Front Page Titles (by Subject) CHAPTER VII.: IMPORTANCE OF THE SYSTEM TO MASSACHUSETTS. - The Shorter Works and Pamphlets of Lysander Spooner, Vol. 2 (1862-1884)
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CHAPTER VII.: IMPORTANCE OF THE SYSTEM TO MASSACHUSETTS. - Lysander Spooner, The Shorter Works and Pamphlets of Lysander Spooner, Vol. 2 (1862-1884) 
The Shorter Works and Pamphlets of Lysander Spooner, vol. 2 (1862-1884) (Indianapolis: Liberty Fund, 2010).
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IMPORTANCE OF THE SYSTEM TO MASSACHUSETTS.
The tariffs, by means of which a few monied men of Massachusetts have so long plundered the rest of the country, and on which they have so largely relied for their prosperity, will not much longer be endured. The nation at large has no need of tariffs. Money is the great instrumentality for manufacturing. And the nation needs nothing but an ample supply of money—in addition to its natural advantages—to enable our people to manufacture for themselves much more cheaply than any other people can manufacture for us.
To say nothing of the many millions who, if we had the money necessary to give them employment, might be brought here from Europe and Asia, and employed in manufactures, more than half the productive power of our present population—in the South and West much more than half—is utterly lost for the want of money, and the consequent want of science, skill, and machinery. And yet those few, who monopolize the present stock of money, insist that they must have tariffs to enable them to manufacture at all. And the nation is duped by these false pretences.
To give bounties to encourage manufactures, and at the same time forbid all but a favored few to have money to manufacture with, is just as absurd as it would be to give bounties to encourage manufactures, and at the same time forbid all but a favored few to have machinery of any kind to manufacture with. It is just as absurd as it would be to give bounties to encourage agriculture, and at the same time forbid all but a favored few to own land, or have cattle, horses, seed corn, seed wheat, or agricultural implements. It is just as absurd as it would be to give bounties to encourage navigation, and at the same time forbid all but a favored few to have ships.
The whole object of such absurdities and tyrannies is to commit the double wrong of depriving the mass of the people of all power to manufacture for themselves, and at the same time compel them to pay extortionate prices to the favored few who are permitted to manufacture.
When tariffs shall be abolished, Massachusetts will have no means of increasing her prosperity, nor even of perpetuating such poor prosperity as she now has,* except by a great increase of money; such an increase of money as will enable her skilled laborers and enterprising young men to get capital for such industries and enterprises as they may prefer to engage in here, rather than go elsewhere.
Even if Massachusetts were willing to manufacture for the South and West, without a tariff, she could hope to do so only until the South and West should supply themselves with money. So soon as they shall supply themselves with money, they will be able to manufacture for themselves more cheaply than Massachusetts can manufacture for them. Their natural advantages for manufacturing are greatly superior to those of Massachusetts. They have the cheap food, coal, iron, lead, copper, wool, cotton, hides, &c., &c. They lack only money to avail themselves of these advantages. And, under the system proposed, their lands and railroads are capable of supplying all the money they need. And they will soon adopt that, or some other system. And they will then not only be independent of Massachusetts, but will be able to draw away from her her skilled laborers, and enterprising young men, unless she shall first supply them with the money capital necessary for such industries and enterprises as may induce them to remain. They will, of course, go where they can get capital, instead of staying where they can get none.
So great are the natural advantages of the South and West over those of Massachusetts, that it is doubtful how many of these men can be persuaded to remain, by all the inducements that capital can offer. But without such inducements it is certain they will all go.
And Massachusetts has no means of supplying this needed money, except by using her real estate as banking capital.
It is, therefore, plainly a matter of life or death to the holders of real estate in Massachusetts to use it for that purpose; for their real estate will be worth nothing when the skilled labor and the enterprising young men of Massachusetts shall have deserted her.
All this is so manifest as to need no further demonstration. And Massachusetts will do well to look the facts in the face before it is too late.
What prospect has Massachusetts under the present “National” system?
The Comptroller of the Currency, in his last annual report, says, that of the $354,000,000 of circulation authorized by law, Massachusetts has now $58,506,686. He says, further, that this is more than four times as much as she would be entitled to, if the currency were apportioned equally among the States, according to population; more than twice as much as she would be entitled to, if the circulation were apportioned among the States, according to their wealth; and three times as much as she is entitled to upon an apportionment made—as apportionments are now professedly made—half upon population, and half upon wealth.
