William Gouge
An Inquiry

Of the Remote Consequences of the System.

Our view of the extent to which paper-money Banking affects our social condition, will be very imperfect, if we confine it to the direct operations of the system.  These are, as it were, but the first links of a long extended chain.  Each effect becomes in its turn a cause;  and the remote consequences are of more importance than the immediate.  To prove this, a few plain truths will suffice.

If two men start in life at the same time, and the one gets, at the commencement, but a small advantage over the other, and retains the advantage for twenty or thirty years, their fortunes will, at the end of that period, be very unequal.

If a man at the age of twenty-one years, is deprived of one hundred dollars which he had honestly earned, and honestly saved, the injury done to this man must be estimated by the advantage he would have derived from the use of his little property during the rest of his life.  The want of it may prevent his turning his faculties to the best account.  The loss may dispirit his future exertion.

If a man is, at any period of his life, deprived of a property, large or small, accumulated for him by the honest industry and economy of his ancestors, the wrong done to him is of the same character as that which he sustains when he is unjustly deprived of property which was the fruits of his own industry.  It is the dictate of nature that parents shall leave their wealth to their children, and the law of the land, in this case, only confirms the dictate of nature.

It is not easy to set bounds to the effects of a single act of injustice.  If you deprive a man of his property, you may thereby deprive him of the means of properly educating his children, and thus affect the moral and intellectual character of his descendants for several generations.

Such being the consequences of single acts, we may learn from them to estimate the effects of those political and commercial institutions which operate unequally.  They lay the foundation of an artificial inequality of wealth: and, whenever this is done, the wealth of the few goes on increasing in the ratio of compound interest, while the reflux operations of the very causes to which they owe their wealth, keep the rest of the community in poverty.

Where the distribution of wealth is left to natural and just laws, and the natural connection of cause and effect is not violated, the tendency of "money to beget money," or rather of wealth to produce wealth, is not an evil.  A man has as strong a natural right to the profits which are yielded by the capital which was formed by his labor, as he has to the immediate product of his labor.  To deny this, would be to deny him a right to the whole product of his labor.  The claims of the honest capitalist and of the honest laborer, are equally sacred, and rest, in fact, on the same foundation.  Nor is it the law of nature that the idle and improvident shall suffer temporary inconvenience only.  By neglecting to form a capital for themselves, they render their future labor less productive than it otherwise might be: and finally make themselves dependent on others for the means of both subsistence and employment.

But, unequal political and commercial institutions invert the operation of the natural and just causes of wealth and poverty – take much of the capital of a country from those whose industry produced it, and whose economy saved it, and give it to those who neither work nor save.  The natural reward of industry then goes to the idle, and the natural punishment of idleness falls on the industrious.

Inasmuch as personal, political, commercial, and accidental causes, operate sometimes in conjunction, and some times in opposition, it is difficult to say, in individual cases, in how great degree wealth or poverty is owing to one cause or to another.  Harsh judgments of rich and poor, taking them individually, are to be avoided.  But it is notorious, that, as regards different classes in different countries, wealth and poverty are the consequences of the positive institutions of those countries.  Peculiar political priviliges are commonly the ground of the distinction: but peculiar commercial privileges have the same effect: and when the foundation of the artificial inequality of fortune is once laid, (it matters not whether it be by feudal institutions or money corporations,) all the subsequent operations of society tend to increase the difference in the condition of different classes of the community.

One consequence of unequal institutions is increasing the demand for luxuries, and diminishing the effective demand for necessaries and comforts.  Many being qualified to be producers of necessaries, and few to be producers of luxuries, the reward of the many is reduced, and that of the few raised to an enormous height.  The inventor of some new means of gratification for the rich, is sure to receive his recompense, though thousands of able-bodied men may be starving around him.

This may be illustrated by a case drawn from England, where the favorite opera-singer receives her thousands per annum, while the able-bodied agricultural laborer is forced to draw on the parish rates for subsistence.

Something similar to it may be found in our own country, where the second rate singers, dancers, and players of Europe, accumulate fortunes in a few years, while multitudes of humble but useful women in all our large cities, struggle hard for the means of a bare subsistence.

Now, there is no cause of complaint in people's lavishing their thousands on favorite singers and dancers, if those thousands have been honestly earned and fairly got.  But if they owe their thousands to political or commercial institutions operating specially to their advantage, those political and commercial institutions are not of the kind most conducive to social happiness.

Through all the operations of business, the effects of an unequal distribution of wealth may be distinctly traced.  The rich have the means of rewarding most liberally the professional characters whom they employ, and the tradesmen with whom they deal.  An aristocracy in one department of society, introduces an aristocracy into all.

