Christopher Hollis
Two Nations


Chapter XVII — America

It will inevitably occur to the objector to say, “Of the capital goods that went abroad from England, it may be true that a proportion went into the low-wage native countries.  But others went into the new countries, where the white worker notoriously receives a higher wage than he receives in Europe.  On the formula of money finding its own level, how was it possible for these new countries to borrow at all?

In order to find an answer let us return to the history of the most important of them, the United States of America, taking it up again where we left it in a previous chapter.  It will be remembered that the question was there raised how far pre-revolutionary America was a high-wage country, supplied, as it was, by black slave labour and white forced labour, that was virtually slave labour.  It was also argued that the desire for financial freedom was prominent among the causes of the American revolt.

As soon as Independence had been won from Great Britain, the decks were clear for a second fight.  That fight, as is usually found after a successful revolution, was the fight to decide whether independence was to be true independence or whether, after the change of names, the financial system was to re-establish over the new government that same control which it had exercised over the old.  The protagonist of plutocracy, a surprisingly frank protagonist, was Alexander Hamilton.  Among his proposals was one astonishing in its impudence even for the antagonist of such a cause.  The Germans in our own day have carried to a fine art the technique of first defaulting on the interest of their loans and then, when as a result the bonds have slumped, buying them up at a fraction of their par value and thus getting rid of their debts for perhaps a quarter of what they originally borrowed.  Things were not very different in Alexander Hamilton’s America.  In order to fight the war, Congress had raised certain loans and then had subsequently defaulted on their interest.  As a result, of course, they stood very low and were only sellable at a fourth or a fifth part of their par value.  Alexander Hamilton, the Secretary of the Treasury, gave private information to his financial friends, who therefore bought up the loan at its low market figure.  He then announced that the Government would redeem it by paying off the present holders at par plus accrued interest, with the price-level considerably lower than that of the time of the contraction of the debt.  In order to pay them off, he raised a new loan from the New York bankers, thus saddling the new country with a permanent National Debt, which he confessed to thinking necessary in order that finance’s mastery of its policies should be unshakable.(179)  “He wishes it never to be paid,” explained Jefferson(180) at the time, “but always to be a thing wherewith to corrupt and manage the legislature.”  He thus bound, as Calhoun afterwards put it,(181) “more strongly to the Government that already powerful class by giving them, through its agency, increased profit and a decided control over the currency, exchanges and the business transactions of the country.”  The interest on the new loan was to be raised by import duties.

Alexander Hamilton’s great opponent was Thomas Jefferson.  Hamilton spoke for the city interests, Jefferson for the agriculturists.  It was Jefferson’s belief that “our government will remain virtuous ... as long as they are agricultural.  When they get piled upon one another in large cities, as in Europe, they will become corrupt as in Europe.”(182)  It was this love of the broad acres which caused him, when he was President, to welcome the opportunity of extending the territory of the United States by purchasing from Napoleon France’s vast western American Louisiana territory.  In this purchase Jefferson saw two advantages.  First, he would be freeing the United States from the embarrassment of a strong neighbour over the frontier.  Second, by adding good agricultural land to its territory he would be strengthening the agricultural as against the city interests.

His purchase had further consequences than he had foreseen.  Had the United States remained a small country, hemmed into the sea by the Alleghany Mountains, it is not possible confidently to prophesy on which side victory would have lain in the controversy between the Jeffersonians and the Hamiltonians.  But at least it would have been possible for the little country to have lived out a simple agricultural life, without the complications either of large foreign loans or of large immigration.  By the Louisiana purchase she became a vast country; she also became an empty country.  The temper of her inhabitants was one of hurry.  They were not willing — perhaps in the circumstances it was not possible — to leave the country to fill up by the slow process of natural increase and only to develop its resources as natural increase created a demand for development.

Granted a sparsely populated country anxious for quick development, certain consequences inevitably followed.  First, they could only develop by foreign loans, for they had not as yet got the surplus of goods to exchange against the foreign goods which they needed.  Secondly, they could only develop if they consented to recruit their labour-supply by immigration.  Either the immigrants had to go direct to the West or else, if the West was to be colonized from the East, then the immigrants had to be imported into the East to fill the vacant jobs there.  Now the temper of the times forebade the importation of further black slaves.  Therefore the new immigrants must be white.  Therefore, while the black population was only growing by natural increase, the white population was growing both by natural increase and by immigration.

Now that the United States were independent, it was impossible for them to obtain European immigrants except by genuine persuasion, nor could they persuade anybody to cross the sea to them unless they offered him a higher standard of living than he could obtain in his old home.  Therefore while, had things been different, slavery might have maintained itself for many years in its old home, it was certain that, whatever the laws might say, it would never really obtain a hold in the new states carved out of the Louisiana territory.  Slavery would not obtain a hold simply because there were not enough slaves to do the manual labour.  As those states developed, they would inevitably have come to rely more and more on white labour, and, as inevitably, the white labourer would have demanded the expulsion of the negro slave as the price of his labour.  For the presence of the slave would have both destroyed the prestige and lowered the price of manual labour.  Therefore there is little doubt that, even had there been no Civil War, slavery would soon have been abolished by the states themselves in all the new states south of the Mason-Dixon line.  They would have followed California in the blunt battle-cry of “No niggers, slave or free.”  The Abolitionists had already all but won in Texas.

