Your other lecturers have pleasant and upbeat subjects to consider. I am stuck with economics, which is a notoriously dreary subject. It is even more of a downer when we consider how far the U.S. is today from a Southern, Jeffersonian political economy which was once a powerful idea.
Economics as practiced today is a utilitarian and materialistic study. It is concerned with maximizing profit, with describing the actions of man as an economic being, and explaining the allegedly inevitable results of supposed economic laws. Our Southern forebears did not practice economics. They practiced political economy—which is concerned with human well-being. Those old-time Southerners did not assume that man is to be understood wholly or chiefly as an economic being. They did not believe that the economic conditions they faced were entirely determined by abstract laws—but rather that they were the result of human decisions, some of them the product of corrupt politics.
Unlike Marxists and the kinds of capitalists they decried, they did not believe that material conditions controlled the thoughts of man. Rather, they believed that the human mind created material conditions. They also did not believe that maximum wealth was the proper goal of productive work. There were such things to be considered as widespread and comfortable prosperity; and stewardship instead of maximum exploitation of God’s bounteous Nature. Man must eat, but he does not live by bread alone. Economics being the product of human acts and decisions, it was part of the moral realm and not merely technical knowledge.
Most of all Jeffersonian political economy insisted that the health of society was not represented by great wealth but by widespread ownership of real property. Without widespread ownership of real property, which made the great mass of men independent citizens, there could be no healthy society, and certainly no free society.
This is a real and long-lasting tradition of thought. It underlay much of the formation of colonial Southern society. There was a reason that English poets referred to Virginia as “the earthly paradise.” Because those who had no hope of independent status at home could there attain it. This ideal of the independent citizen was the motivation of many people in the War of American Independence. It was basic to Thomas Jefferson’s opposition to the economic program of Alexander Hamilton which was the first great American political conflict. The tradition is fully explicated in the writings of John Taylor of Caroline and in the speeches of John C. Calhoun and many other Southern statesmen. The tradition was expressed in provisions of the Confederate Constitution.
The Hamiltonian opposite did not triumph completely in the antebellum era. But with the War for Southern Independence, Lincoln and his party, in the absence of Southern votes in Congress, were able to install an advanced form of Hamilton’s dream that dominates the American economy right up to the present moment. America became devoted to capitalism, by which is meant not free enterprise but private profit subsidized by government.
The Southern Jeffersonian conception of the good society did not completely disappear even after Lincoln and his party negated it, but long remained in Southern Democratic opposition to Big Business. I might mention the Clayton Antitrust Act of 1914, bearing the name of Representative Henry D. Clayton of Alabama, son of the Confederate general of the same name. And the Glass-Steagall Act of 1932. This law was designed to separate commercial and investment banking and correct some of the abuses that had led to the Great Depression. It carries the names of Senator Carter Glass of Virginia and Representative Henry B. Steagall of Alabama. The repeal of this law by the Reagan administration, according to many experts, caused the savings and loan crisis of a few years ago, to which the only solution to be found by either party was for the taxpayers to “bail out” the misbehaving bankers and brokers so they could continue to draw their multi-million dollar salaries rather than go to jail. The malefactors were judged to be Too Big to Fail or Too Big to Jail.
In our Hamiltonian world nobody could think of anything except government bail-out. You can bet our Southern forebears would not have allowed such an atrocity, nor the recent Trade Bill with its secret contents that was passed by both parties against the will of the people and will accelerate the destruction of small business enterprise and the dispossession of American workers.
Economics is not only a dreary subject, it is also a complicated subject. Years of study have convinced me that those who write economic history don’t know what they are talking about. What they usually do is simply repeat political polemics. But politicians and special interests are not interested in saying what is true, they are interested in advantage. I don’t think anyone really understands all the variables that are at work in a vast national economy, and I certainly do not. What I am presenting here is two conflicting ideals that have dominated American hopes and wishes from the beginning.
A Jeffersonian political economy as the ideal was implicit in the Southern classic I’ll Take My Stand. A few years later, 1936, some of the Twelve Southerners joined some Northern and British writers in the last formal defense of a humane economy—Who Owns America? A New Declaration of Independence. The Great Depression had generated much discussion about fundamental reform of the American regime. Communists and socialists were sure they had the answer—government control of property. Progressives thought capitalism could be preserved but the economy could be managed by expert planners like themselves, basically the New Deal approach.
