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Section the Fifth: BANKING - John Taylor, An Inquiry into the Principles and Policy of the Government of the United States 
An Inquiry into the Principles and Policy of the Government of the United States (Fredericksburg, VA.: Green and Cady, 1814).
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Section the Fifth
I Shall now proceed to the examination of banking, in the face of a prepossession, which has seized, like a panick, upon the publick mind. If it is a limb of the aristocracy of the third age, it cannot be attached to the body of our policy without some dismemberment to make room for it. We know that banking made no part of this policy, state or continental, originally; and that now, like the tail of a Cape sheep, it constitutes its most conspicuous member.
Priests have at all times performed acts, which enrich themselves, and are by the laity believed to be miracles. Had it been your lot, reader, to address an audience composed of these priests and their laity, to prove that such acts were not miracles, what would you have considered as the most stubborn obstacles against success? You answer, the interest of one party and the superstition of the other. And yet neither this interest nor superstition, furnish fact or argument as to the truth or falsehood of these miracles, or the justice of the tax they inflict. Ought either then to suffocate inquiry and truth; and would you not pity the unhappy blindness or vice capable of fostering an errour so gross?
Reader, I only ask you not to become yourself this object of commiseration. Neither prejudice nor avarice will conduct you to truth. Refute the arguments which are refutable; but yield your conviction to those which you cannot refute.
Premising, that all the objections against debt stock or paper systems, apply with equal, and often with accumulated force against banking; and that the latter subject is considered separately, not as being of a very different nature, but for the sake of perspicuity; we will enter directly upon it.
Had banking been called ‘a paper feudal system,’ and had the barons proposed to take it by that denomination as a reimbursement for their abolished tenures, it might have been fairly weighed against the landed feudal system, to estimate the effects of the exchange. In that event, it would have been clearly seen by the people, that the money to be collected by ‘a paper feudal system’ for their lords, was the representative of the services rendered under the landed feudal system; and that whatever convenience they might derive from altering the mode of payment, the payment itself would remain. Money, or a circulating medium of any kind, in its quality of representing property and labour, conveys property and labour to its possessor; and if A, entitled to the menial services of B, contracts to receive of B their value in money, though B may prefer this mode of payment, he must still perform the same value in labour to acquire the money it is commuted for. Such bargains were often made between the kings and the people of England, in the sale and purchase of vexatious prerogatives. If then a nation bestows a pecuniary income on an order of nobles or of bankers, it conveys so much of its services to this order as the money represents; nor is there any difference between rendering the services in kind, and in the pecuniary commutation, except in the superior convenience of the latter mode; since the services must be still performed. If a great nation owed its personal labours to one thousand individuals, so much excepted as might afford a bare subsistence, it would mend its condition in a small degree, by purchasing them out for an annuity in money; but not in a great one, if it paid to the order the full value of them. As money is a vehicle for retaining, it is also one for conveying the most oppressive usurpations, and possesses a complete capacity for re-enslaving nations indirectly, after an accession of knowledge or a division of property, has liberated them from the direct feudal slavery. This treacherous quality of money was perceived by the Spartan legislator, without discerning any remedy for it, but that of destroying its inestimable benefits. It is clear that nations, by giving any species of currency to an order or interest, will give it a title to every species of service from the multitude; that the revival by law of a title to such services through the intervention of a currency, is a substantial revival of the feudal system; that a legal currency possesses a power of destroying, with wonderful rapidity, the division of property which destroyed that system; and that without a very considerable division of property, a free government cannot exist. The remedy for these evils, which Lycurgus did not discern, is to prohibit legal distributions of money or currency, those excepted rendered unavoidable by government, and to leave their distribution to industry.
Even the precious metals have furnished to the contrivers of pillage and oppression a medium for extracting indirectly from nations, a far greater proportion of their labour, than they could ever be made to pay directly by the feudal or any other regimen: but the impossibility of multiplying these metals at pleasure, inflicted a considerable check upon this fraudulent perversion of so useful a representative of property. 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 labour 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 labour and property were transferred by money. This plain truth, awakened the exertions of avarice and ambition, to deceive the vigilance of labour and industry: the objects of pillage. The first intricacy with which they endeavoured to hide their design, was woven of indirect taxes travelling in mazes; the second, of loaning obscured by the mist of futurity; and the 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. The defence of banking, ‘that its enormous annual acquisitions travel to it from some terra incognita, and are not drawn from the labour and property of a nation,’ shall be first considered.
The common nature of bank debt and funded debt, has attracted the common appellation, stock. Existing together, their price will fluctuate in relation to national adventures, because the national ability to pay, is coextensively the sponsor for each. Peace and prosperity cause bank and funded stock to rise in price; war and adversity, cause both to fall. Both are heroes and patriots in safety, and cowards and traitors in danger. As the state of the nation affects both in the same way, both must affect the state of the nation in the same way. If stock did not act upon the labour and property of nations, their adventures or wealth, could not react upon stock. The reaction is the same as to both funded and bank stock.
If national adventures or measures can raise or diminish the value of bank stock, it is under the same inducement as debt stock to influence a government. Therefore one hundred millions of bank stock, will acquire as much of this influence, created by laws and not by constitutions, as one hundred millions of debt stock. Its sole object is to induce a government to enable it to tax the nation, in an indirect and complicated mode, to enrich itself; whereas the chief design of our constitutional policy, is to subject the government to the national influence to prevent this wicked deed. Had there been no debt stock in England, but an equal value of bank stock, that alone would have influenced the government to govern in the same mode, as bank and debt stock united induce or compel it to do. The same interests which now exist, would have existed in that case, namely, the stock interest, the government interest, and the national interest; and the same union between the two first, would have produced the same effect to the last.
Debt stock could not permanently receive its interest, where there was no labour; if bank stock could not permanently receive its dividends, in the same case, those dividends, however indirectly collected, must also be paid by labor. As the fund necessary for the subsistence of the one, is necessary for the subsistence of the other, it follows that they are of the same nature, and must subsist by the same means; and that neither debt stock nor bank stock can be fed, except by taxation, direct or indirect, simple or complicated.
The degree of taxation produced by these engines, is capable of being ascertained with considerable correctness. Debt stock gives to a nation or its government, one hundred pounds of money, for an annuity of five or six pounds. Bank stock receives an annuity of ten or twelve pounds, including dividends, expenses and perquisites of directors, for keeping its hundred pounds. Which is the highest tax upon a nation—five millions annually for one hundred millions received; or ten millions annually on one hundred millions of bank stock, for nothing received? Can the latter tax be concealed by its enormity, as a high mountain is hidden by clouds?
The custom of buying the privilege of banking, is an evidence of its nature. Unless it had been a tax, it could not be bought, nor could it be sold. The title by which a government sells, is that of national agent, selling national property; and the purchaser is enabled to buy, by a reimbursement of his purchase money with a profit. Sale and profit imply property; how is it reached in this case, except by taxation?
The ingenuity of beguiling a nation, by bribing it with a part of its own, strengthens this observation. Suppose a thousand stockjobbers, with the munificence and patriotism of stockjobbers, should say, ’society, create ten millions of stock; you may keep one fifth of it, as payment for four fifths which you shall give us.’ The property of stock being to tax, the proposition simply is, ’society, if you will permit us to tax you at eight hundred thousand dollars a year, (computing bank dividends at ten per centum,) you may tax yourselves at two hundred thousand.’ As bank stock holders retain their stock, they do not lend it to a nation as a compensation for taxing it by means of that stock. These two hundred thousand dollars, are ingeniously used to dazzle the multitude, so as to conceal from them, that they pay eight hundred thousand to individuals, for the privilege of taking two hundred thousand from themselves, and bestowing it on the government. To be gulled by false prophecy or pretended miracle, is known to be within the capacity of human ignorance; but a national inability to count is a real miracle. Corporate rights to tax the nation in a great sum, for the sake of the nation’s exercising the right of taxing itself in a small one, are like bribes to a government for permission to plunder the people, as practised under the Turkish policy.
The fact ‘that bank stock is a tax gatherer,’ is only controverted by the assertion, that its dividends arise from the voluntary acts of individuals. ‘Voluntary and individuals.’ Precisely the terms invariably resorted to, whenever the object is to varnish over tyranny, pecuniary or personal. Innocent men are imprisoned for life by tyranny, and a nation is fleeced by monopoly and indirect taxation; ought the indignation of justice to be quelled by being told, that these calamities only fall on individuals?
Most taxes, by which nations have been enslaved, are voluntary. By forbearing to drink liquors of any kind, or to make a deed, will, bond or bill of exchange, several taxes in England may be avoided; strictly then, their payment may be called voluntary; yet by these and similar taxes, England is made the property of a monied aristocracy; and such taxes were felt in the United States as a regular progression towards the same system. Did neither of these countries sustain an injury, because the injury was inflicted throughout the medium of voluntary taxation? Is the sale of church paper, for enriching a clergy in this world, under pretence of excusing the sins of the buyer in the next, innoxious to mankind, because the traffick is voluntary?
Whether the ignorance of the payer that he is taxed, so as to diminish or destroy the responsibility of a government to a nation, is a good or a bad argument in favour of indirect or voluntary taxes; it does not at least justify the imposition of such taxes for the sake of the argument: it does not prove, supposing it is a good stratagem to keep the people ignorant of the amount paid, that this amount ought to be given to corporations or private individuals; it does not justify the establishment of chambers of taxation, entrenched in impenetrable secrecy, with power to commission and scatter tax gatherers wherever they please. Whatever therefore can be urged in defence of indirect taxation for the benefit of a nation, leaves the collections made by banking for the benefit of a chartered company, as defenceless as before.
Admitting then, that the tax paid to banking, arises from the voluntary acts of individuals, it is by no means an argument in its favour, stronger than the voluntary purchases of church paper or indulgences, in favour of that practice. The question would still remain, whether it is wise or just to suffer the passions of individuals to be used as channels, for drawing the wealth of a nation into a few hands.
But it is denied that the profit of banking belongs to the voluntary class of taxes; and in the course of the following observations, we shall urge sundry reasons to shew, not only that it is a tax, but an inevitable tax.
A, whom we will consider as representing the whole class of borrowers from a bank, must acquire a profit upon the use of the paper, equivalent to the interest he pays; otherwise he could not borrow. From his continuing to borrow, it is evident that he only advances the tax, and that it is reimbursed. This regular result is of the nature of fate or necessity, and not of free will or discretion. The residue of a nation composes the class, throughout which, A, the borrowing class, circulates the paper, and it is unable to exercise any volition, adequate to the avoidance of his reimbursement.
Excluding the idea of the class of borrowers, 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.
It is asked, whether the borrowing class, may not forbear to borrow, and whether this power of forbearance, is not an evidence, that the profit or income collected by banking, proceeds from the voluntary act of individuals. 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, although he never borrowed or used it. Such sufferers do not exercise the least formality of volition.
That the profit of banking is both a tax and an inevitable tax, is asserted by stockholders themselves, and the legislatures which grant charters. The wealth collected from a state by bank paper issued without it, is called a tribute; and the remedy resorted to is to establish the tribute at home. Tyranny, and especially pecuniary oppression, has been generally most tolerable, the farther off. It is certainly true as bankers assert, that a banking corporation in Maryland can tax Virginia by circulating its paper within that state, and of course it is also true, that a banking corporation in Virginia, can tax Virginia by the same means; the questions are, which can carry the oppression to the greatest extent; the domestick or foreign corporation; and if the former, whether a greater, will remedy a less evil?
The argument in favour of repulsive banks, coincides in other points with the ideas we have expressed. Few or none of the notes coming from distant banks, admitted to have collected a tax in Virginia, were borrowed by the citizens of that state. Therefore, not the borrower, but the nation in which the notes circulate, pays the tax. If the borrower does not pay the tax, his will or pleasure that it shall be paid by others, does not make it a voluntary tax; nor entitle it even to that unsubstantial defence. As the circulator of the paper, he inflicts and enhances the tax for his own benefit. And the payer, not being the borrower, has no check over, or volition in relation to the tax. It will even be collected from individuals whom the paper never reaches, by its capacity to cause the value of property and even of coin itself, to fluctuate.
Those who create new banks, to protect one state against the calamity of bank paper, coming from another, also assert that bank paper is a blessing. Bold contradictions sometimes hide truth, as vehemency does cowardice. Will climate, or the names of stockholders have the effect of making bank paper sometimes a curse, at others a blessing? Then a tribute; now a mine of wealth? Sincerity, as a citizen of Virginia, wishing to introduce banks, after having truly urged that Virginia paid a tax to stock holders in other states, would have simply requested that the same individual tax might be transferred to Virginians. This would have brought the question fairly before the publick. Shall a tax be created for the sake of its expenditure at home? Shall we foster separate sinecure interests at home, because a contribution towards their support abroad, is an evil? And even these questions would have resulted in a very simple numerical calculation; namely, whether it would be wise to extract a revenue from the state, payable by all its citizens except about one thousand, who should receive it; in order to save half the sum, collected by citizens of other states, towards the payment of which these thousand also contributed? This degree of sincerity might reasonably have been expected of stock itself; but disinterestedness would have added, that the idea of one tax driving out the other, that is, of domestick bank paper, driving out bank paper issued without the authority of the state, was delusive. The extraneous paper, being possessed of the quality which collects the tax (currency or circulation) would continue to circulate and tax; and the remedy would therefore simply amount to an addition of a new tax to the old. Such will continue to be the effect of this remedy of opposing state paper to extraneous paper, until a state is saturated with tax. A country is saturated with debt stock, when it can no longer pay its interest, and with bank paper, when it can no longer pay its dividends. Whilst Virginia is able to pay the dividends of her domestick stock, and the same contribution heretofore collected from her by extraneous paper, one payment will not abolish the other, but both will be made; and the creation of a bank tax to expel a bank tax, only amounts to the ingenious idea, that one lash will cure the smart of another.
The real remedy against strange bank paper is as visible as light; but it would lead to discussions, which native stock feared to encounter. If bank paper is a tax gatherer, one state may prohibit the circulation of another’s paper, with as much propriety, as it could expel tax gatherers in the shape of men, commissioned by another. No disguise, change of shape, or new dress, can bestow a right to tax, where no such right exists. But native stock felt its dilemma; an expulsion of strange paper by law, because it was a tax, would have told the people by law, that native paper was also a tax. It preferred therefore the delusion of an opinion, that one tax would diminish another, as the basis of its own existence, to an inquiry, which might have terminated in the conclusion, that no legislature in the United States have a better right to tax their constituents for the benefit of banking corporations, than one state has to tax another state for the same purpose.
Into this inquiry, let us proceed; beginning with the right of Congress to tax the Union for the benefit of a bank corporation. Our arguments will be founded upon an opinion, that bank paper collects a revenue. Supposing its payment to be unavoidable, an apportionment by the census is required by our constitutional policy; allotting it to any other description of tax, a bank in each state, or some distribution of stock, is equally required by the mandate of uniformity; and both these constitutional principles are grossly violated, by a bank so located, as to enrich one state, and tax another. Considered as a non-descript species of revenue, no power to inflict it on the publick, or to bestow it on private people, is given to Congress.
In the appropriation, as in the apportionment or uniformity of revenue, will be found a limitation of the power of Congress. An unconstitutional mode of taxing, may inflict partial injuries upon particular states, but an unconstitutional application of revenue, may be ruinous to all. It is inconceivable that the constitution, whilst so cautiously providing against the first evil, should have overlooked the second. The loosest security against it, is deposited in a limitation of the revenue collected, to the ‘common defence and general welfare of the United States;’ and the right of Congress to appropriate a revenue collected by bank paper, for the defence or welfare of a corporation, is visibly beyond this wide definition.
Under the idea ‘of carrying the powers given into execution,’ could Congress have invested the parliament of England, with the privileges granted to the bank of the United States? Such a charter would have bestowed on England the object of her war upon us, revenue. In what part of the constitution is to be found a prohibition upon Congress to bestow a revenue upon the British parliament, or a power to bestow one on chartered companies? A construction necessary to invest Congress with one power must include the other.
Testimony applicable to the question exists without and within the constitution. A rejection of a proposal for empowering Congress to establish a bank by the convention, is the evidence without the constitution; and a special power to grant charters ‘to authors and inventors,’ is the evidence within it, uniting in a condemnation of the construction, which claims for Congress an unlimited power of bestowing revenue upon corporations, and literally forbidding that mode of doing it called banking. A special and limited power excludes the idea of a general and unlimited power, which includes the special one.
In most or all of the state constitutions, diploma, charter and corporation, are condemned as inimical to liberty, and as usurpations upon man’s natural rights. In none, is a power given to the legislature, to bestow a revenue of any kind at the national expense upon corporations.
The constitution of Massachusetts declares, that ‘no man, or corporation, or association of men have any other title to obtain advantages or particular and exclusive privileges distinct from those of the community, than what arises from the consideration of services rendered the publick;’ and that of Virginia, ‘that no man or set of men, are entitled to exclusive or separate emoluments or privileges from the community, but in consideration of publick services.’
The words ‘common defence and general welfare,’ twice used in the constitution of the United States, contain the principle advanced in the two last quotations. They are the exact contraries to ‘particular, exclusive or separate privileges or welfare.’
The constitutions quoted, literally enrolling ‘exclusive privileges and emoluments’ in the list of tyrannies, proceed to expound the words ‘publick services.’ These only are admitted to possess a legitimate title ‘to exclusive privileges and emoluments.’ Had legislators been left at liberty to extend these words to whatever they should deem to be publick service, they might have created and endowed with exclusive privileges and emoluments, a corporation for introducing monarchy, as well as for introducing the aristocracy of paper stock, under the idea, that it would serve the publick.
But their constitutional exposition is unequivocal. The privileges and emoluments allowed to publick services, are neither ‘inheritable or transmissible to children, descendants or relations,’ because ‘publick services’ being ‘in nature’ neither hereditary or transmissible, so exclusive transmissible privileges or emoluments were incompatible with the principles of liberty. This construction of the terms, by the instrument in which they are used, restricts legislative power by a definition, far short of an unfettered imagination, licensed to pronounce whatever comports with its fancy, its interest or its plots, to be serviceable to the publick. It unequivocally dissevers the privileges or emoluments allowed to publick services, from whatever may be sold, or transmitted to relations, like bank stock. And expounds these terms, as well as their equivalents, ‘general welfare,’ according to their original unsophisticated intention.
The governments of the union, Massachusetts and Virginia, have granted banking charters, conveying saleable, transferable and descendible exclusive privileges and emoluments; and have thus opened by precedent a way to every conceivable power, by usurping the mother of all powers, that of distributing wealth. This may be given to foreigners, whether plebeians, nobles or kings, and held both in peace and in war, as rewards ‘for publick services’ or ‘for common defence and general welfare,’ by bank ‘exclusive privileges and emoluments.’ The word ‘common,’ requires a membership with the community, and the king, nobility, clergy and paper aristocracy of England, holding bank stock in America, in a war between England and the United States, must therefore be considered, as rendering publick services, and advancing our defence and welfare, to bring the appropriation of money to their use by the bank law, within the meaning of this expression. If such fictions are able to overturn constitutional principles, the idea of a constitution capable of restraining legislatures, is itself a fiction.
It is admitted that this part of our reasoning is of little weight. If banking is a publick benefit, constitutional prohibitions ought not to deprive the publick of that benefit; only the constitutions ought to be amended to come at it. Banking ought therefore to be considered, as it affects nations morally and politically, and not by any verbal test. But it cannot be overlooked, that although banking was rejected and excluded by the framers of the general constitution; and although many eminent and learned men long denied to congress a power to incorporate banks; yet it has never been judicially questioned; and all the state legislatures have found it in the words ‘publick services,’ after congress discovered it lurking under the expression ‘general welfare.’ Individuals and entire parties, to a vast extent, have loudly reprobated, and calmly defended this power; and the folly or knavery of those who first represented it as an usurpation dangerous to free government, and afterwards seized upon it, ought to be a memorial to nations against reposing an excessive degree of confidence in parties or individuals; in judges or legislatures; in governments or patriots.
