Old myths die hard. One of the oldest with its roots firmly in the sectional crisis of the nineteenth century is the belief in the existence of the “Slave Power.” This uniquely American conspiracy theory, found mostly among the folks of the Midwest, posited that Southern slaveholders were bent on spreading the institution of slavery into the territories and even into the states of the Old Northwest itself. Certain episodes in the Union’s public discourse seemed to confirm, to a degree, the suspicion of those Northerners who subscribed to the theory. Thomas Jefferson’s diffusion argument, whereby slavery would be allowed to spread beyond the borders of the South raised the hackle of antislavery Northerners, though Jefferson viewed the diffusion of slavery as a method to weaken and extirpate the institution. The Missouri Crisis gave birth to the “Slave Power” conspiracy, but not yet fully matured. The antebellum sectional conflict provided new impetus for the theory’s adherents. Territorial expansion resulting from the Mexican American War, the enthusiasm of a minority of Southern politicians for incorporating Mexico and Cuba into the Union, the emergence of explicitly proslavery theorists such as George Fitzhugh, and most importantly the Dred Scott decision fed the fires of speculation on the part of northerners regarding the potential expansion of slavery. In the heated atmosphere of the 1850s, Northerners in such faraway places as St. Paul and Ann Arbor wrote of their fears of Southerners coming with their slaves to destroy the liberty of white men, plunder their property, and undermine free labor.
It was all bunk. As Senator Stephen Douglas pointed out, slavery was not suited to the western territories, which would be settled by migrants from the Northern states. Any territorial constitution allowing for the owning of slaves could be changed by subsequent territorial or state legislatures reflecting the larger number of free state migrants into the western territories. Kansas proved the foresight of Douglas’s observation. After much conflict and cries of foul from Democrats North and South, Kansans were allowed to reject the Lecompton Constitution, which recognized the legality of property in slaves, and the substitution with one that did not. This triumph of Douglas’s doctrine of popular sovereignty was a messy one. There was evidence to suggest that Southerners pro slavery migrants may have initially outnumbered Northern immigrants to Kansas, even if one excluded those Missourians who in 1855 crossed the border to vote for the territorial legislature and Congressional delegate for the territory. Nevertheless, census data indicated that there were only 192 slaves (and 151 free blacks) recorded in the 1855 Territorial Census, by1860 the number of slaves was two. The numbers of free state emigrants from the North became the majority in Kansas by 1860. Meanwhile, like the Missouri “Border Ruffians,” Iowans crossed the border into the Nebraska territory to illegally vote in Nebraska’s territorial elections successfully securing Nebraska as a free territory, though there was no real danger it would have ever seen the establishment of slavery in its borders. As historian Avery Craven asserted, by 1860, the West was effectively closed to slavery. The “Slave Power” theory, however, did not disappear. It proved a useful rhetorical device to blame the political class of the South for the sectional conflict, secession, the resulting War Between the Sates, and any other ill affecting the sturdy grain farmers of the Midwest.
The most recent iteration of the Slave Power conspiracy theory comes from the pen of Michael Hudson, a prominent economist who is currently a Distinguished Research Professor at the University of Missouri, Kansas City and the president of the Institute for the Study of Long-Term Economic Trends. In an essay titled, “How US Slave Interests Stifled US Monetary and Banking Policy Until 1913,” published in Naked Capitalism, Hudson offers what is the most expansive form of the Slave Power yet written. According to Hudson, the slave states both shaped the US Constitution and limited the powers of the federal government with the sole end of protecting the institution of slavery. In Hudson’s view, the “southern states insisted on the National government relinquishing as much power to the states as possible ” to enable them to obstruct any federal initiatives “binding on the entire United States.” Thus, the southern states opposed the North and the West in their efforts to limit the extent of slavery and successfully oppose attempts at national economic development contained in the policies of protective tariffs, internal improvements, the establishment of a national bank, and commercial banking in general. This obstruction was a defense mechanism to preserve slavery in the face of a growing Northern population which would result in the aforementioned policies, as well as the abolition of slavery. Southern insistence upon hard money (gold and silver coin) deflationary policies was also a part of their nefarious policy to strangle credit markets and retard national economic development, as well as keep grain and cotton prices low so that slave labor could be fed and Southern cotton internationally competitive. Professor Hudson’s lone receipt is a quote he attributes to John Taylor of Caroline, “if Congress could incorporate a bank, it might emancipate a slave.” Even in defeat, the slave power was able to continue the retardation of American economic and financial development until 1913, neat trick for a region sunk in poverty after the Late Unpleasantness. Alas, the historical and economic reality is far more complex than Professor Hudson realizes. As usual, the devil is in the details.
