groups, creditors and debtors; the first supplying its want of physical strength, by alliances with fleets and armies, and practising the most unblushing corruption. A consciousness of inflicting or suffering injuries, fills each with malignity toward the other….
A legislature, in a nation where the system of paper and patronage prevails, will be governed by that interest, and legislate in its favour.For example, look at the recent regulations concerning cryptocurrency. There is absolutely no doubt whose interest cryptocurrency regulations favour. They favour interests, Taylor was right, of “paper aristocracy”, not of People. It is impossible to do this without legislating to the injury of the other interest, that is, the great mass of the nation. Such a legislature will create unnecessary offices, that themselves or their relations may be endowed with them.
They will lavish the revenue to enrich themselves.
They will borrow for the nation, that they may lend. They will offer lenders great profits that they may share in them
It is impossible to place any effective check upon this aristocracy of paper…
But if an order of paper and patronage is erected, (remember that nothing makes an order but one interest,) in what manner is its power to be checked by a balance of property? The wealth of paper and patronage is daily growing, wherefore t cannot be measured or limited; it is therefore impossible to balance it; and yet without this balance of property, the power which clings to wealth, will destroy liberty, even in the opinion of the English theorists.
The aristocracy of paper is a burden upon the producers
The aristocracy of paper is a burden upon the producers.
Like the Physiocrats, Taylor traces the source of wealth to the products or profits of the land, and by an ingenious method he endeavors to show that a paper aristocracy subsisting upon the profits of the land is a no less burdensome aristocracy than one of rank and title.
By taxation, the profit arising from land may be apportioned between the possession and the system of paper and patronage; or it may be wholly transferred to the system.
If then an order, such as the late nobility and clergy of France, by an income consisting of the profit of one-third of the lands of France, attracted a degree of power oppressive to the nation; does it not evidently follow, whenever the system of paper and patronage, has acquired one-third of the profit produced by all the lands of a nation, that it will also acquire the oppressive degree of power, interwoven with that degree of. wealth.A paper aristocracy is more inhuman and more implacable in the pursuit of its interest than an aristocracy of conquest
A paper aristocracy is more inhuman and more implacable in the pursuit of its interest than an aristocracy of conquest.
A nation exposed to a paroxysm of conquering rage, has infinitely the advantage of one subjected to this aristocratical system.
One is local and temporary; the other is spread by law and is perpetual.
One is an open robber, who warns you to defend yourself; the other a sly thief, who empties your pockets under a pretense of paying your debts.
One is a pestilence, which will end of itself; the other a climate deadly to liberty.
After an invasion, suspended rights may be resumed, ruined cities rebuilt, and past cruelties for- gotten; but in the oppressions of an aristocracy of paper and patronage, there can be no respite; so long as there is anything to get, it cannot be glutted with wealth;
Think of the abusrdity of “unrealized gains” tax!… And yet, some politicians (“aristocrats of paper”) are seriously considering it! “As long as there is anythign to get”… so long as there is anything to fear, it cannot be glutted with power; other tyrants die; this is immortal.
A conqueror may have clemency; he may be generous; at least he is vain, and may be softened by flattery. But a system founded in evil moral qualities, is insensible to human virtues and passions, incapable of remorse, guided constantly by the principles which created it, and acts by the iron instruments, law, armies and tax gatherers.
With what prospect of success, reader, could you address the clemency, generosity, or vanity of the system of paper and patronage?
Of course the paper system makes fine pretensions to national usefulness
Of course the paper system makes fine pretensions to national usefulness:
It promises to diminish, and accumulates; it promises to protect, and invades.
All political oppressors deceive, in order to succeed. When did an aristocracy avow its purpose?
Sincerity demanded of that of the third age [the paper aristocracy] the following confession:
’Our purpose is to settle wealth and power upon a minority. It will be accomplished by national debt, paper corporations, and offices, civil and military. These will condense king, lords and commons, a monied faction and an armed faction, in one interest: This interest must subsist. upon another, or perish.
The other interest is national, to govern and pilfer which, is our object ;, and its accomplishment consists in getting the utmost a nation can pay.
Such a state of success can only be maintained by armies, to be paid by the nation and commanded by this minority ; by corrupting talents and courage; by terrifying timidity; by inflicting penalties on the weak and friendless, and by distracting the majority by deceitful professions. That with which our project commences is invariably a promise to get a nation out of debt; but the invariable effect of it, is to plunge it irretrievably into debt’
As of Sep 2024, the US debt is over $35,000,000,000,000 and growing. Source: https://www.usdebtclock.org/ The methods of the paper or capitalist aristocracy are so subtle and so closely wrapped up in public policy that it is almost impossible to lay them bare
The methods of the paper or capitalist aristocracy are so subtle and so closely wrapped up in public policy that it is almost impossible to lay them bare. Moreover, it has its system of moral and philosophical defence which frightens off the investigator.
The difficulty of producing a correct opinion of the cause and consequences of the new born aristocracy of paper and patronage, surpasses the same difficulty in relation to the aristocracies of the first and second ages, as far as its superior importance.
The two last being substantially dead, their bodies may be cut up, the articulation of their bones exposed, and the convolution of their fibres unravelled;
but whenever the intricate structure of the system of paper and patronage is attempted to be dissected, we moderns surrender our intellects to yells uttered by the living monster, similar to those with which its predecessors astonished, deluded, and oppressed the world for three thousand years.
The aristocracy of superstition defended itself by exclaiming, the Gods! the temples! the sacred oracles! divine Vengeance! the Elysian fields! — and that of paper and patronage exclaims, national faith! sacred charters! disorganization! and security of property
So great is the spell cast over me intellect by the moral devices of the paper aristocracy that the credulous American public is thoroughly deceived by fine words.The devices of the old privileged order can be no longer used in the United States to keep the masses satisfied. But the sham of defences of the new order of of paper are treted seriously
The devices of the old privileged orders — titles, ribbons, splendors, pomp, honors, eternal and temporal penalties — have been penetrated and exploded; they can be no longer used in the United States to keep the masses satisfied. But the sham defences of the new order of paper are treated seriously:
We moderns; we enlightened Americans; we who have abolished hierarchy and title; and we who are submitting to be taxed and enslaved by patronage and paper, without being deluded or terrified by the promise of heaven, the denunciation of hell, the penalties of the law, the brilliancy and generosity of nobility, or the pageantry and charity of superstition.