The history of man proves that all will often avail themselves of the precedents established by their predecessors, and reprobated by themselves. Every precedent, however clearly demonstrated to be unconstitutional and tending ‘towards monarchy and an iron government’ by a party out of power, will be held sacred by the same party in it; and those who clearly discerned the injustice and impolicy of enriching and strengthening federalists by bank or debt stock, at the publick expense, will seldom refuse to receive a similar sinecure. In short, a power in the individuals who compose legislatures, to fish up wealth from the people, by nets of their own weaving, whatever be the names of such nets, will corrupt legislative, executive and judicial publick servants, by whatever systems constituted; and convert patriots from the best friends, into the most dangerous foes of free, equal and just principles of civil liberty.
Let us return more particularly to our subject. It will be remembered, that we have endeavoured to prove, that a revenue is collected from nations by banking. Our knowledge of that currency, called paper money, will suggest new arguments to this point. Long experience has demonstrated to America, that a paper currency will never retain its value, unless it is attended by a tax adequate to its redemption. We will suppose, however untrue it may be, that every bank contains coin to the amount of its capital. Yet this is a sum, inferior to the aggregate of its stock, its notes, and its dividends. If the coin is only mortgaged for the two last items, yet these greatly exceed its amount, and this excess forms a mass of paper currency, for which the coin is no security. Without a security adequate to its redemption, we know it to be a law of paper currencies to depreciate; and as this surplus of bank paper beyond the ability of the deposited coin to redeem, does not depreciate, its credit must be supported by some other security; that security is the tax, which banking collects; a tax, not only sufficing for the redemption and credit of this species of paper currency, but supplying a redundancy, sufficient in some cases to add one half of its numerical value to the coin deposited as stock.
Of the correctness of this reasoning, and of the nature of banking, an ancient practice in Pennsylvania, furnishes a demonstration. That state, whilst a province, became a banker. It made and loaned a paper currency, at a moderate interest. The interest paid for it to the state, was a tax, applied to publick use. This is banking, stript of its ambiguity. Simply an indirect mode of taxation, successfully used to raise national revenue. The idea that it was not a tax, because individuals borrowed the money, and collected and paid the tax, would be an assertion in every view less tenable, than that an impost upon ordinary licences was not a tax, because such licences were voluntarily taken and confined to a few persons; the reimbursement derived from the privilege in both cases, transfers the tax from the individuals to the publick.
The differences between the Pennsylvanian and the present mode of banking, are, that then the tax was paid by individuals to the publick; now it is paid by the publick to individuals. Then it was paid to assist industry, and defray publick expenses; now to enrich idleness, and supply the means of luxury to a separate interest. Then the publick required a knowledge of the amount paid, from its own representatives; now it pays an amount unknown, to corporations in which it is not represented. Then the publick received five or six per centum of individuals for paper currency; now it pays ten or twelve per centum to individuals for the same currency. That species of paper currency could not corrupt legislatures or nurture aristocracy; this must do both. That being dealt out by the publick interest, and not by the interest of monopoly, circulated through a nation like coin, liable to no artificial fluctuation, and begat fair, useful and honest competition; this being regulated by a separate interest, is made to cause prices to fluctuate with a view to personal and local emolument. That did not monopolize and expel specie; this commences with the first measure, and terminates with the second, so as to make itself indispensably necessary.
But it is said that the Pennsylvanian species of bank currency will fail in its credit. It is never to be forgotten, that credit is an ally of safety and factions, and not of peril and nations. That it is bold and flourishing in security, and fearful and withering in danger. A small degree of danger being about to assail the credit of the bank of England, the corporation influenced government to protect it against the payment of its debts to the nation; a protection, which would not withstand the shock of war, invasion, superior force and disaster, as long as did the currency of national credit in France and America.
National credit includes the credit of every individual; a part cannot be more solid than the whole; and if the whole is lost, the parts must also be lost. A calamity which threatens to overwhelm a nation, destroys confidence among individuals. Bank credit depends upon bonds given by individuals. Pennsylvanian credit was supported by the same pledge, and by the additional guarantees of landed security and national faith. A calamity, capable of destroying the bonds, mortgages and national faith, three sponsors for Pennsylvanian bank currency, will destroy the single sponsor for chartered bank currency. And a nation will defend its own credit with more animation, whilst it diminishes their taxes, by bringing them revenue; than it will bank credit, which increases their taxes, without bringing them revenue. National credit would arouse bravery, interest and patriotism, like other property; but bank and funding credit, cannot inspire a nation with patriotism, because it is a tax gatherer, which zealously engages in the wars of ambition, avarice and orders, and flees from imminent national danger. A rapacious coward cannot make a nation brave.
If the credit of a whole nation is perfidious, it only aggravates the absurdity of purchasing a portion of its own perfidious credit, at an enormous price; and of expecting to cure the perfidy of the whole, by attaching to a part, the additional excitements towards treachery, arising from exclusive privilege and separate interest. These never had any business in society, but to corrupt governments and plunder nations. They are exactly the remedy, universally proposed by the enemies of the principle of self-government, for this imaginary evil of national perfidy to itself. National credit, say they, is perfidious. Resort therefore to corporation, vendible, monopolized and successional credit, as a much better shield for liberty. Equally perfidious, in their opinion, is national wisdom, and therefore they recommend titled, hereditary and successional wisdom, as also a better shield for liberty. Such opinions are consistent. But how can those be reconciled, which assert, that treachery to liberty forever lurks in hereditary, successional and monopolized wisdom, and that her safety consists in vendible, successional and monopolized credit?
Pennsylvanian credit, produces the benefit of a revenue, as national wisdom does that of freedom; and corporation credit produces taxation, as hereditary wisdom does tyranny. As credit can produce revenue, it is property, and it will be considered, whether as such, it can under our policy be thrown into a state of monopoly, or disposed of by exclusive charter, as districts and inhabitants are in Russia, or branches of commerce in England. If a monopoly of the wine trade, cannot be chartered to a corporation, will credit, which covers every branch of commerce, admit of a state of monopoly?
The value of credit, as property, appears evidently in the price it sells for. A nation, by giving away its credit, loses what Pennsylvania sold at six per centum. By erecting corporations to monopolize or expel its specie, to make room for their credit, it loses the use of this specie worth six per centum more. And necessity then compels it to buy of these corporations the credit it gave to them, at the price of ten or twelve per centum upon their stock. These items shew that credit is either property, or a machine for transferring property, more effectual than that made of hereditary and 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 errours 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 own hideousness, the other to hide the benefits of national credit.
If all the banks in the United States circulate fifty millions of paper dollars, five millions of real property will thereby be collected. And if national credit, instead of corporation credit, had issued the same sum in the mode successfully practised in Pennsylvania, a revenue of five millions would have been received instead of being paid, making a difference of ten millions annually to the nation. Are these great sums of wealth no property? If they are property, to whom do they belong? If they belong to any body, can they be transferred by laws and charters, under a policy, which considers property as sacred?
This plain fact enables us to compare accurately, our system of monopolized and transmissible credit, with a system of monopolized and transmissible wisdom. By this comparison it will be divulged, that the pecuniary oppression of privileged credit, is far greater than that of privileged wisdom; and hence it is a just inference, that its avarice is also greater. Avarice breeds the treacheries of privilege against liberty. Unprivileged or national wisdom is its friend, because such wisdom can see no object to betray, for the gratification of avarice or ambition; privileged or corporation wisdom is its foe, because the species of wisdom can see such an object. We will select an expensive system of monopolized wisdom, to illustrate these ideas. The king of England receives for his wisdom, one million of pounds sterling, equivalent to the annual labour of fifty thousand men. The labour of fifty thousand men, is equivalent to the subsistence of two hundred thousand people. For the subsistence of two hundred thousand people, this man renders the ‘publick service’ of a king, and pays also the salaries of sundry other publick servants. His exclusive emolument therefore, however exorbitant, is within the principle of the constitutions lately quoted. The banks in the United States receive for their credit, at least five millions of dollars annually, equal to one million one hundred and twenty-five thousand pounds sterling; to the annual labour of fifty-six thousand five hundred working men; and to the subsistence of two hundred and twenty-five thousand people. They are neither publick servants, nor do they pay the salaries of publick servants. Confining the payers for the king’s wisdom to Britain, the expense is divided among twelve millions, and extending the computation to all his dominions, it may possibly reach to twenty. Therefore the proportion of subsistence drawn by the king’s privileged and monopolized wisdom from labour in England, is less than that drawn from labour by privileged and monopolized credit in America.
When we behold an honest indignation against the system of privileged and monopolized wisdom, and an honest approbation of the system of privileged and monopolized credit, existing in the same mind, why should we be proud of the human intellect?
The pecuniary sufferings of nations from banking may be exhibited with some accuracy by figures, and though figures cannot exhibit its drafts upon their political principles, we may conclude with almost equal certainty, that a separate factitious interest, will not preserve a free government in America, because it has never done so in any other country. Monopoly, like other evils, takes refuge under some good. It attempts to include within its scope, the acquisitions of talents and industry, and to confound them with those of legal fraud; and to consider private property, roads and canals, whence arise good effects, as of the same nature with hierarchy, nobility, banks, or any species of legal separate interest, though productive only of political oppression or pecuniary fraud.
Admitting private property, however incorrectly, to be a species of monopoly, its effects, such as subsistence, comfort, and a multitude of physical benefits, draw a distinct line between it and the fraud or force of hierarchical and feudal usurpations. These, instead of possessing a common nature with private property, diminish or defeat its benefits.
Government, considered as a monopoly, has also been called a necessary evil, because it has been almost universally planted in its evil and not in its good qualities. A monopoly is erected, calculated to awaken the avarice and ambition of its members; these evil qualities are accordingly awakened; they resort to force and fraud for their own gratification; and such monopolies beget the civil tyranny, denominated a necessary evil.
But as private property may be planted in the good or in the evil qualities of monopoly, so may a government; by banishing fraud or force, as means of acquiring private property, its protection begets beneficial effects; and by forbearing to excite avarice and ambition by fraudulent laws and separate interests, government will produce human happiness and comfort, and be considered as a necessary good.
It has been our policy, so to divide power, and diminish the excitements of avarice and ambition, as to wring out of its soul the poisons arising from the evil qualities of monopoly; laws to foster these qualities, labour to revive what that policy labours to destroy.
If monopoly is made up of good and evil qualities; and if our policy has planted our government in its good qualities, a revolution is effected by transplanting it into its evil qualities. The constitutional corporation is endeavoured to be cleansed of avarice and ambition, the scourges of mankind; and legal corporations, having the first, which begets the other, breathed into them, as their vital principle, cannot constitute the same species of government.
These inimical principles cannot in nature subsist together; one must subdue, reform or contaminate the other. In England a paper system has contaminated the government; here, the only argument which can be urged against the same process and result, is, that the pure principles of our constitutional corporations, will reform the vicious principles of our legal corporations, created by themselves.
Towards this experiment, the constitutional and legal corporations are mixed up together. The constitutions and laws then begin to solicit the suffrages of this compound. ‘Adhere to us,’ say the constitutions, ‘and we will take care that neither your ambition nor avarice shall be gratified.’ ‘Come over to us,’ say the laws, ‘and we will gratify both.’ Will the audience make a separate interest, which bestows on it exclusive wealth and power, subservient to the general interest, which rigidly refuses to feed it with either?
If it is a moral truth, that mankind prefer themselves to others, then it is a moral certainty, that members, both of the government and of the corporation, will prefer the interest of the corporation to the interest of the nation. As a member of the government, I am met constantly by division and responsibility; the money I collect from the people, must be accounted for and applied to their use; and both my power and compensation is dependent on their will. As a member of the separate interest, I tax without limitation; I receive without account; I apply to my own use; I am dependent only on my own pleasure; and I acquire the power following wealth, unsubjected to the publick suffrage. By taking the side of my own interest, I influence the government in my own favour. By taking the side of the national interest, I sacrifice my own. As all separate interests prefer themselves, and bend governments into a 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.
There is no occasion that one should be a political Linnæus, to discover the class of political systems, to which orders or separate interests belong. When such influence a government, publick opinion cannot also influence it. They do not belong to that class of political systems, which they destroy. Their essence is minority, and their principles must participate of their essence; and if it is good government to consult the national interest, they must uniformly be opposed to good government, because they constantly consult their own interest.
Without closely estimating the political influence of the species of separate interest called banking, we can at a glance discover, that a power to give and receive charters, to draw wealth from the people, and to share in it, and to obtain adherents at the publick expense, is a great power. It is that which I have called legislative patronage.
This excessive power, like all others, will act upon the moral qualities of human nature. Its pecuniary seductiveness, is exactly opposed to the policy, supposed by all our constitutions to be most likely to awaken the good moral qualities of human nature; and exactly such, as have constantly awakened its evil. Nations, resorting to elective and representative forms of government, consider a strict similitude between the interest of the legislature and of the people, as the chief security for fidelity. They have never divided these interests, by establishing a difference, to the extent of five millions annually, to be paid by the one, and received in money or power by the other; no free constitution has ever declared, that a legislator might legislate wealth to himself, and taxes to the people; and no man in his senses ever thinks of securing the honesty of an agent, by a powerful temptation to betray him. Even the king of England cannot himself pass a law, to inflict the million he receives; whilst the legislators of these states might receive the five millions they inflict by banking, and do receive a considerable portion of it. On the contrary, all our constitutions consider it as a sacred principle, that legislators should really, and not nominally, be affected by the good or evil dispensed by law, as the nation is affected. As a majority of a nation cannot be bankers, the opening of a subscription to all is a formality, the futility of which is demonstrable in the certain and necessary result of this formality. That, invariably places the legislator-stockholder in a minority. And of course he must be affected by every law which may affect stock; not as the nation are affected, but as this minority is affected. Executive patronage would become similar to legislative, if the president could both create offices, and bestow them on himself or his creatures, as the latter bestows charters.
Whenever legislatures, or men in power of any denomination, can receive charters, exclusive privileges or emoluments which they create, they will incline to make them good gifts. Accordingly, bank stock is so manufactured as to sell at an advance, often as high as fifty per centum. Thus a legislator who creates, subscribes for and sells stock, converts by his own legal magick, every dollar he can raise, into nine shillings. This is undoubtedly a good thing for himself; if a miracle can be performed, and if laws for enriching orders, without labour or industry of any kind, will enrich the rest of the people, then it may be a good thing also for his constituents.
If it is, let nations rejoice, and look for the speedy accomplishment of their hitherto frustrated hopes, that oppression would cease. It will be both useless and absurd, that avarice should any longer pursue its tyrannical measures, after a mode is discovered of gratifying its lust, without putting the rest of a nation to any expense. Still more wonderful is this discovery; better than costless; it is sold to enrich a nation, by enriching a paper interest. Oh happiness unlooked for! No longer remains then a motive for that mass of patronage and taxation, by which nations are enslaved. This beautiful system of banking enriches stockholders by dividends and the people by bank notes. Patronage is received and returned with mutual civility and profit. And avarice is at length converted into a blessing for industry.
Every word of this reverie must be credited, to justify banking. But although we may wish that it was as true as it is pleasant, yet it requires a very strong faith indeed to believe, that this political alchymy is less fraudulent than the chymical. One proposes to make gold out of something; the other out of nothing.
If England held all the bank stock of the union, the furnace of this new species of alchymy would burst, ‘as if a bolt of thunder had been driven through’ the states, and all its promises would vanish, ‘in fumo,’ not before the refined satire of Ben Jonson, but before common sense. It would be instantly seen, that England, the stockholder, was enriched by the dividends, and America taxed and impoverished by the notes. By filling the place of England with three or four thousand native and foreign stockholders, the place of the people is not altered. Such of them as are legislators, will vote upon political questions, exactly as England would, if she held our stock and could legislate for us. The ground which sustains this argument, is that upon which banking has spread from state to state; namely, that taxes, and not gold for publick benefit, are forged in the furnace of this new alchymy. Whether taxes are replaced by transferring their appropriation from A to B, from a foreign country to a native legislator, is left to the sagacity of the reader.
Patronage is an instrument by which governments corrupt a faction to take part with them against nations, and thus gradually acquire more power than the people ever gave. If this instrument is obtained by foreign conquest, as in the acquisition of India by England, the people still suffer by the unconstitutional power it confers; it is infinitely more calamitous to a nation, when gotten by domestick operations.
Had the governments of the United States, bestowed upon themselves and their partisans, offices to the value of five millions annually, the patronage would have been the same with that created by banking; which welds the corporation to the government, and the government to the corporation, against the people, like sinecure offices to the same amount. For this vast and boundless mode of acquiring power, there is no allowance in any constitution. It is a great weight, which was never thrown into the scales, by those who made them; can it be thrown in by law, and leave the division of power between a nation and its government, unaltered?
In another view, the patronage created by banking, spreads out in the United States, far beyond any influence capable of being produced, by creating offices of the value just mentioned. The general government may influence the whole fabrick, by means of a power to regulate the places of deposit of the general taxes, and by regulations as to the paper which may be received in payment. This influence may reach state legislatures as stockholders, and convert the best barrier devised by the principle of division, against usurpation and consolidation, into an insidious and secret instrument, for the ends it was intended to obstruct.
A slight interest is a bad mirror for reflecting justice, but a great one is a camera obscura inverting right and wrong. Through this medium, stockholding legislators will discover, that it is just to retain their annuities, by any compliances for which the people, not themselves, suffer; and a silent revolution, which will secure or increase these annuities, will appear to them to be necessary for the publick good.
Against this obvious danger, we are consoled by being told, that the separate banking interest, is not a titled order; that if titles were added to its wealth, our constitutions, like the walls of Jericho, would be overset by the noise; but that useless the aristocracy shall discover its progress by its shouts, they are safe.
On the contrary, a separate interest is more dangerous, if it can create, sustain and enrich itself without being designated, than if it cannot; if it assails by mine and sap, than if it assails by the sound of drums. If Lords could create and enrich Lords by law, the government would soon become a feudal aristocracy. If bishops could create and enrich bishops by law, the government would presently become an hierarchical aristocracy. So if stockholders can by law make and enrich stockholders, the government of course becomes a paper aristocracy. It was the title or badge of the hierarchical and feudal orders in England, which by designating the members, afforded the means of limiting their progress; and if either of these aristocracies could have possessed itself, unseen, of legislative power, it would have legislated itself into permanent tyranny. If our constitutions required that every stockholder should be clothed in a surplice, that he might be known and excluded from legislative power, or only allowed a portion of it, as belonging to a separate aristocratical interest, he would, like the lord or the bishop, be thereby rendered less dangerous. Thus checked or balanced, these orders are considered by republicans as a bad political system; unchecked or unbalanced, even monarchists allow them to be execrable; they admit of no control without a title or badge; and the paper interest is designated by neither.
That a separate untitled interest is more powerful and dangerous than a separate titled interest, is a fact so notorious as to supersede an occasion for argument. The untitled paper interest in England, has made prisoners of the two titled orders, uses them sometimes as clerks in its counting house, at others as jackals to hunt its prey, and at all times to pronounce its will for law; this it has gradually effected, because it could act secretly; it is a warriour invisible to his adversary, or a conjurer invisible to the crowd he defrauds.
In the history of our forefathers, we recognize three political beasts, feeding at different periods upon their lives, liberties and properties. Those called hierarchical and feudal aristocracy, to say the worst of them, are now the instruments of the third. Protect us, Heaven! We exclaim, against these monsters, inert, subdued and far away from us! Oh what a beautiful creature is here! we add; upon beholding a whelp of the third, so strong as to have swam into our country across the Atlantic; and the infatuation concludes with a sincere commiseration of the people of England, on account of the misery with which they are loaded by the mother of this identical whelp. Our mistake in estimating titled nobility and paper stock, is exactly that of the mouse, terrified with the cock and charmed with the cat.
Representation ceases to be an effect of election, whenever a representative can draw wealth from his own laws, by means either of office, sinecure or monopoly. His income under the law, being greater than his expense, his interest is adverse to the interest of the people, who pay the tax or income which he receives. A power to take from a nation and give to itself, is a strict definition of civilized tyranny. A legislator cannot be guided by the interest, both of the minority and majority; of the exclusive and general interest; of the receiver and payer of the tax. He will be guided by the interest to which he belongs; if he is a receiver of the tax, he will tax.