From the day of the Louisiana purchase the days of the domination of the Union by the old slave-owning states of the south-east were then certainly numbered.  Indeed it was really certain that the days of the whole doctrine of state sovereignty were numbered.  For it was inevitable that sooner or later the centre of gravity of the states must shift to the west.  And, whereas the eastern state was a true unit, senior to the Union and the master of its citizens’ loyalty, the western state was nothing but an artificially created administrative area, the object of no man’s primary loyalty.  If the Union was to survive at all, it was inevitable that in the end the West would conquer the East, the men of no state would conquer the men of a state.  Had the south-easterners been wiser in their foresight, they would perhaps have made up their minds from the very time of the Louisiana purchase either to accept the inevitable or alternatively to leave the Union while they would still have been allowed to leave it peacefully.  They did neither.  They continued the experiment of the Union.  The English capital poured into New York and from New York it was redistributed for the development of the country.  On balance there was of course as yet no question of repaying the London loans.  Every year London sent over in new loans far more than she received on the interest of the old.  It was not till 1873 that the tide turned and American exports began to exceed her imports.  Yet, even in the early years of the century, she had to have some exports — she had to have something to offer which would seem to promise to the London lender a prospect of repayment of his loans.  What could she offer ?

She clearly had no manufactured goods to export.  The cornfields of the west were not yet developed, nor indeed was England as yet willing to accept large quantities of imported food.  The only thing that she could offer was cotton.  Now cotton could only be produced in the slave states of the South.  This fact had two consequences.  On the one hand it made it of vital importance both to the English money-lender and to his New York jackal that the Union should be preserved and therefore there grew up a school of thought which denied that right of secession which had at first been universally taken for granted, which three states — New York herself, Rhode Island, and Virginia — had specifically affirmed as the condition of their entry into the Union, which had been taught as the generally accepted doctrine in such places as, for instance, the official military academy at Crown Point.  This school of thought was, when the appropriate time came, to be launched upon the country as the Republican Party.  On the other hand, it made it necessary not only that the south should produce cotton but that it should produce as much cotton as possible.  Writers — the present writer among them(183) — have sometimes spoken of the life of the South before the Civil War as static and conservative.  Such language is false.  The two generations between Washington and Lincoln saw a profound revolution in southern life.  In Washington’s day the south-eastern planters were a race of subsistence farmers producing a variety of crops — rice, indigo, tobacco, corn.  By the time of the Civil War all other crops than cotton had been as far as possible ruthlessly destroyed, while the cotton crop, which consisted of two million pounds at the time of Washington’s inauguration, had risen by 1860 to more than two billion pounds — had increased by over 1,000 times.(184)

How was this transformation effected ?

In America there was no educational system to close the mind, such as the English public school and university system.  What education existed was in somewhat slavish copy of English models, but fortunately for America there was not very much of it.  As a consequence truths, that in England were only recognized by such men as Cobbett, were in America universally self-evident.  The strength of the money-power was everywhere recognized; Alexander Hamilton had been frank and explicit in his proclamation of a purpose of making it strong.  Yet, though strong and recognized to be strong, it was violently unpopular.  Andrew Jackson from the frontiers of the West had in the 1820s made himself the leader of the battle against it.  He denounced it as “more formidable and dangerous than the naval and military power of an enemy.”(185) A great wave of public enthusiasm carried him into the White House in 1828 and he was triumphantly re-elected in 1832.  His years were filled with his great warfare against the United States Bank — the central bank whose charter he refused to renew.

The bank fought him with those weapons which it is the habit of the money-power to use.  It controlled the press, as it always can, since newspapers cannot be run without overdrafts and without advertising.  It won to itself a majority in Congress by issuing loans to Congressmen on specially cheap terms on the plea that “it was in the public interest that such persons should have practical instruction in the principles of banking.”(186)  Daniel Webster, the great patriotic orator, the master of the Senate, was, as we now know, in its pay.  The publication of the letters of Nicholas Biddle, the Bank’s President, has revealed one in which Webster explains how he has refused to undertake a case against the Bank and adds, “I believe my retainer has not been renewed or refreshed as usual.  If it be wished that my relation to the Bank should be continued, it may be as well to send me the usual retainers.”(187)

