William Gouge
An Inquiry

Probable Effects of the Establishment of a System of Sound Currency and Sound Credit.

The laws which govern the moral world are just as certain in their nature as those which govern the physical: but it is not always easy to fortell the effects of a political measure, because it is not easy to foresee the precise combination of causes that will be in operation at any future period.  David Hume reasoned with perfect correctness from the premises before him, when he predicted that an increase of the national debt beyond a certain amount would make the British Government bankrupt.  But he did not foresee the great increase of wealth, and consequent increase of ability in the people to bear public burdens, which has been caused by the use of steam and of productive machinery;  and the Government has swelled the debt beyond the amount he fixed upon, without becoming bankrupt.

As we have neither a large standing army nor an expensive navy, neither King nor titled nobility to support, neither sinecurists nor pensioners to pay, it would seem rational to believe that, on the destruction of the monied corporation system, honest industry in the United States would be secure of its reward.  But it is, perhaps, too soon to assert that the ingenuity of those who wish to grow rich by the labor of others will then be exhausted.  The Banking system destroyed, they may invent some other, equally plausible and equally pernicious.

There has been at least an apparent improvement in the moral sentiments of men.  About three centuries ago, it was customary to insert in the treaties between Christian Kings, a stipulation that the subjects of one King should not plunder the subjects of another, on the high seas, in time of peace – in other words, it was made matter of express covenant that merchants should not be pirates.  At a much later period, many Scottish gentlemen thought it quite as honorable and as honest to levy "black mail" on the estates of their neighbors, as to levy rents on their own estates.

Some intelligent writers seem to be of opinion, that the improvement in moral sentiment is rather apparent than real.  There is, they assert, so much less personal risk certain modern modes of acquiring wealth, that men can lay little claim to merit because they do not carry off their neighbors' cattle by force of arms, or rob ships on the high seas.  Lord Byron appears to have been of this way of thinking, for he said that "if the funds failed, he meant to take to the high-way, as he considered that the only honorable mode of making a living, now left for honest men."

"For why ?
The good old rule sufficeth still,
The simple plan–
That they shall take who have the power,
And they shall keep who can."

"Many ingenious men" says an American author, "have amused themselves and others, in forming theories respecting the social compact.  Some supposed it to originate in one way, some in another.  Some supposed it to have been formed for one purpose, some for another.  It is supposed by some to have been formed for defence – others suppose it to have been formed for aggression.  It is true, that every thing on this subject is mere speculation;  and one man has as much right to form theories as another, but it is very clear, that aggression must precede defence, and that before communities could have been formed for defence, there must have been others formed for aggression.  Had there been no such thing as attack, men would never have thought of defence.  The primary object, therefore, in forming the social compact, must have been plunder;  and the first article of that compact no doubt was, "we will plunder our neighbors."  The second article probably was, "we will not plunder each other."  This article was necessary to enable them to carry the first into effect.

"The first article in the social compact has been faithfully executed, as far as it was practicable.  The second article has been and still is evaded, or forcibly violated, by a large portion of every community.  How many people do we see in every community, who, instead of supporting themselves by their own industry, contrive to supply themselves with the necessaries and comforts of life, from the industry of others ?  Some do this by fraud and overreaching.  Some by direct violence – some by the exercise of their wits in one way, some in another.  Some by the permission, or the express provision, of the law – others in violation of it.  What a host would there be, if all the people in the United States even, who live by the labor of others, were collected together.

"The history of mankind, in all ages of the world, shows that they will never labor for subsistence, so long as they can obtain it by plunder – that they will never labor for themselves, so long as they can compel others to labor for them."[6]

This is a gloomy view of things: and we cannot say that we assent to its correctness in every particular.  We trust there has been, in the last three centuries, some real improvement in the minds of men.  Yet history and experience both show that there is a strong principle of evil which shows itself in different forms in different men, and which changes its appearance in communities with change of circumstances.

As this principle is found in Americans as well as in Europeans and Asiatics, we may rest assured, that, if the money corporation system shall be abolished, attempts will be made, under the plausible pretext of promoting the public good, to have other laws passed, and other institutions established, which will give to some members of the community advantages over the rest.  The attempts of this kind will probably be numerous, for even those who apparently pay most regard to the principles of natural justice, think themselves fairly entitled to such advantages as the law gives them, and deem it quite proper to endeavor to advance their private speculations by procuring legislative enactments in their especial favor.  If these attempts shall be successfully resisted, we may rationally expect – being delivered from the curse of paper money and of monied corporations – a considerable improvement, in the following particulars.

1.  The demand for most articles of commerce and manufactures will become regular, and the supply will conform itself to the demand, the variations being seldom so sudden or so great as to prevent men of good common sense from managing their business successfully.  At present, men find it difficult to make the operation of the natural causes that affect supply and demand the basis of an estimate, in engaging in any enterprize, because these causes are confounded with others growing out of the present sys tem of business.

2.  Bankruptcies will be as rare as they were before the Revolution, and losses by bad debts will be inconsiderable.  More or less uncertainty will always attend foreign commerce.  Events which may happen abroad may, from time to time, have an injurious effect on bodies of merchants engaged in a trade with particular countries;  but, as is correctly observed by Mr. Gallatin, the effects of commercial revulsions in a country having a metallic currency, are generally confined to dealers, extending but indirectly and feebly to the community, and never affecting the currency, the standard of value, or the contracts between persons not concerned in the failures.