Established banks exclaim that others would be pernicious; just as one established or chartered religion exclaims against chartering another; or as patricians disapproved of ennobling plebeians. But though the established bank contends that others would be pernicious, an application for a new bank, as loudly insists that the old one is a hateful monopoly, which a new one will destroy. Destroy in the same manner, as a noble order of fifty members would be destroyed, by creating fifty more, and as the oppression resulting from one titled sect, would be destroyed by titling another.
This falling out is managed with mutual embarrassment; the parties are obliged to conceal the true cause of quarrel, and to put it upon the ground of partialities to individuals in loans of bank currency. As if the new bank was not as capable of partiality as the old. The evil of bestowing on the quality, partiality, the distribution of national currency, is proposed to be remedied, by extending the power of partiality. Not this partiality, but the dividends or tax, is the real object of dispute. The old bank knows that its paper is a tax, subject, like other taxes, to the limitation of national ability, and it wishes to exhaust this ability itself; but the proposed bank wishes to come in for a share of it; yet neither, even when under the obligation of legislative responsibility, is ever heard to make to the people these honest confessions.
This true ground of quarrel between established and proposed banks, confesses the correctness of the opinion, which supposes that funded stock and bank stock, are both national debt; and that interest and dividends are both paid by taxing the nation. By new stock, the evil in both cases is cured in the same way. So long as national ability to pay interest or dividends suffices to meet the new stock, it is an additional tax upon that ability; whenever either species of stock exceeds this ability, either will depreciate. Both, therefore, equally imply a debtor and creditor. But in a legislature made up of old stockholders, and intended stockholders, such an idea of the subject will be suppressed, and a compromise effected between the parties upon selfish grounds, not upon principles of national interest.
It is easy to comprehend the possibility of a form of government, capable of being correctly denominated, an elective aristocracy; and to predict, without much foresight, that the decay of the principles of our policy, will commence with that form. It is produced by whatever will defeat an honest and faithful sympathy between a nation and its representatives. Such a case is illustrated by the house of commons of England. That house gains a power by its paper system, which is able to proclaim its corruption, and to defy reform. Such a case is the natural offspring of an union between an elective legislature and a separate interest. Can a stronger cement for this union than banking be discovered? It gratifies the avarice and ambition of the confederates, without expelling from the senate house, disclosing acquisitions, or attracting punishment.
The division of powers is an essential quality of our policy and constitutions. That between the people and the government is destroyed, by a power in the government to increase its share, by its own laws; as it that also between the general and state governments, if either distributee can increase its quota of power by law. By banks, governments may create factions, which will adhere to them against the people, or to one section of our policy, against another. With these instruments, the general or state governments might disorder the distribution of power between themselves and the people, and between each other. To both, enlistments by lucrative charters will furnish mercenary troops, and mercenary troops, wielding either stock or swords were never considered as good guardians of liberty. Charters and banks will become the chief objects of state legislation, and if twenty legislatures can outstrip one in this manufacture, the general government may lose its power, and the calamities of a dissolved union will follow. These will ravage the states, until they ripen the publick mind for the introduction of a steady tyranny by some military adventurer; and the catastrophe of the drama will be the effect of exchanging our system of genuine representation, cautious division, and effectual responsibility, for the monopoly and corruption of a system of banking, charters and paper.
There is utility in these baleful auguries. They may induce the nation to examine omens, and enable it to defeat fulfilment. They deserve in this view, all the indulgence of honest intention.
States may see an advantage in excluding the currency of banks created by Congress. Large states may exclude that of small. Exclusions of this kind will enhance the value of state stock. This will be just, because no equality in the profit made by bank paper, can exist between states of an unequal size, with an equal and unlimited right to send out this tax-gatherer. The collections under the laws of each state, ought at least to correspond with the domestick fields for circulation. The same reason which induces a large state to emit rival paper, may induce it to expel rivalry from its own dominion. It would be evidently unjust that Delaware should be enriched by taxing the union with a mass of bank paper; therefore it will be prevented. The bank tax of Virginia, has the same motive for driving away any interloping bank tax, as for introducing itself; money will be made by it. Cannot you discern, reader, stuff for weaving a tissue of avarice, ambition, rivalry and hatred, which has no ingredient for allaying human passions, restraining human vices or preventing human slaughter? View it steadily, and you will behold our inestimable state governments, shrinking into charter traders; and contriving paper navigation acts to plunder or repel plunder, by means of paper currency, with the same spirit and intention in regard to other states, which the trade navigation act of England breathes, in regard to other countries.
To avoid these calamities, our hope rests upon the moderation of charter and monopoly. The extent of this moderation, is equivalent to that exhibited by the invocation, required of their subjects by Persian monarchs. Charters command their subjects to exclaim, ‘Oh monopoly! live as long as the law pleases.’ If the law can bestow existence for one year, it may for a million. It may give perpetual life to whatever metaphysical being it can create; and charter is so moderate, as to claim a right to live out the whole life allowed by law. Once created, it pretends to independence of its God, law; to independence of law’s God, constitution; and to independence of constitution’s God, the nation.
These pretensions are not extravagant; for if a government is so contrived, as that its members can take the charters which they make, these charters will live as long as the government lives. A maker of laws, to enrich himself, which cannot be repealed, is a far greater power than a maker of constitutions. Constitutions are tenants at will; the tenure of charters is not even limited by good behaviour, or liable to be annulled by impeachment and conviction of treason. A legislator, by charters here, and charters there, can so wedge up present or future ages, that the long possession of these tenants for years will become a settled right, and the remainder-man will forget his reversion.
A power to make irrepealable law charters, is above responsibility, and independent of its constituent. The correction of a corrupt or ruinous measure, comprises all the essence and benefit of responsibility. A change of representatives, without this correction, is a barren formality. It is even impolitick, unless followed by a correction of the mischief which suggested the change. New representatives will be incited by the preservation of a pecuniary abuse, to repeat it for their own emolument; if they are not permitted to destroy it, they will think it right to reimburse themselves by a new charter, for their sufferings under the old.
The infatuation opposed to the reasoning, which discloses the destruction of responsibility and legislative integrity, lurking in the system of charter and banking, is an unexamined idea, that our constitutions contain some charm, some magical influence, which will preserve liberty, by the agency of avaricious charter-making and charter-taking representatives. History produces no instance of national happiness, under a legislator, corrupted by the most sordid passion, of which human nature is susceptible. Legislative purity might preserve liberty and happiness, under constitutions otherwise defective; but the most perfect constitutions otherwise, could not preserve liberty and happiness, with legislative corruption.
In all ages legal beings have been invented, which contend that man was made for them, and not they for him. Having both escaped from his service, and converted him into their servant, they invest themselves with a drapery of glittering fictions, to dazzle him into submission. Hierarchy, though always defended by whatever could inspire reverence, and often dressed in the robes of religion, has at length fallen before the solid principle, ‘that civil institutions belong to nations and that nations do not belong to civil institutions;’ whilst avarice presumes to assert the reverse of this doctrine, which religion was unable to defend. It pretends that man was created for law charters, tho’ not for law churches; and that it is equally a sacrilege to discontinue the former, as to revive the latter. Thus parties and factions measure their principles by their interest, and assert or deny the same proposition, like lawyers for fees. Hence they censure their predecessors for obtaining wealth, in modes which they use themselves, and pretend to be guided by different principles, whilst they worship at the same shrine. Just as a Pope, had the conversion of Rome to christianity failed, would have become the high priest of Jupiter, and practiced the idolatry he had loudly condemned, to increase his revenue, splendour and power. Or does this charter doctrine advance the designs of the leaders of opposite parties, as a good revenue might have done those of the leaders of opposite religions?
The ability of a corrupt legislature to make a form of government or constitution worse, and finally to overturn it, is illustrated, not only in England, but in the history of Rome. Two of the means used by the patricians to effect this end, were usury and an usurpation of national conquests. Compound usury and an usurpation of national credit, are two of the means used by the system of banking. The dexterity of the present age, has sharpened the edges of these patrician weapons, and varnished and lengthened their blades, so as to dazzle and to strike a whole nation. The patricians enslaved individuals with usury; banking, nations. The patricians usurped and drew wealth from foreign conquests; banking usurps national credit, and draws wealth from domestic territory. The patricians by their means, gained wealth so slowly, that it required an operation of several centuries to corrupt and destroy the government; stock can collect wealth by credit so rapidly, as to shorten the process to a few years.
Five millions drawn annually from a nation itself by a separate interest, will with more certainty enervate and enslave it, than if the same sum was drawn from their conquered enemies; because toiling for others, and receiving the earnings of others without toil, is a double momentum towards these results; whereas a tribute paid by foreigners, as debasing only by luxury, and not by tyranny also, is a single one. Profit without labour, will be preferred to labour with loss. The effort of the best informed will be to get out of the nation into the separate interest, to avoid the labour with loss, and to gain the profit without labour.
Nations have for three thousand years been doomed to oppression, by an opinion that they had not capacity to govern themselves; are they doomed to suffer it for another three thousand years, from an opinion that they are unable to give themselves a paper currency, if it should be useful? In the first case, the nation is persuaded that it is a fool, but that a few individuals are wise; in the second, that it is a pauper, but that a few individuals are rich. The last idea is even ludicrous, as the sole object of banking is to tax a rich nation to enrich poor individuals.
After a patient trial of charter privilege and monopoly for three thousand years, almost at the moment they are rejected as poison to civil and religious liberty, we are told that they are wholesome aliment for commerce. It is not surprising that self-interest should tell us this; but it is, that self-interest should believe it, and recommence the fairest, most patient, and most expensive experiment which was ever made. After another tedious term of rueful experience, monopoly will again exclaim, that it confesses itself to be pernicious, when applied to commerce and credit, just as it now confesses the same thing, in relation to religion and civil power, but that in some new form it is a blessing; and the experiment ought then, with as much reason as now, to be recommenced.
It is to elude the discovery of its enmity to civil and religious liberty, that monopoly confesses the charge in its old forms, hoping under the candour of this confession, to get into operation in a new form. Admitted in the stupendous form of a paper currency, it becomes instantly connected with civil government, and civil and religious liberty is settled by experience, to be uniformly the victim of a connexion between a lucrative monopoly, and government in any form. It is not a new experiment, therefore, which we are trying. It is only charter and state instead of church and state. Even supposing the principle of monopoly can be introduced by banking without its infecting the civil government; the wisdom of planting some parts of our policy in a monopoly of civil rights, and others in their freedom, is still questionable. These principles are irreconcilable enemies. Mr. Adams’s history of orders abundantly proves that they are never found in the same community, but in a state of war; and that the war never terminates, but in a victory on the side of one of the combatants.
If it would be dangerous to republican government, for the President to make officers of monarchists, is it safe for legislatures to make monarchists of citizens by debt and bank stock, or by any species of monopoly? Republicans, turned into kings, bishops, lords or stockholders, are no longer republicans. Neither bishops nor bankers are exempted from the physiological qualities of man. Less than a million annually received by the officers of government, is supposed to expose them to the effect of these qualities, and excludes them from legislatures; five times as much received by bankers, is supposed to exempt them from the effect of the same qualities, and conducts them into legislatures, where they shield themselves from taxation; and from one exclusive privilege, extract another. Yet banking creates treasuries for usurpation; a division of wealth is a necessary auxiliary to a division of power; and an accumulation of the former, a stride towards rendering the latter useless. That it can also create treasuries for national defence, is the countervail urged in answer to this argument. And this countervail itself encourages the dissipation of governments; endows them with a dangerous degree of pecuniary independence of the nation; stakes the national safety upon the capriciousness and selfish views of every predominant party; involves the necessity of nurturing at the general expense a minor interest, and terminates in the state of England. The quackery of defending nations by banking, is a mine of wealth to an order of bankers, as the quackery of defending them by feudal tenures, was to the order of nobles. Give us all the land, said the feudal barons, and we will defend you. Give us all the money and credit, say the bankers, and we will do it. In both cases, nations pay the hire, and do the work themselves. Just as the quackery of salvation was a mine of wealth to the priesthood, and purchased nothing for the laity. What mystery can be more absurd, than the doctrine that an entire nation cannot defend itself, but that it can be defended, by the device of converting a few of its members into bankers?
Mr. Adams asserts, and republicans admit, that a policy which confers civil power on one separate interest, is more imperfect than one which divides it among three. It is better to have no predominant separate interest, or more than one. None is freedom, one is tyranny, and several may be a mixture of both. If the king and the house of commons, were cut out of the English government, the nobility would be tyrants. By aggrandizing the nobility with a certain degree of wealth, the king and the house of commons would be nearly or entirely expunged from the English form of government. By aggrandizing a banking interest co-extensively, the same result ensues. The history of feudal barons and religious titularies proves, that wealth, and not title, conveys power.
Election advances and rivets the power of a wealthy order. In England, election, so far from producing an order or interest to counterpoise the stock order or interest, produces the most effective instrument for advancing its wealth at the expense of the nation. Could any better means have been devised for increasing the income of the stock order, than a house of commons? If the eligibility of the king or the nobles to the house of commons, would have destroyed the theory of checks and balances, although these interests might be avoided by the people in elections; we cannot fail to discern the reason, why the eligibility of the stock interest to that house, (which cannot be avoided by the people) converts it into an instrument for effecting, what it was intended to prevent; namely, the predominance of a separate interest over the national interest. Is a corruption, poisonous to the British theory, salutary to the American?
Though an order or distinct interest is compounded of many members, it constitutes only one body, guided by self-interest. Whenever in a combat between two men, a leg or an arm of one shall desert to the other, then a member of the stock interest may be expected to desert to the national interest. Add to the cement of wealth a mass of political power, gotten by election, and a Colossus rises up, animated by one mind, who easily makes the havock of the national interest required by his own, because its members are never united by one mind, and lie about, so scattered and disjointed, that he picks up and uses them as weapons for assailing the body they belong to. The capacity of a paper interest in England, to make instruments of orators, kings, lords and commons, evinces its gigantick power.
What! exclaims both the friend and the foe, to publick good; shall we have no corporations, no colleges, no turnpikes, no canals; because they are separate interests? Do not charter and privilege strew the face of a country with palaces and plenty? Yes, and with huts and penury.
With equal propriety it might be asked, if we can have no magistrates, unless these magistrates are kings or nobles? The assertion that these beget liberty, made by the admirers of monarchy, is equivalent to the assertion, that paper orders beget national prosperity, made by the lovers of stock. As the first is asserted of the most inveterate enemies to liberty, the other is asserted of an inveterate enemy to property. Magistrates may be so moulded as to turn out despots: charters, as to turn out thieves; oppression, under pretence of protecting; and fraud, under pretence of enriching, are not novelties. Magistrates and separate interests, moulded to advance the publick good, are blessings; but for gratifying ambition or avarice, are curses.
Although the king of England has but few domains, yet the English civil power, is that generated by a rich government and a poor people; whilst the reverse is superficially the case. The phenomenon is resolved by considering the power carried by wealth to the paper, patronage and church separate interests, as given by the government to itself, at the expense of the people; and demonstrates by experiment a mode of usurpation. Walpole strengthened the English government by stock and taxes. Five millions annual income to bank stockholders, create a more alarming degree of power, than if the five millions had been given to one man; it makes a multitude ardent in the cause of fraud and oppression, instead of one; therefore Walpole, to strengthen a king, made a faction by stock, in preference to enriching the king himself. If our government (including the state sections of it) had given five or six millions annually to itself, every man would have perceived its accession of power; but when it dispenses the same sum in the mode thought by Walpole to obtain the most power, the accession is hardly seen by any, and is utterly imperceptible to the receivers.
It being unquestionably true, that an organization of property by law, is equivalent to an organization of power by law, as Mr. Adams and Lord Shaftesbury assert, it follows, either that the governments of the United States have not a right to exercise the first, or that they have a right to exercise the second, If it is not our policy that a government can increase its own power by its own will, and if laws for enriching factitious interests will increase its power, by bribing partisans, such laws are subversive of our policy.
This indirect mode of stealing power from nations, compensates them with vices for the wealth it purloins. It corrupts a passion to which mankind are indebted for the most perfect state of society, and its blessings, namely, a love of property. In either extreme, like many other passions necessary to our happiness, it becomes pernicious. Enthusiastick philosophers, falling into one, by attempting to eradicate a love of property, have laid the axe to the root of society. Such attempts, though always unsuccessful, are always mischievous. By covering a love of property with odium, it unfits inexperienced young men for an association, of which this love is the chief ligament. By depreciating the motive of the sanction, the sanction itself is weakened. Accordingly, having rooted out a love of property from the mind, law and contracts lose their influence, and a community of goods, unsuccessfully attempted even by religious zeal, terminates philosophical fanaticism. Before the catastrophe arrives, pecuniary distress, begotten by a contempt of property, prevents men from being good, and is active in forming bad citizens; and not unfrequently converts a metaphysical saint, into a practical devil. He arraigns justice of avarice; he adjudges it to be sordid and base in a creditor to demand payment; he breaks contracts, because they are to be fulfilled by money; and as most civil rights are measured by money, he tramples upon most. His theory being repugnant to the principles of society, he violates them at every step; he cannot live by rules he hates and breaks; and he is gradually moulded by the bitter expiations to which he has condemned himself by a contempt of property, into a malignant misanthrope, an abandoned scoundrel, or an unprincipled and ferocious demagogue. He who dissipates his property, dissipates also his virtue and honour.
This extreme however is so far outstript by its opposite, in generating human misery, that language recoils from the horrour of a just description. Separate interests, goaded on by an avarice, awakened by unjust laws, and rendered unconscious of guilt, by the sanction of the statute book, have filled the old world with crimes, and perverted the primitive end of society to secure property, by making it the instrument for its invasion. Is the new world destined to copy this old process, and suffer its dispensations?
This essay has been written for the purpose of inquiring by what interest mankind ought to be governed, natural and general, or artificial and particular. It considers industry, effort and talents, as constituting the first class, and law and charters, for enriching individuals or factions, as constituting the second. Without pursuing the details to which the subject would lead, it has selected a few of the latter, to illustrate its reasoning, but not as containing a history or exhibition of the whole class of artificial and particular interests, by which mankind have been oppressed. In this selection, feudal, hierarchical and stock, are the particular interests, of whose history most use has been made, as they have succeeded each other in England. The stock tyrant, the present metropolitan of the benefice called Britain, is said to be fair and just, because those who chose to do so, might subscribe to banks or loans. To the arguments used in another place for detecting this fallacy, the following are added. The mode by which a tyrant succeeds to his tyranny, cannot convert oppression into justice. If offices, productive of mischief to a nation, were like bank shares exposed to sale, could the purchasers justify the mischief, by urging, that any one who had money, might have purchased? Several Romans purchased the empire. Could they justify a right to tyrannize, because any other person, rich enough, might have also purchased? Could a lottery for distributing the titles and privileges of an aristocratick nobility be fair, because all those of a nation able to pay for them, might buy tickets? Did the neighing of Darius’s horse make his government legitimate, because seven persons possessed tickets in the lottery, or would it have been legitimate, if seven thousand had shared in the chance?
Among the instruments of oppression, the hereditary are most excusable and least oppressive, and those bought the least excusable and most oppressive. The former are thrust by birth into tyranny; the latter purchase it with a deliberate malice against justice and liberty. The mischiefs of the hereditary tyrant are limited by his physical imbecilities; those of a bought separate interest, are extended by a boundless moral energy. If a title by birth, by lot or by purchase, would not have justified or softened the tyranny of a Tiberius, a Caligula, or a Nero, how can a title by either justify or soften the tyranny of the more lasting and extended feudal, hierarchical or stock tyranny?