A spell is put upon our understandings by the words ‘public faith and national credit,’ which fascinates us into an opinion that fraud, corruption and oppression constitute national credit; and debt and slavery, public faithOn the eve of the Revolution, he Americans were quick enough to see that they were being exploited by Great Britain through taxes. At that time they scornfully rejected Dr. Johnson’s celebrated argument that taxation was no slavery. Yet, they are not keen enough to discover exploitation by a class at home
This is all very curious indeed, for on the eve of the Revolution, the Americans were quick enough to see that they were being exploited by Great Britain through taxes and other devices.
At that time they scornfully rejected Dr. Johnson’s celebrated argument that taxation was no slavery.
They were able to see that they were being robbed when they were taxed by another nation, but now they are not keen enough to discover exploitation by a class at home.
Yet,it is strange, that it is so difficult to distinguish between honest and fraudulent taxes, imposed by a minor interest on the public interest, and so easy to discern the real design of taxes imposed by one nation upon another.
In the latter case, monopoly is clearly understood to be an indirect mode of taxation.
The United States know that the monopoly of their commerce by the English, was a tribute; but they refused to know, that the monopoly of a circulating medium by banking is also a tribute.
Useless offices, established here by the English government, were clearly perceived to be a tribute; but useless offices established by our own government are denied to be so.
Pretexts for taxation invented by England were detected by dullness herself; but pretexts invented at home seem to deceive the keenest penetration.…
Dr. Johnson’s maxim could never convince us, that taxation by banking, funding systems, protecting duties or patronage was no slavery, if the profits arising from such institutions were received by English capitalists: does the substitution of a different receiver [i.e., American capitalists] alter the case?
Powerful as the system of paper and patronage is and insidious and dangerous as are its methods, the Constitution strangely enough makes no safeguards against it
The Americans devoted their effectual precautions to the obsolete modes of title and hierarchy, erected several barriers against the army mode, and utterly disregarded the mode of paper and patronage.
The army mode was thought so formidable, that military men are excluded from legislatures and limited to charters or commissions at will;
and the paper mode so harmless, that it is allowed to break the principle of keeping legislative, executive, and judicative powers separate and distinct, to infuse itself into all these departments, to unite them in one conspiracy, and to obtain charters or commissions for unrestricted terms, entrenched behind publick faith and out of the reach, it is said, of national will; which it may assail, wound, and destroy with impunity.
This jealousy of armies and confidence in paper system can only be justified, if the following argument of defence is correct:
‘‘Soldiers, admitted to the legislature, would legislate in favour of soldiers; but stock jobbers will not legislate in favour of stockjobbers’
Taylor then turns to an examination of the fiscal system which is the source of this new danger to republican institutions
Having thus disposed of Adams’ contention that an aristocracy of wealth inevitably springs up out of inequalities in human nature and set up the hypothesis that the paper or capitalistic aristocracy of the United States is founded on exploitation fostered by the policy of the government, Taylor then turns to an examination of the fiscal system which is the source of this new danger to republican institutions.
Taylor’s doctrines of political economy may be summarized in a preliminary fashion as follows:
Broadly speaking, these doctrines may be summarized in a preliminary fashion as follows:
Funded debts, banks authorized to issue paper, and protective tariffs are capitalistic devices for wringing money out of the producers of real wealth — commodities; in fact Taylor sometimes speaks of “the paper stock capitalists.”
Commerce, if let alone, would perform a useful social function of exchange and would not be guilty of exploitation if not involved with paper stock capitalism.
The paper stock group thrives as a parasite upon the landed class particularly; it concentrates in cities; it draws to it the best brains of the country; and it enjoys a power altogether out of proportion to its numerical strength.
The landed class being numerous, greatly divided through the minute division of landed property, and without many of the advantages of education enjoyed by the capitalist class in the towns, is likely to be overwhelmed by the latter in contests for power.
This class division is the source of party divisions.
The landed interest is the only true basis of democracy — a defence against communism on the one hand and capitalistic exploitation on the other.
The solution of the contradictions is the destruction of the ’paper aristocracy” by the destruction of its government privileges.
Funded debt, ppaper issuing banks, and protective tariffs are engines for exploiting the producers of wealth. It is a fraud
With regard to the funded debt, he comes to the conclusion that it is a fraud upon the present and future generations when considered from an economic point. of view alone. Anticipation in the form of debt, he says,
does not conjure into real existence, the commercial, agricultural or manufactured products of. futurity. It does not add to the corn or coin of the realm… .. It cannot bring up from futurity a gun, a soldier, a ration or a cartridge.
The present generation suffers every hardship and cost of war, although anticipation pretends that it is suffered by future generations.
And this delusion is used to involve nations in wars, which they would never commence, if they knew that all the expense would fall upon themselves.
This delusion is responsible for the deaths of tens of millions of people during the two world wars in the 20th century. It is twice suffered; by the living, who supply all the expenses of war; and by the unborn, who supply an equivalent sum, to take up certificates of the expenses paid by the living. No item of the expense of war is more transferable from the living to the unborn, than the blood it sheds…
A maniac, whose income in kind is just sufficient to support him, takes it into his head to give his bonds to sundry people annually for its value, whilst he is consuming it.
At the end of fourteen years his whole income is gone, though he has only expended its annual amount. Such is anticipation to nations.