Who Owns America? took a different stand. Who Owns America? Well might we ask. Both capitalists and socialists, these writers argued, were asking the wrong questions. Both took for granted the gigantic concentration of power over the economy in a few great corporations, only argued over detail. There was little difference between them. Both were for preserving a system in which the mass of people were wage earners at the mercy of owners. This was the wrong kind of society. The U.S. had begun as and for a time had continued to be a society of wide-spread property ownership, of independent citizens. Free enterprise and private property are good things. We are all for them, they said. We reject socialism but we also question the existing domination of America by corporate capitalism. As John Taylor of Caroline had pointed out in his great exposition of Jeffersonian political economy, An Inquiry into the Principles and Policy of the Government of the United States, a rich country is not the same thing as a happy people. And certainly a rich government is not the same thing as a prosperous people.
If we ask today who owns America, here is what we get. The richest three per cent of families own 54% of the national wealth. The richest 10% of families own 75% of the national wealth. Most of the rest of us own nothing except mortgages. We are at mercy of large institutions. We are not the independent citizens that Jefferson said were necessary for a free society and a healthy society. In fact, the inequalities of wealth are worse today than they were in 1936 and have been getting steadily greater since the 1970s.
The writers of Who Owns America? contended that huge corporations in effect own the country and the politicians. What is a corporation? The founding generation considered corporations to be legal monopolies, generally bad things. The Philadelphia convention voted down giving the federal government the right to charter corporations, which did not prevent Alexander Hamilton from insisting on the chartering of a national bank as soon as the government got under way. He said it was “necessary and proper.” John Taylor pointed out that this was the first of countless instances where mere verbiage was employed to distort the plain intent of the Constitution.
A corporation is a legal person, except that unlike a person it is immortal and cannot feel pain or guilt. The 14th amendment was supposed to be for giving rights to the newly freed slaves. Shortly after it passed (illegally) the U.S. Supreme Court declared corporations to be legal persons. Like persons, they are said to have rights that may not be interfered with. The Supreme Court thus vetoed numerous efforts of State governments to regulate corporations. Under this cover corporations proliferated like kudzu and did as they pleased. It can be argued that the unscrupulous Republican sponsors of the 14th amendment intended this all along.
What is corporate property? An individual owns stock in a corporation. What does he own? He owns a right to dividends if there are any. He may sell his stock, for more or less than he paid for it. He is personally liable for the corporation’s debts to only a small extent, which is a great advantage to all those participating in the corporation. Unlike a farm or a family business, the corporate stockholder has no practical responsibility for what the corporation does, and most importantly he has no moral responsibility to society, to workers, to turning out a good product. The corporation is in the power of a few men. This is true whether they are business executives, the expert planners of socialism, or the party officials of communism. In each case the happiness of the people is dependent upon remote forces over which they have almost no control. Unlike a society with widespread ownership of productive property, this is not a healthy or a really free society.
The capitalists yell about threats to free enterprise and the evil effects of interference with the law of supply and demand. The trouble is, Big Business never has practiced free enterprise. It is too powerful to tolerate competition. There is a lot of small scale free enterprise in America, but not in Big Business which controls rather than participates in the free market. The authors pointed out that in the Depression prices of farm products declined by over 30%. But the prices of steel and automobiles had not declined at all. If the law of supply and demand was working, prices should decline with declining demand. Something was interfering with the free market. The large corporations reacted to declining demand by reducing wages, firing workers, and cutting production rather than lowering prices, which would have been the economically sound and socially useful thing to do. They preserved their profits because their foreign competition was excluded by government tariffs and their gigantism guaranteed their ability to stifle any potential domestic competition. The only real solution offered by the New Deal was to flood the economy with cheap money so as to increase demand, which might help unemployment but would also keep profits up. So much for free enterprise.