The Comptroller further says, that a law of Congress, passed July 12, 1870, requiring him to withdraw circulation from those States having more than their just proportion, and to distribute it among those now having less than their just proportion, will require him to withdraw “from thirty-six banks in the City of Boston, $11,403,000; [and] from fifty-three country banks of Massachusetts, $2,997,000.”
Thus the law requires $14,400,000 to be withdrawn from the present banks of Massachusetts.
When this shall have been done, she will have but $44,106,686 left. And as this will be more than three times her just proportion on a basis of population, and nearly twice her just share on a basis of wealth, there is no knowing how soon the remaining excess over her just share may be withdrawn.*
By the census of 1870, Massachusetts had a population of 1,457,351. She has now, doubtless, a population of 1,500,000. Calling her population 1,500,000, the $58,506,686 of circulation which she now has, is equal to $39 for each person, on an average. When $14,400,000 of this amount shall have been withdrawn, as the law now requires it to be, the circulation will be reduced to less than $30 for each person, on an average. If the circulation should be reduced to the proportion to which Massachusetts is entitled, on the basis of wealth—that is, to $25,098,600—she will then have less than $17 for each person, on an average. If the circulation should be reduced to the proportion to which Massachusetts is entitled on a basis of population—that is to $13,879,778—she will then have a trifle less than $9 for each person, on an average.
For years the industry of Massachusetts has been greatly crippled for the want of bank credits, although her banks have been authorized to issue their notes to the amount of $58,506,686; or $39 to each person, on an average. What will her industry be when her banks shall be authorized to issue only $44,106,686, or $30 for each person, on an average? What will it be, if her bank issues shall be reduced to her proportion on a basis of wealth, to wit, $25,098,600; or less than $17 for each person, on an average? Or what will it be, if her bank circulation shall be reduced to her proportion on a basis of population, to wit, to $13,379,778; or less than $9 for each person, on an average?
In contrast with such contemptible sums as these, Massachusetts, under the system proposed, could have nine hundred millions ($900,000,000) of bank loans;* that is, $600 for every man, woman, and child, on an average; or $1,500 to each adult, male and female, on an average; or $3,000 to each male adult, on an average.
Which, now, of these two systems is most likely to secure and increase the prosperity of Massachusetts? Which is most likely to give to every deserving man and woman in the State, the capital necessary to make their industry most productive to themselves individually, and to the State? Which system is most likely to induce the skilled laborers and enterprising young men of Massachusetts to remain here? And which is most likely to drive them away?
But the whole is not yet told. The present “National” system is so burdened with taxes and other onerous conditions, that no banking at all can be done under it, except at rates of interest that are two or three times as high as they ought to be; or as they would be under the system proposed.
The burdens imposed on the present banks are probably equal to from six to eight per cent. upon the amount of their own notes that they are permitted to issue.
In the first place, they are required, for every $90 of circulation, to invest $100 in five or six per cent. government bonds.* This alone is a great burden to all that class of persons who want their capital for active business. It amounts to actual prohibition upon all whose property is in real estate, and therefore not convertible into bonds. And this is a purely tyrannical provision, inasmuch as real estate is a much safer and better capital than the bonds. Let us call this a burden of two per cent. on their circulation.
Next, is the risk as to the permanent value of the bonds. Any war, civil or foreign, would cause them to drop in value, as the frost causes the mercury to drop in the thermometer. Even any danger of war would at once reduce them in value. Let us call this risk another burden of one per cent. on the circulation.
Next, every bank in seventeen or eighteen of the largest cities—Boston among the number—are required to keep on hand, at all times, a reserve—in dead capital (legal tenders)—“equal to at least twenty-five per centum,” and all other banks a similar reserve “equal to at least fifteen per centum,” “of the aggregate amount of their notes in circulation, and of their deposits.”
Doubtless, two thirds—very likely three fourths—of all the bank circulation and deposits are in the seventeen cities named. And as these city banks are required to keep a reserve of dead capital equal to twenty-five per cent., and all others a similar reserve equal to fifteen per cent., both on their circulation and deposits, this average burden on all the banks is, doubtless, equal to two per cent. on their circulation.
