Good Riddance, Andrew Jackson! – The Expunging of this Catastrophic President from All US Currency Is Long Overdue
Good Riddance, Andrew Jackson! – The Expunging of this Catastrophic President from All US Currency Is Long Overdue
UFAAUnited Front Against Austerity | TWSPTax Wall Street Party
Morning Briefing | Friday, April 22, 2016
Old Hickory’s Destruction of the Second Bank of the United States Sabotaged US Economic Growth and Opened the Door to the Financial Panics of 1837 and 1857, Putting the United States on a Path to Sectionalism and Civil War; Jackson’s Great Opponent Was Henry Clay of Kentucky, Supporter of the American System of Political Economy
For this cartoon in greater detail, please click on the image
Jackson was a monetarist and precious metals fetishist like many libertarians of the current age. This 1837 cartoon by E.W. Clay shows contemporary awareness that Jackson’s Specie Circular, which specified that all payments to the federal government for public lands had to be in gold or silver, had popped the land bubble but had also caused the worst depression in the history of the young country. Like Jackson, libertarians generally advocate a deflationary crash as the best policy under any circumstances, because they think it will make their money worth more.
The Tax Wall Street Party welcomes the decisions by the US Treasury to remove Andrew Jackson from the $20 bill, to keep Alexander Hamilton on the $10 bill, and to feature Harriet Tubman on the $20 note. We hope to provide more historical context for these figures now and in the weeks ahead, and today we will focus on the highly destructive economic policies of Jackson.
Not surprisingly Donald Trump has protested the removal of Jackson. “Andrew Jackson had a great history. I think it’s very rough when you take someone off the bill,” said Trump. Jackson is an exponent of the same demagogic cultural populism which Trump practices today.
Another group protesting are the Austrian School libertarians. Their hero is Andrew Jackson, whose hare-brained meddling caused the devastating Panic of 1837 and shut down US economic development, putting the country firmly on course for the Civil War two decades later.
Jackson started as a protégé of arch-traitor Aaron Burr, and took part in Burr’s abortive Western Conspiracy to set up an anti-American kingdom in the Mississippi basin. As president, Jackson was a tool of the British and Swiss banks, whether he knew it or not. His right-hand man Martin Van Buren of New York knew it.
To understand the crimes of Jackson, it is necessary to see his actions in the context of the economic and financial policy fights of the 1820s and 1830s. The following are excerpts from Webster G. Tarpley, Surviving the Cataclysm (Joshua Tree CA: Progressive Press, 1999-2009).
Before Jackson: John Marshall and Henry Clay Launch a Time of National Progress Based on the American System
The War of 1812 ushered in a period of resurgent nationalism, marked also by the first landmark decisions of Chief Justice John Marshall of the Supreme Court. The most prominent of the War Hawks was Henry Clay, from the western state of Kentucky, the best available spokesman and political operative of a group of American System supporters which included Mathew Carey, the Philadelphia economist and publicist. Clay was also acquainted with Friedrich List, whom he met in Washington in 1825 when the latter was visiting there with the Marquis Gilbert de Lafayette. Clay’s program; as laid out for example in his unsuccessful Presidential campaign of 1824, he called the “American System,” a phrase borrowed from Alexander Hamilton. The American System was Clay’s programmatic platform in the election contest. The adversary of the American System he referred to as “the foreign policy.”
Andrew Jackson’s Great Adversary: Henry Clay’s American System
Clay’s program was designed to become the platform of a new political party that would be national in scope and nationalist in character. This party turned out to be the Whig party, which achieved only limited success in its mission of nation-building. Clay was determined to fight sectionalism by re-establishing the pre-eminence of the national economic interest, also in order to build the country’s military strength. This meant the institution of a strongly protective tariff, of the type that Hamilton had recommended but been unable to obtain. “There is a remedy,” said Clay, “and that remedy consists in modifying our foreign policy and in adopting a genuine American system. We must naturalize the arts in our country, and we must naturalize them by the only means which the wisdom of nations has yet discovered to be effectual – by adequate protection against the overwhelming influence of foreigners.”