One tyrant may thank God that he is not another tyrant. Banking may say that it is not a hierarchy or noble order. It will admit that charters for establishing such orders are criminal, and contend for the innocence of its own; just as the nobility and bishops of France, once held mercantile charters in the highest contempt, and their own in the highest respect. When Europe was torn to pieces by the principle of bestowing exclusive wealth and privileges on religious sects, each sect contended that the remedy for the evil, lay in its own possession of this wealth and these privileges. It was found however by the United States, to lie in the abrogation of them all. Mr. Adams’s book, by changing a few names, might be easily converted from a system for balancing civil orders against each other, into one for balancing religious sects in the same way; and when the most powerful of these sects, were intriguing, fighting and negociating to find out this balance of wealth and power among themselves, those who expected to gain by the doctrine, would allow it to be classical. The balance of religious sects, however, could never be found, and the privileges bestowed upon them by law, charter or treaty, were only apples of discord thrown into society. Such apples are the privileges of civil sects. These inflame the zeal for wealth, as those did the zeal for religion. The former zeal burns now, as did the latter some centuries past; and civil privileged sects will regard the publick happiness, as religious did then. The principle, universally agreed in the United States to be inconsistent with religious happiness, cannot advance civil. On the contrary, civil privileges are likely to produce religious misery, as religious privileges have produced civil misery, and we must probably have both privileged, civil and religious sects, or neither.
Wealth, religion and truth, as by law established, compound a political system, of strict Athanasian orthodoxy; it does not contain three principles, but only one. And wealth, religion and truth, established by industry, conscience and free inquiry, is the opposite system, founded also in one principle.
Wealth, established by law, violates the principle, which induced the American states to wage war with Britain. It separates the imposer from the payer of taxes. No nation would tax itself to enrich an order or separate interest. When therefore a nation is so taxed, it must proceed from the power of the order itself, which is invariably the imposer and receiver of the tax; whilst the rest of the nation is the payer.
No interest, whose acquisitions are the effect of law, and not of labour, can pay any portion of a tax. Publick officers, who receive salaries, pay no taxes, and therefore are not allowed to impose them. If one half of these salaries were taken from them by the name of a tax, they would neither be taxed, nor entitled upon that ground to participate in the imposition of taxes; because the law only resumes what it gave, and takes nothing which it did not give; it would only be a diminution of salary for services. In like manner, bankers ought not to inflict the payment of the wealth they extract, and if this wealth given by law, was resumed by law, it would only be a cessation of a naked benevolence; and a worse ground for claiming a right to impose taxes, than a diminution of a salary for services.
Mankind are united by the necessity for subsistence in a common interest. Those who furnish the subsistence, pay all the taxes. As subsistence flows from the earth, that may be called the mother of men, liable to make all the disbursements they need. Hence, all, or nearly all taxes, must be ultimately paid by agriculture, and ought of course to be inflicted by her, if the doctrine is true, that the payer is the only just imposer of taxes. Agriculture cannot be partial, because she cannot shift the tax from her own shoulders. From her other interests diverge, like rays from the sun, but she is the centre of them all. If one of these rays usurps from the parent sun, the distribution of his light, it may be induced to darken another, for the purpose of increasing the splendour of its own; as a child who makes the will of a parent, disinherits his brethren for his own advantage. And so legislation flowing from, or influenced by any particular interest, in whatever form, has never failed to rob other interests.
Perhaps no separate interest would constitute a less exceptionable legislator, than commerce, on account of its close connexion with agriculture and manufactures; and yet, without considering the complicated means she could practise, to make other interests, and even that of agriculture, subservient to hers; a simple power of converting all other interests into insurers of her adventures, giving them the losses, and keeping herself the profits, would be sufficiently tyrannical.
If commerce would be the least exceptionable separate interest, as a legislator, or as influencing legislation, because of her connexion with agriculture and manufactures, paper stock must be the most exceptionable, because it has no connexion with either. It is not one of those rays diverging from the sun, or one of those interests arising from the earth, capable of being softened by the affinities of a common ancestor. Belonging to the family of cunning, it is inexorable to the family of the earth, and favorable to its own relations. These two families, in all their branches, are natural enemies. Whenever any member of the family of artificial interests gets into the camp of the other family, it lets in its comrades, and plunders to the uttermost. Among them, paper stock has been most conspicuous for such feats. In England, it has allied itself with its kindred, gotten into the camp, and plundered the nation in the last century beyond the magnifying conception of lunacy itself. Above ten hundred millions of pounds sterling are now supposed to be due to loan and bank stock, to which the payments made during a century must be added, to find the amount of which the family of the earth, has been stript by the family of law. In the United States, speculation, as it was called, bought of the family of the earth an hundred millions at one shilling in the pound, and then compelled it to re-purchase it at twenty. This family of the law soon disclosed its affection for its relations, monarchy and aristocracy. Here too bank stock is already annually extracting from the family of the earth, of labour and of property, five times as much as the civil government of the United States costs. Already, like the ancient hierarchy, it pretends that to tax it would be sacrilege. And already, like a tyrant preparing punishment for treason, it has proposed to inflict death upon forgery, where the system of mildness has been carried so far, as to subject murder in the second degree to imprisonment only. Fear for its wealth will induce this branch, like all of the same race, to let in its kindred.
The revival of the charter of the bank of the United States, was denied upon the ground of the political power conveyed by bank stock to the subjects of England; and the highest authority declared in this denial, that less than ten millions of it would invest foreigners with a pernicious portion of such power. Natives will derive still more power from stock, because their whole mass of social rights are enlisted as its ally and partisan. There is no provision in our constitutions, for a legislative conveyance of power by bank stock, either to citizens or foreigners. This decision, and the talents which produced it, proclaimed, that bank stock conveys political power. It proclaimed, that less than ten millions of it made a few foreigners, under all the disadvantages of that character, dangerous; but the same authority is silent as to the danger to be apprehended from an hundred millions of bank stock, in the hands of people to whom every branch of the government is open. The United States bank stock held by the English possessed the usual transferable quality, but no one contended that this quality was any security against the pernicious political power annexed to bank stock. If the United States had originally created a government of bank stock, and annexed the entire political power to an hundred millions or any other amount of it, a transferable quality in this stock, would not have expunged the aristocratical qualities of such a government. Had A assigned a share of this stock to B, the latter would have occupied the place of the former in this government, just as a feudal son did that of his dead father. Nor is a transfer of the power annexed to bank stock, from one citizen to another, a better security against that power, than was a transfer of the stock of the United States’ bank, from one Englishman to another, against the political power derived from stock by Englishmen.
The similitude between a stock and a feudal aristocracy is perfect. Money is made the basis of political power in one; land, in the other. The power is not annexed to money in general, but to a portion of it, moulded by law into stock; as in the feudal form it is not annexed to land in general, but to a portion of it, moulded by law into lordships. Those having money but no stock, are excluded from political power in a stock aristocracy; as those are, having land but no seigniory, in a feudal one. In both, though money and land possess the same intrinsick value by whomsoever held, portions of each are by the artifice of law, made more valuable than other portions naturally of the same value; and of course more powerful. This identical essence of monopoly, and sole cause of aristocracy, is the same in both cases. If there are two portions of people, each possessing a million of dollars, and one has its money converted by charter into stock, whilst the same favour is refused to the other; the difference between them as to social influence, power or rights, though less visible, is really the same, as between the same portions possessing an equal quantity of land, after the lands of one portion are moulded by law into lordships, whilst no favour is granted to those of the other. However such monopolies may be decorated by the trappings of ingenuity, the artifices of fraud, or the oblations of folly, both exhibit the simple case of endowing by law a selected portion of property, either money or land, with a better income and more social power, than is derived by its holders from a far greater portion of both, not so endowed.
This argument suffers no injury from the consideration, that our constitutions have not expressly annexed political power to bank stock; because, if it naturally imbibes political power, such indirect acquisitions derived from ordinary and not conventional legislation, however tortured, can never be reconciled with the policy of the United States, if it is founded in good, just and equal moral or political principles; as to that, the difference between the treason of the sword or of the pen by which it is destroyed, will merely consist in the degrees of pain inflicted by the respective operations. Banking has only appeared to any extent in Genoa, Venice, Holland and England. Does it bring its letters of recommendation from these monarchies or aristocracies, because it has homogeneously coalesced with them? Yet, these experiments, by disclosing the fatal truth, that banking could enrich an order, awakened an order here to be enriched. It advertised itself as a talisman against poverty, and obtained proselytes both of clergy and laity, or of those to whom its promises were truths, and of those to whom they were falsehoods. Fraud ever promises riches in heaven or upon earth, and hence it has been necessary in this essay to trace it through the chief forms it has assumed, in the first, the second and third ages, to shew the innate similitude of these forms to each other, and the inconsistency of all, with the civil policy of the United States. The subject ought to be fairly explained, that the nation may judge whether monopoly shall destroy its constitutional principles, or these principles, monopoly. If circumstances propelled the United States, like France, into a form of government too free or too honest for the national character; or if the wages of banking, like the pay of armies, have already moulded our legislatures into mercenary troops, it may be best to avoid an unavailing contest by a tacit submission; but if a publick exists in the United States, able to sustain a publick interest, a greater quantity of human happiness will be produced, by preferring that interest, to a monopoly in the hands of a very few.
This essay does not aspire to the honour of proposing a new political system. It only endeavours to ascertain the principles of old ones, and to shew that the publick will and publick interest, and an exclusive will and an artificial interest, cannot possibly constitute a governing power, in union. That these moral beings, are the only natural political enemies capable of existing, and are doomed by the author of human nature to eternal warfare. That no artificial balance can appease this eternal hostility, any more than it could reconcile good and evil. That hence, and not from a defective balance, Mr. Adams has never been able to find these opposite principles quietly poising each other. And that the United States, by creating a pecuniary separate interest, capable of entering the list with publick interest, have proclaimed a warfare precisely of that nature, which has demolished human liberty universally. In this age of avarice, a nation which creates paper stock and monied monopoly, but guards itself against feudal tenures, secures its liberty as wisely, as one would have done in the fourteenth century, by creating feudal tenures, and guarding itself against paper stock.
The gross and humiliating delusion by which banking lives, is ‘that the family of industry, are enriched by the idle family of artifice.’ England displays the profound wisdom of land and labour in outwitting stock, in this trial of skill. Stock now receives from them nearly double the amount of the whole price of all the exported labour of the nation; that is about forty millions, for enhancing the value of its exported labour, which sells for twenty. The United States will not yet supply us with this perfect demonstration, but the progress towards the same point has been as rapid as was the progress of England, from the commencement of her stock career. In debt and bank stock we only pay about ten millions of dollars annually, to obtain the enhancement of price or value, which we are taught to expect from stock, on about forty millions worth of exported labour. If stock benefits land and labour, then it is a misfortune to us only to pay it twenty-five per centum on our exports, and we ought immediately to create a sufficient quantity to acquire the English blessing of paying it two hundred. An exact statistical knowledge of the enemy’s country, being disclosed by the unerring medium of figures, we must resort to fate to account for the blindness of mankind.
All separate factitious interests pretend that they benefit nations in some mode, too intricate to be investigated by the mass of mankind. Thus hierarchies and noble orders yet retain a spacious existence. Of all such pretences, banking resorts to the least intricate. It gravely tells nations that it enriches them by taking their money; that by emptying a quart bottle of half its contents, the residue will become three pints. If a nation possessed a certain quantity of bread, would it be increased by depositing it in the hands of a corporation, and paying ten per centum for receiving the residue on the credit of the corporation bread notes? Would an annual deduction of one tenth part of the bread, increase the quantity, and make the nation more secure against famine? Will an annual appropriation of one tenth of its money to the use of a similar corporation, increase its wealth and secure a nation against poverty? The first species of fraud would be reprobated with universal indignation; the second is deliberately practised. Is the belly wiser than the head? A monopoly of money reaches all human wants, comforts, luxuries and passions. Every oppressive government is produced by some of the progeny of monopoly. If an individual of this family, has too often enabled tyrants to oppress nations, can the genus, covering, corrupting and commanding the whole species, enrich them?
If the monopoly of banking will rob a nation of its liberty, by corrupting or usurping the government, it is almost superfluous to prove, that it will rob it of its property also; because every separate interest acquiring one, has uniformly gotten the other. To the latter inquiry we shall however more particularly advert, since the pecuniary effects of banking will admit of reasoning so nearly connected with figures, as to exhibit mathematical certainty. The truth or errour of the assertion, ‘that banks add to the price or value of the product of labour,’ is capable of being exhibited to the eye.
The reader will recollect the difference between price and value. Local price will settle its own level, in relation to local currency. If the price of agricultural products, consumed at home, had been increased by banking, home manufactures so consumed, would have experienced a proportional increase. No species of labour, will suffer itself to be sacrificed by bank currency, for the benefit of another. Each will compensate itself, by enhancing its price up to its natural level. If therefore bank paper could produce local disorders, in the balance of labour against labour, the effect could not be permanent; and a re-adjustment of the level of price, would place the several departments of labour in the same relative situation, as to value, even if the price of each had been doubled. To disarrange the natural relation between the value of labour, ascertained by fair competition, would wickedly oppress, unfairly to enrich; and damp the spirit of industry. And an advancement of the price of labour, pari passu, would produce neither gain nor loss. It follows, that if bank paper did advance prices, nothing would be gained by a nation, in regard to its domestick commerce; and of course, that it can gain nothing by banking, except through the medium of its exported labour.
All the ground therefore upon which banking can operate, as to an increase of value, lies between the domestick and foreign price of exported labour. If wheat is worth eight shillings here, and ten shillings in the foreign market, the influence of bank currency upon the price of wheat, would be limited to two shillings. Beyond these confines, its power to enhance price by exciting competition, cannot extend; and therefore an enhancement within this narrow restriction, comprises the entire retribution within the power of banking to make, for the revenue it extracts.
Supposing there exist banks in the United States, operating upon a capital, real or imaginary, of fifty millions of dollars, and receiving a revenue, including dividends, perquisites and expenses, of ten per centum, or five millions annually; this five millions is the sum paid by the United States, for the supposed benefit of having the price of exportable labour enhanced within the limitations just stated. We have before proved that an evil and not a benefit, is conferred on a country, by disordering or raising the prices of labour consumed at home.
Supposing the exportable labour of the United States, to be forty millions annually, then they pay five millions or twelve and an half per centum to banks, upon the total of the subject, the real value of which can possibly be effected by banking; and if the difference between the value of this subject, here and abroad, should not amount to twelve and an half per centum, as is generally the case, it is evident, that a pecuniary loss results to a nation by banking, because the price paid for it, exceeds any possible enhancement of value within its power.
Out of the same fund, that is, the difference in a specie value, between the price of exported labour here and abroad, the whole amount of mercantile profit is to be taken; because competition cannot be so excited by banking, as to destroy this profit, without destroying commerce; nor is it conceivable that mercantile calculation could be so deceived, as ardently to patronize a system productive of such a consequence. If this mercantile profit amounts also to twelve and an half per centum on exported labour, it raises the deduction under a bank currency, upon forty millions of this subject, to twenty-five per centum, or ten millions annually. From this expense, there is no deduction pretended, except the enhancement of value by exciting mercantile competition. To reimburse it, banking, through this boasted competition, must save to the nation five millions annually, out of a mercantile profit of five. At whatever rate mercantile profit is computed, the advantage of mercantile competition must come out of this fund. Would an able calculator give six per centum for bank paper, if it was true that it deprived him of one, two, three, four or five millions annually, and bestowed it on labour?
The difference between the home and foreign price, as the ground for banking to operate on, is yet farther narrowed, by the deductions of freight, commission and insurance. These cannot be destroyed by any competition it may excite; on the contrary, if banking did increase the price of labour consumed at home, it would increase this deduction, and narrow still more the ground for its operation, on exported labour.
In fact, banking, instead of exciting competition, must, like duties, fall on the commodity, and fail to lessen mercantile profit. The merchant advances the price paid for its currency, as he advances duties. He must not only be reimbursed the one, in the price of the commodities he buys, as he is reimbursed the other, in the price of the commodities he sells, but he mist also gain a profit on both his advancements, otherwise he would be as inimical as he is friendly, to imposts and banking. Duties add to nominal price; do they also enrich nations?
The inefficacy of banking for enhancing the value of the products of labour, was demonstrated in the United States by an embargo. The exportable, instantly lost two-thirds of its price, without any change in the bank currency. And the price of the consumable, was instantly regulated by the home demand, just as the demand of foreign markets, when these markets are open, regulates the price of exportable labour. Could banking have regulated value or even price, the exact regulation of both, by need, would not have appeared in this complete experiment, of an intercourse between its currency and the products of labour, upon a theatre, isolated by this embargo against every species of foreign influence.
Its impotence for enhancing value, between the people of the same country, is not however conclusive evidence of its effects between distinct nations. Seeing that price and value are regulated at home by the market or need, we may certainly conclude that products consumed abroad, will be regulated by the same standard, and therefore the only question is, in what mode banking affects these regulators. This is done by increasing or diminishing the labour of a country, employed in providing for human wants. If it increases this labour, it diminishes; if it diminishes this labour, it increases the price of its products. It is certain that banking produces the latter effect, to the extent of the labour employed in its operations, and of that enabled to live in idleness upon the income of its stock. So far as it thus enhances the price or value of labour at home, it is a mode of doing it, precisely equivalent to effecting the same end by neutralising an equal portion of labour, with useless offices, endowed with unearned income. But so far as it thus enhances price abroad, it is a solid enhancement of value in favour of the nation which has the understanding to avail itself of the circumstance. The enhancement of the price of wheat in England, for instance, so long as its bank stock maintained its equality with specie, was a real enhancement of the value of labour in the United States, but not in England, by reason of the equalising powers of native labour; and the whole effect of our own bank paper, was to render some part of this real benefit merely nominal.
We now arrive to a conclusion of a formidable aspect. If bank currency cannot benefit a nation, through the medium of domestick commerce; because every species of labour consumed at home, will equalise its price in relation to a local currency; and if it cannot destroy or even diminish mercantile profit upon exported labour; it follows, that it does not reimburse a nation for the tax it collects; and at best only raises prices and excites industry, like taxes and useless offices.
A bank currency may therefore, in its domestick operation, both increase price and diminish value. The first by neutralizing a portion of labour; the second, by burdening the same country with its maintenance, against any reimbursement for which the equalising nature of native prices, is an effectual obstacle.
But specie rather excites than neutralises labour, and draws little or no tax from a nation. The possessor can part with it at a small profit, or even at none, without ruin, because he pays no interest for it; and it is his interest to take any profit in preference to its lying inactive. But the borrower of bank paper, cannot part with it, without making a profit equal to its cost. He cannot afford to take a profit even of five per centum, as a buyer with his own money may. He must consider himself in the lights of both borrower and merchant, and feel a necessity of making profit in both character. The owner of specie considers himself as a merchant only. The first is under a necessity of uniting in a tacit combination, compounded of bankers and borrowers, to depress prices, that one may get interest, and the other profit; these ends must be effected, or borrowing and lending bank paper would cease; they are only to be effected by a depression of price. And thus a field of competition to the vast amount of six per centum, is shut against bank currency, and open to coin; of course coin will produce better prices than bank currency, unexceptionably according to the criterion of value, and generally according to a nominal computation. Whenever it has hoarded or banished specie, it has gained the exclusive regulation of prices, as there does not exist a specie currency able to rival corporate currency; and then it becomes so powerful a regulator of prices, as to produce most of the effects of an exclusive privilege.
After the banishment or incarceration of fifty millions of specie, and the substitution of one hundred millions of bank currency, the latter would render all the commercial duties, previously rendered by the former; but as it could not render more than all, so it cannot perform more duty than the preceding sum of specie; if it was miraculously turned into specie, half of it would fly away into other parts of the commercial world, because half could perform the whole duty. Still the hundred millions, though half of it is useless, cannot afford to give as good prices as the fifty, because the hundred millions is burdened with the payment of eight on ten millions annually to the bankers and their officers, whereas the fifty, like an owner of land in fee, has no such rent to pay. Whence it happens that the price and value of the products of labour is higher in South America, than in England and North America, although the latter countries have a greater quantity of circulating currency in proportion to population; but then the former has more specie currency.