In the days when the Articles of Confederation governed the United States, Virginia made a grant of land to the confederate government of what was then known as the Northwest. Working from the principles established by Thomas Jefferson, slaveholder, in the Ordinance of 1784, the authors of the Northwest Ordinance, possibly Nathan Dane and Rufus King, chartered a territorial government, established a method to admits states to the Union, provided for a bill of rights, and forbade slavery in the territory as established by Jefferson, a slaveholder, in his original draft of the Ordinance of 1784. The grant of land and abolition of slavery in the Northwest Territory was made for several reasons, one of these reasons was a goodwill gesture on the part of Virginia to Northern states who were fearful that the states below the Mason Dixon line would outpace them in future population growth. The Ordinance passed the Congress by a vote of 17 to 1, suggesting that the “Slave Power” had not yet emerged, or that it was not particularly powerful.
Hudson may be surprised, possibly shocked, that at the Philadelphia Convention slave traders from Connecticut under the leadership of Roger Sherman “conspired” with delegates from the Deep South to keep the slave trade open for as long as possible. Perhaps equally shocking to the good professor is the fact that in the early days of the republic the South contained strongholds of Federalists who supported the policies of Alexander Hamilton, and (gasp!) were slaveholders. Some prominent names include President George Washington and Chief Justice John Marshall of Virginia, William Loughton Smith, Edward Rutledge, Charles Cotesworth Pinckney and Thomas Pinckney of South Carolina, Samuel Chase and Luther Martin of Maryland, the list could go on. All slave-owners, though their views on the institution varied, all supportive of Hamilton’s economic policies. On the other side of the ledger are a considerable number of nonslave holding Republicans from the North who opposed the economic development policies of the Federalists. These included Levi Lincoln, James Sloan, and DeWitt Clinton, all of whom were antislavery but somehow allied themselves with the people Hudson labels, the “Slave Power.”
As for the Southern Jeffersonians, who I assume Hudson would place as members of the Slave power since they favored states’ rights, free trade, and hard money. The caricature of their economic policies as a mere attempt to preserve slavery is sad. The literature on the Jeffersonians economic ideas and policies is vast. I suggest Professor Hudson begin with Drew McCoy’s The Elusive Republic, then work his way through vast number of scholarly articles on the subject and finally try his hand at some of the other scholarly monographs on the subject. Whatever one may think of the Southern Jeffersonians’ ideas on national economic development, their views and policies were not mere devices to protect slavery. They had solid theoretical grounding in Adam Smith, the physiocrats especially Jean Baptiste Say, and David Ricardo, as well as other theorists of the day. John Taylor of Caroline had also come to an independent finding similar to the Irish economist Richard Cantillon on the tendency of inflation to benefit elites at the expense of others who did not have the same access to credit and thus could not purchase goods and services with new money while paying old prices. For the sake of brevity, two figures who I imagine might qualify as archfiends in Hudsons financial Inferno, John Randolph of Roanoke and John C. Calhoun, both of whom were praised for their financial acumen and knowledge of banking. The former by Jefferson’s able Secretary of the Treasury, Albert Gallatin and the latter by Bray Hammond, an assistant secretary to the Board of Governors of the Federal Reserve and the Pulitzer Prize winning author of Banks and Politics in America. A bit more research and one will find that the states’ rights Jeffersonians were interested in a tad more than just the preservation of slavery.
Unfortunately, Hudson’s account also suffers from basic factual errors and internal contradiction. Henry Clay, the great Whig leader and one of Hudson’s good guys, considered himself both a Westerner and Southerner. He was also a slaveholder. The First Bank of the United States (and the Second Bank of the United States) was not given a monopoly over the currency as modern central banks often enjoy, but its currency was legal tender throughout the Union, and advantage not enjoyed by state banks, and it operated as the federal government’s fiscal agent. Most of its capital was made up of what we now call Treasury bonds, and it could and often did hold the some or all the federal government’s reserves. Andrew Jackson’s war on the bank was initiated when he not only vetoed renewal of the bank’s charter but directed the Treasury Department to withdraw federal deposits from the bank and remove them to “pet banks” favorable to the administration. It seems, contra Hudson, that the federal government was indeed helping to underwrite the issuing of credit by its deposit policy. Hudson seems unfavorable to the establishment of the Independent Treasury under President Martin Van Buren, yet the source he quotes citing Henry Clay seems to obliquely resurrect the specter of the Continentals inflation of the War for Independence as the most likely effect of the new independent treasury policy. Yet Hudson argues for the necessity of inflationary policies for the developing republic throughout his piece. I suppose some inflation is better than others. Meanwhile, many state banks in the North, such as Ohio, pursued tight monetary lending standards and high gold and silver reserve policies. Mississippi, on the other hand, was notorious for the inflationary credit polices of their state banks, and they were awash in slavery.