These effects are, it is true, most obvious in countries where the causes of an artificial inequality of wealth are of a permanent character, and connected with political organization: but they can be discovered in our own country.  The inequality of reward our lawyers and physicians receive, is caused but in part by inequality of talent.  It is owing in part to the inequality of the means of those who employ them: and to the disposition the many have to prefer the lawyer or the physician who is patronized by the rich and fashionable.  They feel that their own education disqualifies them for forming a proper estimate of professional talent, and take the judgment of those they suppose must, from their superior wealth, have better means of information.

It is, however, among the hard-working members of society, that the ultimate effects of such causes are most observable.

The condition of a multitude of poor women in our large cities, has lately attracted the attention of the benevolent.  It appears from the statements that have been published, that they can, by working ten or twelve hours every day, earn no more than from seventy-five cents to a dollar a week.  Half of this sum goes for house rent and fuel, leaving them from thirty-seven and a half cents to fifty cents a week for food and clothing for themselves and children.  Some thousands are said to be in this situation in Philadelphia alone.

Various proposals have been made to better their condition: some futile, others absolutely pernicious.  The laws of supply and demand are too powerful to yield to sermons and essays.  The low rate of the wages of these poor women, is the effect of general causes – causes which affect, in one way or another, every branch of business.  In the great game we have been playing, much of the wealth of the country has passed into a few hands.  Many men dying, have left nothing to their widows and children;  and others who still live, cannot support their families, except by the additional industry of their wives.  The work of a seamstress can be done by a woman in her own house, in the intervals she can spare from attention to her children.  In this way, the number of seamstresses has been increased.

On the other hand, many families who would gladly employ these poor women, are compelled by their own straitened circumstances, to do this kind of work themselves.  In this way the demand for seamstresses is diminished.

Private benevolence may improve the condition of individuals of this class: but the class itself can be benefitted by such causes only as will diminish the number of seamstresses or increase the demand for their labor.  The cause that will improve the condition of one of the industrious classes of society, will improve the condition of all.  When an end shall be put to unfair speculation, then, and not till then, will honest industry have its just reward.

Effects on Moral Character.

The practices of trade seem, in most countries, to fix the standard of commercial honesty.  In the Hanse towns and Holland, while they were rising to wealth, this standard was very high.  Soldiers were not more careful to preserve their honor without stain, than merchants were to maintain their credit without blemish.

The practices of trade in the United States, have debased the standard of commercial honesty.  Without clearly distinguishing the causes that have made commerce a game of hap-hazard, men have come to perceive clearly the nature of the effect.  They see wealth passing continually out of the hands of those whose labor produced it, or whose economy saved it, into the hands of those who neither work nor save.  They do not clearly perceive how the transfer takes place: but they are certain of the fact.  In the general scramble they think themselves entitled to some portion of the spoil, and if they cannot obtain it by fair means, they take it by foul.

Hence we find men, without scruple, incurring debts which they have no prospect of paying.

Hence we find them, when on the very verge of bankruptcy, embarrassing their friends by prevailing on them to indorse notes and sign custom-house bonds.

Instances not unfrequently occur of men who have failed once or twice, afterwards accumulating great wealth.  How few of these honorably discharge their old debts by paying twenty shillings in the pound !

How many evade the just demands of their creditors, by privately transferring their property.

It is impossible, in the present condition of society, to pass laws which will punish dishonest insolvents, and not oppress the honest and unfortunate.

Neither can public opinion distinguish between them.  The dishonest share the sympathy which should be given exclusively to their unfortunate neighbors: and the honest are forced to bear a part of the indignation which should fall entirely on the fraudulent.

The standard of commercial honesty can never be raised very high, while trade is conducted on present principles.  "It is hard," says Dr. Franklin, "for an empty bag to stand upright."  The straits to which many men are reduced, cause them to be guilty of actions which they would regard with as much horror as their neighbors, if they were as prosperous as their neighbors.

We may be very severe in our censure of such men, but what else ought we to expect, when the laws and circumstances give to some men so great advantages in the great game in which the fortunes of the whole community are at issue – what else ought we to expect, but that those to whom the law gives no such advantage, should exert to the utmost such faculties as remain to them in the struggle for riches, and not be very particular whether the means they use are such as the law sanctions or the law condemns.

Let those who are in possession of property which has been acquired according to the strict letter of the law, be thankful that they have not been led into such temptations as those on whom the positive institutions of society have had an unfavorable influence.