But those who use it to deceive, plunder and enslave them, artfully liken it to the case of a man who buys an estate on credit, or who gives bonds to himself
ll paper systems are, in fact, indirect laws of confiscation
A funded debt is not only economically a fraud at the outset, but it continues to be an ingenious method whereby one class may take from another.
It only conjures the wealth of existing people out of some hands into others; and the credit with which to buy property of the living given by the certificate, constitutes all the solid wealth gained by anticipation.
It is a shrewdly contrived engine for confiscation.
All paper systems are, in fact, indirect laws of confiscation, used for the purposes which induced the French revolutionists to transfer more directly, a great mass of landed property from their antagonists to themselves.
These purposes simply were to enrich themselves and establish their power.
It was to enrich, and establish the power of the Whigs, at the expense of the Tories that Walpole used a paper system.
In America, a paper confiscation svstem, conferred wealth and power on a monarchical party at the expense of the Whigs.
In both countries, those who furnished the riches, lost much of their power and property; those who received them, gained it.
The French confiscations went boldly to their object, like a direct tax.
The English and American confiscations, secretly and circuitously effected their design, by the complication of a paper system; like an indirect tax.
Today, people are enslaved by both systems: by direct and indirect (hidden) taxes at the same time. Most don’t understand the mechanics of inderect tax. If they did, there would be a bloody revolution against the oppressive governments. One seized and transferred the land itself.
The others, mortgaged it; artfully leaving to the owner the appearance of property, whilst he is only a receiver of the profits for the benefit of the mortgage.
The only reason why the precious metals do not afford unlimited means for “pillage” is because their supply cannot be indefinitely extended by operations of the human will
Bank stock and currency, however, are not subject to the limits imposed by nature on money made of the precious metals.
The same is true for some cryptocurrencies. An artificial currency is subject to no such check, and possesses an unlimited power of enslaving nations, if slavery consists in binding a great number to labor for a few.
Employed, not for the useful purpose of exchanging, but for the fraudulent one of transferring property, currency is converted into a thief and a traitor, and begets, like an abuse of many other good things, misery instead of happiness.
Mankind soon discovered that money was easily converted into a medium for oppression as well as for commerce, and hence arose nearly as strong a dislike to heavy taxes in money as in kind; it being clearly seen that labor and property were transferred by money.
This plain truth, awakened the exertion of avarice and ambition, to deceive the vigilance of labor and industry; the objects of pillage.
The first intricacy with which they endeavored to hide their design was woven of indirect taxes travelling in mazes;
the second, of loaning obscured by the mist of futurity;
and third, of an artificial currency or banking, complicated by the crookedness of its operation, flattering to industry, and restrained by no natural check, as a medium of fraud and tyranny
“A medium of fraud and tyrany.” Precesely! In other words, the banking system is simply a “paper feudal system.”
In other words, the banking system is simply a “paper feudal system.” It represents no real wealth; it creates no real wealth. It is nothing more nor less than another scheme for beguiling the nation and taxing labor and land.The certainty and simplicity with which a bank inflicts and collects its profit, becomes still more visible. The operation is carried on between a nation and a banking corporation.
The nation, through the channel of its members, exchanges a thing called credit, reduced to the form of bonds or notes for the payment of money, with the corporation, giving a boot, profit or difference, of about eight per centum per annum, which the bank bond, note or credit, is arbitrarily made by law to be worth, beyond the national bond, note or credit.
This effect is produced by subjecting the members of the nation to the payment of a compound interest to the corporation on their bonds, notes or credit, and absolving the corporation from the payment of any interest to the members of the nation, on its bonds, notes or credit; and exhibits both the inevitability of the tax, and a mode of its collection.In short, the nation permits a private corporation, in return for a small payment, to coin its credit into notes and then borrows those notes at a high rate of interest, thus taxing itself for the benefit of a bank stock aristocracy.
It is not voluntary. By the help of law it creates a necessity for its own currency
But it may be objected that the bank levy is simply a tax on the voluntary borrower.
Should bread and water be placed in abundance, before a hungry and thirsty multitude, could their eating and drinking be fairly said to be merely voluntary?
Currency is the medium for exchanging necessaries. If gold and silver, the universal medium, are. legislated out of sight, all human wants unite to compel men to receive the tax collecting substitute. This is banking.
By the help of law it creates a necessity for its own currency; and this extreme hunger is misnamed volition.
The coin currency being expelled or drawn out of circulation, to an extent sufficient to create a necessity for some substitute, the power possessing the right of supplying and regulating that substitute, can inevitably so manage it, as to enrich itself by means of that necessity.
It can supply the needed currency upon the terms and in the quantities it pleases.
And if fluctuations in currency, produced and managed by chartered monopolies, can affect price or value, it follows that, through his income, his money, and his property, an individual is reached by the tax of this currency, though he never borrowed or used it.
Such sufferers do not exercise the least formality of volition
The bank stock scheme as “a machine for transferring property” is ‘more effectual than that made of hereditary or exclusive wisdom’
The bank stock scheme as “a machine for transferring property” is
more effectual than that made of hereditary or exclusive wisdom. Both machines have been invented; for this purpose.
The hereditary magnifies the defects incident to human government in its best form, to hide its own greater vices.
The credit machine, in strict imitation of this example, seizes. upon the errors of paper money, as reproaches against national credit; and hides under them its own greater aptitude to shrink from danger, and also its capacities for corrupting governments and plundering nations.
Of the bad features in the face of paper money, corporation credit makes two masks, one to hide its hideousness, the other to hide the benefits of national eredit.
If all the banks in the United States circulate fifty millions of paper dollars, five millions of real property will thereby be collected.
Are these great sums of wealth no property?
If they are property, to whom do they belong?
If they belong to anybody, can they be transferred by laws and charters, under a policy, which considers property as sacred?
Paper stock is no friend to free commerce
Inasmuch as commerce is generally in the hands of a group closely allied to the capitalistic circles, we might expect to find Taylor condemning that economic interest as roundly as the others; but he refuses to put the men of trade among the exploiters.