Bank currency, being in its nature a monopoly, must inevitably be governed by the innate law of monopoly. This is to enhance its own value, by diminishing value in some other quarter. It cannot otherwise subsist. If bank currency gave a better price than coin, the coin would be drawn from the bank for the purpose of buying cheaper, and the moment it performs its promise of outbidding coin, it perishes by depreciation.
So long as it operates as specie, an influx of bank paper into this country; produces an efflux of specie, which departs to raise the real value of foreign labour, whilst the remaining local currency, can at most bestow only a nominal increase upon domestick. Bank currency, passing as specie, is embodied with the general business of commerce, and like specie, is governed by the principles of commerce. These have declared, that even a redundancy of specie itself, cannot be made to render permanent local benefits. If bank currency is inextricably interwoven with and influenced by the principles of commerce, it is simply a redundancy of specie, under a prohibition against exportation. It will enhance the value of the commodities, bought by the banking nation of another, periodically, by producing a redundancy of specie; and permanently, by a diminution of labour. Whilst a country can give high prices in specie, for foreign manufactures, on account of a redundancy of money caused by bank currency, foreigners will prefer them to high-priced commodities. After the specie is gone, the price of the same commodities, as to foreigners, will be fixed by the markets abroad, and not by the paper at home.
But reasoning upon the question, whether bank currency will enhance or depress prices, is superseded by experience. The philosophers no longer debated whether a monster was in the sun, after they saw the fly in the telescope. Through the experience of England, we are presented with the disputed fact. England has the most paper currency of any country of the commercial world, and the price of her manufactures is the lowest.
In contemplating the example of England, we must discern compulsion at the beginning, as well as at the end of her commerce. Her labour is compelled to sell low to her mercantile interest, and foreign nations or her colonies are compelled to purchase high of the same interest. Her maritime power is the instrument of the latter compulsion, and her bank currency of the former. This bank currency cannot force up the prices in foreign nations, as her fleet does by vexing and crippling competition; but it can force down the prices of labour at home. By taxing labour to maintain this fleet, that commerce is enabled to sell high abroad; and by a monopolized currency, regulating the prices of domestick labour, she buys low at home. She draws wealth and opulence from two sources, knavery and violence. To maintain the oppression over foreign nations and colonies, she frequently involves herself in war; to maintain the oppression over home labour, she is forced to use the penalties, corruptions, and mercenary armies, forming the code of all despotisms. But she is enriched, because labour is her slave, goaded by a paper system, and she makes competition shrink by a fleet.
Lord Sheffield lately observed in debate, that ‘money was the medium of commerce in France, and credit its medium in England.’ And he supposed, that hence arose the advantage possessed by English commerce over French. It is true, that this cause does constitute a portion of that advantage. Specie, the national currency in France, allows labour a competition with commerce, in fixing prices; but paper currency or credit, guided by the spirit of monopoly in England, enables commerce to settle the prices of labour. Commerce and productive labour are dealers; with a national currency they bargain on equal terms; with a corporation currency, governed by commerce, on unequal. Hence the price of labour being higher in France than in England, France shuts her ports against English manufactures. Yet English credit or paper, far exceeds French coin; therefore less coin gives better prices, than more credit or paper. If France and England should exchange situations, the prices of home labour would be raised in England by a less amount of national currency; because it would consist of specie, and force commerce to deal with labour on equal terms; and in France, these prices would be depressed, by a greater amount of national currency, because it would consist of corporation paper, and enable monopoly to regulate the prices between labour and commerce.
A circulating medium, measured out to a nation by corporations, or even by the commercial interest, will certainly enrich and strengthen the measuring interest, but is there a single circumstance tending towards publick happiness or virtue, in this effect? The acute bishop Tillotson has said, ‘If the appearance of any thing be good for any thing, the reality must be better.’ The appearance of virtue may be useful to the guilty; but it is less useful than virtue itself, and is frequently a snare to others. The appearance of money may be used to transfer property, like the appearance of virtue; and to an interest which monopolizes this appearance, it may be, according to Lord Sheffield, more beneficial in a pecuniary view, than the reality; but to a nation, the money itself, or a national currency, will, in conformity to Tillotson’s maxim, be better than credit or an appearance of money.
The design and nature of money or currency, confirms the superiority of coin to credit. Money is not intended to create wealth, or the objects of commerce; nor is it able to do either. Its office is to represent and exchange them. Such being the limited power of specie, paper, its shadow, cannot do more. Specie can transfer wealth from one country to another. If the United States could at pleasure create specie, they might, by a prudent use of such a monopoly, enrich themselves considerably at the expense of the world. It is not the office of paper currency to transfer wealth from one nation to another, because of its locality; but to transfer wealth from man to man, or from a nation to a corporation. Its design is to enable individuals to imitate nations, in the science of overreaching. So long as it represents wealth, corporations, able to create it, can more effectually draw wealth from the rest of a nation, by its means, than one nation could from others, by a power to create specie; because it can transfer land from man to man, whereas specie can only transfer moveable wealth from nation to nation. Paper money or credit, within the sphere of its currency, is more able to transfer property, than specie, within the sphere of commerce. A chartered power of creating it will therefore be used, as would be an exclusive national power of creating coin.
If a paper currency increased the price of exports, England could not export. This idea is repeated for the sake of examining a difficulty which it suggests. Although the price of English exportable labour is kept lower than the exportable labour of other countries, by the means to which the United States have resorted, to raise the price of their exportable labour; how happens it that England must moreover resort to war and fleets to force her commerce, and that she shrunk from a competition with the United States, even when our currency was specie, and the price of our labour higher?
The fact shews, that a nation, after having submitted to the evil and injustice of diminishing the price of its own labour, by a paper currency, was yet unable to rival a country without a paper currency, and where the price of labour was higher; and therefore that its commerce was in some way injured by the monopoly prescribed for its benefit. The solution of this enigma requires a knowledge of English commerce, the want of which confines me to surmise. Foreign nations and colonies, would as probably take advantage of the low price of labour in England, as her capitalist or commercial interest does, if they could enter into a competition with that interest. This is prevented by a navigation act, contrived to secure the benefit of the low price of labour, to an order of citizens; and to exclude foreign participation. And the spirit of monopoly, which levelled this instrument against home labour, levels it also against the world, to enhance the value of exportable commodities, after they have passed form the workman to the capitalist or merchant.
But the fact, without any explanation, suffices for our argument. It proves, that bank currency will have the effect of diminishing the price of exportable labour to the workman, and that it must be raised in favour of the merchant, by the means used in England, namely, war, fleets and navigation laws.
It is as a general position true, that the interest of commerce and agriculture are the same; and we are seduced by the truth of this maxim, to neglect an examination of our subject; concluding, from the great opulence evidently drawn from corporation currency by commercial individuals, that agriculture must be correspondently enriched. The real opulence bestowed by banking on one interest or one place, we see with the eye of the body; the supposed opulence bestowed on the other, we imagine is to be seen by the eye of the mind, through the mirror of a general maxim.
The maxim might be greatly extended. All human interests are the same. Nothing which is vicious or wrong, can be really beneficial to any. The interest of governments and nations is the same. Yet tyranny, mischievous as it is to both, is common. False and factitious interests, are eternally seducing men from true and natural interests; and alliances, intended by nature, are often broken by law. A monopoly of commerce, or of a branch of commerce, would enrich the monopolist, but injure the agriculture or manufacture, which supplied the commodity. A monopoly of commerce before the revolution, enriched Britain; the merchant of America; but it was injurious to our agriculture. To bestow opulence upon an American city by a commercial or paper monopoly, would be merely as oppressive to agriculture, as to bestow it by the same means on Glasgow. Washington might be enriched by settling there a vast stock income, or sinecure offices to an equal amount; but would this enrich the nation? And if commerce and agriculture may commit hostilities against each other, it would be still more erroneous to cover a monopoly of national currency, by a maxim, which only supposes that commerce and agriculture have the same interest, whilst they pursue their true interest.
Agriculture, formed into an aristocracy by the feudal system, being guided by a false interest, became infinitely less beneficial to commerce, than it would have been, uninfluenced by the spirit of monopoly; and commerce, moulded into a paper aristocracy, will thence also become less beneficial to agriculture, because it will be influenced by the same spirit. That it can breathe its pernicious errours into the one, wide as it is spread, is evinced by its capacity to corrupt the other, which spreads wider; unless the monopoly of national currency, is an organ of political respiration, less powerful than feudal monopoly. A close affinity is perceivable between the operations of a feudal and paper aristocracy; and if commerce could justly complain of the one, agriculture must suffer by the other. Labour needs land to produce, and money to transfer agricultural products. A monopoly of the necessity, land, or a monopoly of the necessity, money, are equivalent modes of extorting from labour. A vassalage, inflicted by means of the necessity, money, is not more voluntary than a vassalage inflicted by means of the necessity, land. Borrowing is as unavoidable, as leasing for rent or services. The collection of the interest or dividends by a stock aristocracy, is as certain as the collection of rents and services by a feudal; and the superiority of one over the other, for effecting the end of every aristocracy, rests upon the superiority of the sum collected. This estimate is left to the reader.
We will proceed to another. As we all know that a regular influx of wealth, from a majority to a minority, is a regular influx of power, the United States ought to estimate the quantity of each, they are pouring into a banking interest. If no new banks should be created after 1808, nor the acquisitions of the old increased, the five millions annually collected by the existing banks, at compound interest, carry from the publick to the corporations, in twenty years, above one hundred and eighty-four millions of dollars. Here is already a vast current of money and power running one way; will those check it in whose favour the current sets? Are the receivers, as regulators of power and wealth, of undoubted confidence?
In the same twenty years, the United States lose the use of fifty millions of specie, or national currency, expelled or locked up as bank stock, to create a demand for bank paper. At compound interest, (specie being equal in value to bank paper) this use is worth above one hundred and ten millions, exclusive of the sum exported. Thus, by being deprived of its specie, for which it paid nothing, and supplied with paper at the price it costs, the difference to the nations in the present state of things, will amount in the next twenty years to near three hundred millions of dollars.
If stock should cease to accumulate, such will be its operation; but as history, both here and in England, ascertains its fertility in devices for its own increase, our calculation is probably too low. Let us however fix the amount at three hundred millions. The reader will recollect, that in treating of debt stock, we endeavoured to shew, that its interest was equivalent to the rent of land, and that to borrow was to sell. In that case, the nation is supposed to receive a price for itself or its land; in this, it pays the rent, interest or dividend, but receives no price. And it enhances the price of bank stock, for which it receives nothing, by subjecting itself to pay double the interest paid for debt stock.
That a banking system does amount in several views to a national sale of itself, the history of its infancy here, furnishes strong apprehensions. Church stock, and feudal stock, formed parties, which trafficked in publick rights; and parties have grown up with paper stock here. It has been said in the publick prints, that banks have already become instruments for influencing election, and that the Manhattan bank could have defeated Mr. Jefferson’s. If one bank could deprive the publick of any degree of patriotism and talents, the whole system could expose it to any degree of vice and ignorance. Whilst I am writing, prices are offered to legislators for charters. What can be sold for these prices, except the people? What else have legislators to sell? It is admitted, however, however, that it is as well to sell them, as to bestow them gratuitously.
In Rhode-Island, bank stock, to the amount of four millions, is said to have been created. She has near seventy thousand people. Allowing her eighteen thousand actual labourers, and her stock to collect in expense, perquisites and dividends, ten per centum, her labour pays a capitation tax of above twenty-two dollars annually to banks. If the union contains six millions of people, it can bear, by the ratio of Rhode-Island, four hundred and twenty millions of bank stock, which would inflict upon the people an annual tax of forty-two millions. There is nothing extravagant in this calculation; England has far oustript it in stock accumulation; Rhode-Island has already realized it.
If the stock interest in Rhode-Island, draws more nett profit from banking, than the Virginia masters do from eighteen thousand Negro slaves, banking approaches in substance to a mode of selling freemen. Arthur Young calculates the profit of English West-India slaves, at five pounds each. The banking mode of converting the labour of one to the use of another, is more profitable than this personal slavery.
We cannot omit here to remark a difference between the pecuniary interest of wealthy classes. Where monied capital or stock constitutes wealth, its interest points to land and labour, as the only objects able to satisfy its purpose and trade; but where land and labour constitute it, income and accumulation can only be drawn out of itself by the creations of industry; for the utmost oppression of real over factitious wealth, is limited to a forbearance of its own bounty. This suggests a question of worldly wisdom. It is left to the reader to decide which is the dupe. The stock interest, in supposing that it enriches itself by banking, at the expense of land and labour; or the land and labour interest, in supposing that banking will enrich that. One is inevitably mistaken.
The efficacy of stock, as a mode by which governments sell or give nations to minorities, of which they may constitute a portion themselves, is capable of arithmetical certainty. A debt of four hundred and twenty millions sterling covers twelve millions of people at thirty-five pounds sterling a head. This is about the average value of all the people in Britain, including every age and sex, considered as personal slaves. Britain owes several hundred millions of debt stock, beyond this sum, and nearly as much more to banks of all descriptions, besides her East-India debt. Ireland has an equivalent debt of her own. This valuation is regulated by the value of the West-India slaves; but as the people of Britain supply a double capitation income to stockholders, a better mode is disclosed of making some men profitable to others, than the West-Indian. This enormous mass of stock for transferring the profit of labour to idleness, has been compiled with about twenty millions of specie; evincing, that governments can make stock out of stock, and that debt stock, like bank stock, is capable of being indefinitely multiplied without money. It has been often said, that poor labouring people in Europe, encounter more penury and distress than the Negro slaves in the United States. The profit extorted from the Negro slave is moderated by the immediate interest of his master in his existence. It is moderated by the master’s benevolence, and by his respect for his own reputation. But the slave of stock enjoys none of these ameliorations; and therefore it is not surprising that he should be more miserable than the personal slave. The several descriptions of stock in Britain already require a far greater profit from the people, than can be paid by twelve millions of personal slaves. The paying class, is also diminished by the receiving and unproductive classes. Excessive labour, poor-houses, penury, prisons, famine, crimes, must follow. Let not the advocate for enslaving freemen by means of stock, venture to compare his system with personal slavery. It will be found that indirect slavery, like indirect taxation, is capable of being carried to greater excess than direct.
It is proper to examine arithmetically also, the progress of stock in America. Our supposed fifty millions of bank stock, being a sum beyond the deposited and existing coin, fixes the capacity of our stock like the English; to multiply itself without specie. It circulates, we will suppose, eighty millions of paper, costing the country above six per centum; adding these eighty millions to as much debt stock supposed to exist, and the grapples of stock to about thirty-two dollars a head, appear already to be thrown over us. Shall we disentangle ourselves from them whilst we have it in our power, or defer the effort, until we are irretrievably entangled in the intricacies of indirect slavery? A slavery, in which the sufferer is ignorant of his tyrant, and the tyrant is remorseless, because he is unconscious of his crime.
By bank stock, unless all our reasonings are erroneous, and our examples inapplicable, a government may subject a nation to the payment of a capitation profit, to those to whom it shall be conveyed by charter, exceeding any profit extracted from personal slaves; and political principles may be corrupted. Are there any greater temporal calamities? Are there any temporal blessings capable of balancing them? Weigh the terrifick duumvirate, oppressive taxation and a corrupt government, against the benefit proposed by banking. All it proposes, its total advantage, lies in the simple space of substituting some millions of bank currency, for some millions of specie currency.
We have endeavoured already to prove, that the substitution is an evil, supposing it to cost the nation neither money nor principles; if we have failed, it may yet be an evil, on account of the loss of money and principles it requires. We will add several observations upon these points.
The freedom of our commerce, and the tendency of money to find a level in the commercial world, furnishes a well founded belief, that specie had arrived, or was hastening from all parts of the commercial world, to render us all the commercial services capable of being rendered by money, when banking checked its career.
The sudden diminution of specie upon this event, is an evidence that we had enough for our wants. Had we needed more currency, specie would have continued in circulation with bank currency. But that currency, by producing a redundancy of circulating medium, became an ostracism against the innocent and patriotick specie.
It follows that bank paper is an operative agent in the adjustment of the level of specie, throughout the commercial world, though local itself; because the specie it banishes from one country, goes off to another. Hence a country, by confining her currency to specie, will receive remittances in coin from all others resorting to bank currency; by resorting to it, the same country sends such remittances to other countries in coin also. Banking therefore effects two ends completely: it enriches other countries by the expulsion of specie; and it enriches stockholders by the price paid for their paper, to supply the place of the expelled specie. Do we incur the first misfortune, for the sake of the second?
The disappearance of specie, ascertains that its quantity sufficed to render every commercial service which currency can render, and no amount can render more service than a sufficient amount. But though no amount of currency, can perform services for a nation, beyond the national demand for such services, yet an artificial bank currency may be thrown into circulation, capable of taxing, but incapable of serving a nation. Supposing that fifty millions of specie have been taken out of circulation by banking, and that this sum sufficed to meet all our demands for a currency, we now give five millions annually to get too much of that, of which we had enough for nothing; and with which we were regularly supplied, by the equalising nature of universal currency; just as Virginia, by an utter exclusion of paper, would have been supplied with specie. The single quality of universal currency, possessed by bank paper, consists of a detrimental capacity to expel specie, whilst it is unable to go abroad itself, to remove the evils arising from a redundant currency. Of these qualities, a state of the Union, or the whole Union, may avail itself, as a means of turning the paper systems of other states, or of the commercial world, to advantage. Their influence in adjusting the distribution of money, would ensure to the forbearing country its allotment in specie, whilst the inability of paper currency to fly abroad, condemns the banking country to the two evils of a redundancy of currency, and of receiving its allotment in local paper purchased by an annual tax.
It would be endless to enumerate all the effects of this condemnation; a few, serving to illustrate the scope of our reasoning, and the imbecility of all attempts to prevent the natural flux and reflux of specie, cannot be omitted.
There is certainly a measure, beyond which a nation cannot be benefited by money. Its redundancy being an evil, the political or commercial body instinctively labours to expel it, as the natural body does a disease. But if a nation entrusts to a college of political doctors, the power of dosing it with money, whilst they are enriched in proportion to the physick they administer, their fees will be their guide, and not the health of the patient. A redundancy of local currency, produced by doctors hired to keep it up, cannot be disgorged by the efforts of nature struggling for health.
Money (like prices, trades and manufactures) regulates itself better than it can be regulated by the doctors, despotism, monopoly or banking. A regulation of money, is always a regulation of prices, and an interposition by law, in the economy of individuals. It covers effort and competition in every shape, and combines in a mass the several evils which would flow from distinct legal prices, for each separate object of human industry. Such an interposition with a single article of industry, has invariably terminated in mischief; it is therefore probable, that the power of measuring out currency, placed in corporations, which is an interposition with all prices, and all objects of human industry, will not produce good.
A providential scarcity of the metals, devoted to become the medium of commerce, prevents the evils of pecuniary redundancy, and this utility is destroyed by an unlimited power of multiplying paper currency. Overflowing mines of these precious metals, would destroy their utility as a medium of exchange; and confined to one nation, would diminish rather than increase its happiness. Paper money enables avarice to inflict the misery of this redundancy, whilst not even the refuge of forging it into ploughshares is left to the nation. Corporations are solicited by the most fascinating orator to deluge a nation with a flood of currency, no part of which is subject to be drained off by the ebb natural to specie. Is that commerce free, the currency of which is regulated by a corporation?
It is because no single government is able to regulate universal currency, that it cannot raise the value of exportable by local currency. It is, however, able to diminish the profit of this labour, by quartering upon it the dividends of this local currency, as we have endeavoured to prove. Supposing that it may also produce the effect, insisted on for its defence, namely, that of enhancing local prices or home subsistence; it then combines the two operations, of diminishing the value of exportable labour to the labourer, and of enhancing his expenses.
An effect, extremely similar to this, is produced in England by paper currency and excises. The first keeps down in a degree the prices of exportable labour or manufactures, and the second enhances the expenses of subsistence. A redundancy of bank paper here, which shall enhance expenses, operates as excises do in England, except that the excise there goes to the government, and here to corporations.