Yet the money-power judged rightly that mere bribery of politicians would not be sufficient.  “Nothing but the evidence of suffering abroad will produce any effect in Congress,” thought Biddle.  And Webster agreed that “this discipline, it appears to me, must have very great effects on the general question of the chartering of the Bank.”(188) As long as Jackson was in power, it was useless to do anything, but Jackson’s successor, Van Buren, from New York and not from the West, was, it was hoped, of less stern stuff.  Van Buren succeeded in March, 1837, the Bank’s charter lapsed, and at once “this discipline” was duly applied — drastic deflation, imposed really by the money-power but ascribed to the loss of “confidence” owing to Jackson’s “wild-cat finance” — and the usual result of a fall in prices and consequent ruin, bankruptcy, starvation, and unemployment.  And naturally enough, when the next election came, the Democrats, Jackson’s party, went down to defeat, and the Whigs, the party of the money-power, ruled in their stead.  Concerning the money-power’s candidate, General Harrison, Biddle gave instructions “Let him not say one single word about his principles, or his creed — let him say nothing — promise nothing.  Let no Committee, no convention — no town meeting ever extract from him a single word about what he thinks now or will do hereafter.  Let the use of pen and ink be wholly forbidden!”(189)

The truth was that money had always the final ace.  The West was always vulnerable because it was always in a hurry.  It wanted loans for its rapid development, and the true source of those loans was not New York, which it could perhaps conquer, but London, which it could not reach.  If the piper would not dance to his master’s tune, the master would not pay at all.  Thus the money-power of New York was able to dictate the development both of the West and of the South.  We have spoken in another chapter of the system under which development is dependent upon loans of bank-created money which have to be repaid long before the goods for whose manufacture they were issued come on the market.  It is of the essence of such a system, it was argued, that the issuers of money can control the pockets into which it goes and can therefore control the productive life of their country.  As Calhoun put it(190) with moderation, the system gave them “a decided control over the currency, exchanges and the business transactions of the country.” There was only one strong limitation to that control.  Wages had to be high to attract immigrants and to compete with the alternative of pioneer farming in the West and, if wages were high, then Americans could only manufacture if they were protected by a tariff against the competition of the lower-wage manufacturing countries.

But, if the producer for the home market must have a high standard of living, there was no reason why the producer for the foreign market, the cotton-grower, should share that high standard.  For cotton’s labour, fortunately for finance, was not dependent upon immigration.  It was on the other hand desirable that its price should be kept as low as possible so that Lancashire might buy as much as possible and thus the London money-lender be persuaded that America’s exports were large enough to give him a promise of larger dividends.  Now the wages of labour in the South could not be reduced since the labourer, being a slave, did not get any wages — though there is indeed some reason to think that conditions for the slave became worse in the generation before the Civil War.  On the other hand, the profits of the planter could be reduced, and they were being reduced all through the generation that preceded the Civil War.  They were reduced in this way.  The effect of the tariff was to raise the prices of all articles in the home market — of everything, that is, that the planter bought whether as machinery for his business or as comfort for his private life.  On the other hand the price of cotton was a price in the world market, settled by the demand of Lancashire.  Had the planter raised the price, the masses of the world would not have used cotton as they did.  Therefore throughout the whole pre-war generation the southern planter was paying more for everything that he bought and receiving the same for everything that he sold.  It is possible for us, as it was not possible for his contemporaries, side by side with Calhoun’s great speeches on the unconstitutional nature of the tariff, on the high principles of freedom, on the undying nature of patriotism, to set the account-books of the Calhoun estate with their sorry record of ever-mounting costs and ever-mounting debt.  And in those books is the secret of what was happening to the South throughout that generation.  Owing to the tariff the whole South was going into debt.  We must never forget the important statistic which Horace Greeley, who had good sources of information, gave at the outbreak of the Civil War, that southern debtors owed at least $200,000,000 to money-lenders in New York City alone.(191)

Why to New York, it may be asked.  With their philosophy of state rights, with their Jacksonian tradition of opposition to central banking, why did they not borrow from their local banks? Because, under the system, a large bank can always lend more liberally than a small bank.  Suppose it to be a general truth that people only demand one-tenth of their deposits in cash.  A large bank can count with confidence on the habits of its depositors corresponding to the general habits of the country.  There may be one man here who demands more than one-tenth, but there is certain to be another, to balance him, who is content with less.  A small bank cannot be sure.  It may be indeed that its depositors on the whole demand considerably less than one-tenth, but it may equally be that they demand more.  And, in face of this latter possibility, the small bank can never lend so large a multiple of its cash holdings as the large one.  Also the large bank has clients engaged in every variety of business and therefore needing their cash at every different period of the year.  It is probable that a high proportion of the clients of the small bank will be all engaged on the same business — the predominant local business — and therefore their demands for cash will all tend to fall in at the same period of the year.  It may be argued that these considerations seem to prove the absolute superiority of large banks over small banks; it may be argued that they but prove that, if you are going to have a swindle, you had better have a gigantic swindle — for it is the whole system of double-money that is in debate.  However that may be, they at least show how it was that the southern planters owed their debts to New York.

This southern debt to New York is the explanation of much.  The debts were bank-debts.  They were short-term debts.  They had to be repaid, and yet they never really could be repaid.  They could only be nominally repaid by further borrowings.  And the price of the borrowings was the acceptance of the lender’s terms.  It is common enough for the books to describe to us how the area of cotton-cultivation spread in the years before the war.  But cotton no more spreads of itself than gold flows into a country unasked.  The area of cotton spread because the banks lent money to those who would grow cotton and forced into bankruptcy those who refused.