He admits that “commerce, monarchy, paper stock, legislative corruption, privileged orders, charters of exclusive commerce, and hierarchy exist together in England,” but he holds that this is an unnatural alliance, because there is no real affinity between paper stock and commerce.
The latter has a useful and productive function to perform, i.e., buying in the cheapest market and selling in the dearest, and monopolies and paper charters are its avowed enemies.
The very fact that England, with all her paper stock capital, is compelled to go to war for commercial advantages, Taylor thinks, is conclusive proof that paper stock is no friend to free commerce — perhaps the most unsuccessful piece of reasoning in which he indulges.
In spite of this enmity between commerce and artificial restraints of various kinds, Taylor is forced to admit that stocks, both national and commercial, are a goad to commercial activities, but he believes that a far better stimulant _ is to be found in “free and moderate government,” allowing trade to flow into natural channels where it can “buy cheap and sell dear.” The fact that commerce flourished so vigorously under the Articles of Confederation without the aid of paper capital is sufficient proof to him that no such aid is needed now. Commerce must, therefore, break with these unnatural alliances and return to “free” methods.
In other words, Taylor seems to have anticipated, in this respect, the Manchester school. Or perhaps it would be better to say that he had learned his lessons from Adam Smith so far as this branch of his political economy is concerned.
That the paper stock group is a parasite upon the landed class, Taylor has no doubts
He sketches the history of the rise of the capitalistic Whigs in England as an element deliberately imposed upon the landed gentry and adds:
A paper system followed the revolution produced by the present form of our general government, and operated upon the landed Whigs here exactly as it had done upon the landed Tories in England.
It taxes them, enriches a credit or paper faction; changes property; forms a party; and transforms its principles as in EnglandParticularly insidious is the power of the rere corporation endowed with special privileges by the government and always ready to bring sinister influences to bear in the legislature
On this point Taylor writes with great feeling. He had observed at first hand the course of politics during the first administration and had unearthed by some skilful investigation the actual participation of interested stockholders and speculators in the proceedings of Congress.
He is not speaking of an academic matter, therefore, when he says:
As all separate interests prefer themselves, and bend governments into subserviency to their designs; so one neither responsible, nor weakened by division, nor made up of distinct independent interests, by means of different departments and unconnected offices, will act with a degree of concert and force, for its own aggrandizement, which would be impracticable to the several governments in America. The banking power is therefore a stronger, as well as a richer, power than the civil. The holders of both will use the latter as an ally of the former; the two powers will unite in one, and all the checks invented to control the civil power will be silently lost in the illimitable influence of the stock power.
A power of regulating property is engendered of a capacity to enslave nations surpassing a power to regulate the press, as far as an influence over a whole nation, or great factions, exceeds one over a poor author
Fraudulent government
No form of civil government can be more fraudulent, expensive, and complicated than one which distributes wealth and consequently power by the act of the governmentitself
That’s the description of every modern government. Distribution of other people’s wealth is what they do the best. There are two modes of invading private property
There are two modes,” said Taylor, “of invading private property; the first, by which the poor plunder the rich, is sudden and violent; the second, by which the rich plunder the poor, slow and legal…
Whether the law shall gradually transfer the property of the many to the few, or insurrection shall rapidly divide the property of the few among the many, it is equally an invasion of private property, and equally contrary to our constitutions.
If equalizing and accumulating laws are the same in principle, it is inconceivable how the same mind should be able to detest the one, and approve the other. Integrity is compelled to reject both and spurning at docgtrines, calculated to incite the few to plunder the many, or the many to plunder the few, leaves every man under the strongest excitement to labor for his own and national prosperity
Taylor repudiates therefore the communistic principles of Godwin with the same zeal that he attacks the special interests
The very philosophy of communism, he traces to the exploitation of the producers of real wealth by fictitious interests.
To the indignation inspired by the fraudulent legal modes for acquiring wealth, mankind are indebted for the pernicious and impracticable idea of equalizing property by law.
This speculation has been considered by philosophers, in contrast with its opposite. It seemed to them more reasonable and just, that property should be made equal, than unequal, by law.
Destroy the alternative by assailing both its branches with the benefits arising from leaving property to be distributed by industry, and the argument would assume a new aspect.
It would be discovered, that arts and sciences, peace and plenty, have never been found disunited from metes and bounds.
Just how “labor” had “distributed” property in land Taylor does not attempt to explain.
Taylor’s system may be summed up in the following manner
The masses have always been exploited by ruling classes, royal, ecclesiastical, or feudal, which have been genuine economic castes sustaining their power by psychoglogical devices such as “loyalty to the throne and altar.”
Within recent times a new class, capitalistic in chargacter, has sprung up, based on exploitation through inflated public paper, bank stock, and a protective tariff, likewise with its psychological devices, “public faith, national integrity, and sacred credit.”
In the United States, this class was built up by Hamgilton’s fiscal system, the bank, and protective tariff, all of which are schemes designed to filch wealth from productive labor, particularly labor upon the land.
Thus was created a fundamental conflict between the capitalistic and agrarian interests which was the origin of parties in the United States.
Having no political principles, capitalism could fragternize with any party that promised protection, and in fact after the victory of the Republicans successfully ingtrenched itself in power under the new cover.
The only remedy is to follow the confiscatory examples of other classes and destroy special privilege without comgpensation.
The expenditures of the Federal government mounted upwards (dbuled form 1796 to 1800). New direct tax on houses, land, and slaves
Meanwhile the expenditures of the Federal government mounted upwards, giving new cause for complaint on the part of the “tax-burdened people.” They were in round numbers $5,800,000 in 1796, $6,000,000 in 1797, $7,600,000 in 1798, $9,300,000 in 1799, and $10,800,000 in 1800.
The national debt, instead of decreasing, was augmented by the extraordinary military expenses; and the war on the stock-jobbers. became more vociferous than ever.