Further, the giant corporations existed not because concentration is a result of economic law. Industry was not controlled by entrepreneurs or managers—it was controlled by bankers. Wealth had come to consist of entries on bankers’ books. Today, of course, it is even more abstract—dots on a computer. We all know the havoc that has been wreaked by derivatives—gambling on the abstractions of abstractions. Such property is infinitely manipulable for private profit. John D. Rockefeller had never done a productive day’s work in his life, but he controlled Standard Oil which controlled a large part of the market in the U.S. It was not socialists who hated the fabulously rich Rockefeller, who exhibited his Yankee public spirit by handing out dimes to Sunday school children. The socialists were glad to see the concentration of industry he had brought about and which he claimed was a socially beneficial thing. It was a move toward their goals. Unlike widely dispersed property, it would be easy for the government to take over. It was the entrepreneurs who hated Rockefeller, the men who used their knowledge and risked their money to get the oil out of the ground. They found that Rockefeller capital had bribed state legislatures, rigged railroad rates, bought refineries, and acquired and suppressed new patents that would have cheapened production for small producers. The real producers of wealth were not able to sell their product except on Rockefeller’s terms, which usually meant turning over control. I guarantee you that today, when Lawrence Rockefeller of the Chase Manhattan Bank calls, the President of the United States answers it as soon as he can. The power of the banks is almost never questioned in American public discussion. Now that is real power, when you can prevent yourself from even being mentioned. And when somebody does mention it, he is immediately branded a loony conspiracy theorist.
And, the authors of Who Owns America? , as did those of I’ll Take My Stand, asked: what is so great about concentration of industry into a few gigantic firms? Is a huge factory necessarily more efficient than many small factories spread through the countryside? It is certainly less humane and makes the workers even more insecure. No, we had giant corporations not because they are efficient because that is what the bankers want. It makes their control easier and firmer. The bankers always get what they want. We do not want to do away with private property, the authors of this last gasp of Jeffersonian political economy said—we want to see policies that will spread it around, that will curb the corporations and increase the number of people who have enough property to make an independent living. We want to see a genuine free market. And especially we want to see the South become free. It has been since 1865 a colonial possession of the North, an impoverished region exploited for raw materials and cheap labour, its development inhibited by very specific federal laws in favour of Northern interests. For just one example, steel may be shipped to Atlanta more cheaply from Pittsburgh than from nearby Birmingham. For another, margarine, which can be made from cotton seed, is banned at the demand of the Wisconsin dairymen.
Of course, the program of Who Owns America? was too humane, too lacking in money to buy politicians and media, too unappealing to the vast herd of petty intellectuals who dominate American discourse. It could not succeed, and America has gone on its present way.
Hamilton’s program consisted of tariff, national bank, and public debt. The Constitution gave Congress the power to tax imported goods. The idea was that it was a fairly painless source of revenue for the government in its few limited functions. George Mason of Virginia was a major player in writing the Constitution but he refused to sign it and went home to oppose ratification. This tariff power is a very bad idea, he said. The Yankees will use it to loot the South. The first tariffs were five per and Hamilton did not get his wish for high “protective” tariffs to subsidise American industry. But for forty years prior to the War Between the States, customs duties made imports too expensive so that Americans had to buy over-priced manufactured goods from Northern factories. Five-sixths of federal revenue was collected at Southern ports and spent in the North. Cotton and other Southern products provided the overwhelming quantity of U.S. exports yet the South faced declining prosperity and paid most of the taxes. The brilliant historians of today tell us the tariff was not important as a cause of Southern secession—it was all “slavery”. They think the tariff is unimportant because it only oppressed Southerners, a people who don’t count.
Anyone who leaves out the significance of what happened in early 1861, between Lincoln’s election and Fort Sumter, and insists it was all about “slavery” will never know the truth about the WBTS. In the first response to secession Northerners cited the Declaration of Independence on consent of the governed and said “Let the erring sisters go in peace.” Abolitionists said they were glad to be free of Southern contamination. Then Congress passed the Republican tariff of almost 50% on most imports. The new Confederate government voted a tariff of 5% and announced that Northerners could have free navigation of the Mississippi river and use of the port of New Orleans. Influential Northerners realized what this would mean. They would lose their captive source of revenue and market in the South. Their profits would nose-dive. They might even have to pay taxes themselves. Not only would they lose the South, but it was obvious that the whole Mississippi Valley would prefer to trade through the low tariff Confederacy rather than the United States. In public speeches and private letters, in newspaper editorials and petitions to Congress, and in every other way, influential Northerners let it be known that war was preferable to allowing the South to escape. One could fill several books with such statements. When asked why the South could not be allowed to peaceably secede, Lincoln invariably referred to the loss of revenue—not “slavery.”