It was not difficult for any Southerner to see that here was a system that was steadily driving his country to ruin.  Against that system he had two weapons.  He had the weapon of the threat of secession, to prevent which most Northerners were prepared to make to him very considerable concessions.  He had the alliance of the Jacksonian West, which cared indeed but little for states’ rights, the feeling of which was on the whole settling against slavery but which shared with the South its detestation of the money-power.  The somewhat incongruous coalition of the South and West, helped by some northern supporters, made up the Democratic Party, which on the whole ruled America from Jackson’s time to the Civil War.  It was an anti-financial party.  Yet everything costs money — even attacking the money-power.  And, as is the invariable way with political parties, with the passage of the years its living faith tended to sink down into the mere repetition of conventional formulæ.

The cotton-planters were inconvenient debtors because they were possessed of a high pride and, under the leadership of such men as Calhoun and Hammond, of an inconveniently accurate understanding of the confidence-tricks of credit.  If their banker-creditors pressed too hard, such men were always ready to answer with a threat to expose throughout the North the trick by which “the white slave” was kept the obedient servant of finance.  As John Randolph threatened,(192) “Northern gentlemen think to govern us by our black slaves; but, let me tell them, we intend to govern them by their white slaves.”  Or, as Senator Hammond put it in a trifle greater detail:(193)

“In all social systems there must be a class to do the mean duties, to perform the drudgery of life.  That is, a class requiring but a low order of intellect and but little skill.  Its requisites are vigor, docility, fidelity.  Such a class you must have, or you would not have that other class which leads progress, civilization, and refinement.  It constitutes the very mud-sill of society and of political government;  and you might as well attempt to build a house in the air, as to build either the one or the other, except on this mud-sill.  Fortunately for the South, she found a race adapted to that purpose to her hand --a race inferior to her own, but eminently qualified in temper, in vigor, in docility, in capacity to stand the climate, to answer all her purposes.  We use them for our purposes, and call them slaves.

"The Senator from New York [Seward] said yesterday [Wednesday, March 3, 1858.] that the whole world had abolished slavery.  Ay, the name, but not the thing;  all the powers of the earth cannot abolish it.  God only can do it it when he repeals the fiat, "the poor ye always have with you;"  for the man who lives by daily labor, and scarcely lives at that, and who has to put out his labor in the market and take the best he can get for it;  in short, your whole hireling class of manual laborers and "operatives," as you call them, are essentially slaves.  The difference between us is that our slaves are hired for life and well compensated;  there is no starvation, no begging, no want of employment among our people, nor too much employment either.  Yours are hired by the day, not cared for and scantily compensated, which may be proved in the most painful manner, at any hour, in any street in any of your large towns.  Why, you meet more beggars in one day, in any single street of the city of New York, than you would meet in a lifetime in the whole South.  We do not think that whites should be slaves, either by law or necessity.

"Our slaves are black, of another and inferior race.  The status in which we have placed them is an elevation.  They are elevated from the condition in which God first created them, by being made our slaves.  None of that race on the whole face of the globe can be compared with the slaves of the South.  They are happy, content, unaspiring, and utterly incapable, from intellectual weakness, ever to give us any trouble by their aspirations.  Yours are white, of your own race;  you are brothers of one blood.  They are your equals in natural endowment of intellect, and they feel galled by their degradation.  Our slaves do not vote.  We give them no political power.  Yours do vote;  and being the majority, they are the depositaries of all your political power.  If they knew the tremendous secret, that the ballot-box is stronger than "an army with banners," and could combine, where would you be ?  Your society would be reconstructed, your government overthrown, your property divided, not as they mistakenly attempted to initiate such proceedings by meeting in parks, with arms in their hands, but by the quite process of the ballot-box.  You have been making war upon us to our very hearth-stones.  How would you like for us to send lecturers or agitators North to teach these people this, to aid in combining and to lead them ?

"Mr. Wilson and others.  Send them along.

"Mr. Hammond.  You say, send them along.  There is no need of that.  Your people are awaking.  They are coming here.  They are thundering at our doors for homesteads, one hundred and sixty acres of land for nothing, and southern Senators are supporting them.  Nay, they are assembling, as I have said, with arms in their hands, and demanding work at $1,000 a year for six hours a day.  Have you heard that the ghosts of Mendoza and Torquemada are stalking in the streets of your great cities;  that the inquisition is at hand ?  There is afloat a fearful rumor that there have been consultations for vigilance committees.  You know what that means.

"Transient and temporary causes have thus far been your preservation.  The great West has been open to your surplus population, and your hordes of semi-barbarian immigrants, who are crowding in year by year.  They make a great movement, and you call it progress.  Whither ?  It is progress;  but it is progress towards vigilance committees.  The South have sustained you in a great measure.  You are our factors.  You bring and carry for us.  One hundred and fifty million dollars of our money passes annually through your hands.  Much of it sticks;  all of it assists to keep your machinery together and in motion.  Suppose we were to discharge you;  suppose we were to take our business out of your hands:  we should consign you to anarchy and poverty.