It was not diminished when, by a law approved July 14, 1798, a direct tax was laid upon houses, lands, and slaves, to meet the increasing demands upon the federal revenue.
Although this law was made somewhat more palatable to the Repubglican members of Congress by placing a heavy progressive tax on houses in cities, it was not received with satisfaction by the Southern states, for in addition to the land tax, Congress laid a tax of fifty cents on every slave between the ages of twelve and fifty.
The Federalists then poured oil on the fire by passing in the same year the famous Alien and Sedition Acts
The Federalists then poured oil on the fire by passing in the same year the famous Alien and Sedition Acts. The first of these measures, directed against Frenchmen in the United States, authorized the President to expel from the country aliens whom he deemed dangerous to public peace and safety.
The second measure, approved on July 14, the same day as the direct tax law, was designed to facilitate the suppression of Republicans who attacked the adminisgtration in public print/
It made liable to fine and imprisongment any one who counselled or attempted rioting or insurgrection against the authority of the United States or who was guilty of issuing false, scandalous, or seditious writings against the government of the United States, the President, the Senate, or the House of Representatives. The federal courts began at once to enforce the Sedition Act with evident enthusiasm.
These rash measures no doubt alienated many Federalists, for even the reliable Marshall opposed both of them on grounds of law and expediency.
The Virginia and Kentucky legislatures protested against them in their famous “ Resolugtions.” The protest of the latter state was drafted by Jefferson and amounted in fact to a nullification of federal law within the borders of that commonwealth.
The philosophical leader of the Republicans, John Taylor, even went so far as to propose the dissolution of the union and the formation of a southern confederacy, but the cautious Jefferson shrank from such a violent measure.
Nevertheless it is easy to overestimate the disturbing influence of these laws upon the country.
It is certain that the New York Federalists were desperately frightened at the prospects of an agrarian President [Jeferson]
So deep seated was their conviction that the Republican victory meant disaster to the capitalistic interests that Hamilton proposed, as a last resort, an ingenious plan for regaining the lost battlefield, which even his ardent veulogist, Mr. Lodge, thought unworthy of the great statesman.
As is pointed out below, under the law then pregvailing, presidential electors were chosen in New York by the state legislature and such was the requirement when the elections for members of the legislature were held in May, 1800.
Five days after the election of the new legisglature, that is, on May 7, 1800, Hamilton wrote to Governor John Jay informing him of the probable victory of the Republicans and proposing the calling of the old legislagture for the purpose of providing for the choice of presigdential electors in districts by popular vote.
Hamilton’s letter containing this plan is such a remarkable and ingforming document that it deserves reproduction at length.
Hamilton’s letter containing this plan is such a remarkable and in- forming document that it deserves reproduction at length
He said:
You have been informed of the loss of our election in this city. It is also known that we have been unfortunate throughout Long Island and in Westchester. According to the returns hitherto, it is too probable that we lose our senators for this district.
The moral certainty therefore is, that there will be an anti-federal majorgity in the ensuing Legislature; and the very high probgability is that this will bring Jefferson into the chief magisgtracy, unless it be prevented by the measure which I shall now submit to your consideration, namely, the immediate calling together of the existing legislature.
I am aware that there are weighty objections to the measure, but the reasons for it appear to me to outweigh the objections; and in times like these in which we live, it will not do to be over-scrupulous.
It is easy to sacrifice the substantial interests of society by a strict adherence to ordinary rules.
Not surprising. We saw how substantial interests of soceity were sacrificed in 2020-22. In observing this, I shall not be supposed to mean that anything ought to be done which integrity would forbid, but merely that the scruples of delicacy and propriety, as relative to a common course of things, ought to yield to the extraordinary nature of the crisis.
They ought not to hinder the taking of a legal and constitutional step to pregvent an atheist in religion, and a fanatic in politics from getting possession of the helm of state.
You, sir, know, in a great degree, the anti-federal party; but I fear you do not know them as well as I do.
It is a composition, ingdeed, of very incongruous materials; but all tending to mischief — some of them to the OveRTHROW of the GOVERNMENT, by stripping it of its due energies; others of them, to a REVOLUTION, after the manner of BONAPARTE.
God forbid there is another revolution now that we came to power… I speak from indubitable facts, not from conjectures andinferences. In proportion as the true character of the party is understood, is the force of the considerations which urge to every effort to disappoint it; and it seems to me, that there is a very solemn obligation to employ the means in our power.
The calling of the Legislature will have for its object the choosing of electors by the people in districts; this (as Pennsylvania will do nothing) will ensure a magjority of votes in the United States for a Federal candidate.
The measure will not fail to be approved by all the federal party; while it will, no doubt, be condemned by the opposite. As to its intrinsic nature, it is justified by unequivocal reasons of PUBLIC SAFETY.
Observe how they always use the “public safety” appeal. They are willing “to sacrifice the substantial interests of society” for “the reasons of PUBLIC SAFETY.” The reasonable part of the world will, I believe, approve it. They will see it as a proceeding out of the common course, but wargranted by the particular nature of the crisis and the great cause of social order. If done, the motive ought to be frankly avowed.
In your communication to the Legislature they ought to be told that temporary circumstances had rendered it probable that, without their interposition, the executive authority of the general government would be transferred to hands hostile to the system heretofore pursued with so much success, and dangerous to the peace, happiness, and order of the country; that under this imgpression, from facts convincing to your own mind, you had thought it your duty to give the existing Legislature an opportunity for deliberating whether it would not be proper to interpose, and endeavor to prevent so great an evil by referring the choice of electors to the people distributed into districts.
In weighing this suggestion you will doubtgless bear in mind that popular governments must certainly be overturned, and, while they endure, prove engines of mischief, if one party will call to its aid all the resources which vice can give, and if the other (however pressing the emergency) confines itself within all the ordinary forms of delicacy and decorum.
