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THE DELUSION OF THE DEBTORS - William Graham Sumner, The Forgotten Man and Other Essays (corrected edition) 
The Forgotten Man and Other Essays, ed. Albert Galloway Keller (New Haven: Yale University Press, 1918).
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THE DELUSION OF THE DEBTORS
The Delusion of the Debtors1
Fifty years ago a political agitation was started for the annexation of Texas. As the enterprise appeared like a barefaced piece d land-grabbing, it was necessary to invent some historical, political, and moral theories which would give it another color. One such theory was that Texas had properly belonged to us, but that it was given away by Monroe and Adams in 1819. Therefore the project was presented as one for the re-annexation of Texas.
The Re-monetization of Silver.
An attempt is now made to impugn the coinage act of 1873 under various points of view, in order to lay a foundation for the claim that it is only sought now to re-monetize silver. Not a single imputation on the act of 1873 has ever been presented which will stand examination, but, ff that were not so, that act was like any other act of Congress which has become the law of the land, and under which we have all been obliged to live for twenty-five years. We cannot go back and undo the law and live the twenty-five years over again. All the mistakes and follies of the past are gone into the past for all classes and all persons amongst us. The men of the past must be assumed to have acted according to their light, and we who inherit the consequences of what they did must make the best of both the good and ill of it, as the case may be, or as we think it is. If now we make a new coinage law it must stand on its own merits, and on the responsibility of the men who make it, now and for the future. All references back to 1873 are idle and irrelevant.
The plain fact, therefore, to be faced without any disguise, is that we are invited to debase the coinage and lower the standard of value, now and for the future, as a free act of political choice, to be deliberately adopted in a time of profound peace, and that this is to be done with the intention and hope that it will perpetrate a bankruptcy at fifty cents on the dollar for all existing debtors. Can this project be executed? It cannot. The scheme and plan of it for a nation of seventy million people is silly and wicked at the same time, and is both, beyond the power of words to express. The projectors of it deal with the economic phenomena of a great nation as if they were talking about a game at cards, and they plan to do this with prices and that with debts, this with exports and that with banks, as if they were planning a program for building a barn. If we try to realize the operation proposed we shall see how childish and absurd it is.
We must distinguish between three classes of debtors: great financial institutions, small mortgagors, and partners in collapsed booms.
Financial Institutions as Debtors.
The great financial institutions are intermediaries between debtors and creditors. They have received capital from some people and lent it to others. They have to recover it and pay it back. If they only recover it at fifty cents on the dollar, they can only repay it in the same way. What this would mean is that the creditors of those institutions would be paid “dollars,” but that when they tried to re-invest them they would find that prices had risen to a greater or less degree in those dollars for the things which they wanted to buy. To this the Populists answer, triumphantly, that now the debtors find that the prices of their products have fallen, so that when they try to sell them they cannot get enough to pay their debts; but the debtors are those who made contracts and undertook enterprises five, ten, fifteen, or twenty years ago, expecting to make gains which they certainly would have kept. As things have turned out they have not made the gains, and their plan is to escape the loss by throwing it on some one else. The institutions in question, however, are bound to protect the interests of either body of their clients, borrowers or depositors, when either is unjustly threatened, and they are by no means destitute of means to do it. A law to forbid specific coin contracts is but one step in the desperate policy of prostituting law and corrupting the administration of justice, which would be necessary in the attempt to force through the plan under discussion. It would fail at last, because the advocates of it would find that, as the popular saying is, it would “fly up and hit them in the face.” It is not possible to throw society and all its most important institutions into confusion without ruining all the interests of everybody, and at last everybody but the tramp or pauper has to ask himself whether it will pay. As for the institutions, many of them would be ruined in the operation. It is not possible for them simply to collect and repay in the debased dollars. The operation would produce snarls and knots at every turn. Lawsuits would multiply on all sides, and would so entangle the affairs of the institution as to ruin it. The proof of this is presented by the difficulties of liquidation in any case, even when there is no question of currency revolution, and when general affairs are in a normal condition, unless there is time and security for all the operations. In this case the demands on the institution would be precipitated at once, so far as the form of contract would allow.