"You complain of the rule of the South:  that has been another cause that has preserved you.  We have kept the Government conservative to the great purposes of government.  We have placed her, and kept her, upon the Constitution;  and that has been the cause of your peace and prosperity.  The Senator from New York [Wm. Seward] says that that is about to be at an end;  that you intend to take the Government from us;  that it will pass from our hands.  Perhaps what he says is true;  it may be;  but do not forget --it can never be forgotten; it is written on the brightest page of human history-- that we, the slaveholders of the South, took our country in her infancy;  and, after ruling her for sixty out of the seventy years of her existence, we shall surrender her to you without a stain upon her honor, boundless in prosperity, incalculable in her strength, the wonder and the admiration of the world.  Time will show what you will make of her;  but no time can ever diminish our glory or your responsibility."

The waning power of the southern planters, it became evident by the middle of the century, would be broken the day that the uneasy coalition of the South with the West was broken.  At the Presidential Election of 1860 the southern Democrats made the fatal error of quarrelling with their fellow Democrats outside the slave states over the question of slavery in the new territories recently acquired by the Mexican War and the extension of the country westwards.  Their split enabled the new party — the Republican Party — to win the election with a minority vote for their candidate, Abraham Lincoln.

The Republican Party was New York’s bid to detach the West from the South.  Before the nominating convention its most prominent member had been Seward, the representative of New York finance, “a believer,” as was said, “in the adage that it is money that makes the mare go.”  The main plank of the party was that of high tariffs but, in order to attract western votes, it had added the plank of “free homesteads” for those who would settle in the West.  “Vote yourself a farm,” was the election cry throughout the West.  As little as possible was said about the slavery question, for, as a Republican paper in Philadelphia pointed out, Frémont, the Republican candidate of four years before, “had tried running on the slavery issue and lost.”(194)

The Republican tactics succeeded, if not so far as to give Lincoln a majority, at least so far as to make him President.  He polled 1,857,000 votes against 2,804,000 for his opponents, but their divisions enabled him to carry a majority of the states.  What followed is familiar to all.  The south, led by South Carolina, seceded.  Lincoln refused to accept their secession, and there followed the war, ending finally in southern defeat.  The war was in no way a war against slavery.  Before its outbreak Lincoln, in order to quiet southern fears, had been willing to give them a constitutional amendment specifically guaranteeing to them the continuance of slavery.  Slavery was only abolished by accident and as a manoeuvre of war.  Nor in spite of the Gettysburg speech was it in any sense a war for “government of the people for the people and by the people.”  By an accident of the constitution Lincoln was the President of his country, but he had not the support of the majority of its citizens.  It was, as he throughout most frankly recognized, a war for the preservation of the Union — preservation of it for a variety of reasons, noble and ignoble, ranging from those of high Imperialism to those of the lowest usury, according to the breasts that entertained them — but nevertheless always for the preservation of the Union.

Legend, skillfully directed for somewhat obvious purposes, has sought to make of Lincoln an almost superhuman figure.  For there have been many to whom it was convenient that the origins of the Republican Party should be enveloped in a mist of almost Arthurian romance.  It is therefore hard to say anything moderate or balanced about him without appearing to be engaged in an exercise of the odious art of debunking.  But, while much can be said in praise of his engaging, colourful, and humorous personality, while he proved himself a great master of the diplomacy of war, the sane verdict on his political career cannot be other than this.  He was put forward by the moneyed interest as an “available” candidate who would attract the votes of the West but who was never for an instant intended to be the master of his own policy.  It was the stalest and most regular trick of American politics.  He was put forward exactly in the spirit in which the Whigs had put forward General Harrison and General Taylor.  Whether he would have been pliable to his master’s voice or whether he would have turned and fought the money-power, as Andrew Jackson, that other great leader from the western frontiers, fought it, can never be known, for he was killed before he had the chance to show.

One thing is very certain, and that is that, had he fought it, his place in the polite textbooks of history would have been to-day a different one from what it is.  He had not fought it during the war.  For, as in similar circumstances in England, the rich who supported the war refused to pay for it.  In his first year of office Lincoln borrowed $8.52 for every dollar that he could raise by taxation, and even by the end of the war the ratio between loan and tax was still 3 to 1.  The national debt, which at the time of his accession was $74,985,000 had risen by his death to $2,846,000,000.  Prices, owing to inflation, had multiplied by three, but the patriots who lent their money lent on condition that they were paid their interest in gold.  They lent the current money of the moment, but they were to be repaid in gold.  If then one was a banker in the closing years of the war, lending to the Government was a profitable business.  You said that you lent the Government $100 at 7 per cent.  In fact, you wrote the Government a cheque on yourself for $100, of which, according to the usual proportion, the Government only demanded $10 in cash.  On that $10 of Greenbacks, as the notes were called, you received interest of $7 in gold, which was at the rate of exchange about $21 of greenbacks.  Therefore Lincoln’s Government, instead of the mere 50 per cent per annum which the British Government paid to its bankers in the last War, was paying 210 per cent — a considerable rate.  Jay Cooke, the most prominent of the War financiers, retired from the War a very rich man, but, as Mr. Beard truly says, he “did not escape criticism.”(195)

