What’s important about the
presidency of Andrew Jackson, in the context of a discussion about corporations
in the early United States as in any other, is the theretofore unexplored
perspective it brought to bear on what had previously been the exclusive
province of statesmen. The so-called “democratization” of America that Jackson
oversaw in the late 1820s and into the 1830s represents a fundamental turning
point in the history of American political and social life. Those who had
previously been thought of by the nation’s elite as a disorganized,
ill-informed, and easily manipulated rabble – the American citizenry – became
the “common people.” Egalitarianism became the rule of the day; lack of
experience became a virtue. Men who had in previous generations attempted to hide
their lowly origins and become “gentlemen” began to celebrate their
provincialism, their coarse manners and plain dealings as symbols of pride and
guarantees against corruption. Jackson oversaw this transformation because he
was a part of the rabble, the mass of Americans who had followed the proposals
and initiatives of the Founders since the years of the Revolution but were
rarely given cause to lead themselves.
Accordingly
Jackson’s opinions on the need for a central bank and on corporations in general
were much more in line with that of the average American than those of any of
his predecessors as president. He did not always think in terms of national
priorities and national outcomes; of international trade or commerce or
economic trends. He could be provincial. He could be short-sighted.
Part-ideologue and part pragmatist, he believed most strongly in his lived
experiences and his own deep-seated convictions. In this way he was so like the
people whose loyalty he courted, and they returned it more deeply and more
powerfully than had ever been possible with Madison, Jefferson, or even
Washington.
I
say all of this because I think it’s important to understand that Jackson’s
perspective on corporations was less a break with continuity than a kind of
inversion. He did not build on the groundwork laid by Hamilton, Jefferson and
Madison – who between them established, denounced and re-established central
banking in the United States – but expressed and rearticulated the experiences
of the general American population. He experienced all that his predecessors
had – the fat and thin years in the 1790s, the near-breaking point of the War
of 1812, the Panic of 1819 – but from a different point-of-view. He knew from
personal experience what the 1st and 2nd BUS had done for
America and Americans, and in 1830 seemed finally to be in a position to turn
those experiences into national policy.
Between the delivery of his first
message to Congress in December, 1829 and its follow-up in 1830 Jackson seemed
to have re-evaluated his previously cautious criticism of the 2nd
BUS. His Second Annual Address to Congress in December of that year was much clearer
in its condemnations of the central bank and the need for a potential
replacement than its predecessor. In it Jackson again brought up the topic of
the Second Bank in the context of its re-charter, not due for a further six
years. The consequently pre-emptive nature of the debate the President appeared
eager to spur could evidently be excused by what he claimed were the, “dangers
which many of our citizens apprehend from that institution as at present
organized.” Beyond the criticisms or concerns with which the American people
had been inclined to view the central bank in 1829, matters of opinion both, by
1830 they apprehended dangers. Matters, it seemed, had escalated. Jackson
followed this by framing the modification or replacement of the 2nd
BUS in terms of the, “spirit of improvement and compromise which distinguishes
our country and its institutions.” Rhetorically it seemed like Jackson was
attempting to recapture the initiative. “Improvement and compromise” were
doubtless among the terms that Secretary Hamilton deployed in 1791 while
attempting to convince Congress and President Washington that a central bank
was necessary to the growth and stability of the United States. The Bank was an
improvement because it would allow the federal government to borrow money and
expand existing infrastructure, as well as create a stable national currency
capable of funding economic growth in manufacturing, agriculture and trade. The
Bank of the United States was also a compromise; Hamilton made no secret of its
shortcomings, or the fact that it would greatly enrich a small number of
stockholders above any other single person. Yet, in 1830, President Jackson
attempted to reframe concepts like improvement and compromise. Declaring them
virtues particular to the American genius, he set them against the 2nd
BUS. To improve and compromise is, colloquially speaking, to be progressive,
constructive, prudent or reasonable. As Jackson seemed increasingly eager to
convince his fellow Americans, the Second Bank was none of these things; it was
corrupt, irresponsible, static and ultimately destructive of democracy and its
attendant values. He may not have been prepared to say exactly that in 1830,
but he seemed at least to be planting the seeds.