But, Banking has a more extensive effect on the moral character of the community, through that distribution of wealth which is the result of its various direct and remote operations.  Moralists in all ages, have inveighed against luxury.  To it they attribute the corruption of morals, and the downfall of nations.  The word luxury is equivocal.  What is regarded as a luxury in one stage of society, is, in another, considered as a comfort, and in a still more advanced stage as a necessary.  The desire of enjoyment is the great stimulus to social improvement.  If men were content with bare necessaries, no people would, in the arts and sciences, and in whatever else renders life desirable, be in advance of the lowest caste of the Hindoos, or the unhappy peasantry of the most unhappy country of Europe.

But, whatever moralists have said against luxury, is true when applied to that artificial, inequality of fortune which is produced by positive institutions of an unjust character.  Its necessary effect is to corrupt one part of the community, and debase the other.

The bare prospect of inheriting great wealth, damps the energies of a young man.  It is well if this is the only evil it produces.  "An idle man's brain," says John Bunyan, "is the devil's workshop."  Few men can have much leisure, and not be injured by it.  To get rid of the ennui of existence, young men of wealth resort to the gambling table, the race ground, and other haunts of dissipation.  They cannot have these low means of gratification, without debasing those less favored by fortune.

The children of the poor suffer as much in one way, as the children of the rich suffer in another.  The whole energies of the father and mother are exhausted in providing bread for themselves and their family.  They cannot attend properly to the formation of the moral character of their offspring – the most important branch of education.  They can ill spare the means to pay for suitable intellectual instruction.  Their necessities compel them to put their children to employments unsuited to their age and strength.  The foundation is thus laid of diseases which shorten and imbitter life.

Instances occur of men, by the force of their innate powers, overcoming the advantages of excess or defect of wealth;  but it is true, as a general maxim, that, in early life, and in every period of life, too much or too little wealth, is injurious to the character of the individual, and, when it extends through a community, it is injurious to the character of that community.

In the general intercourse of society, this artificial inequality of wealth produces baneful effects.  In the United States, the pride of wealth has more force than in any other country, because there is here no other pride to divide the human heart.  Some of our good republicans do, indeed, boast of a descent from the European nobility;  but when they produce their coats of arms, and their genealogical trees, they are laughed at.  The question is propounded, if their noble ancestors left them any money.  Genius confers on its possessor a very doubtful advantage.  Virtue, with us, as in the days of the Roman poet, is viler than sea weed, unless it has a splendid retinue.  Talent is estimated only as a means of increasing riches.  Wealth alone can give permanent distinction, for he who is at the top of the political ladder to-day, may be at the bottom to morrow.

One mischief this state of things produces, is, that men are brought to consider wealth as the only means of happiness.  Hence they sacrifice honor, conscience, health, friends – every thing, to obtain it.

The other effects of artificial inequality of wealth, have been treated of at large, by moralists, from Solomon and Socrates downwards.  To their works, and to the modern treatises on crime and pauperism, we refer the reader.  The last mentioned treatises are, for the most part, only illustrations of the ultimate effects of positive institutions, which operate unequally on different members of the community.

Effects on Happiness.

The inferences the intelligent reader must have drawn from what has already been stated, preclude the necessity of much detail in this part of our inquiry.

Wealth is, if independently considered, but one among fifty of the causes of happiness: and poverty, viewed in the same light, is but one among fifty of the causes of misery.  The poorest young man, having health of body and peace of mind, and enjoying the play of the social sympathies, in the affections of wife, children and friends, is happier than the richest old man, bowed down with sickness, oppressed with anxiety for the future, or by remorse for the past, having nobody to love, and beloved by nobody.

But though we may, by mental abstraction, consider wealth independently, or poverty independently, neither the one or the other is absolutely independent in its operation.  There is no cause in either the physical or the moral world, but which works in conjunction with other causes.  Health of body and peace of mind, with the just play of the social affections, may give happiness, independently of wealth: but in extreme poverty, it is difficult to preserve either health of body or peace of mind, and the play of the social affections becomes then a source of misery.

Some little wealth, at least enough for daily subsistence, is necessary for the enjoyment of life and the pursuit of happiness: and hence it is, that the right to property is as important as the right to life and the right to liberty.  "You take my life when you do take the means by which I live."