Lincoln, after his murder, was succeeded by his Vice-President, Andrew Johnson, a man from Tennessee, the only President to have come from that state except Jackson.  He had unfortunate faults of personality which made him ill-suited for fighting the great battle which Jackson fought and which Lincoln perhaps would have fought.  President only by accident, he could bring to his task none of the prestige which Lincoln would have brought to it.  He was not fitted for success and he did not meet with it.  Yet both in the North and in the South he fought for the permanent appetites of mankind — for justice and for mercy and for honest government.  Whatever may be said against him, there is this to be said for him.  The men who hounded at him — Charles Sumner, Thaddeus Stevens with his mulatto mistress, Benjamin Butler, the blackmailer — were perhaps as vile a crew as ever dabbled anywhere in the trade of politics.  I know not where to find the likes of them unless perhaps among those who made the English Revolution of 1688.  It is a certain title to honour to have been hated by such men.  Of these men and of their policy during the years of reconstruction it is not unfair to say that they destroyed every good thing for which Jefferson Davis fought in the South and every good thing for which Lincoln fought in the North, and that under their rule “government of the people for the people and by the people” perished utterly from such portions of the earth as they were able to control.

The phrase is important, for the effect of the Civil War and the reconstruction was virtually to transfer the Government of the United States to the professional politicians of the Republican Party, whose nominees held the Presidency save only during Cleveland’s terms of office, from the Civil War until 1912.  And of that Republican Government, whether it was a good government or a bad government, at least this can be said in no spirit of wanton paradox, that it was probably the least democratic government that ever flourished in any great country in the whole history of European man.

The Republican party was the party of the money-power.  In Lincoln’s day it had made a bid for, and had captured, western support by its promises of free land to those who would settle there.  It had kept its promise, and it still, as a general rule, allowed some citizen of a western state to be the holder of the nominally supreme power.  But the masters of the credit machinery could always get back what they had given away by putting the owners of land into debts which it was impossible for them to pay and then foreclosing on their land.  The policy of the 1870s was one of drastic deflation, owing to the return from greenbacks to gold and owing to the stoppage of silver coinage, a deflation which caused a fall in the price of wheat from over $2 a bushel in 1865 to under $1 a bushel in the subsequent decade.  It was therefore obviously quite impossible for the farmer to get out of debt.  Thus under the Republican rule of the last quarter of the century the land of the West was passing steadily into the hands of absentee landlords.  In 1884 it was found that approximately 20,000,000 acres had passed into alien hands.  Lord Dunmore had 100,000 acres, Lord Dunraven 60,000, the Duke of Sutherland nearly 500,000, a syndicate headed by the Marquis of Tweedale 1,550,000.  Two English syndicates owned over 7,000,000 acres in Texas and a German syndicate more than 1,000,000 acres.  More than half the land in the Pacific and Mountain states was in the hands of absentee landlords. [Ibid., ii, 151.]  An official commission appointed by President Theodore Roosevelt made itself responsible for the strong judgment that “hardly a single great western estate held a title untainted by fraud.” [Ibid., ii, 199.]

There was as a rule little to choose between the official Democrats and the Republicans in the readiness of their service to usury.  Yet there were individuals who saw what was happening and raised their protest against it.  One at least, though his protest was a failure, yet made of himself a national figure — William Jennings Bryan, a man of some eccentricity, yet entirely undeserving of the absurd legend that he was little better than a half-wit, which the intelligentsia and the money-power combined to foist on him because of his hatred of usury and sincere belief in the Christian religion. (For the “parlour Bolsheviks” in the United States, with their mid-Victorian agnosticism have always been convenient instruments for playing usury’s game and have fallen, like great fish, into every trap that it has laid for them.)

The dominating factor in the economic and political situation was that the country still needed foreign loans and, so long as that factor remained, so long the ultimate seat of American Government was neither Washington nor New York but London.  If the capital goods were to continue to flow to America, she must be able to provide exports with which to offer the investor the prospect of dividends.  What could she offer ?  Even after the Civil War there was still cotton, and Republican politicians, who fought secession, who clamoured for the humiliation of the planter, who loudly proclaimed the negro’s right to a vote, were careful not to demand for him higher wages.  Yet, as the volume of investments grew, cotton was no longer enough.  What else could the Americans provide ?  There was corn in the West, and the English foreign investor in the 1870s, by destroying his own domestic agriculture, made it possible for payments to be made to him by importation of corn.  Yet, if the western farmers were to sell their corn on the London market, they must put it there at the same price as competing exporters from Canada or from the Crimea.  How could that be done ?  There were two ways.  They could, as the American manufacturers did, sell a portion of their crop at a high price to the American consumer and the rest at the world price to the English consumer.  But, had they done so, the price of bread in America would have risen.  Wages would have had to be raised, and with more paid out in wages there would have been less to be paid out in dividends.  Therefore, to prevent the farmers from doing this, the politicians, acting of course for their masters, while giving protection to every American industry, allowed no tariff on corn, and thus they could prevent any attempt of the American farmer to sell his corn at home at a high price by importing corn from Canada or elsewhere to undersell him.