That being said, and taking his
word for it, Old Hickory seemed not to be completely against the idea of there
being a central bank. Indeed, though his concerns about the way the Second Bank
of the United States operated were both constitutional in nature and responsive
to those of his fellow citizens, he seemed willing to concede that the Bank did
perform certain useful functions. The second half of the above quoted passage,
after the words “and its institutions” reads: “it becomes us to inquire whether
it be not possible to secure the advantages afforded by the present bank
through the agency of a Bank of the United States so modified in its principles
and structures as to obviate constitutional and other objections.” Significant
though these objections where, it seemed President Jackson agreed at least that
the 2nd BUS afforded certain “advantages.” Furthermore, he was
willing to agree that these advantages were important enough to the public good
of the United States as to attempt to modify the Bank in such a way to ensure
it could continue to provide them.
This is where things get
complicated.
Because it seemed that President
Jackson’s solution, so revealing as to his beliefs about corporations and their
purpose in American life, was to alter the 2nd BUS in such a way to
make it no longer a corporation at all. Rather, Jackson posited, an American
central bank should have been a branch of the Department of the Treasury,
capable of holding both individual and government deposits but not of making
loans or owning property; a collector of taxes that could sell bills of credit
as a means of exchange, but would have no shareholders, no debtors, and few
officers. This altered institution would have been something altogether
different than the 1st or 2nd BUS; less a bank than a
provider of miscellaneous financial services. These changes would, Jackson
argued, allow the central bank to no longer violate certain constitutional provisions
and render it incapable of operating, as the existing Second Bank presumably
did, on the, “hopes, fears, or interests of large masses of the community.” Doubtless
this passage was intended to condemn the way the Bank combined its privileged
position as an arm of government with the profit-making motives of its shareholders.
As a government department it stimulated the economy by offering loans and as a
private corporation it did so to the fullest extent possible, at times without
considered the long-term consequences. In Jackson’s defence, the Panic of 1819
was at least partially the result of a dangerous overextension of credit on the
part of the 2nd BUS and its various branch offices. While that
institution can hardly be blamed for engineering the early-19th-century
land rush that created such a serious demand for large quantities of paper
currency to begin with, officers of the Bank proved themselves exceptionally
capable of and willing to exploit it.
Interestingly, Jackson followed
up what appears to be a strongly anti-corporate position with an offhand
endorsement of state banking. After stating that separating the functions of
the Second Bank of the United States from its status as a corporation would
neutralize many of its faults, Jackson wrote that, “The States would
[therefore] be strengthened by having in their hands the means of furnishing
the local paper currency through their own banks.” This passage seemed not to
be delivered with any kind of emphasis, and in that sense it – paradoxically –
is rather emphatic. It should come as no surprise that Jackson was eager to
increase the power of the states at the behest of the federal government. The
old general had been a states-rights advocate since his days as a legislator in
the 1790s, and had been swept into the presidency in 1828 on a tide of populist
discontent with the moneyed elite that had traditionally dominated American
politics. What is of interest is that Jackson apparently considered state banks
to be so closely tied to state sovereignty that to his thinking weakening
federal control over the former would directly benefit the latter. This is
significant for at least two reasons.
One is that it indicates
Jackson’s endorsement, implicit or explicit, of the conception of corporations
as extensions of the sovereignty that creates them. Chief Justice Marshall expressed
quite clearly in McCulloch v. Maryland that
when the United States Congress creates a corporation through an act of
legislation (as it had with the 2nd BUS in 1816) it was engaging in
a transfer of sovereign power to said corporation. In essence a corporation was
a means by which a government could achieve a desirable end; a mechanism for
making use of state power that was funded by private wealth. Jackson did not
echo this claim in his Second Address to Congress, loath as I’m sure he would
have been to publically agree with the venerable Chief Justice on anything.
Nevertheless, he appeared to approve of the same basic concept. Lessening the
power of the 2nd BUS would strengthen the power of the states, he
wrote, because it would allow them to independently exercise a specific
sovereign power (in this case the issuing of paper currency). Said exercise
would be facilitated through the use of local banks – “their own banks,” as
Jackson put it. State banks were thus extensions of state power because they
allowed state governments to accomplish something they had the sovereign right
to do but lacked the means to realize. Disagree though he might with the Chief
Justice over the scope of this principle’s application – state or federal –
Jackson and Marshall apparently agreed that corporations were in essence tools
for the expression and extension of sovereign power.