Clay also demanded a vigorous policy of new road and canal building to link up regional markets and reduce the costs of transportation of goods. As he knew as a congressman from Kentucky, the frontier had now advanced to the trans-Appalachian west, beyond the mountains, and transportation was an urgent issue, although it had been neglected by Jefferson and Madison. Clay favored the creation of an inter-American development block, joining with the newly independent republics of former Spanish and Portuguese America. In this, he strongly supported the Monroe Doctrine, and agitated for the immediate recognition of the new states as they acquired their independence. As the Secretary of State under John Quincy Adams, Clay intended to use a conference of Latin American states held in Panama in 1826 as a vehicle for these plans, but this was not successful, and he was later disappointed by Bolivar’s lust for power at any price. Clay exhorted his fellow citizens to support the revolt against colonialism in Ibero-America: “Let us break these commercial and political fetters; let us no longer watch the nod of any European politician; let us become the real and true Americans, and place ourselves at the head of the American system.” Clay at one time proposed the building of a Pan-American highway, a road that would link all the Americas in defiance of British sea power.
Clay, as Speaker of the House of Representatives, was later instrumental in obtaining the approval of the bill re-creating the Bank of the United States. Here he was aided by John C. Calhoun of South Carolina, a War Hawk who later degenerated and turned pro-states’ rights over the slavery issue. The second BUS was set up in 1816, with a twenty year charter. This time the capital of the bank was made 35 million dollars, which made it the largest corporation in the world, with one fifth of the stock being bought by the government. The Bank survived an initial round of British financial warfare and went on to become even more successful than the first BUS.
The BUS did a number of things which may seem elementary today, but which were absolutely indispensable and often uncertain. The lack of a relatively stable form of cash money in adequate supply and acceptable all over the country was a necessity, but often very little cash money was available. The only alternative to the BUS were the state banks, which were often totally unstable and corrupt. Import-export financing for trade with Europe was also provided by the BUS. Of tremendous importance was the ability of the BUS to stand as a shield or buffer between the US banks on the one hand, and the Bank of England and other European institutions on the other. If the British had the ability to suck all the liquid cash out of Boston, New York, and Philadelphia, the US economy could be collapsed in a few weeks, resulting in a colossal depression. This is what happened in 1837. But as long as the BUS existed, this form of British economic-strategic warfare had little chance of being effective.
The Constitutionality of the Second BUS was affirmed by Chief Justice Marshall in the 1819 opinion in the case of McCulloch vs. Maryland. Clay was also a partisan of a standing army and a powerful navy. His main points were a national bank, a protective tariff and internal improvements, meaning infrastructure. As he told the House after returning from a trip abroad, the lessons of his trip “were lessons that satisfied me that national independence was only to be maintained by national resistance against foreign encroachments, by cherishing the interests of the people, and giving the whole physical power of the country an interest in the preservation of the nation.” He urged the House to “commence the great work, too long delayed, of internal improvement.” He desired to see a “chain of turnpike roads and canals from Passamoquoddy to New Orleans; and other similar roads intersecting the mountains, to facilitate intercourse between all parts of the country, and to bind and connect us together.” He spoke out for the protection of domestic manufacturing, “not so much for the sake of the manufacturers themselves, as for the general interest.” “We should thus have our wants supplied when foreign resources are cut off; and we should also lay the basis of a system of taxation, to be resorted to when the revenue from imports is stopped by war,” argued Clay.
The Whig program was summed up by Pennsylvania Senator Andrew Stewart: “The true policy of this country… was to make New England instead of Old England, the great theatre of our manufactures. They had the capital and their population had become sufficiently dense to justify its employment in this way. We will thus create in our own country an ample market for the consumption of the cotton and the sugar of the south, and the wool and flour of the middle and western states, which no longer found a market abroad. It will make the great sections of our confederacy mutually dependent on each other. It will bind and unite them together by the strong ties of interest and intercourse, combining all the elements of national prosperity – agriculture, manufactures, commerce. These, with a good system of internal communications, would render our prosperity perfect, and our Union indissoluble.” This constituted what was properly and emphatically called the ‘American system of policy.’“
The Protective Tariff
Support for these views was strong enough to permit the passage, in the aftermath of the war of 1812, of the first truly protective tariff, the tariff of 1816. This inaugurated a tendency for further protectionism that lasted until 1833, in the midst of the Jackson years. 1816 thus emerges as a watershed year, with the Second BUS and a protective tariff levy going through in the same year. The twenty years after 1816 were accordingly ones of unprecedented growth. This was the case also because of the Presidency of John Quincy Adams, a strong pro-development dirigist who defeated Clay for the Presidency in the contested election of 1824. Clay, as we have seen, became Quincy Adams’ Secretary of State. In Adams’ inaugural address, he stunned the crabbed Jeffersonian states’ rights exegetes of the Constitution by announcing that “the great object of the institution of civil government is the improvement of those who are parties to the social compact”, and enumerated the impressive powers that the Constitution afforded to do just that, going on to say that “if these powers may be effectually brought into action by laws promoting the improvement of agriculture, commerce, and manufactures, the cultivation of the mechanic and the elegant arts, the advancement of literature, and the progress of the sciences, ornamental and profound, than to refrain from exercising them for the benefit of the people themselves would be to hide in the earth the talent committed to our charge – would be treachery to the most sacred of trusts.” Adams recommended a national university, astronomical observatories, and a whole array of scientific enterprises. He ridiculed the narrow-minded sectionalism of most opportunist politicians, asking if they were “palsied by the will of their constituents.” Adams here was out far in advance of Clay, who did not have the same personal authority of independent intellectual accomplishments.