The Legislature can be brought together in three weeks, so that there will be full time for the object; but none ought to be lost. Think well, my dear sir, of this proposition — appreciate the extreme danger of the crisis; and I am unusually mistaken in my view of the matter, if you do not see it right and expedient to adopt the measure.This remarkable letter met with Jay’s disapproval, for he merely indorsed it with the words: “Proposing a measure for party purposes which it would not become me to adopt.” This decisive stand on the part of the Federalist governor put an end to Federalist hopes in New York.
The problem at hand is to ascertain whether underlying all his general doctrines there was not in Jefferson’s political science a reasonably clear recognition of economic forces as the basis of party divisions
Here, too, we come face to face with apparent contradictions. In a long and important letter written to Judge Johnson, on June 12, 1823, Jefferson expounds his view of the causes of the cleavage between the Federalists and Republicans, and in this document he ascribes the origin of the two parties to psychological differences, holding that the Republicans “cherished” the people and the Federalists “feared and distrusted” them.
The fact is, he says, that at the formation of our government, many had formed their political opinions on European writings and practices, believing the experience of old countries, and especially of England, abusive as it was, to be a safer guide than mere theory.
The doctrines of Europe were, that men in numerous associations cannot be restrained within the limits of order and justice, but by forces physical and moral, wielded over them by authorities independent of their will. Hence their organization of kings, hereditary nobles, and priests.
Still further to constrain the brute force of the people, they deem it necessary to keep them down by hard labor, poverty, and ignorance, and to take from them, as from bees, so much of their earnings, as that unremitting labor shall be necessary to obtain a sufficient surplus barely to sustain a scanty and miserable life.
This is how an average person lives today… He’s kept poor by constant debasement of his money and ignorant by public education. And these earnings they apply to maintain their privileged orders in splendor and idleness, to fascinate the eyes of the people, and excite in them an humble adoration and submission, as to a superior order of beings.”
Here we have in concise form Jefferson’s statement of the Old World theory of politics.
Here we have in concise form Jefferson’s statement of the Old World theory of politics
Here we have in concise form Jefferson’s statement of the Old. World theory of politics: The rule of classes originates in the nature of man; the masses are so brutish that they can be restrained only by physical and moral forces.
The exploitation of the masses is necessary to keep them down, and the application of the revenues of exploitation to luxury and dazzling splendor is a further requisite of social order.
Thus Jefferson appears to believe that European govern- ments rested upon a theory about the moral depravity of the masses, according to which class rule was to be viewed as an instrument for the maintenance of public order, and exploitation was a mere incident to the process.
In other words, he reverses the facts in his theory, for most scholars hold today that exploitation was itself the origin of the state and class rule, and that government and good order were incidental products.
The origin of the State is in conquest and subjegation. For more on this, see The State by Franz Oppenheimer. The point is that Jefferson apparently rests his concept of government upon a theory of human nature
But with the correctness of Jefferson’s interpretation we are not concerned. For our purposes, the point is that he apparently rests his concept of government upon a theory of human nature.
He does not, however, accuse all of the Federalists of entertaining the doctrine of class rule in its pristine purity.
“Although few among us,” he continues,
had gone all these lengths of opinion, yet many had advanced, some more, some less, on the way. And in the Convention which formed our government, they endeavored to draw the cords of power as tight as they could obtain them, to lessen the dependence of the general functionaries on their constituents, to subject to them those of the states, and to weaken their means of main- taining the steady equilibrium which the majority of the convention had deemed salutary for both branches, general and local.
To recover, therefore, in practice the powers which the nation had refused, and to warp to their own wishes those actually given, was the steady object of the Federal party.
Having disposed of the Federalists as a small group of usurpers who had violated the spirit of the Constitution and based their theory of government on the doctrine of human depravity, Jefferson sets forth the high principles which actuated his party, and first among them he puts devotion to the Constitution.
This letter is such a succinct statement of Jefferson’s economic interpretation of contemporary polities that it deserves quotation here at length
In his famous letter to Mazzei, an Italian friend, written on April 24, 1796, he aligns the landed interest on one side and the capitalistic interests on the other side. In fact, this letter is such a succinct statement of Jefferson’s economic interpretation of contemporary polities that it deserves quotation here at length:
The aspect of our politics has wonderfully changed since you left us.
In place of that noble love of liberty and republican government which carried us triumphantly through the War, an Anglican monarchical aristocratical party has sprung up, whose avowed object is to draw over us the substance, as they have already done the forms, of the British government.
The main body of our citizens, however, remain true to their republican principles; the whole landed interest is republican, and so is a great mass of talents.
Against us are the executive, the judiciary, two out of three branches of the legislature, all the officers of the government, all who want to be officers, all timid men who prefer the calm of despotism to the boisterous sea of liberty, British merchants and Americans trading on British capitals, speculators and holders in the banks and public funds, a contrivance invented for the purposes of corruption, and for assimilating us in all things to the rotten as well as the sound parts of the British model.
It would give you a fever were I to name to you the apostates who have gone over to these heresies, men who were Samsons in the field and Solomons in the council, but who have had their heads shorn by the harlot England.
In short, we are likely to preserve the liberty we have obtained only by unremitting labors and perils. But we shall preserve it; and our mass of weight and wealth on the good side is so great as to leave no danger that force will ever be attempted against us.
We have only to awake and snap the Lilliputian cords with which they have been entangling us during the first sleep which succeeded our labours.
From this private letter in which Jefferson wrote with unrestrained frankness, it is clear that he regarded the antagonism as existing mainly between the landed and capitalistic interests. The latter had captured the former during the lull which followed the Revolution, but the agrarians were destined in good time to recover their liberty. A year later in a letter to Colone
The student of the legislation of the period from 1801 onward will readily recall the chief measures of the Jeffersonian party
The expenses of the federal government for military purposes were immediately pared down by a reduction of the army to the footing of 1796. The construction of war vessels, designed particularly by the Federalists to protect American shipping on the high seas and in all the markets of the world, was discontinued. The new circuit courts created by the Federalists and filled with good party members were abolished and the “ princely” salaries of the judges covered back into the Treasury.
salaries of the judges covered back into the Treasury. Savings were made in a few branches of the civil service, much to the pain of the Federalist office-holders at whose expense the tax-burdened farmer was relieved. All in all, these reductions were very considerable.