An interesting sidelight that is never mentioned. The Lincoln Republicans, while emancipating the slaves, passed a Contract Labor Law. This allowed companies to collect gangs of workers in Europe, paying their passage over in exchange for being bound to work for a set number of years. Obviously such workers were very vulnerable, and of course readily available as strike breakers. Some companies had a regular policy of bringing in contract immigrants every certain number of years to keep down wages and union activity. That is why New England can no longer brag that it is pure WASP country. Emancipation anyone? And to think that some people expected the Republicans, the original cheap labour party, to oppose the recent unlawful illegal immigrant amnesty. We might also mention that under Lincolnian legislation the government gave away vast amounts of public lands to railroad and other corporations. It never occurred to them to give any land to freed African Americans in the South, although they were ready farmers. The role of the black people was to stay in the South, vote for carpetbaggers, and not darken the Northern home front. It is no accident that the Lincoln and Grant administrations are the most corrupt in U.S. history.
Then there was the national bank. What is necessary to understand is the central bank throughout American history has never been a government bank. It is a private banking cartel to which the government gives the tremendously powerful and profitable control over the credit and currency of the country. Why should Congress turn over its responsibility to provide a sound currency to private bankers? You tell me. Lincolnians went Hamilton one better. They set up a series of national banks instead of one. This spread the loot around to more Republicans but did not alter the principle. Nor does the Federal Reserve. The government appoints the head, who may suffer some government influence, but the real power is in the great New York banks. They decide whether interest rates should be raised or lowered and how much or how little credit is allowed in the national economy. They determine much of economic life for you and me. And did you know that Hamilton created the evil practice of legislation by executive order. Without consulting anyone, he ordered that banknotes, the paper issued by private banks, could be accepted in payments to the government. The banks are not businesses, said Calhoun in 1837, they are great and irresponsible political institutions.
Then there is the national debt. Imagine that Alexander Hamilton declares that “a public debt is a public blessing.” What can he possibly mean? Debt a blessing? Well, Britain has a public debt and the well-to-do classes put their money into government debt, draw interest, and strongly support the regime. The United States needs to be strong and wealthy like Great Britain. After all, Britain is the strongest and wealthiest country in the world, and the U.S. to become rich and powerful must be like her. Bad reasoning and bad wishing.
We all agree, says Hamilton, the new Secretary of the Treasury, that we must pay off the outstanding debt of the War of Independence. Let us do this with interest bearing government bonds. The opposition was not yet fully aware and organized. There was, as always, a kicker. Besides what was owed to foreign governments, the debt was in Continental currency and in promises to pay soldiers’ bounties and suppliers. This paper was tremendously inflated. The original recipients had had to sell it at cents on the dollar. It was now in the hands of Northern big city capitalists who had acquired it cheaply. We must pay of this debt at face value to its current holders, Hamilton said. To establish the government on a sound basis and establish its credit we must show that we pay our debts. Commenting on this claim of establishing the faith and credit of the federal government, John Taylor says: “A crocodile has been worshipped, and its priesthood have asserted, that morality required the people to suffer themselves to be eaten by the crocodile.”
James Jackson of Georgia, a veteran of much Revolutionary war combat, raised an objection in the House. Wait a minute. Why are we rewarding these speculators instead of those who sacrificed for our independence? There is none of this paper left in Georgia. The people had to sell to meet their immediate needs. It all was bought up cheaply by well-funded speculators. Jackson was over-ridden by a ruthless pre-planned opposition juggernaut. A little later Hamilton got the state debts funded in the same way. Note that most of the Southern States had already paid their debts. Most of the Northern States had not. I would love to tell the story of the Yazoo claims, the first great financial scandal in American history, which happened about the same time. By bribery a group of Philadelphia money men had acquired millions of acres of land for cents on the acre. These included James Wilson, U.S. Supreme Court justice who is still often cited as a great conservative philosopher. Suffice it to say that this corrupt deal was protected by the U.S. Supreme Court under the guise of the provision that no State may interfere with “the sanctity of contract.” In Congress, whenever he sniffed corruption in the air, John Randolph of Roanoke would point a long bony finger and shout: “Yazoo! Yazoo!”
Here we need to understand the conflicting ideas of the good society that were presented in the early days of the U.S. government in order to make their economics conceptions comprehensible. According to Hamilton men are flawed, imperfect creatures. Therefore, they need to be governed by their betters. Further, a government must be strong and active to protect the country and promote its welfare. Jefferson had the perfect answer: “Where do these angels come from?” If human are imperfect, which they are, where do you get these superior creatures who have the right to govern others?
