What the hell was all that supposed
to mean?
I know I’ve posed this question
(or some variation thereof) more than once over the course of the last year
(has it been a year?), but it’s one that I’m sure anyone who is gracious enough
to take the time to read my scribblings asks with not inconsiderable frequency.
In this case, as I begin the 13th in a series of posts at times only
theoretically about the same topic, some degree of puzzlement would seem
abundantly justified. More than once I wondered myself what it was I was
driving at. Rest assured I do have a point, and one which I hope I’ll be able
to clear up and expand on over the course of the next few paragraphs.
I hope.
If there was one thing I could
point to, one idea that this months-long study of central banking in the early
United States caused me to think of, it would probably have to be the notion of
historical progress. There is, I think, a perception in mainstream Western
culture that history is basically a narrative of progress. As we, the human
species, move through one era after another our understanding of the world
increases, becomes more complex, and allows us to explore and build and create
new and better (note emphasis) ways
of living, communicating, and basically existing. This plays out in the very
mundane but recognisable association of things that are more recent with a
quality of superiority (the newer the better, essentially). Without going into
depth as to why this is (not being a psychologist, anthropologist or
sociologist), I think it’s fair to say that it’s an idea the majority of people
in the West hold to be true on some level, conscious or otherwise. Consequently
when most people who live in what could be considered the Western World look
back on their own history, rare though I feel such occasions are, they tend to
view events in terms of a logical progression from bad to good or ignorance to
knowledge. As comforting as this notion is, perhaps because it helps creates an
understanding of ourselves as being at the pinnacle of human civilization, it
is fundamentally bad history.
As your average historian will
tell you (as they chuckle dryly to themselves over a glass of Chardonnay at a
dinner party you don’t remember why you agreed to attend), assuming that
history is a chronicle of the triumph of human progress assumes that “progress”
is inherently good and that good is inherently better or stronger than bad (or
evil, or ignorance, or whatever you want to call it). Historians love to say
things like this. Once you’ve overcome the urge to throttle the person who just
shared this particular revelation with you (in this hypothetical scenario I
just realized I've constructed) I invite you to entertain the notion that this
theoretical historian has a point. If we think of history only in terms of the
triumph of progress and the banishment of ignorance, how do we explain the loss
of scientific and philosophical knowledge that followed the collapse of the
Western Roman Empire? Of the witch burnings that accompanied the emergence of
the European Renaissance? Or the rise of the Third Reich? Easy though it might
be to respond that all of these supposed historical “errors” were eventually righted,
the question of how they came about at all, presupposing that history is a narrative of progress, remains to
be answered. In truth there isn’t really a satisfying answer because the basic,
underlying assumption is flawed. In the simplest terms history is not a record
of progress, but rather an attempt to understand why and how the events of the
past occurred the way that they did. Sometimes there are trends; sometimes
certain ideas seem to catch on, gain strength, or rise to prominence. What’s
important to understand, however, is that the reason these ideas appear to
succeed is not because they are intrinsically good, but rather for a multitude
of reasons having to do with time, place, culture, economics, religion,
diplomacy, warfare, and who knows what else.
But I digress.
The reason that the topic of
corporations in the early United States caused me to think about the myth of
historical progress is because of the way the relationship between the American
government and central banking over the course of the first half-century of the
nation’s life belies the existence of a simple narrative of a to b, ignorance
to knowledge. The fact that not once but twice the United States government
chartered a central bank, only to turn against the idea and hasten its demise
demonstrates a more complicated series of forces at play than mere progress
alone. Rather, what appears when taking into consideration the history of
American corporations between the 1790s and 1830s is a somewhat more cyclical
than linear relationship. What I mean is the acceptance or rejection of
corporations during this period in the early United States seemed to ebb and
flow in two distinct waves. One occurred between the 1790s and 1810s, when
Federalist economic policies that favored corporations as a means to distribute
the responsibility and cost of government initiatives gave way to Republican
suspicion of corporate privilege and the growth of monopolies; the other
between the 1810s and 1830s, when Republican acceptance of corporations as a
useful, if easily abused, tool of state policy transitioned into Democratic
distrust of limited corporate accountability and fear for the corrosion of
America’s republican sensibilities. These two waves are connected, share many
of the same figures, but combined they don’t necessarily represent a larger
trend or movement towards some inevitable future wherein the superior value or
idea won out. Rather, they are by-products of a larger, messier process whereby
the political and cultural identity of the United States of America was created,
transformed, broken apart and reconstructed over the course of the nation’s
first fifty years of existence. Central banking and corporations in general
were a part of this process; studying them helps us to understand some of its
contours.