Next, the banks are required to pay to the United States an annual tax of one per cent. on their average circulation, and half of one per cent. on the amount of their deposits.
Here is another burden equal to at least one and a half per cent. on their circulation.
Then the capitals of the banks—the United States bonds—are made liable to State taxes to any extent, “not at a greater rate than is assessed upon the monied capital in the hands of individual citizens of such State.” This tax is probably equal to one per cent. on their circulation.
Here, then, are taxes and burdens equal to seven and a half per cent. on their circulation.
Next, the banks are required to make at least five reports annually, to the Comptroller of the Currency, of their “resources and liabilities.” Also reports of “the amount of each dividend declared by the association.”
Then, too, the banks are restricted as to the rates of interest they are permitted to take.
Then “Congress may at any time alter, amend, or repeal this act;” and thus impose upon the banks still further taxes, conditions, restrictions, returns, and reports. Or it may at pleasure abolish the banks altogether.
All these taxes, burdens, and liabilities, cannot be reckoned at less than eight or nine per cent. on the circulation of the banks; a sum two or three times as great as the rate of interest ought to be; and two or three times as great as it would be under the system proposed.
And yet the banks must submit to all these burdens as a condition of being permitted to loan money at all. And they must make up—in their rates of interest—for all these burdens. Under this system, therefore, the rate of interest must always be two or three times as high as it ought to be.
The objections to the system, then, are, first, that it furnishes very little loanable capital; and, second, that it necessarily raises the interest on that little to two or three times what it ought to be.
Such a system, obviously, could not be endured at all, but for these reasons, viz.: first, that, being a monopoly, those holding it are enabled to make enormous extortions upon borrowers; and, secondly, that these borrowers—most of whom are the bankers themselves—employ the money in the manufacture and sale of goods that are protected, by tariffs, from foreign competition, and for which they are thus enabled to get, say, fifty per cent. more than they are worth.
In this way, these bank extortions and tariff extortions are thrown ultimately upon the people who consume the goods which the bank capital is employed in producing and selling.
Thus the joint effect of the bank system and the tariff is, first, to deprive the mass of the people of the money capital that would enable them to manufacture for themselves; and, secondly, to compel them to pay extortionate prices for the few manufactures that are produced.
Under the system proposed, all these things would be done away. The West and the South, that are now relied on to pay all these extortions, would manufacture for themselves. Their lands and railroads would enable them to supply all the manufacturing capital that could be used. And they could supply it at one half, or one third, the rates now required by the “National” banks. Of course, Massachusetts could not—under the “National” system—manufacture a dollar’s worth for the South and West. She could not keep her manufacturing laborers. They would all go where they could get cheap capital, cheap supplies, and good markets. And then the manufacturing industry of Massachusetts, and with it the value of her real estate, will have perished from the natural and legitimate effect of her meanness, extortion, and tyranny.
Looking to the future, then, there is no State in the Union—certainly none outside of New England—that has a greater interest in supplying her mechanics with the greatest possible amount of capital; or in supplying it at the lowest possible rates of interest. And this can be done only by using her real estate as banking capital.
[* ] I say “poor prosperity,” because the present prosperity of Massachusetts is not only a dishonest prosperity, but is also only the prosperity of the few, and not of the many.
[* ] If the excess mentioned in the text should not be withdrawn, it will be only because the system is so villainous in itself, that other parts of the country will not accept the shares to which they are entitled.
[* ] Since the notes on page fifth were printed, the Boston Journal, of Jan. 11, 1873, says that, by the valuation of 1872, the real estate of Massachusetts is $1,131,306,347.
[* ] At first they were required to invest only in six per cent. bonds. But more recently they have been coerced or “persuaded” to invest sixty-five millions ($65,000,000) in five per cent. bonds. And very lately it has been announced that “The Comptroller of the Currency will not hereafter change United States bonds, deposited as security for circulating notes of national banks, except upon condition of substituting the new five per cents. of the loan of July 14, 1870, and January 20, 1872.”—Boston Daily Advertiser of February 5, 1873.
From this it is evident that all the banks are to be “persuaded” into investing their capitals in five per cent. bonds.