3.  The value of that which forms the principal item of wealth in every country, the land and its improvements, is affected slowly by natural causes.  It seldom rises or falls, except in particular situations, more than one or two per cent. in the course of a year.  Such variations would not be great enough to prevent the majority of men from forming correct estimates of the value of real estate: and as there would be a continuous rise in the value of land, with the increase of wealth and population, sellers would be quite secure in receiving one-fourth of the purchase money and a mortgage for the remainder, and buyers would run little risk of losing, from a fall in the price of property.  The special causes which would affect the value of lands in particular localities, might be estimated with some degree of exactness.

4.  The prices of land and commodities being left to the regulation of natural causes, it would, in most instances, be easy to form a judgment of the probable result of different undertakings.  The risk, in the great majority of en terprizes, would not be greater than that of the farmer when he ploughs and sows his fields.  It would be easy to tell what businesses are adapted to the state of the country, and to different parts of the country.  The developement of the natural sources of wealth would proceed in natural order, and men would grow rich, not by impoverishing others, but by the same causes that enrich nations.

5.  Credit would be diffused through the community, and each man would get that share to which he would be justly entitled.  The thrifty young mechanic, and the in dustrious farmer, though not possessed of real estate, would be able to borrow on bond, for such periods as might be necessary to bring their little undertakings to a successful issue.

6.  Every increase of capital increasing the fund out of which wages would be paid, would increase the reward of the laborer.  Through the new distribution of capital which would be produced by a just apportionment of credit, the number of the competitors of the working-man would be diminished, and the number of his employers increased.  He would thus reap a double advantage, from the in crease of competition on the one side, and its decrease on the other.

7.  The present order of things, by rendering the condition of some members of society almost hopeless, takes away from them almost every inducement to industry and economy.  They labor only from the stimulus of necessity; and if, in particular seasons, they obtain more than is necessary for immediate subsistence, they expend it in procuring some sensual gratification.  But, open to these men a fair prospect of acquiring a little property and of being secure in its possession, and many who are now indolent will become industrious, and many who are extravagant will become economical.  Give them an object worth working and saving for, and but few, even of those who are least gifted with natural prudence, will become a burden to their friends, or to the public.

8.  The moral character of a great part of the nation has been stamped so deeply by causes which have been in operation for half a century, or for nearly a century and a half, if we count from the first issue of paper money by Massachusetts, that many years perhaps, will, elapse, before it can be essentially changed.  But one of the first effects of abolishing the money-corporation system, will be that of raising the standard of commercial honesty in a perceptible degree, and the standard of political honor will, in a few years, be sensibly elevated.

9.  In a state of things in which industry was sure of its reward, few persons would be destitute of the pecuniary means for obtaining instruction.  The intellectual powers of the great body of the people would then be fully developed, and this could not fail to promote the correct management of public and private affairs.

10.  The causes of evil are as numerous as the varieties of evil.  The Banking system must be regarded as the principal cause of social evil in the United States;  but it is by no means the only one.  There are other positive in stitutions in our land which are very pernicious.  Remove the Banking system, and the extent in which most other evil institutions operate, will become evident.  The application of the proper remedies will then be an easy task.

In the best social system that can be imagined, that is, in one in which there should be no laws or institutions of any kind except such as are absolutely necessary, and in which the few laws and institutions which are really necessary should be perfectly just in principle and equal in operation, there would necessarily be an inequality in the condition of men.  It would proceed in part from differences in mental and bodily strength, in skill, in industry, in economy, in prudence, and in enterprize.  In part, it would proceed from causes beyond human control.  But this would be a natural inequality, and it would not be an evil.  The sight of one man enjoying the reward of his good conduct, would induce others to imitate his example.

We have evidence in the condition of Switzerland and Holland, of what patient industry can accomplish.  One of these countries is mountainous and rugged;  the other is a marsh, great portion of which has been reclaimed from the sea.

Yet they are, in proportion to the number of square miles they contain, among the richest countries in the world.  In Switzerland there are, or were till lately, many absurd restrictions on the liberty of the people.  The national debt of Holland is very great, and the taxes are consequently heavy.  Switzerland is an inland country, and has intercourse with distant nations, through the permission of the neighboring kingdoms.  It owes its independence to the sufferance of its powerful neighbors.  Holland is frequently devastated by hostile armies.  It is not free from commercial monopolies.  In both Holland and Switzerland there is an inequality of political rights quite incompatible with our American ideas of natural justice.  Yet, under all these disadvantages, natural and political, Holland and Switzerland have arrived at a degree of improvement which excites the admiration of every candid observer.

Now, if the Union of the States can be preserved, to what may we not rise, under our free political institutions, with the immense extent of our natural resources, with all our advantages for foreign and domestic trade, and exempted as we are by our situation from a participation in the wars of Europe.

It would really appear that, if we could only get rid of a few laws and institutions which give advantages to some men over others, we might arrive at a state of improvement which would surpass that of any country of which mention is made in history.  We have more means of happiness within our reach, than any other people.  If we turn them not to a good account, the fault will be our own, and we must patiently bear the consequences.


6.   Raymond, Elements of Political Economy, Baltimore 1823.