That being said, thinking back to
the previous summer when a friend asked me what the Founding Fathers had to say
about corporations I now feel able to answer. I would respond, first and
foremost, that they had different things to say at different times, and that as
with any topic under the sun there was really never much of a consensus among
them. James Madison went from helping lead the charge, along with his friend
and collaborator Jefferson, against the First Bank of the United States during
the latter’s presidency (1801-1809) to promoting, after 1816, a rigorous
economic program at whose centre was what would become the Second Bank of the
United States. He was not alone in this, and between Jefferson, Hamilton,
Madison, Washington, Adams (John and John Quincy), Gallatin, Clay and Jackson
there existed a spectrum of opinion that stretched from full-throated support
for central banking and corporations to intense, almost paranoiac suspicion of
their undemocratic aspects. But of course the study of history is so often an
attempt to identify and explain the significance of trends or patterns, and the
research I’ve delved into lo these many months has turned up its fair share.
While I reiterate that opinions
as to the worth of corporations varied greatly from one Founder to the next I
would also grant that there seemed to exist a general consensus of opinion at
any given time as to the philosophical underpinnings of corporations and how
they actually functioned. Alexander Hamilton, founder of the First Bank of the
United States and Federalist partisan extraordinaire, evidently viewed
corporations through much the same lens as the British ministers he so admired,
as vehicles that permitted private wealth to be put to use in the achievement
of public ends. They were admittedly imperfect – in terms of granting
privileges, even monopolies, to the few – but they at least managed with proven
success to channel the avarice seemingly inherent in human nature towards
constructive, socially beneficial end goals. To this Presidents Washington and
Adams seemed to agree, for between them they had little to say concerning the 1st
BUS and the terms under which it operated. Jefferson, as I hope I’ve made
clear, was far less sanguine.
The Sage of Monticello was quick
to point out all of the ways chartered corporations broke with established
legal conventions and effectively helped create a “moneyed class” of exclusive
shareholders. To his thinking the negative aspects of granting incorporation to
small groups of investors almost always outweighed whatever benefits the
resulting corporate entities might have offered as tools of government. That
being said, his utilitarian streak seemed willing to grudgingly countenance the
existence of small, state-chartered banks meant to meet the financial needs of
farmers, entrepreneurs, and planters like himself. So long as these
institutions didn’t dominate the state governments that created them, and so
long as they were allowed to proliferate and compete in such a way as to
prevent the formation of a monopoly, Jefferson allowed that they had a useful
purpose to serve. Caveats aside, this admission demonstrates that even radical
Republican Jefferson agreed in principle with radical Federalist Hamilton that
corporations, properly regulated, could usefully contribute to the general good
of American society.
The decentralized, Jeffersonian
take on corporations was brought the forefront of American political culture
upon Jefferson’s ascendance to the highest office in the land in 1801. Under
his auspices, and with the moderating influences of cabinet secretaries Madison
and Gallatin, Hamilton’s 1st BUS was weakened and the growth of
state-chartered corporations exploded. In addition to preventing the emergence
of monopolies and ensuring that more Americans had access to useful services,
the multiplication of corporations that accompanied Jefferson’s presidency
carried additional ideological significance. By widely distributing corporate
privileges, formerly intended to be exclusive state-granted largess, state
legislatures in the Jeffersonian era helped republicanize the American
corporation in a way that preserved the egalitarianism so many Americans
regarded as the cornerstone of their revolution. Though the 1st BUS
was permitted to wither away and ultimately perish in 1811 under Jefferson
successor Madison, the orthodox understanding of corporations remained largely
state-focused (providing a means for governments to achieve what they could not
afford in a way that was also philosophically satisfying).