And a consequence of placing the exportable labour of that country, under the regimen of a currency regulated by a corporation, illustrates both the mischief of such a power, and our whole scope of reasoning, by a very striking fact. It is by this means deprived of a share in the government. The manufacturers are subject to capitalists, and regulated for their benefit. We have endeavoured to prove, that the paper system would impoverish the agricultural interest, which produces our exportable labour, worm it out of the government, and reduce it to subjection. Let the fate of the English manufacturers, from a paper regimen, point to our agricultural fate, under a similar regimen. Let their fate also display the justice dispensed by a power to regulate currency. It is the justice invariably dispensed under the seduction of avarice. But seduction is unnecessary to produce an adherence to one’s own interest. A power to regulate currency for the agricultural, or manufactural interest, and to enrich itself thereby, will rapidly acquire the weapon which governs the world. In pursuance of its separate interest, it has usurped the government in England, under the name of the monied interest: reader, which is the preferable substitute for our constitutional policy, the Emperour of France, or the monied interest of England?
The power of substituting a factitious local currency, for one naturally universal, is a handle, stronger than that of superstition, with which to manage nations. Allegiance to the faction, is secured by the fear of losing this artificial money. Specie is independent of a faction, and able to become a patriot. It can attend us in our flight from tyranny, and travel over the world, to feed, clothe and arm patriots; but paper chains to the sod, and remains at home to tax for party or corporation benefit, and not to cherish liberty. But let us leave the goddess to take care of herself, and look a little farther after our money. Although we have seen separate interests enslaving nations from the beginning of the world, it is still a very difficult thing to make mankind believe, that corporations for gathering money, do really take that which they were instituted to take. They are now convinced, that the separate interests of superstition and title, had their money in view, under other pretences; and to save it, have expelled them. But they will not believe, that a pecuniary order, which avows the design, denied by these detected orders, is in earnest. No, this order, unlike others, intends to enrich nations, not itself. Let us count these riches in other modes.
Supposing about fifty millions of stock to exist in the United States, and that about eighty millions of bank currency are circulated, it follows, as before observed, that the nation pays at least five millions annually for the bank currency, and loses the use of fifty millions specie, worth annually three millions more.
These eight millions are annually paid by the nation, to gain thirty millions currency, more than it set out with. The price paid for this additional currency amounts to about twenty-seven per centum per annum. Which is the better policy; to give eight per centum for money, for the purpose of attacking France or England; or twenty-seven, to raise up a separate interest to attack our form of government?
But if the fifty millions specie performed more useful services than the eighty millions bank currency, the computation settles in the fact, that we pay a difference of five millions annually in favour of an evil. This is an errour still more egregious. It is taking up sorrow upon interest. A nation which can count, will see that direct pecuniary orders operate as their indirect predecessors have done.
Our calculation goes upon the favorable ground for banking, that the stock is in specie, ready to meet the notes, or to come forth upon a national emergency; but if this stock was never real, or if the specie is banished by a redundancy of currency, so as gradually to reduce the supposed specie stock to paper credit; the total loss of so much coin, and the possible misfortunes which may arise from an inability to meet the debts of banking by real money, would constitute no inconsiderable items of additional evil bought by the nation.
The evils bought with debt stock, have been often compared to those obtained by banking. Compare also the riches they bestow on a nation. One does not expel specie, the other does. One collects five or six per centum interest, the other ten or twelve per centum charges and dividends. Ah! but these dividends cost nobody a farthing. Well! let us call the interest of national debt a dividend, and the debt is no more.
Their political and physical similitude, breaks in upon us at every step, abstractedly or experimentally considered. Funded stock, when proposed for national consideration, was announced as a blessing; this blessing was said to be comprised in its increase of capital and industry. The same mantle, stript by publick sagacity, from funded stock, has been with wonderful ingenuity, thrown over bank stock. That also is gravely announced by its inventors as a publick blessing; and why? It will increase capital and industry. The United States detected the shallow artifice under which the designs of funded stock were hidden, because it was moreover defended by pretexts, said to be necessities; they cannot see the same artifice spread over the designs of bank stock, because it has no auxiliary; or because we sometimes search in vain for that which lies directly before our eyes.
This common and solitary refuge of our twin namesakes, is simply that of all orders enriched by law and oppression. ‘It is their opulence,’ say they, ‘which gives employment to labour and excites industry.’ Thus have all such orders concealed the wealth they extract, and the poverty they inflict. As a justification of banking also, this old mode of concealment requires attention.
Does banking increase capital? It does, if real capital is increased, by increasing paper currency; but if paper currency can at most be considered as capital, when balanced by property and labour, an additional quantity can no more increase capital, than blowing up poor mutton can increase meat. A redundancy of specie would not form a stationary capital. As birds of passage travel in search of food, specie travels in search of the real capital it represents; and if the food or employment is insufficient for either concourse, the overplus flies away. If specie could create capital, it would find stationary employment every where. From these facts we infer, that money is not capital, but the representative of capital; and that it is inverting the true and genuine relation between capital and money, to suppose that money produces national capital, instead of national capital producing money. The value of labour is real capital. If a nation had an hundred millions of money, but did not labour, it would presently be without capital; but if its labour was worth five millions annually, though it had no money, it would have an hundred millions of capital, which would soon attract money. The introduction of bank paper is uniformly the epoch from which the diminution of specie is dated. If specie therefore is capital, bank paper diminishes capital; if not, neither can its representative be capital. It is by real capital, that specie is equalised among commercial nations. As a representative, it is subordinate and responsible to its principal. Bank paper cannot possess an intrinsick value, if the value of specie is representative; therefore it cannot increase capital; and a surplus, beyond a necessary currency, far from falling within any idea of the term capital, can only exist by feeding on capital, the principal of currency. If bank paper was new capital, so far from expelling the representative of the old, it would require more representation, and attract specie. Or if, like specie, it was the responsible representative of capital or property, it would be subordinate to its principal. On the contrary, it is made by law, an irresponsible representative of capital or property; and a currency converted from the servant into the master of property, necessarily becomes a tyrant, to secure its power.
The advocates of banking admit this doctrine, by contending that it is beneficial to a nation to expel specie by paper; as it causes an exchange of the representative of capital, for the thing itself. If the capital, thus gotten from foreign nations, by the expelled specie, would produce a permanent profit, superior to the annual cost of the substituted paper, this would be true; but the difficulty of discovering any such profit, and the visibility of the cost, are strong evidences that it is false. This stratagem for enriching a nation can be practised but once, whereas the cost of bank paper substituted for expelled specie is annually repeated. Besides, a redundancy of specie for exportation, produced by the creation of bank paper for home use, diminishes the value of that specie; and this depreciation both causes its flight, and constitutes an actual loss to the stockjobbing nation. Again. If an increase of currency, was an increase of capital and industry, the stratagem of sending abroad the specie or universal currency by the stockjobbing nation, defeats the end proposed; both by the amount of the money exported, and also by increasing the capital and stimulating the industry of rival nations, to whom the specie is exported.
When we see gold and silver fly away from a country, because it is unable to create capital, and because capital can only retain a competent representation in currency; an opinion, that bank currency will create it, undoubtedly contains more of credulity, than one, that any other metal can create gold. It affords matter for another alchymist. The drama might again exhibit cunning preying upon the avarice it pretends to feed. But a stage would be too small to contain the two orders of character; that of Epicure, Mammon, Ananias and Tribulation on one hand, and to Subtle and Face on the other.
Bank paper, not being capital, or able to create capital, it is to be further examined, whether it encourages and creates labour and industry, as it also pretends. If it did, the new created industry, would retain the specie it expels. This inquiry lies in a comparison, between a legal institution for acquiring wealth to an enormous extent, without talents or industry; and leaving its acquisition to the regulation of talents and industry. Wealth in both cases is supposed to be the spur to exertion. By a laborious cultivation of my talents and persevering industry, I acquire a moderate degree of wealth; by banking I acquire infinitely more, without labour or talents. Why should I subject myself to the fatigue of becoming learned and useful, to become the scoff of a rich, idle and voluptuous order? Their abundance, to which I must contribute, will diminish my competence, in the eye of comparison, almost to nothing; and of course in my own eyes. No, I will go into the lottery where there are no blanks; Where every ticket draws annual prizes; and where, as a stockjobber, I may be as rich, as idle, as ignorant, and as useless, as a bishop, nobleman or king. What will the world say of our experiment to establish a free government, if an epithet, universally considered as far more humiliating than those of bishop, nobleman or king, should become the title of a separate order or interest in the United States?
This mode of encouraging industry, by creating rich and idle orders to give it employment, has been practised in various forms, but all contain the same principle. Hereditary and hierarchical orders, encourage industry in the same way as stock orders do; by taxing it to maintain themselves in idleness and affluence. The lash is applied to slaves, and taxation to freemen, to encourage industry. Masters and orders praise the effect of both causes, to gain wealth and leisure for themselves. If one evil has been imposed by a foreign nation on this country, should it therefore impose the other on itself?
When debt stock boasts that it is an encourager of industry, it refers to the stimulus of taxation; yet it attempts by every artifice, to conceal from the people the cause of this vaunted effect. Bank stock also boasts of the same merit, but it pretends that an abundance of money, and not the goad of taxation, is its cause. The first, by hiding the cause of the effect it claims, confesses its treachery not more conspicuously than the second, by pretending that it encourages industry by a superfluity of money. Are extortion and donation, a robber and a prodigal, equally encouragers of industry? I, says debt stock, encourage industry, by taking away your money; and I, says bank stock, by pouring money into your pockets. When, by theory or experience, has it ever been said, that either the redundancy of money, or the loss of earnings, was an encouragement to industry? If the inculcation of a false opinion, that industry enjoys her own earnings, is the best mode to which all orders, titled or stock, can resort for her encouragement, it is evident that the mode would be improved, by making the opinion true. Fulfilment would be a stronger excitement to industry, than disappointed hope.
The true sanction of private property, consists in its effect to stimulate men to industry, and the improvement of the understanding; from the consideration that they will enjoy whatever their knowledge and industry may gain. Exactly the reverse of this sanction, and this effect, is the doctrine, that knowledge or industry will be excited and increased, by transferring a portion of their gains from themselves, to orders, hereditary, titled, hierarchical or stock. Although all such orders profess themselves to be encouragers of knowledge and industry, and friends to private property, it is hence evident, that they either deceive themselves, or attempt to deceive others.
An idea, heretofore suggested, seems of sufficient importance to be again brought to mind, for the sake of arguments, which have since occurred. It is that which supposes the credit of nations to be property, of a species, as far beyond the power of a government to give away to corporations, as any other species.
Currency and credit are social rights, in a state of appropriation, and not a species of wild game, to be seized and bestowed by governments, any more than other social rights. To save, not to sell or give away such rights, constitutes the utmost power of free governments. To bestow on corporations, by charters, an exclusive right of uttering currency, is more exceptionable, than to give or sell to them an exclusive right of uttering new patents for land, because every individual owns a share of the national credit, which is not the case as to land. Or considering the nation’s land, in a territorial view, as equivalent to the nation’s credit, the dismemberment of one, would be a question equivalent to the dismemberment of the other.
The term ‘national,’ applied to currency and credit, furnishes an argument in favour of these positions. The use of a term descriptive of appropriation, proves that currency and credit are appropriated. All property is under the sanction of a twofold species of appropriation in society. It is appropriated to the use of the nation, for publick defence, and the administration of the government. After this object is satisfied, it is appropriated to the use of the individuals composing the nation. But there is not in free countries any appropriation, to the use of a government, called party or administration territory, commerce or credit, to be chartered by it to individuals or factions. On the contrary, this third kind of appropriation, constitutes a violation of publick and private property, and the difference between free and despotick governments.
The right and property of national credit, territory and commerce, are of the same nature; and it equally violates a policy, founded in the principles of liberty, for a government to charter away portions of one, as portions of another. Those minor appropriations of credit, land or commerce, produced by the talents, labour and industry of individuals, or by the municipal law which embraces every member of a society, are of the second species of appropriation, and distinct from the third.
The principles of political morality admit only of the appropriation of property, in the two first modes, and reject the third, as unnecessary for a government, inconsistent with the ends of its institution, and the ground work of civilized tyranny.
A transfer of private or publick property, or both, from individuals or nations, to orders, corporations or to other individuals, is the evil moral principle, in which all hereditary and hierarchical orders have been founded, and of course, in plain hostility with any principles, capable of being assigned as the ground work of the government of the United States.
That government could not by its laws or its power, enrich corporations at the publick expense, nor touch property, except for publick use, was so well understood as a principle, essential to liberty, as to have been unequivocally expressed in most of our constitutions, by inhibitions of ‘exclusive emoluments,’ except for such publick services as were not transmissible. Our governments are not allowed to invade that appropriation of property called private, by bestowing emoluments which some portion of it must pay, upon any occasion, except such as is covered by that appropriation called publick. They are therefore prohibited by the written rule, as well as by the moral principle, essential to free forms of government, from invading or transferring property for private or corporation emolument. And lest a government might call a violation of private property, a publick benefit, as it has uniformly done in every species of monopoly, the constitutions quoted have provided against this evasion, by limiting a power in the governments to bestow emoluments, for the compensation of personal and unalienable publick services.
That credit and currency are, in society, property, both publick and private, is demonstrable from other considerations. Talents and industry will divide and distribute credit and currency, as they do land. A species of wealth which talents and industry can distribute, is property. What is the distinction, allowing our governments to take away the whole, or any portion of this species of property, and to give it to corporations, which must not admit a power of chartering away the lands of individuals, and the national territory? If both land and credit, or currency are distributable by talents and industry, then, to distribute either by law, is fraudulent and oppressive.
If it be said, that credit and currency cannot be considered as property, publick or private, because they cannot be divided by metes and bounds, like land; it is answered, that an incapacity for a similar division is common to sundry social rights, such as the freedom of religion and of the press; and that the sanction of the right, not the marks of the division, being the basis of property, this sanction must be equally strong in relation to land and credit or currency, if it can reach both, and must be equally violated by distributing either by law.
Commerce is called national, like credit and currency. It is less capable of a division among the people than credit, or currency. Is it not a species of property, both publick and private? As publick, it is an object of taxation. As private and publick, our government cannot charter it entirely or in portions to corporations, because in our society, there exist only two appropriations of property, publick and private; the first as payment for publick services, to be made by law; the second, the acquisition of private people, which no law can transfer to other private people.
There is no distinguishing between commerce, credit and currency, as objects of social property. This indelible similarity admits only of two inferences; either that our constitutions have surrendered both to be appropriated to individuals or corporations, by the charters of our governments, or that they have surrendered neither.
Knowledge, at first view, seems to possess less of the nature of property, than lands, commerce, credit or currency; yet a legal monopoly of knowledge, is inconsistent with our principles. The compulsion to buy corporation currency, produced by banishing national currency, greatly resembles the compulsion to buy hereditary knowledge, by banishing national knowledge. To buy corporation currency to carry on trade, seems as absurd as to buy hereditary knowledge to carry on government. The Chinese monopoly of knowledge, is an illustration still stronger than the hereditary. An order, by prohibiting the use of an alphabet (the coin of knowledge) produces national ignorance, and thence draws with its exclusive knowledge, exclusive wealth and power. By the banishment of specie (the coin of fair and free commerce) and the substitution of hieroglyphicks confined to a species of mandarin, the privileged individuals, will also, like mandarins, draw exclusive wealth and power. If this Chinese monopoly of knowledge, sensibly affects private property, is it inconceivable that a monopoly of credit or currency will also sensibly affect it?
Credit or currency, is unquestionably of the nature of private property, so far as it is able to transfer it. If a government should allege against a charge of having invaded private property, that it only furnished the instrument for taking it away, the charge would be acknowledged. There can be no honest difference between transferring property from private people, to a corporation, directly or indirectly. The moral and constitutional principles, which condemn the one, condemn the other. Not the process, but the injury, constitutes the violation of these principles. Will it be said, that although our governments cannot directly take away publick or private property, and give it to corporations, that they may give them the power of expelling specie, and of transferring property indirectly by corporation currency? Any portion of bank paper, thrown into circulation, represents and transfers some portion of private property, from individuals to corporations or to other individuals. If it becomes the only currency, its effect in this operation is constant and great. And the limitation of this transfer, depends on the will of the corporation. Although we have avoided the details of banking as much as possible, it cannot be overlooked, that the liability of the stock only, the unlimited power to issue notes, and the capacity of those notes to transfer property, constitute temptations, which human nature has never been a match for. The nation possessed a national currency; after the complete introduction of a corporation currency, it no longer possesses this species of property. If the national territory was as effectually thrown into the form of a feudal monopoly, as its currency is thrown into that of a banking monopoly, the national territory would be covered by the term ’seigniory,’ as the national currency is now covered by the terms ‘bank notes,’ and the suppression of the term ‘national,’ in both cases, is an equal evidence that an order had obtained, what was previously the publick property.
Let us suppose that a legislature had in the publick treasury half a million of dollars. Could it make a bank by charter, and give it this money? Why not? The money belongs to the nation; and it would be a transfer from the nation to a corporation, of so much publick property, for no publick object.
If national currency is suppressed, and corporation currency interpolated, it will have the effect of transferring from the nation to the corporation, a much larger portion of private property, than this unjust and unconstitutional donation of half a million of the publick money. Is a small transfer of publick and private property to a corporation, contrary to our policy, but a great one consistent with it?
This argument cannot be eluded by the fact, that bank corporations supply their own stock or capital. It is not the property covered by that capital, supposing it to be specie, which is transferred by governments from nations to banks. That capital covers as much of the property of other people, without the help of law, as it ought to cover; and can only transfer the amount it represents. To this amount, and to no more of the property of others, are the holders of this specie capital, justly or constitutionally entitled.
But the law steps in, unites these holders into a bank, and empowers this bank to issue twice as much currency as its capital, actually retained to meet its notes. Thus the effect of transferring property from the people at large to the bank must inevitably follow, by deranging so egregiously the fair and equitable value or level of national currency, as to make a portion of it in the hands of corporations, of double value to that which remains in the hands of the nation. And this enormous and exclusive appreciation of the value of specie or national currency, is gained by the privileged sect; whilst the money held by all not of the corporation, is in fact depreciated by the fraudulent donation.
Let us throw this argument into figures, as the only mode of making it perfectly plain. Half a million, in a fair and just state of the partnership, called society, represents and entitles the holders to only half a million’s worth of property; and those who hold the property of this partnership, owe to its holders, and must relinquish so much of their property as the currency represents, and no more. But a few individuals of this partnership or society, have prevailed upon the government to grant them an exclusive charter, to issue a whole million of currency, upon the credit or opinion that they possess half a one. Is it not evident, that these members of the society have gained an advantage over those not sharing in the privilege; and that so much of the property of the rest of society, as the whole million of bank currency will cover, beyond the half million of specie, is thereby inevitably taken from the partnership called national or social, and transferred to the minor partnership, called corporate or banking? If so, the principle of an equality of rights is violated, by making the money of a few men, more valuable than the money of the people at large; and by the indirect, but certain mode thence arising, of transferring the property of those who have the least valuable money, to those possessing the most valuable. Nor can a species of exclusive privilege be conceived, capable of producing greater pecuniary loss and gain. Accordingly, banking, in gathering wealth, travels with a rapidity unattempted by the most able hierarchical collector.
We have supposed, merely to simplify the argument, that specie stock emits double its amount in bank currency. This is precarious and fluctuating; and therefore the reader is reminded, that although a precise sum is mentioned for the sake of perspicuity, yet that the argument applies to the surplus of bank currency issued, whatever it be, beyond the actual specie deposited in the bank. The portion of society privileged to issue two, three or four dollars for one, becomes one order, and the unprivileged, another. The dollar which can multiply itself, is more puissant, than the dollar which cannot. One is a patrician, the other a plebeian. These dollars will represent their owners, or the owners their dollars.