John Adams, a model example of the all too common type of Yankee abstract intellectual, made the systematic Federalist case in his A Defense of the Constitutions of the United States Against the Aspersions of Monsieur Turgot. We all want to preserve a republican government of the people, he said. In my reading of history I have made the brilliant discovery that governments of the people are most often overthrown by too much majority rule. The people will soon discover that they can vote themselves the wealth of their betters. So to keep the people in line we need a ruling class of superior wealth and virtue. The people must hold their betters in awe. As President, Adams rode around in a carriage with white horses, insisted on being addressed as “Your Excellency,” and held very formal receptions. All of which Jefferson, a genuine aristocrat, dispensed with when he became President. And, Adams elaborately argued, to keep the people in line we need such constitutional provisions as a two-house legislature, an indirectly-elected President with veto power and command of the armed forces, and judges untouchable by the people. We see how that worked out as a restraint on government officials.
It was an elitist program. Jeffersonians were not too far off the mark when they labeled the Federalists as “monarchists,” because they were so in love with the British system, or what they thought was the British system. The Federalists compared Jeffersonians to the Jacobins who were busy cutting off heads in France. They were far off the mark, being demagogic, indulging in the standard New England custom of demonizing those who stood in their way to power and riches.
John Taylor of Caroline County, Virginia, had the systematic answer for the Jeffersonians. It was true Britain is a very rich and powerful country, he said. It system creates that. But its system also creates a mass of the most appalling poverty. Supporting the government and the elite who profit from it places a crushing burden on the people. Surely that is not what we want for America where now the citizens, mostly farmers, are self-sufficient? “A power in a government of any form, to deal out wealth and poverty by law,” Taylor wrote, “overturns liberty universally, because it is a power by which a nation is infallibly corrupted.” Furthermore, Adams’s history is all wrong. It is not the people who seek to control government and loot their betters. Most of the time the people simply go about their business and live their lives. All of history, contra Adams, shows that corruption arises when an elite uses government to loot the people. In the past the people were looted by force and superstition. In the new system they are to be looted by fraud—by stocks and government bonds. If he had only known, Sancho Panza would have asked Don Quixote to reward him with stocks and bonds rather than the governorship of an island. Looting the people, and especially the Southern farmer, is what your Federalist economic policies are for. You are establishing a class, Taylor wrote, that is wealthy because of its influence in the government, whose unearned wealth comes from the labour of the people. You are reproducing the evils of Europe and destroying the chance that America has for something better for human happiness. And all your setting up of constitutional contraptions to thwart majority rule are ridiculous and will fail. The answer is to restrain power, and in particular in the sovereignty of the States to limit the elites that will get control of the U.S. government in your system. Who was the true prophet of the future, Adams or Taylor?
Thomas Jefferson said that the earth belongs to the living, that the present generation may enjoy the fruits of the earth but it cannot destroy the equal right of the next generation to such enjoyment. He said this was among the most important of his beliefs. This idea was attacked, of course. Jefferson is a dangerous radical, they said. He doesn’t believe in tradition and stability and in passing down property to your loved ones. But what Jefferson was talking about was debt and particularly government debt. It is deeply immoral for a present generation to use up the earth so that it leaves the next generation burdened. John Taylor comments: “The present age is cajoled to tax and enslave itself, by the errour of believing that it taxes and enslaves future ages to enrich itself.”
Lincoln’s war created a tremendous debt and the U.S. government continues to borrow money. The government has a great income. Why does it need to borrow money? Because rich people like government bonds. It is risk free, tax free and draws good interest The government used to finance itself that way when it generally balanced the budget. Now it finances its tremendous deficit spending the same way. The U.S. Congress has long been spending beyond its means year by year, and not because of an emergency, but to buy elections. There is now a debt so tremendous that it can never be paid. To pay it would take all the earnings of you, your children, and your grandchildren to infinity. However, the holders of government bonds do not mind. They are receiving substantial, risk free, tax free interest. These bondholders now include foreign governments which the Founding Fathers would consider treasonable. Merely paying the interest on the debt is now the major part of the budget.
I have generalised recklessly in this presentation. But remember that I am dealing here not so much in dollars and cents as in ideals of the good society.
This lecture was delivered at the 2015 Abbeville Institute Summer School.