The only remedy then was for the farmer to produce more cheaply than his competitor by making a freer use of the latest labour-saving devices.  This he did, and was thus able to maintain a standard of living, which, though lower than that of his fellow countryman in the town, was higher than that of the farmer in other countries.  But inevitably every invention was soon copied by the competitor and it was a hard race to keep always ahead.  Once that for one instant he lost his lead, he had no alternative but to accept a yet lower standard of living and to go into debt.  Once that he was in debt, his creditors could dictate his policy, could compel him to concentrate on the production of crops for the export market, just as they had compelled the southern planters to concentrate on cotton.

Yet the whole century was, though few understood it, a transitional century.  For the first three-quarters of it American imports every year exceeded her exports.  That is to say, every year she received more in new investments than she paid out in interest on the old investments.  Then 1873 was the turning year.  Thenceforward exports every year exceeded imports.  She was paying more in interest than she was receiving in new investments.  Yet, if she was to pay her interest, she still needed new investments.  By the end of the century a third stage was reached.  By then so large was the surplus of exports over imports that she could, had she wished, have paid her interest without accepting any further foreign capital.

Until recently the whole question of America’s trade balances was rapt in much obscurity owing to paucity of data.  There is still much to be made clear but the whole situation has been enormously illuminated by the statistics recently prepared for and submitted to President Roosevelt by Mr. George N. Peek, his special adviser on foreign trade.  According to Mr. Peek’s figures, between 1896 and 1914 the United States exported $31,033 million and imported $21,180 million.  She had invisible exports of $86 million shipping charges and $652 million other miscellaneous items, making a total of goods and services exported of $31,771 million.  Her invisible imports were $727 million paid to foreign shippers, $3,230 million, spent by American tourists abroad, $2,850 million sent abroad in charity or by way of immigrant’s remittances, and $570 million miscellaneous items making a total of goods and services imported of $29,557 million.  She had therefore a “favourable” balance of a little over $2,000 million.  On the other hand she had to remit as interest on foreign investments in the United States $3,800 million, while she only received as interest on American investments abroad $760 million.  She had to pay out therefore on balance $3,000 million.  She only had a “favourable” balance of $2,000 million to pay it from.  Therefore she had to borrow another $1,000 million.  But, formidable as such a sum may sound, yet, spread over a period of eighteen years and a population of some 100,000,000, it only means about 50 cents per person per annum.  There was little doubt from the turn of the century that every person in America could, if need arose, have been induced either to consume 50 cents a year less or to produce 50 cents a year more.  Foreign capital was no longer a necessity to the United States.

She did not however during these years merely borrow $1,000 million from abroad.  She borrowed $2,000 million and lent $1,000 million.  That is to say, rather than get the country out of debt, her financiers preferred to start foreign lending themselves.  Thus in 1899 J.P. Morgan floated the first important American foreign loan on behalf of the Mexican Government.  In 1901 he lent $50 million to the British Government to fight the Boer War.  Further loans followed to Japan and China.  But it was mainly into the countries of Spanish America that American capital found its way.  Some of it went there for those countries’ economic development;  other loans were political.  For these latter there were almost a regular formula.  It would be suggested to General X that he should raise a revolution against President A.  Money would be lent to him to make the revolution and to President A to suppress it.  For a time the loans would be so controlled as to keep the rival fighting forces roughly equal.  Then, when it appeared that no more could be squeezed out of the country, one of the combatants would be offered far more liberal loans than his rival on the condition that, when successful, he made himself responsible for his rival’s debt as well as his own.  The Church would be either pillaged or reinstated according to whether it had been found the more convenient to make the liberals or the conservatives win.  By a formula of which this is not an unfair description a solution was found for the problem of Santo Domingo in 1905, for that of Cuba in 1906, for that of Nicaragua in 1907, for that of Honduras in 1911.  It was used by Woodrow Wilson to establish in power the anti-clerical regime of Madero in Mexico and to depose President Sam from the Presidency of Haiti. [Ibid., ii, 501 et seq.]  Whether it was a better or a worse policy than the policy of frank annexation of the European powers is debatable.

Yet the important truth is that, even in spite of the American export of capital, with the twentieth century she no longer had any absolute need to import capital.  This made a most remarkable and almost immediate difference to American political life.  London ceased to be the capital of the United States.  In the nineteenth century every serious political candidate for high office (with the exception of Bryan who was always defeated) had always been at pains to denounce “radical policies” and to deny — what every single person in America knew perfectly well to be true — the overriding influence of the money-power over politics.  In 1893 Andrew Carnegie, who was allowed to hire private assassins from Pinkerton’s to shoot down his workmen, had the impudence to write in his Democracy Triumphant, [Ibid., ii, 209] “There is not one shred of privilege to be met with anywhere in all the laws.  One man’s right is every man’s right.  The flag is the guarantor and symbol of equality.  There is no party in the state that suggests or which would not oppose any fundamental change in the general laws.  These are held to be perfect.”