But to prevent any mistake, it is necessary more particularly to explain the mode or process, by which the enhancement of the value of an incorporated dollar, beyond an unincorporated one, is effected. It consists chiefly of two items. First, the surplus of notes circulated, beyond the amount of the stock or capital, produces a surplus of interest, beyond what the stock or capital could produce; the whole of which is an addition to the value of incorporated, beyond that of unincorporated specie; and will transfer a correspondent surplus of property. For instance, if a capital of half a million stock, can circulate two millions of paper at six per centum only, one-fourth of the paper produces the whole interest which unincorporated specie can produce; therefore the other three-fourths are additional value given to the incorporated specie by an exclusive privilege, destroying an equality of rights in the national pecuniary partnership, and transferring unjustly all the property covered by such additional value. The second important item of this process of appreciation, consists of the artifice of taking out a portion of the stock or capital, and acquiring with it the whole property it represents, and ought in justice to transfer; and of circulating paper currency, upon the credit of an opinion, that the stock thus used remains deposited. It is obvious, that the interest of the whole of the paper, circulated upon the basis of ideal stock, is an addition to the value of the specie, which has in person transferred all the property it ought to transfer; and that this unjust enhancement arises from the exclusive privilege. If it is recollected that there are about fifty millions of bank stock in the United States, and that even a moiety of it could not possibly have been deposited in specie, the great effect of artificial stock, in transferring property will at a glance be conspicuous.
The example of a commercial partnership, consisting of one thousand persons, supplying different quotas of stock, will still illustrate the argument. We will suppose that the stock of the wealthiest individual of the partnership, amounted to one thousand dollars, and of the poorest, to one; and that the intermediate space, was occupied by a great variety of sums, constituting the stock of the other partners. The profits are the property of the partnership, and ought to be proportioned according to the stock of each individual. The partner entitled to one thousand dollars, ought to have one thousand times more than the partner entitled to one dollar of the stock. But if you give him two, three or four thousand times more, than you give to the partner having one dollar stock, you rob this poor partner, and all the intermediate partners, of a portion of their property, and give it to the rich partner. By suffering the rich partner to take his thousand dollars out of the partnership, and leave only his credit behind, he acquires its value in property, besides retaining the double interest to acquire more property. Society is this partnership; bankers, the partners who draw more property than their money or that of others represents; cunning and rich bankers, those who take away their stock, or a portion of it, and continue to draw this overplus of property; and the poor partner represents those, not bankers, and limited to draw property in strict proportion to the value of their money.
National currency is the stock representing national property, as mercantile capital represents partnership profit. This stock is unequally divided, but it is entitled to a proportional value in property, as mercantile capital is in profit. Banking enables about one in a thousand of a nation to draw out of the national stock of property, considerably more than his share of national currency entitled him to, which unjust overplus is a deduction from the property of the other members of the society; just as any mode, direct or indirect, by which one partner could get more than his proportional share of mercantile profit, transfers to him the property of others. And as the acquisitions of banking, from the nature of the institution, must settle in the hands of the wealthy class, it is of course a mode of adding to the wealth of that class, by taking from all others; similar to the enrichment of the rich mercantile partner, and analogous in its effects to every exclusive order, which has heretofore deluded and enslaved nations.
The injustice of appreciating partially and exclusively the money of a minor order, or of any portion of society, is yet further illustrated, by recollecting, that appreciation is necessarily attended by its correlative, depreciation; and that the effects of the one in moral geometry, are an exact mensuration of the effects of the other. Value is relative. If the money or property of one portion of the society, is made by law to be worthless, the money or property of those not thus oppressed, will consequently be worth more; if the law adds partially to the value of the money or property of some, it correspondently diminishes their value as to others. The funding system illustrates both positions. First, by funding without providing for the interest, the certificates were depreciated, and other money or property appreciated, because two shillings of it would buy twenty shillings of the certificate. Secondly, by providing for the payment of the interest after the depreciated property had been purchased by the appreciated property, an appreciation of certificates took place, which lessened the value of all property subjected to make the appreciation good, even of those who had suffered the depreciation. This appreciation of certificates tenfold beyond their current value, is the literal case of appreciating specie by banking beyond its current value; except that the appreciation of specie does not visibly appear to be so exorbitant. Although, if banks have resorted to paper to make up capital, as is unquestionable, the difference between the legal appreciation of monopolized certificates, and of bank stock, in point of exorbitancy, will be inconsiderable. Whatever it is, the moral injustice of making a currency, worth only twenty shillings in the pound, of the value of eighty or forty shillings, in favour of a few corporations, is founded in the same principles of monopoly, partiality and violation of property, in which the depreciation and appreciation of the certificates was founded; except that for this, no pretext or nominal reason existed. It is a plain continuation of that system. The depreciation of certificates, enabled a few to get them at one-tenth of their nominal amount. Their appreciation invested the holders with an enormous pecuniary advantage. Banking appreciates money incomputably, especially where bank paper has made bank stock. It is the second great movement of an enormous and crushing monopoly.
To display and compare with our policy and constitutions, the abuses which have successively destroyed liberty and happiness, it was necessary to prove the distinction between these abuses and our political principles, and their irreconcileable enmity to each other. This part of the essay, is devoted to the consideration of a system of partiality and monopoly, introduced by law, because we conceive it to be as inimical to our policy and constitutions, and more dangerous than Mr. Adams’s system of orders; or than the aristocracies of nobility or hierarchy.
Aristocracy is forever adapting itself to the temper of the times. In those of ignorance and superstition, it pretended to be the sanctified herald of the gods. In warlike times, it glittered in armour, and boasted its prowess. And now, it dazzles avarice with such riches as we see in dreams, whilst it is building up for itself a tower with cent per cent, from whence it can scale and conquer our constitutions.
Against that portion of the system of paper and patronage, called funding or anticipation, none of the American constitutions have provided a check. If borrowing and funding can enslave nations, our governments possess a despotick power, without any control, that of election excepted. It ought therefore, if it can be effected, to be placed in a state of division, between the general and state governments, to prevent either from destroying the other by this instrument; or to be subjected to some other check. Armies will enslave their country, after they have bled for it; therefore they must be checked by an armed nation; funding systems bleed their country, and unless they are more patriotick than armies, they seem to be an object of equal danger.
The army mode of enslaving the nation, is not left to the exclusive control of election. Military men are excluded from legislatures, and whilst the general government may raise an army, the states may arm, officer and discipline the militia.
If banking is inconsistent with the positive rules of our constitutions, or adverse to their general principles, the laws upon the subject are void. But supposing it only transfers property unfairly, and to be as dangerous to liberty as funding, it cannot plead national necessity as a subterfuge against annihilation; and what friend to free government would hesitate to annihilate the power of borrowing, if there was a certainty that the national defence would never render it necessary? But it can plead charters; the Lord deliver us from charters! Admit that the banking system ought not to have existed, yet these sanctions for evil say that it shall continue to exist.
A history of charters would afford vast amusement and instruction to nations; it would terminate in ascertaining, that orders have practiced as insidiously behind these, as behind altars. Such as are improvidently granted by nations, or corruptly by governments, are said, like the oracles, to be sacred; but those obtained by nations or individuals from orders, are disregarded or destroyed, as interest or ambition dictates. English municipal law, applies to the charters to be revoked in favour of orders, the term obreptitious, implying, that they were obtained by surprise, or by a concealment of their effects; in which cases they are to be vacated. But it has no term or process, recognizing a right in nations to resume improvident grants, or to annual those made by the government, contrary to national rights or publick good. Admitting, however, that the people of our Union have no right to save their liberties against an host of charters, unless a precedent to justify it can be found (a doctrine as correct, as that they have no right to the Union or their policy, because they are unjustified by precedent) this English law furnishes such a precedent.
Orders in England constitute the sovereignty; the people, in the United States. The sovereignty of orders annuls charters for sundry causes; the sovereignty of the people may therefore, even according to precedent, annul them for the same causes. No cause could be more completely within the reason and scope of the English doctrine, than one, which would tend to the destruction of the sovereignty of orders in that country; whatever tends to the destruction of the sovereignty of the people here, is equally within its scope and meaning. And the right of the sovereignty here to annul obreptitious charters, is stronger than it is in England, because there the charter may be the act of the sovereignty itself; here it can only be the act of the agents of the sovereignty, responsible, of limited powers, and having no power directly or indirectly to change the nature of the government by obreptitious charters.
Bank charters, in a vast variety of views, fall within this English law doctrine, unless the reasonings of this essay are incorrect. Who, for instance, was aware that this was a mode of indirect taxation? And who believed, that at this moment the United States were paying five millions worth of their property, annually, to a small portion of their people, for a fictitious currency?
These law charters, however sanctioned by legal forms, are never genuine national law. National will, in free governments, is the only genuine sanction of law. The will of the legislature, is the instrument for proclaiming this sanction. If a legislature should pass a law charter, for advancing the exclusive interest of the legislative body, or of some other combination of men, at the expense of the national interest, both moral and pecuniary, it obviously makes a false proclamation, and the question is, whether the genuine sanction of law, or this false proclamation, ought to be most sacred. Without leaving our subject to consider the device of consecrating these spurious laws, beyond the genuine, and even beyond constitutional law itself, it falls within it to consider the character of a separate or exclusive interest, which invariably dictates them.
It is happily hit off unintentionally by Mr. Addison in his third Spectator, where he personifies publick credit, by a virgin, enthroned on gold in the hall of the bank of England; surrounded by funding laws; delighted with contemplating them; timorous; a valetudinarian; suddenly withering; suddenly reviving; converting whatever she touched into gold, which would as suddenly vanish or become tallies, if she was affrighted; fainting and dying at the sight of a commonwealth; and revived by monarchy.
By mistaking the exclusive interest called funding, for publick credit, Mr. Addison has described the character of paper stock. Gold, and not virtue, is the terrestrial deity of this allegorical being, so improperly represented as a virgin. She admits promiscuous and loathsome embraces to acquire it. Wealth rises as if by magick around her, as around fraud and theft. It disappears upon the least rustling of danger; as a robber hides his booty. She is timorous from conscious guilt. She is a sickly moral being, because she is formed of bad moral principles. She faints and dies under a commonwealth, because she cannot live within the pale of common interest, and can only subsist on its destruction; and she is revived by monarchy, a congenial being, which aids this fearful, sickly, fainting, reviving, magical and wicked being, by surrounding her with consecrated law charters.
Contrast genuine and honest publick credit, with this thievish spectre, and assign the privilege of consecrating law, to general or exclusive interest, as the result shall indicate which of the two is the purest legislator.
Genuine publick credit is enthroned, not upon gold gathered by law into a bank, but upon property distributed by industry. It is greatest, where national debt is least. It flows from national wealth and prosperity, not from the wealth of corporations enriched by exclusive privileges. It creates gold by industry, not by magick; and saves it by valour, not by hiding; it is a healthy moral being, because it is formed of good moral principles; and bold, because it is honest. It flourishes under a commonwealth, and dies under a monarchy. Hostile principles cannot live in union and friendship. National credit and corporation credit must consort each with its like. They are respectively killed and revived by monarchy and a commonwealth, because a government founded on the principle of minority accords with one, and that founded on the principle of majority, with the other. Corporation credit, artificially created by law and orders, unite and cohere, from an identity of origin and nature. National credit, arising from fair industry and national wealth, can only unite with a free and equal government.
All partial interests, capable of procuring or sustaining a law, belong to the family of this virgin described by Mr. Addison. Of the two sisters of this family which have appeared in the United States, funding and banking, one only is now heaping up gold by magick, and figuring in legislatures. She is adored as a beauty, and the other execrated as a hag; although the family likeness is so strong, that they pass for twins. As the fate of the general interest, depends upon this amour between the government and the twin sister of Mr. Addison’s virgin, the consequences of endowing her with the privilege of passing consecrated laws or law charters, as her English sister has been endowed, are referred to the reader’s consideration. Liberty was nearly smothered in the embraces between our government and Mr. Addison’s virgin; the amour going on with her sister will hardly revive it. But let us return from the political features of the subject, to calculation. The annual exports of the products of the United States, have been supposed to amount to about forty millions of dollars, and the bank capital to about fifty; and we have endeavoured to prove, that the five millions paid annually for bank paper, cannot be reimbursed by any additional price bestowed by it on our exports. This glimpse of the manner in which banking, in its infancy, enriches agriculture and manufacturers; in its maturity, becomes a clear light. By the return of 1803 to the British parliament, the official value of British manufactures or exports, was less than twenty-four millions sterling, but their real value was estimated by the minister at forty millions. Suppose the quantity of bank paper, publick and private, circulating in England, to be about five hundred millions. It receives between twenty and thirty millions, for enriching those, who export forty millions worth. The agriculture and manufacturers of England, are enriched also in the same mode, by the sister of banking, so recently eulogised in this country for possessing these qualities. Above five hundred millions of debt stock, receives annually more than bank stock. Of what is paid to two other members of the same family, named patronage and hierarchy, we have no account; but exclusive of the sum paid to hierarchy and banking, by manufactures and agriculture, to get rich by the bounty of this generous family, the supplies of the same year exceeded seventy millions sterling; so that the scheme of paper and patronage, when matured, takes from a nation about one hundred millions sterling, to enrich agriculture and manufactures, by enhancing the price of forty millions worth of their commodities.
And after paying all this money, it remains a question, whether bank currency does not moreover diminish prices, to enrich capitalists, at the expense of agriculture and manufactures. In 1803, the United States contained something more than one-third of the people of Britain, and exported much more than a third of her official exports, and nearly that proportion of her estimated exports. The exports of Great Britain were swelled by the estimate of the minister, very far beyond the official returns; and those of the United States, are rigidly confined to them; therefore it is highly probable, that the value of exports, from the two countries, in relation to the number of people, did not fall short on the part of the United States. Britain then, with a vastly greater proportion of this stimulating and enriching stock, exported the same or a less value of commodities, in relation to the number of people, than the United States. This is only to be accounted for, by balancing the exclusive advantages she possesses in fertility of soil, in manufactural perfection, in machinery and in rich provinces; with a drawback, arising from paper currency. Except for some drawback, these immense advantages, ought to have been accounted for in the comparison, by an immense superiority of exports in relation to the numbers of people in the two countries. As they are lost, it affords the strongest evidence against the assertion, that paper currency will excite industry, enrich manufactures or agriculture, or even benefit commerce.
How can it do either, when paper stock draws from the national labour, more than the whole value of what it exports? How can it fail to be the most oppressive tax gatherer, when it is able to take from a nation more than it sells? If it is admitted to be a tax when it takes all, does it cease to be a tax, when it takes a part? The ten hundred millions of bank and debt stock, has made every soul in England worth to paper alone, eighty pounds sterling. Adding to the drafts of paper, those of patronage, civil, military and religious, the value of each soul to the system of paper and patronage, is about one hundred and fifty pounds sterling. The American and West-India slave owners are not task-masters, if this system, which has made freeborn Englishmen of threefold value to itself beyond African slaves, to their master, is not a task-master.
This stupendous mass of paper has been raised from a foundation as imaginary, as that of the earth in Indian cosmography. A man, by becoming a law-maker, contrives to make the reputation of wealth more profitable to him than wealth itself. If a true opinion as to one’s wealth, ought not to plunder a nation, the rights of falsehood are thus made greater than the rights of truth. The means used by the credit men in England, to lay industry under contribution, are used by the men of actual property in the United States, to lay themselves under contribution. The richest interest in the United States, is the agricultural. It does not hold by the tenure of its land, a shilling of the credit which sustains banking; and the small portion of bank stock it possesses, bears no proportion to its landed property. Yet it first mortgaged itself to enrich a poor speculating interest by the funding system, under the delusion of supporting a false national credit; and it again mortgages itself to enrich a banking interest, under the delusion, that it receives, and does not pay the profits of appreciating paper in the last, as in the first form.
In other countries, if the rich are knaves, they are not blind to their own interest. They inflict taxes, direct, indirect and intricate, of which they pay a part; but they take care to receive most or all. If these taxes are paid to armies, churches, navies, pensions or sinecures, they are received by the rich or their children. The paper interest in England, is willing to pay a small part of the enormous tax, drawn from the nation by paper stock, because it receives all; and the landed interest of the United States, is willing to introduce this fathomless mode of taxation here, because it pays nearly all, and receives a small part.
In the United States, the civil offices cost but little, and do not exceed the legitimate necessities of civil government. We have no armies, churches, navies, pensions or sinecures, contrived for the purpose of conveying to the richest class of citizens, the money drawn directly or indirectly from the nation. Stock, bank and funded, are the only modes hitherto used for drawing money from the many for the few; and the rich agrarian law-makers have most unskillfully suffered the money thus drawn to pass into the pockets of fallacious wealth. It is nearly true, that the rich class in England pay some and receive all; and that the rich class in the United States pay all and receive some. The first, fleece labour and industry for themselves; the other, fleece themselves for paper craft. Had the landed interest of the United States, laid out the nine millions a year, which it gives to bankers and certificate buyers, in a church, an army and a navy, it would have made a provision for its younger sons, like the rich classes of other countries, according to the wisdom of this world; all other rich classes combine their own interest and prosperity with high taxes; but to combine its own decay and ruin with taxation, by paying to paper stock nine millions a year, of which it receives but a trivial proportion, is a species of acuteness in the landed interest of the United States, according to the wisdom of no world that I know of.
It is true, that if the landed interest, in creating this annuity, had kept it for itself, corruption, oppression and party spirit would have been the consequence; such being the unavoidable effect of giving away by law, a sum of money annually, eighteen times more valuable than the Yazoo speculation; but as the landed interest pays the chief part of this annuity, it had the best right to receive it; and its sons, crowned with mitres or with laurel, might have cultivated virtues which adorn or benefit society. In how many revolutions of Mercury, would stock beget subjects for a Plutarch?
Had the nine millions been laid out in official patronage, instead of stock patronage, the amount paid by the nation might have terminated there. But banking, besides its dividends, possesses a power of causing the quantity, and of course the value of currency to fluctuate, by which it may impoverish and enrich, or tax and patronise, to a vast amount beyond its dividends; of this the nation can get no account. It is a power equivalent to incessant adulterations and purifications of specie, by an absolute monarch. Coin adulterated, or paper multiplied, buys less. Coin purified, or paper diminished, buys more. It would be dangerous for the strongest despotism to gather wealth, by causing gold to fluctuate, between twelve and twenty-four carats, several times a year. If this despotism was a merchant, it could by such a power, buy and sell the commodities of its subjects at what gain it pleased. The carat of paper money, fluctuates with its quantity, and this fluctuation is at all times within the power of banking, and frequently produced. Being capable of greater repetition, it can enrich and impoverish, beyond any practicable alternate adulteration and purification of coin, for the benefit of a corporation or a despotism. Paper currency can be made better and worse more frequently by the magick of a bank, than specie by the furnace of a monarch; but although the banking adulterations can do so much more work, yet we do not believe it because we do not see the process, and only see the effect, in their amassing wealth with a rapidity and duration, far beyond adulterations of coin in any mode hitherto discovered. If a king of England should call in forty millions of specie, and pay it back in adulterated money, so as to rob the nation of twenty; that freeborn people would probably cut off his head; and the same wise-born people, are quite contented to be robbed of a larger sum annually, by the same principle.
To illustrate the facility with which this may be done with paper, in a stockjobbing way, better than with specie, in a despotick way (as a chymical process, in the moist and dry way, can produce the same result) let us suppose the managers of banking to be buyers of the staple of a country; wheat for instance. When the crop comes in, the price will be kept down, by appreciating or purifying paper currency, by lessening the quantity. Under this influence, those who work the furnace, buy. The loss, like adulterations of specie, falls upon ignorance and industry. It is a law of maximum, or for fixing prices, except that an interested party regulates them, instead of a government.
This incessant fluctuation, in the intrinsick value of bank currency, is at least more likely to favour cunning, knavish, calculating speculation, than simple, honest, thoughtless industry. Those who settle the carat of this currency, are buyers; upon what principle to be found in human nature by the grossest credulity, can they be possibly induced to use this power, for the purpose of enhancing the value of the commodities they buy?