The War of 1812 and its
accompanying financial demands stretched the capability of the Jeffersonian
state-banking network to support a major economic undertaking to the breaking
point. The resultant chartering of a Second Bank of the United States in 1816,
along with a handful of similar centralizing reforms, represented a fundamental
shift away from the Jeffersonian program of limited government. Nevertheless, I
would argue that the basic understanding of corporations held by President
Madison and his supporters remained fundamentally the same as before the war.
Namely, they viewed corporations as tools by which a state implemented policy.
Whether those corporations held a national charter, like the 2nd
BUS, or a state charter, like the Bank of Pennsylvania, the barrier for their
existence was whether or not they contributed something useful to society. If
they did, then the privileges they enjoyed and the profits they generated were
justifiable. This outlook was not substantially challenged by an American
presidential administration until the ascendance of Andrew Jackson in the years
after his first electoral victory in 1828.
Where Presidents Monroe and Adams
the younger had been content to more or less leave the 2nd BUS to
its own devices (even after the disastrous Panic of 1819), Jackson made it
known within his first year in office that he was not satisfied with the terms
under which the Second Bank operated. To his thinking the 2nd BUS
was unconstitutional, grossly out of step with republican values, and had
failed to anchor a strong national currency or facilitate economic growth. On
the basis of these objections Jackson began a years-long crusade against the
Bank, during which he vetoed its re-charter and time and again offered
criticisms against the power it possessed, the economic influence it wielded,
and the accountability it lacked. During this contest between Jackson and the
Second Bank, which Jackson ultimately won, Old Hickory put forth a conception
of the relationship between corporations, the American people, and their
government that represented a fundamental break with the prevailing wisdom of
every administration that had come before.
Rather than view corporations as
tools of government policy – a bank that could provide a stable currency or a
ferry company that facilitated transportation and commerce – Jackson claimed
that they constituted nothing more than a means by which the American people
could exercise their right to earn a living. Banking, he specified, was a
business like farming or manufacturing. If individual Americans wished to pool
their resources and form a corporation in order to pursue said business it was
their right to do so, just as it was the duty of government to put in place the
necessary regulations in order to ensure that no harm came to society at large.
This re-articulation of the meaning and purpose of the American corporation
carried with it two significant implications. The first was the
de-legitimization of public corporations like national banks. If it had never
really been a privilege of government to create corporations as a means of
accomplishing desired objectives, as Jackson asserted, then the existence of
corporate entities that mixed public and private aspects were fundamentally
illegitimate. Corporations, Old Hickory maintained time and again, were private
entities; giving them public responsibilities and access to public resources
only served to create opportunities for corruption and malfeasance. The second
was a new perception of corporations and commerce within the context of the
rights and responsibilities of the American people. By shifting the understanding
of corporations from serving the will of government to serving the will of the
people, and asserting that the pursuit of commerce was a basic right, Jackson arguably
helped lay the foundation of the now seemingly unshakable bond between republicanism,
democracy, and capitalism that pervades the modern United States.
This is, of course, just a
theory. I have no doubt that a great deal more occurred between the late 1830s
and today that contributed meaningfully to the shift in perception I herein attempted
to describe. That being said, I do believe that Jackson’s express views
represent a significant break in the way corporations were seen by members of
the American political elite during the early years of the United States. To
many I’m sure the notion that the rise of Andrew Jackson represents a
fundamental shift in American political culture will illicit little more than a
yawn and a metaphorical pat on the head. I mean to say that it’s well-trod
territory. Still, there it is. I hope I managed to present what I’ve found in a
way that was clear to my readers and left them more informed than when they
arrived.
And, of course, I hope it was at
least the slightest bit enjoyable. For my part, I found this experiment in
longer-form, narrative-driven reflection to present an interesting challenge. Having
to transition from one document to the next while preserving context and
presenting potential avenues of comparison reminded me a great deal of my
schools days and the reams and reams of term papers I churned out over the
course of five years. That is to say, it was nostalgic and also slightly
horrifying.
Such is life.
Thank you for you kind
indulgence. Though I didn’t reference it directly, a perusal of Jackson’s
Farewell Address would yield to the curious reader a handy summation of most of
the Old General’s views on banking and paper currency.
It can be found here: http://en.wikisource.org/wiki/Andrew_Jackson%27s_Farewell_Address
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