In 1911 a member of the plutocracy, Frederick Townsend Martin, wrote a most remarkable book called The Passing of the Idle Rich, in which he frankly explained the ideals of his class and the methods by which for the past half-century it had ruled America through the politicians. [Ibid., ii, 303.]  “We,” he wrote of the plutocracy, “care absolutely nothing about statehood bills, pension agitation, waterway appropriations, 'pork barrels,’ state rights, or any other political question, save inasmuch as it threatens or fortifies existing conditions.  Touch the question of the tariff, touch the issue of the income tax, touch the problem of railroad regulation, or touch the most vital of all business matters, the question of general federal regulation of industrial corporations, and the people amongst whom I live my life become immediately rabid partisans.... It matters not one iota what political party is in power or what President holds the reins of office.  We are not politicians or public thinkers;  we are the rich;  we own America;  we got it, God knows how, but we intend to keep it if we can by throwing all the tremendous weight of our support, our influence, our money, our political connections, our purchased senators, our hungry congressmen, our public-speaking demagogues into the scale against any political platform, any presidential campaign that threatens the integrity of our estate ... The class I represent cares nothing for politics.  In a single season a plutocratic leader hurled his influence and his money into the scale to elect a Republican governor on the Pacific coast and a Democratic governor on the Atlantic coast.”

In the next year there was a remarkable proof of the revolution in American life which her freedom from the need for English capital had brought.  There was a Presidential election.  The three important candidates were Wilson for the Democrats, Roosevelt for the Progressives, and Taft for the Republicans.  Martin’s thesis, the thesis for which twelve years before Bryan had been denounced as an anarchist and a lunatic, was now only not an election issue because it had passed beyond being an election issue.  It was accepted by all the candidates.  “Suppose you go to Washington,” wrote Wilson [Ibid., ii, 592] in the New Freedom, “and try to get at your government.  You will always find that, while you are politely listened to, the men really consulted are the men who have the biggest stake — the big bankers, the big manufacturers, the big masters of commerce, the heads of railroad corporations and of steamship corporations.  The Government of the United States is at present a foster-child of the special interests.”  “Behind the ostensible Government,” ran Roosevelt’s policy [Ibid.] “sits enthroned an invisible government owning no allegiance and acknowledging no responsibility to the people.  To destroy this invisible government, to dissolve the unholy alliance between corrupt business and corrupt politics, is the first task of the statesmanship of the day.”  Taft was by far the most conservative of the three, but he, fresh from the experience of the Presidency, admitted that things “seem to have crystallized into a rigid control of all by the great business combinations.... That the occasion for the general alarm was justified, no one who had studied the situation can deny.” [Ibid.]  At about the same time Elihu Root, the veteran and most distinguished of American lawyers and statesmen, in sight of the end of his long career, recorded that “the ruler of the State (of New York) during the greater part of the forty years of my acquaintance with the State Government has not been any man authorized by the constitution or by law.” [Ibid., ii, 592-3.]  With that very un-English directness of speech which the Americans have, he gave the name of that ruler; it was Mr. Platt, a usurer.

That was the situation when there burst upon America and the world the War of 1914.  She was still on balance a debtor country, and her whole past history had been profoundly modified by that indebtedness.  During the War the need of the Allies caused them to sell their debts to American investors in exchange for munitions of war.  They needed more munitions still and, unable to give goods in their exchange, in their turn borrowed from the Americans.  The Americans emerged from the War a creditor nation and by consequence the inheritors of a set of problems wholly different from those which had troubled their ancestors.  As one looks back, it is not difficult to see how profoundly their policy had been dominated for a hundred years by this burden of the foreign debt.  Yet the United States, a country of 100 million people, had in 1914 a foreign debt of some $1,000 million.  The foreign money-lender never had over her the hold which he has over the British Dominions to-day — Australia with a population of 6 million and a foreign debt equal to that of America in 1914, Canada with a population of 10 million and a debt to London equal to the total American foreign debt of 1914 with a debt in addition of some 100 million more to New York.(196)


proceed !


179. Rise of American Civilization, Beard, i, 341, et seq.

180. Letter to President Washington, 9th September, 1792.

181. Op. cit., Beard, i, 674.

182. Letter to James Madison, Paris, December 20, 1787.

183. In The American Heresy.

184. Op. cit., Beard, i, 655.

185. Ibid., i, 554, et seq.

186. History of the United States, Cecil Chesterton, p. 103.

187. Letter from Senator Webster to Nicholas Biddle, 1831 December 18. "The Correspondence of Nicholas Biddle dealing with national affairs 1807-1844," by Reginald C. McGrane (1919).

188. Ibid., i, 568.

189. Ibid., i, 576.

190. Senator Calhoun, in reply to Daniel Webster on the sub-treasury bill;  in the Senate, March 22, 1838.

191. Ibid., ii, 64.

192. Ibid., i, 693.

193. Senate, March 4, 1858.

194. National Intelligencer.

195. Op. cit., Beard, ii, 71.

196. A Main Cause of Unemployment, Loftus, p. 34.