If the government of the fluctuation or carat of bank currency, was in the hands of a native mercantile interest, such an interest would undoubtedly endeavour to gratify the love of gain, by using it to buy as cheap, and to sell as dear as it could; and it would be to a considerable extent successful; but although it would appropriate to its own use, the whole mass of gain transferred by this fluctuation from the other interests of society, yet the nation would possess the consolation of reflecting, that its loss remained at home, and would return to it, the species of retribution, arising from individual splendour, munificence and luxury. But if a foreign capital should acquire an influence over the quantity, fluctuation or carat of bank paper, the wealth collected by it will be drawn to a foreign country. This is not all the calamity. If such a foreign capital or interest, should be the buyer of our exports, a power over the quantity or carat of bank paper, will enable it to diminish the exportation price, for the benefit of itself, and its own country. The degree of influence held by British capital over American banks, cannot be estimated. Whatever it is, a correspondent degree of effect must follow. It can diminish the prices of our exports both here and in Britain, and increase the English profit on re-exportation. The whole diminution it can cause, in the price of any article, is its gain and our loss. If in the article of tobacco, for instance, this gain is made on re-exportation to other countries; if on that of cotton, on its return, in a manufactured state, in a large amount, to this.
A variation in the value or carat of money, defeats its genuine end, and usefulness. It is the measure of all property, as the bushel is a measure of grain. Permanency makes measures the vehicles of justice; fluctuation, of fraud. If a fixed measure for some articles of property, will dispense justice and discourage fraud; a fluctuating measure for all articles of property, must dispense fraud and discourage justice. False weights and measures will corrupt morals, and a corruption of morals, will overturn governments founded in good principles. If such is the effect of a fraudulent mode of weighing and measuring property, by scales and measures, capable of being examined by the senses, and easy of detection; what will be the effect of measuring property, by a fraudulent mode, beyond the reach of the eye, and only to be detected by patient and deep investigation? Fluctuating money makes all weights and measures false. By extending and diminishing price alternately, the utmost evil of false weights and measures is produced. A few men, whose interest it is to do so, can cause the carat of bank currency, to fluctuate without control, account or punishment. When it diminishes the price of property (wheat for instance) twenty-five per centum, the effect to the seller is the same, as if the buyer had secretly added one fourth to the capacity of the bushel; when it increases the price co-extensively, the effect to this buyer, now the seller, is like cutting off one fourth of the same capacity. And the managers of the fluctuation, or carat of the measure, may thus gain twenty-five per centum, unjustly, by each operation.
A fluctuation between the two steadiest measures of property, gold and silver, has at some periods trenched considerably upon fair dealing, and produced oppressive consequences; adulterations of coin, are partial and temporary aggravations of these consequences, which are never long endured, because the process is physical, and easy to detect; and fluctuations of bank paper, from which the same effects in their utmost malignancy and permanency must follow, are endured, because the process of detection is metaphysical.
If the senses cannot perceive, that the same moral cause will produce similar effects; and that if a fluctuation in the measure of property, by the two first modes, brings oppression, its fluctuation by the third will also bring it; let the mind reflect upon the following supposition, congenial with this third mode. Suppose a corporation, exclusively possessed of the knowledge of assaying metals, to be endowed also with the right of coinage, without check or control, or any knowledge in the nation, as to the quantity of money made, or what it was made of. This corporation would resemble banking in all its aspects but one. A banking coinage, by managing fluctuation, or frequently changing the measure of property, may sell dear and buy cheap; it can throw alloy into paper, by the medium of quantity, and take it out by the medium of scarcity, at the national expense; but the coining corporation have no means of extracting the alloy thrown into gold or silver, without suffering themselves. Herein the cases differ. The coining corporation, can only fleece the nation by putting in the alloy, but the paper corporation can fleece it by taking out as well as by putting in the alloy. This power is an invisible agent, who pares, clips or sweats property at every contract, by making its measure contract or dilate according to his interest.
A nation must have permanent standards for measuring power and property, and perfectly understand their capacity, or cease to be free. If a legislature, though annually elected, can invent a measure, for transferring either to themselves or their faction, they will make it as capacious as they please. The office of our constitutions, is to take this identical power from our legislatures. A bushel of money absorbs power, or a bushel of power, money, as a bushel of sand does water.
By fraudulent modes of measuring property, nations are universally enslaved. Thus the feudal system enslaved. The fraud consisted in accumulating land in the hands of a few, under pretence of compensating these few for defending a multitude. The papal hierarchy became a tyranny from a fraudulent mode of measuring property on earth, by the artifice of selling heaven. Patronage generates despotism, simply from being a fraudulent mode of measuring property; it is not an empty office, but the wealth which it transfers or measures out from the many to the few, in which its tyranny consists. All these are modes of oppression, only because they are fraudulent modes of measuring property. They are indirect, but money is the direct mode of this mensuration. Though money is limited to specie, and should possess the steady value of a known and fixed carat, yet these indirect modes enslave nations, by measuring out property unfairly. But if money, the direct mode of measuring all property, can be made to fluctuate in value or capacity, by a few corporations, the operation in transferring and accumulating property, must be infinitely more rapid, than the operation of any indirect mode; and the effect infinitely more certain. It is this operation which terminates in tyranny, whether it is produced, directly or indirectly, by fraud, accident or pretended necessity. By ending in accumulation, sufficient to beget a separate interest, the tyranny follows of course. Whether banking therefore is founded in fraud or honesty, in deception or sincerity, is unimportant to the inquiry. So long as it is a mode of measuring property unequally by law, and not by industry, capable of begetting a separate interest in a nation, it must produce the effect produced by the feudal, hierarchical and patronage systems; because the effect of all three flowed from their being modes of measuring out property unequally by law, so as to beget a separate interest in a nation. Throughout the history of the civilized world, the admeasurement of property by industry, has bred patriots; by law, traitors to the liberty and happiness of nations. Will the form of a caliber, render a ball propelled by the same force, harmless? Principle is the powder which produces the effects of moral artillery. The powder of banking is precisely the same, with that used by the feudal system, hierarchy and patronage, to batter human liberty; namely, a distribution of property, not by industry, but by law. Wherein consists the oppression of monarchy and aristocracy, except in being such modes of measuring property? Wherein consists the fraud of these modes, except in making this distribution, by the unjust measures, law, and fluctuating adulterated money, instead of leaving it to be made by the just measures, industry, and money of a steady and known carat?
We have supposed the case of one state, erected by congress into a corporation, with the exclusive power of supplying the others with bank currency. Let us subjoin to the supposition, the idea of the incorporated state being mercantile, and the others, agricultural. How forcibly are the effects illustrated, of a power in one dealer, to regulate the value of the currency, or the capacity of the measure, by which the price of property is regulated for both. The whole agricultural interest, unadulterated by any commixture with the banking interest, occupies the precise place of the unprivileged states. In the case supposed, the oppression would not be borne for a moment; because the suffering being would be equal in union, sagacity and power, to the inflicting being. It is borne in the case existing, because the suffering beings, are unequal in union, sagacity and power, to the inflicting beings. Individual ignorance, passion and folly, is no match for corporate knowledge, calmness and cunning. To let loose upon a nation, a faction, enlisted and disciplined by charters and avarice, for the purpose of gathering money of individuals, is a project, equivalent to that of letting loose a veteran army upon an undisciplined militia.
Banking exclaims, let individuals shift for themselves. A band of conjurers or robbers, requires only that individuals should be left to shift for themselves. Individuals can never defend themselves against associations. The design of government, is to protect individuals against these very associations. The tyranny of fraud is not less oppressive, than that of force. All national grievances act upon individuals. A redundancy of circulating paper stock, collecting an enormous tax, must act upon individuals, like other national grievances. If the ten hundred millions of such stock in England, was suddenly converted into specie, whatever would fly away to other countries, would be the portion of currency, useless, and therefore oppressive to the extent of the tax it gathered. The specie expelled by bank paper from the United States, was made by that paper a redundancy of currency, useless, or it would have remained; the tax paid for a paper redundancy, which cannot follow the specie, is an oppression similar to the English. We see in the example of England, the errour of an opinion, that the quantity of a paper currency will be regulated by national wants; we see in America, that bank currency soon expels as redundant, a sum of specie currency, and takes its place to a far greater amount; we see that this redundancy, though unnecessary and pernicious, can gather wealth for a separate interest; to what amount, England has laboured in vain to discover, for a whole century. What expedient can individuals use to avoid these calamities?
Let individuals shift for themselves. What is this, but to exclude them from the benefits of government and society? Unassociated, the bitter beverage, prescribed by the paper capitalists to the English manufacturers, must replenish their cups. There, capital thrives, and labour starves. Here, industry has hitherto regularly gained from capital possessed by idleness. This wholesome operation will be reversed, as in England, by factitious capital, able to tax and out-thrive industry. It can as easily become the master of the industry applied to the earth, as of that applied to the products of the earth. The portion of a nation subject to supply the income of a paper capital, is not in fact in a state of society. Union or association implies equality. But what equality exists between infliction and suffering, between extortion and payment? Can a society or association be formed of a party of masters and a party of slaves? Those associated by law, cry out, ‘let those out of this legal society shift for themselves.’ Gentlemen, our policy intended to give an equal chance to us all in shifting for ourselves. Throw away the law charter tubes, contrived for sucking subsistence from those at work, as the vampire sucks blood from those asleep. However insensible we are of the operation, as you distend we contract, and must dwindle into your slaves, if the process continues. If it is right that individuals should be left by government to shift for themselves, why is the enchanted mantle of law charter drawn over you, which makes those under its cover flourish, and withers all within the reach of its shadow?
When Walpole and the whigs invented the paper system of England, the increase of nominal price it promised, pleased the nation, and established the party. Inquire now of the nation, what pleasure the system gives them, and you are answered with groans. A party, called federal, in the United States, repeated Walpole’s experiment with some success, by exhibiting to the nation the phantom of additional price, and giving to stockholders real wealth and power, at the national expense. And a party, called republican, incited by the pecuniary and political success of these progenitors, are repeating the same experiment, to gain the same substances, by an exhibition of the same phantom. Yet it is notorious, that it is the circulator, and not the receiver of bank notes, who grows rich. No corporation even asked a legislator, for the privilege of receiving paper. The British nation belong to paper stock, and not paper stock to the British nation. The whole juggle is managed according to the arithmetick of Laputa. Suppose a nation raises a certain quantity of exportable commodities, measured by the universal standard, gold or silver, bank projectors pretend to increase the quantity to what extent they please, by substituting a paper measure. And if they can increase them a jot, by altering the mode of measuring them, it is confessed that they can increase them without limitation. For this project, the nation at first pays the projectors five millions worth of the commodities measured by the old standard. Thus the nation lose, and the projectors gain already an eighth part of these commodities. As the paper is increased, the opulence of the projectors and the impoverishment of the nation, correspondently follow. When the projectors gain twenty millions annually, the nation loses half its exportable substance, for a numerical phantom, by which to measure the other half. England gives the whole substance for this phantom. It is Wood’s project in a worse form, as his half-pence contained some copper.
The engines of Archimedes destroyed the Romans, whilst they could not see from whence their fate proceeded. Moral engines are for the same reason concealed from those on whom they play. And these moral engineers, more skilful than Archimedes, often persuade their victims, joyfully to stretch out their necks to the stroke, like Turkish fanaticks, under a persuasion that it will waft them to paradise.
Taxation is a power, infinitely dangerous, and liable to abuse in the hands of a separate interest. In England, the noble interest cannot even propose a money bill. In America, the banking interest taxes, raises or diminishes these taxes, and publickly divides its collections, of about five millions annually, under charters for long terms, without the knowledge or control of the people, or their representatives. Patriotism is even more fusible than conscience, in money. We know that those who rob nations, do really feel as if they were virtuous and honorable men, and would scorn to steal a shilling. Hence the danger of exposing ourselves to be taxed, directly or indirectly, by an individual or a corporation. Feudal barons were liberal, and hierarchical dignitaries, charitable. Yet they oppressed nations by their privileges, with a good conscience. This is the best morality to which banking can aspire. Our policy has exploded it, by considering the criminality of injuring a nation, as amplified beyond that of injuring an individual, by the whole additional extent of the mischief.
Between accumulation by banking, and division by excluding perpetuities and promogeniture; between exclusive chartered interest and general social interest; between publick and corporate, or party influence over legislatures; no resemblance in principle, no sympathy exists. They are all contraries and antipathies. A republican will deride Mr. Adams’s idea, of forming a quiet, permanent and happy government, with contrary and unfriendly principles; and attempt himself to reconcile enmities, inspired by clashing pecuniary interests, at least as malevolent as those inspired by orders. Exclusive privileges, for gathering money, produce parties more hostile to each other, and consequently to human happiness, than exclusive honorary titles. From the spirit of discord and injustice, infused into nations by titles, arise the objections to Mr. Adams’s system. Is this spirit most malignant whetted upon the warm and flexible bosom of honour, or upon the cold and hard liver of avarice? In what unexplored depths of intellect, is to be found the patriotism and consistency of zeal, against and for the same evil principle, selecting its most aggravated forms both for reprobation and eulogy?
Wealth, it was observed, absorbed power, as sand does water. Another figure may place the idea in a stronger light. It attracts, contains and discharges power, as clouds do the electrical fire. Nothing can withstand its bolts. Wealth accumulated by legal means is here spoken of; that within the reach of human industry, being like genial clouds, as incapable of attracting a dangerous surcharge of the moral, as such clouds of the subtile physical fluid. Can Congress and the state legislatures, consistently with our policy, create by law, this electrical machine, able to shock or destroy our constitution?
Words hold principles, as sieves do water. In the words therefore, and not in the principles of our constitutions, parties seek for the chartering power. There, although a power in Congress, to bestow an exclusive banking charter on all the citizens of one state, could not possibly be found, all parties have found a power to bestow it on a few of them, or on a few aliens. And under this construction of the words of constitutions, not containing a single word relating to banking, people are fined, hanged and imprisoned with the common consent of judges, juries and lawyers, out of imitation to the English stockjobbing system. If legislatures can destroy political law or constitutions, by any mode not verbally prohibited, the exclusive right of the people to pronounce this law, or to establish constitutions, is a shadow; as a specification of every mode for destroying constitutions by law, is impossible. In this right consists their sovereignty. The people may call as many conventions as they please for fixing the principles of their government, but these principles can never be fixed, if legislatures can destroy them in any mode not verbally prohibited. All our constitutions, recognise and labour to fortify this right of the people; therefore an indirect legislative mode of destroying it, must be equally unconstitutional, with a positive law for that purpose.
If banking charters, like all other modes for measuring wealth by law, will change the nature and principles of governments, they are as unconstitutional, and as subversive of the sovereignty of the people, as a law for creating a king or an order of nobles. The five millions at this time taken annually from the people by these instruments, have already begotten a political power able to influence governments. This magnet for attracting power, grows daily. Anticipate its effects, by contrasting the accumulation it may end in, with an equal division of property. Would the political effects of the two measures be the same? Would these contraries generate contrary forms of government? If they would, then both are in substance, political or constitutional law, and legislatures have as little right to pass banking laws, for the accumulation, as agrarian laws, for the division of property.
If it is contended, that the state and general legislatures, cannot pass laws for dividing property, but that they may pass laws for its accumulation in the hands of a chartered interest; or that laws either for the division or accumulation of property, are of an honest and genuine municipal nature, without possessing a capacity to model power, and change governments; and if these assertions can be proved, we must proceed to the following argument.
The formation of society, and the alteration of its constituent rules, are admitted by our policy to be rights exclusively lodged in the people, in which rights the government they establish have no share. It is also admitted, that the rights subsisting previous to the compacts called constitutions, all remain, except those relinquished for the sake of forming the government. Banking diminishes these remaining rights, by transferring a portion of them to a new society, not formed by the people. But the government has no power to touch rights, not surrendered by the people for its formation. It was lately stated, that if a legislature can by law form a new society, to draw money artificially from the rest of a nation, that the residue of the old society was no longer in a social state. By the association of the people, the principle of an equality of rights may be asserted and established. By the association of the government, the contrary and artificial principle of exclusive privilege, may be asserted and established. Property, by the association of the people, may be placed under the protection of the first principle; by the association of the government, it may be exposed to the depredations of the second. The first association makes an entire nation; the second divides that nation into two, privileged and unprivileged. The object of one, may be the general good; of the other, to make the general good subservient to private avarice. Both their principles and ends may be precisely opposite. Suppose this new formed little nation, had been invested by government with a power of waging war, against the lives of the associates under the old compact; would it not have violated the rights never surrendered by the people to the government? Do charters to a few, for waging war against the lives or against the property of the rest, differ in principle? Do not both equally violate the rights never surrendered by the people of the United States in forming governments? Where is the difference between taking away the arms or the wealth of the great nation, and giving them to the little nation? Is it not obvious, that a new association, by which either is affected, however called, overturns the old association? From that moment, no association but the new exists; because its operation makes the old association inoperative. The government which contrives, will adhere to the new compact, against the old, contrived by the nation. Those without the new society, to which the government has deserted, belong to no society; and those within it, belong not to the old society formed by the constitution, but to the new one, into which they are formed by law.
To illustrate the ease with which the principles of the society, established by the people, may be destroyed by a banking fabrick, reared by law, let us suppose Congress to create a bank, in which the state governments should receive allotments of stock, equal or superior to the state expenses. As it would be easy, by such an institution, to suppress all other banks, the capacity of this engine to produce an income adequate to the end, is unquestionable. Would it not commute the constitutional policy established by the people, for a new policy growing out of such a law? All the old checks and divisions of power would be overthrown. The pecuniary dependence of the state governments upon the people, would cease. The independence in their allotted spheres of the state, on the general government, would also cease. The state governments would become wholly dependent on Congress for money, by the disuse of the people to their taxes, which like poison administered in honey, would be too pleasant for ignorance to resist. Congress would see and use the influence thence arising, and the state governments would be such checks upon the general government, as those receiving salaries at his will, are upon a king. A charter of the general government would give money to the state governments, to gain a power inconsistent with the charters by which both were created. The political consequences of a proposal to subject the state governments to a pecuniary dependence upon the government of England, would be at once perceived. Is there more danger that they will merge into the English government, than into the general government? Would political or constitutional changes grow out of the remote cause, and none out of the near one? Let us suppose that the general government should be made dependent for revenue upon bank stock under state law charters, and the people to be thereby trained into the habit of paying nothing towards its support. Would it have an influence upon our constitutional policy and endanger that government? If such would be the effect of placing the general government under a pecuniary dependence upon state charters, the effect of the converse of the proposition is certain.
If a foreign government should acquire such a pecuniary influence over the state governments, the considerations, that no political or pecuniary connexion existed between it and our people, and that it did not procure money for the state governments at their expense, by spreading a corrupted faction among them; would present a feeble resistance to its destructive effects upon our policy; but no considerations equally consolatory occur in the case of a similar influence, possessed by the general government. The state governments being bribed to favour the minority nation created by the general government, a triple combination necessarily becomes the real government, and representation would be used as its instrument, just as it is used in England. Corruption would settle down from the head to the foot of the nation.
If banking would change our form of government in the supposed mode, it demonstrates the capacity of law for that end. If it could thus influence legislatures, it demonstrates its capacity to form individuals into corrupt factions. And if it would be dangerous to any society, should a foreign nation create a corrupt faction by a pecuniary influence within its bowels, it is more dangerous to it that its own government should do so, for the reasons by which the danger of an influence, foreign or demestick, over the state governments, is graduated.
The course of reasoning pursued by this essay, results in the definition, that a transfer of property by law, is aristocracy, and that aristocracy is a transfer of property by law. Mr. Adams’s book is eminently instructive, by proving that aristocracy has every where generated calamitous struggles between those who gained, and those who lost property. Besides the unavoidable atrocities of enriched and impoverished factions, Mr. Adams proves by a multitude of examples, that the same aristocratical policy, will induce one or the other of these factions to destroy every vestige of free government; the enriched, to fortify their fraudulent wealth and power; the impoverished, to flee for refuge against many tyrants, under one. It is true that the banking mode of introducing these mischiefs, like the balancing, will ascribe them to an inartificial texture of the machine, but it will not gain the long credit of other aristocratical principles, because its superior rapacity will hasten it on towards the usual catastrophe of political fraud.