The small mortgagors are either wages-men or farmers. As to the wages-men, their wages would undoubtedly go up in time as prices went up, but in the paralysis of industry which would be the first distinct effect of the plan, as soon as it was known that the experiment was to be made, immense numbers of wages-men would be thrown out of employment, and all wages would fall on account of this condition of the labor market. Later, when things began to adjust themselves to the new basis, wages would be low with prices high, both in silver. Advance of wages would come, but it would have to be won through strikes and a prolonged industrial war. In the state of things supposed it would be every man for himself. The wages class would be weakest of all under the circumstances, as they are in every case of “hard times.” How would mortgagors of this class traverse such a time and keep up their interest? As to the principal, which is to be halved, it cannot be halved unless it is paid, and the mortgagor has nothing to pay it with except the surplus which he can save from his wages over the cost of living. The project promises woe and ruin to the wages class, with industrial war and class hatred as moral consequences of the most far-reaching importance.
The farmers expect to double the price of their products, and so get silver to pay off their mortgages. It has been shown elsewhere1 how illusory this expectation is as regards prices. Prices would rise, indeed, in silver, but irregularly and unequally. They would rise for all things which a farmer buys as well as for all that he sells. If, as the silver theorists generally say, all prices were to rise uniformly, the farmer would gain but little. For the only means he would win toward paying off his mortgage would be the surplus of his income over his outgo, and this he could only apply year by year as he won it. If, then, the whole scheme could be made to work smoothly provided the victims of it would submit to it without resistance, does this afford any probability of realizing the great hopes which are built upon the scheme?
Social War the Consequence.
But victims would not submit without resistance, and once more we come to the result that no effect can be expected from this undertaking but social war, and a convulsion of the entire social system, whose consequences defy analysis or prediction. If a man says that he “does not see” what great difference going over to the silver standard will make, it must be that he is little trained to understand the workings of the industrial system in which he lives and on which he depends. It is a monstrous thing that a free, self-governing people should join a political battle, in this year of grace 1896, over the question whether to debase their coinage or not.
The Exploded Booms.
The third class of debtors is by far the most important in this matter — those who are caught in exploded booms. The peaceful and honest mortgagors of farms and homesteads are not the ones who have gotten up this political agitation. The jobbers, speculators, and boom-promoters have been one of the curses of this country from the earliest colonial days. They are men of the “hustling” type, jobbing in politics with one hand and in land or town lots with the other. It is they who, at the worst periods of financial trouble in our history, have always appeared in the lobby, eager for “relief,” declaiming about the “people,” the “money power,” the “banks,” “England,” etc. They have always favored schemes for fraudulent banks, or paper money, or state subsidies, or other plans by which they could unload on the state or on their creditors. Just now it is silver, because silver has fallen within twenty-five years so much that it is what is called “cheap money.” This type of men have always used a dialect, part of which is quoted above, which is so well marked that it suffices to identify them. The history of financial distress in this country is full of it. No scheme which has ever been devised by them has ever made a collapsed boom go up again. With very few exceptions, they have, on account of such expedients, only floundered deeper in the mire. The exceptions have been those who have succeeded in making the state provide them with capital, although by no means all of these have been hard-headed enough to use it to “get out.” Generally they believe in themselves and their schemes, and use new capital only to plunge in again still deeper.
It is men of this class and the silver-miners who have brought the present trouble upon us, who have invented and preached the notions about the crime of '73, the hard times, the magical influence of silver, and all the rest. It is they who have filled and engineered conventions. They will gain no more now than in any former crisis, but they insist on involving us all in turmoil, risk, and ruin by their schemes to save themselves.
Leslis's Weekly, September 17, 1896.