The majority of men are of such temperament, that something more than the means of subsistence for the bare twenty-four hours, is necessary for their happiness.  They must also have a prospect of enjoying the like means of subsistence in future days.  But this is a prospect which, with the reflecting part of the poor, is frequently overcast with clouds and gloom.  Few journeymen mechanics are able to make adequate provision for sickness and old age.  The wages of a laborer will support him and his family while he enjoys health and while employment is steady: but in case of long continued sickness he must look for relief from the hand of public or of private charity.  If he casts his eyes on his wife and children, his dying hours are imbittered with thoughts of the misery which may be their portion.  Corroding care is the inmate of the poor man's breast.  It is so heart-withering, that it may be made a question, if the condition of some slaves in the Southern States is much worse than that of many citizens of the other States.  The want of liberty is a great drawback on happiness: but the slave is free from care.  He knows that when he grows old, or becomes infirm, his master is bound to provide for his wants.

There would be less objection to that artificial inequality of wealth which is the result of unjust positive institutions, if it increased the happiness of one class of society in the same proportion that it diminishes the happiness of another class.  But, increase of wealth beyond what is necessary to gratify the rational desires of a man, does not increase his happiness.  If it gives birth to irrational desires, the gratification of them must produce misery.  Even when inordinate wealth does not give birth to irrational desires, it is attended with an increase of care, and this is a foe to happiness.

With some men, the love of wealth seems to be a blind passion.  The magpie, in hiding silver spoons in its nest, appears to act with as much reflection as they do, in piling money-bag on money-bag.  They have no object in view beyond accumulation.  But, with most men, the desire of great wealth appears subordinate to the love of great power and distinction.  This is the end, that the means.  They love fine houses, splendid equipages, and large possessions, less for any physical gratification they impart, than for the distinction they confer, and the power they bestow.  It is with some, as much an object of ambition to be ranked with the richest men, as it is with others to be ranked with the greatest warriors, poets, or philosophers.

The love of that kind of distinction which mere wealth confers, is not a feeling to be highly commended: but it is hardly to be reprobated, when it is constitutional, and when it is under the government of proper moral principle.  In this case, it is a simple stimulus to vigorous industry and watchful economy.  With some men, the love of ease is the ruling passion, with others the love of pleasure, and with others the love of science.  If the love of riches was not, with many men, stronger than any of the other loves we have mentioned, there might not be enough wealth accumulated to serve the general purposes of society.  They may claim the liberty of gratifying their particular passion in a reasonable way: but it is a passion which derives less gratification from the actual possession of a large store, than from the constant increase of a small one.  The man whose wealth increases gradually from 100 dollars to 1000, thence to 5000, thence to 10,000, and thence to 50,000, has more satisfaction in the process than he who suddenly becomes possessed of 100,000 dollars.  As to the distinction which mere wealth confers, it would be obtained in a state of society in which the distribution of wealth was left to natural laws, as certainly as in a state in which positive institutions operate to the advantage of the few, and to the disadvantage of the many.  If the riches of men were made to depend entirely on their industry, economy, enterprize, and prudence, the possession of 100,000 dollars would confer as much distinction as the possession of 500,000 dollars confers at present.  Those worth "a plum," would then rank among the "first men" on 'change: those who are worth "five plums" can rank no higher now.

But the system has not a merely negative effect on the happiness of the rich.  Such is the uncertainty of fortune in the United States, that even the most wealthy are not exempt from painful solicitude for the future.  Who can be sure that he will be able to navigate his own bark in safety to the end of the voyage, when he sees the shore strewed with wrecks ?  If a man leaves an estate to his children, he knows not how long they will keep possession of it.  If he extends his views to his grand children, the probability will appear strong that some of them will be reduced to abject poverty.

Such is the present custom of trade, that a man who has a considerable capital of his own, not unfrequently gives credit to four or five times the amount of that capital.  He is a rich man, but even if the debts due to him are perfectly secure, the perplexity which is created by a long train of credit operations, the failure of but one of which may prove his ruin, must leave him little ground for solid satisfaction: and the necessity he is under in times of embarrassment, of courting the good-will of Bank Directors, goes far towards destroying his personal independence.  "The servile dependence on Banks, in which many of our citizens pass their lives," was observed by Mr. Carey as long ago as the year 1811.

There is one other evil resulting from the super-extended system of credit which has its origin in Banking, and with a few observations on this, we shall close our remarks on this head of the subject.  We allude to the misery suffered by an honest man, who is involved in debts.  We have known cases in which none of the common rules of prudence had been transgressed in incurring the debts, in which the creditors were perfectly convinced of the honesty of the debtor, and neither pressed for payment, nor reflected on his disability to comply with his engagements: in which the debtor was sensible that his failure would not subject his creditors to any serious inconvenience;  and yet a gloom would overspread the mind of the debtor, and remain there for years.