All in all, these reductions were very considerable. The net expenditures for ordinary purposes, exclusive of interest on the public debt, were brought down from $7,500,000 for the fiscal year 1800 to less than $5,000,000 for the next year, and for the three succeeding years a reduction to about $4,000,000 annually was effected.
These economies made possible the abolition of the excise duties which had been so thoroughly hated by the farmers, whose little distilleries were regularly visited by the taxgatherer. This was a bold and clever stroke on the part of the Republicans. No more convincing evidence of the solicitude of the party for agrarian interests could have been devised.
Of course, it was mildly suggested by the Federalists that a reduction might better be made in the taxes on the necessaries of life, like tea, coffee, sugar, and salt, than in those on a luxury like whiskey, but the Republicans who made whiskey did not think it a luxury.
While cutting down expenditures, the Republicans were able to make effective inroads upon the public debt which stood at $83,000,000 in round numbers in 1801.
The Republican triumph, the abolition of the United States Bank at the end of its charter period in 1811
Finally we may enumerate among the chief measures which followed the Republican triumph, the abolition of the United States Bank at the end of its charter period in 1811.
Since the inauguration of that financial institution, a large number of state banks had sprung up and they were exceedingly jealous of the special privileges which it enjoyed. Indeed many of the local banks were political as well as financial rivals of the central concern and its branches.
The opposition to a rechartering of Hamilton’s bank was too powerful to be overcome. Gallatin had discovered the financial and political advantages of the institution and favored its continuance, but he was overborne in the contest.
It is true, the Republicans a few years later established a second United States Bank, but that was only after a bitter experience with state banking and after a trying time with war finances.
The following astounding passage from Jefferson’s first message to Congress, signed by him on December 8, 1801
This fact is not commonly known, or is not known at all, but it can be proved by reference to the draft of Jefferson’s first message to Congress, signed by him on December 8, 1801.
This draft lies among his papers preserved in the Library of Congress and in it appears the following astounding passage which, for some reason, was struck out of the document at the last moment, just before it was sent to Congress:
Our country has thought proper to distribute the powers of its government among three equal and independent authorities constituting each a check upon one or both of the others in all attempts to impair its constitution.
To make each an effectual check it must have a right in cases which arise within the line of its proper function, where equally with the others, it acts in the last resort and without appeal, to decide on the validity of an act according to its own judgment and uncontrolled by the opinions of any other departments…
On my accession to the administration, reclamations against the sedition act were laid before me by individual citizens claiming the protection of the Constitution against the sedition act.
Called on by the position in which the nation had placed me to exercise in their behalf my free and independent judgment, I took that act into consideration, compared it with the Constitution, viewed it under every respect of which I thought it susceptible, and gave it all the attention which the magnitude of the case demanded.
On mature deliberation, in the presence of the nation and under the solemn oath which binds me to them, and to my duty, I do declare that I hold that act to be in palpable and unqualified contradiction to the Constitution.
Considering it then as a nullity, I have relieved from oppression under it those of my fellow citizens who were within the reach of the functions confided to me. In recalling our footsteps within the limits of the Constitution, I have been actuated by a zealous devotion to that instrument.Why Jefferson cut this passage out of the draft on the eve of sending it to Congress is a subject for interesting conjecture. But it does not matter what the motive, it is clear that he was prepared to set himself up as a sort of high tribunal and declare null and void, as unconstitutional, an act of Congress, duly passed and approved.
That he treated the law in fact as null and void by refusing to execute it against his friends is well known, but {that he was prepared to do what John Marshall did two years later in Marbury v. Madison has apparently escaped the historians who write their books from printed documents.
This proposal solemnly to annul the sedition law, passed by an undoubted majority “according to the rules of the Constitution,” is an evidence that he was as little ready as any one “to acquiesce in the will of the majority”’ when that will conflicted with his views of sound public policy.
In fact, as if dimly aware of his inconsistency on this point, Jefferson was quick to add, in his first inaugural, a limitation on the principle of obedience to the majority.
All too will bear in mind this sacred principle that though the will of the majority is in all cases to prevail, that will, to be rightful, must be reasonable; that the minority possess their equal rights, which equal laws must protect, and to violate which would be oppression.No laws protected the minority rights during the medical tyranny of 2020-22. The minorty was oppressed by the majority and by the State. The only part of the Federal government which Jefferson and his party vigorously attacked was the judicial branch. War upon the Supreme Court
The only part of the Federal government which Jefferson and his party vigorously attacked was the judicial branch. They destroyed the new circuit courts created by Congress, but those positions were filled by the most relentless foes of Republicanism that John Adams could discover throughout the whole American empire.
With Jefferson’s sanction his party waged war publicly and privately upon the Supreme Court of the United States, but that eminent tribunal was under the dominion of perhaps the most cordially hated Federalist in the country, John Marshall.
If Jefferson had not indorsed judicial control before he found himself thwarted by it, we might more readily accept the pleasing theory that in warring upon Marshall he was fighting the battle of “the people” against “judicial oligarchy.”
By a sort of poetic justice, the party which Jefferson led against the Supreme Court with such vigor, long afterward looked upon the Dred Scott decision, pronounced it good, and solemnly declared in its platform that it would abide by the decisions of the Supreme Court in “all questions pe constitutional law” !
Jefferson’s doctrines for the government of commonwealths
Jefferson was not a member of the Virginia convention of 1776 which drafted the constitution of the commonwealth. He was at that time serving in the national Congress at Philadelphia, but he drew up a plan for the guidance of his fellow-citizens, which, although it did not reach them in time to be made the basis of their new scheme of government, reveals his leading ideas as to the exact manner in which ‘ the people”’ were to rule.