The leads me to the other
significant connotation of Jackson’s offhand endorsement of state banking. The
most obvious conclusion to draw from the observation that Jackson was critical
of a national bank but supportive of state banks is that he perceived there to
be a difference between the two. In truth, there were. In the same way that a
state government was different from the federal government – in terms of the
limits of their respective sovereignty – the scope of the autonomy they enjoyed
and the nature of the power they exercised separated state banks from national
banks in very real ways. A state bank, like a state government, flowed out of
the sovereignty of the people whose lives it most directly affected. The people
of, say, North Carolina went to the polls and elected a government to represent
their interests, and that government in turn chartered a corporation (in this
case a bank) in order to see to those interests. Theoretically the government
of North Carolina had nothing to fear from the Bank of North Carolina because
said government had ensured the bank charter it was granting contained nothing
potentially offensive or destructive to its own authority. The resulting state
bank was based in North Carolina, drew its legitimacy from the government of
North Carolina, and relied on the legislators selected by the people of North
Carolina to renew its charter a some future date. A corporation of this nature
likely met with Jackson’s approval because it both provided a set of useful
services and was ultimately controllable.
A national bank was a somewhat
more complicated proposition. Because they were charted by the federal legislature
the various iterations of the Bank of the United States drew their legitimacy
from the sovereignty possessed by the federal government. This sovereignty was
supposedly drawn from the legitimacy the federal government enjoyed at the
behest of the general population. Unfortunately for many advocates of national
banking, federal sovereignty was not something many states-rights advocates
well into the 1850s and 1860s were convinced existed at all. The states
possessed real authority and legitimacy, they claimed, which was delegated to
the federal government for the purpose of pursuing certain national priorities.
The federal government thus possessed no sovereignty of its own, and the states
must always have the final say in the event of a potential conflict. A national
bank was thus on shaky philosophical ground in the minds of men like Jackson
and his allies because the sovereignty of which it was an extension was not
self-contained or autonomous but was a conditional delegation made by the
various states. Said national bank should thus have been beholden to the states
in the same way the federal government was. Experience, however, had proven
otherwise.
Chief Justice Marshall’s decision
in McCulloch v. Maryland made it
clear that because the 2nd BUS was the creation of a federal statute
it was protected from state interference by the Supremacy Clause (Article VI)
of the United States Constitution. This created a supremely troubling situation
for advocates of states-rights and strict constructionism. The Second Bank of
the United States was chartered by the United States Congress, an assembly of
legislators elected to represent the interests of voting citizens from each of
the (as of 1816) 19 states. If all of the Congressmen from, to repeat an
example, North Carolina had voted against granting the Second Bank’s charter in
spite of the fact that the motion passed with sufficient support to become law,
the citizens of that state would still be bound by said bank’s authority though
none of their representatives supported it. If the government and people of
North Carolina wished to alter some aspect of how a bank chartered within their
own state functioned, or wished to deny said bank the privilege of re-charter,
it would be entirely within their power to do so. If, however, the people and
government of North Carolina wished to alter or abolish the 2nd BUS,
under whose monetary authority they were ultimately beholden, they could not do
so without a sufficient level of support from other states. The Second Bank
(and the First, for that matter), thus remained in practice beyond the reach of
the sovereignty possessed by any one of the states at the same time that it
exerted regulatory authority over the banks they themselves had chartered. That
the Second Bank was also a thoroughly unrepresentative institution whose
directors and president were elected by shareholders rather than the general
voting public no doubt further compounded the ire felt towards it by Jackson
and his supporters in the Democratic Party.
To be fair, state banks were
similarly undemocratic institutions; they too had directors and shareholders
who were motivated by dividends and profit margins. Jackson was evidently
willing to overlook these facts, however, because the amount of damage state
banks could do, and the size of the niche the state had carved out for them, were
necessarily limited. In this sense I believe Jackson did possess a utilitarian
streak. He understood as clearly as any of its supporters that corporations
like the Second Bank did serve a purpose. Without precipitously raising taxes –
another perennial bogeyman of strict-constructionists – government simply could
not afford to tackle every problem that fell within its authority. Chartering a
corporation that could combine delegated sovereignty with private wealth was a
proven solution, provided there were reasonable limits to the power it
exercised and the autonomy it enjoyed. By Andrew Jackson’s reckoning, those
that applied to the Second Bank of the United States were thoroughly
unreasonable.
And so,
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