One of the missing pieces in Hudson’s account is the international character of finance and its enormous influence upon American finance. The panics of 1819 and 1837 were caused in part by an increase in interest rates by the Bank of England and restrictive credit policies of Baring Brothers drew financial capital and credit out of the risky, emerging market economy of America. To this day, too many American economists continue to ignore, or are ignorant of, the outsized influence of British finance in the story of America’s economic development. In addition, the Panic of 1837 was further caused, as Peter Temin points out, by a reversal of silver flows which formerly had flowed generously into the United States from Mexico and China. International credit played an enormous role in the development of America, especially cotton agriculture, but it does not merit a place in Hudson’s essay. The other missing piece is the dependence of the North upon Southern cotton exports and subsequent Southern imports to finance its economic development. I suggest the good professor give Thomas Kettell’s book, Southern Wealth and Northern Profits a read. He was most likely a resident of New York, relocated to California after the War Between the States, and was not a slaveholder. It may also come as another shock to Hudson, but some of the largest slaveholders or prominent defenders of slavery in states such as Georgia, Alabama and Mississippi were supporters of the Whigs and their economic policies. Again, some prominent names are Alexander Stephens, Robert Toombs, Herschel Johnson, Henry Lewis, and Henry S. Foote.
As for the postwar era, I am confused as to how the politicians of a defeated and economically devastated South, with slaves emancipated, could function as a “Slave Power.” Also, while the period was one of general deflation, it also was one of tremendous economic growth with the United States emerging as an international economic power. This fact seems to get lost in Hudson’s narrative about the evils of Slave Power driven deflation. As for the Populists with whom Hudson is sympathetic, he oddly neglects to mention William Jennings Bryan’s running mate, Tom Watson, and influential senator from Georgia who also supported Bryan’s crusade to reintroduce silver coinage. It is also important to note that the Populists polled well in Southern rural districts with a long history of support for states’ rights and suspicion of activist federal government.
Hudson’s essay is a cautionary tale for all writers. By tying his thesis to a simplistic conspiracy theory, even an able and insightful thinker such as Hudson will falter. In history, simplistic narratives founded upon dualistic explanations are rarely accurate. History is complex, because humans are complex, and history is the account of what humans have done, thought, and said through time. Manichean dualism, at best, can only convey a distorted misrepresentation of reality. The financial and economic history of America is far more complex and nuanced than Hudson’s simplistic and dualistic model describes. When the data and the model disagree, it is time to build a new model.
The views expressed at AbbevilleInstitute.org are not necessarily those of the Abbeville Institute.
Is Hudson the same economist that is 87 years old?! I’m not being ageist because I am in my 8th decade, but come on man, NOW he comes up with this ‘revelation’? Where ya been Mike? Of course, Hudson is a Yank. The anti-Southern bigot mind virus – or whatever infects the brains of these characters – just never goes away. Hudson, clearly IMO, is another example of The Puritan Problem that Dr.’s Livingston, Wilson, McClannahan, and numerous others have informed us about. It makes me wonder which ‘Progressive billionaire, NGO, ‘Think Tank’ paid him to write such drivel. At least it’s a sign we must be winning, otherwise there’s no need for such propaganda, particularly these days. It’s a 250 year old C-O-N-spiracy. I’m ROTFL. Thank you Dr. Devanny for posting this. You made my day.
Excellent! Thank you.
Re: ‘John Taylor of Caroline, “if Congress could incorporate a bank, it might emancipate a slave.” ‘ …The profound Taylor was focusing on the absence of Constitutional authority for the Federal govt to incorporate bank. If Congress could ignore the Constitution in that way, it could do anything, even rob citizens of their property. This was at a time (~1816) when citizens in almost all states still owned slaves. So Taylor was in no way promoting slavery, but rather appealing to the interests of the people of his time in the interests of preventing what became the extremely corrupt 2nd Bank of the US.
So Hudson’s one “receipt” is bogus.
Great point ‘J’.
how long were northern ports aggressively involved in the international slave trade while desiring centalized banking?