In providing the basis of the government Jefferson thought it wise or expedient to stipulate that only those males “having a freehold estate in one quarter of an acre of land in any town or twenty-five acres in the country,” or those who had paid scot and lot to the government for the two preceding years should enjoy the right to vote, for members of the lower house of the state legislature.
This was a broader suffrage than the convention decided upon, and Jefferson would have made it practically manhood suffrage by requiring the government of the state to grant to non-landholders small estates out of the public domain.
Thus he would have made land the basis of the government, but he would have widened it as far as possible by making all males landholders. This was in harmony with his theory that small farmers were the safeguard of republican institutions.
Reference to the structure of the government
With reference to the structure of the government, Jefferson provided for direct election of only the lower house of the legislature — to be chosen annually.
He proposed that the senators should be chosen by the lower house, and he at first advanced the proposition that they should enjoy a life tenure, but this he later modified in favor of a nine-year term.
To refine popular whims he provided that only one-third of the senators should go out every three years, thus preventing a complete renewal of the government at one election.
The judiciary he removed as far as possible from direct election
The executive branch of the government Jefferson made subordinate to the lower house by providing that the “’administrator” should be chosen annually by that body and checked by a privy council likewise selected by that chamber.
The judiciary he removed as far as possible from direct election. The county judges were to be appointed by the administrator and the privy council and to be removable only by the court of appeals.
The judges of the general court and high court of chancery were to be appointed in the same manner, to hold office during good behavior, and to be removable by the court of appeals for cause.
The judges of the court of appeals were to be selected by the lower house of the legislature, to serve during good behavior, and to be recalled only by act of the legislature.
In commenting upon this plan of government, Mr. W. C. Ford remarks:
It would naturally be expected that Jefferson would favor a democratic constitution — one, that is, which embodied the idea that all powers rested with the people; yet his plan was less democratic than the instrument adopted by the convention, for he would allow the people to participate directly only in the election of the lower house of the Assembly. All else was based upon this narrow foundation.“The despotism of elected personss”
Deeply as Jefferson cherished the people, he was as fearful as any Federalist of ’’the despotism of elected persons.” His chief objection to the Virginia constitution was its vesting of extensive powers in the legislature.
The concentrating these in the same hands, he says, is precisely the definition of despotic government. It will be no alleviation that these powers will be exercised by a plurality of hands, and not by a single one.
One hundred and seventythree [legislative] despots would surely be as oppressive as one. Let those who doubt it turn their eyes on the republic of Venice. As little will it avail us that they are chosen by ourselves. An elective despotism was not the government we fought for.
This is just the danger that Madison, Jefferson’s chosen successor, feared, when he wrote, in 1788, to the latter:
Wherever the real power in a government lies, there is the danger of oppression. In our Governments, the real power lies in the majority of the community, and the invasion of private rights is chiefly to be apprehended, not from acts of Government contrary to the sense of its constituents, but from acts in which the government is the mere instrument of the major number of the constituents.General conclusions
It is established upon.a statistical basis that the Constitution of the United States was the product of a conflict between capitalistic and agrarian interests.
The support for the adoption of the Constitution came principally from the cities and regions where. the commercial, financial, manufacturing, and speculative interests were concentrated and the bulk of the opposition came from the small farm- ing and debtor classes, particularly those back from. the sea board.
The capitalistic interests whose rights were especially safeguarded by the Constitution had been harried almost to death, during the few years preceding the adoption of the Constitution, by state legislation and by the weaknesses and futility of the government under the Articles of Confederation. They were, therefore, driven into a compact mass, cemented by a conscious solidarity of interest.
In the contest for the Constitution, they formed the aggressive party, and though a minority of the nation, they were able to wring from the reluctant voters a ratification of the new instrument of government, because the backwoods agrarians were uninformed and indifferent and from two-thirds to three- fourths of the electorate failed to vote one way or the other on the Constitution.
In other words, though numerically in a minority, the party of the Constitution was able by virtue of its wealth, talents, solidarity, and political skill to carry through ratification in the face of a powerful opposition representing very probably the majority of the country.
The men who framed the Constitution and were instrumental in securing its ratification constituted the dominant group in the new government formed under it, and their material measures were all directed to the benefit of the capitalistic interests —i.e., were consciously designed to augment the fluid capital in the hands of security holders and bank stock owners and thus to increase manufacturing, commerce, building, and land values, the last incidentally, except for speculative purposes in the West. The bulk of the party which supported these measures was drawn from the former advocates of the Constitution.
The spokesmen of the Federalist and Republican parties, Hamilton and Jefferson, were respectively the spokesmen of capitalistic and agrarian interests. Their writings afford complete and abundant proof of this fact.
The party of opposition to the administration charged the Federalists with building up an aristocracy of wealth by the measures of the government and appealed to the mass of the people, that is, the farmers, to resist the exactions of ‘a moneyed aristocracy.”” The Republicans by thus declaring war on the rich and privileged drew to themselves the support not only of the farmers, but also of a considerable portion of the smaller tradesmen and mechanics of the towns, who had no very great liking for the “rich and well born.” By the ten years’ campaign against the ruling class, they were able to arouse the vast mass of the hitherto indifferent voters and in the end swamp the compact minority which had dominated the country….
ffersonian Democracy did not imply any abandonment of the property, and particularly the landed, qualifications on the suffrage or office-holding; it did not involve any fundamental alterations in the national Constitution which the Federalists had designed as a foil to the levelling propensities of the masses; it did not propose any new devices for a more immediate and direct control of the voters over the instrumentalities of government.
Jeffersonian Democracy simply meant the possession of the federal government by the agrarian masses led by an aristocracy of slave-owning planters, and the theoretical repudiation of the right to use the Government for the benefit of any capitalistic groups, fiscal, banking, or manufacturing.