Adams pressed hard for internal improvements, instructing the army engineers to survey prospective transportation routes. Under Adam’s leadership the Congress regularly voted substantial financial aid to interstate roads and canals. The prime improvement carried out by the federal government itself was the Cumberland Road, or National Road, from Cumberland, Maryland to Jefferson City, Missouri, although only Vandalia, Illinois had been reached when the project collapsed in the panic of 1837. This turned out to be the only wholly-owned federal project of this type in the pre-Jackson period. Adams’ term in office was the height of the canal-building epoch, highlighted by the 1825 Erie Canal from the Hudson River in New York State to Lake Erie, which radically cut the time and cost for shipments to the west, since the Great Lakes were linked up with the Atlantic. The Erie was later supplemented by the Pennsylvania Canal, and other canals.
Another Target for Jackson: Friedrich List and His American Political Economy
It was during the term of Adams that the newly naturalized American Friedrich List published his 1827 Outlines of American Political Economy in Philadelphia, addressing the book to Charles Ingersoll, vice president of the Pennsylvania Society. List was against those who wished to limit the role of the central government: “… it is questioned whether government has the right to restrict individual industry in order to bring to harmony the three component parts of national industry and, secondly, it is questioned whether government does well or has it in its power to produce this harmony by laws and restrictions. Government, sir, not only has the right, but it is its duty, to promote every thing which may increase the wealth and power of the nation, if this object cannot be effected by individuals. So it is its duty to guard commerce by a navy, because merchants cannot protect themselves; so it is its duty to protect the carrying trade by navigation laws, because carrying trade supports naval power, as naval power protects carrying trade; so the shipping interest and commerce must be supported by breakwaters – agriculture and every other industry by turnpikes, bridges, canals and railroads – inventions by patent laws – so manufactures must be raised by protective duties, if foreign capital and skill prevent individuals from undertaking them.” Some pages on, List draws up his celebrated contrast of the British system with the American system:
American national economy, according to the different conditions of the nations, is quite different from English national economy. English national economy has for its object to manufacture for the whole world, to monopolize all the manufacturing power, even at the expense of the lives of the citizens, to keep the world and especially her colonies in a state of infancy and vassalage by political management as well as by the superiority of her capital, her skill, and her navy. American economy has for its object to bring into harmony the three branches of industry, without which no national industry can attain perfection. It has for its object to supply its own wants, by its own materials and its own industry – to people an unsettled country – to attract foreign populations, foreign capital, and skill – to increase its power and its means of defense, in order to secure the independence and future growth of the nation. It has for its object lastly to be free and independent and powerful, and to let everyone else enjoy freedom, power, and wealth as he pleases. English national economy is predominant; American national economy aspires only to become independent. As there is no similarity in these two systems, there is no similarity in the consequences of them.
List polemicized fiercely against Adam Smith, whose free trade he branded a “Cosmopolitical” doctrine, alien to national economy. List was also the author of the National System of Political Economy (1840). List was a founder of the German or historical school of economics, which later had to endure the attacks of the Austrian school of von Mises and von Hayek.
Unfortunately, John Quincy Adams and Henry Clay went down to crushing defeat in 1828 at the hands of Andrew Jackson, the general whom Adams had kept out of the White House four years earlier. Jackson was a demagogic cultural populist, duping the masses by playing on their resentment of so-called elitists like the highly educated and experienced John Quincy Adams. Aided by the almost universal manhood suffrage doctrines coming out of the western states, Jackson rode into the White House on a rising tide of frontiersmen, poor farmers, and a class of New York city radical Jacobins called the loco-focos. Jackson won thanks to King Numbers, or, in the words Marshall’s friend Supreme Court Justice Joseph Story, “King Mob.” Jackson postured at being a great friend of the common man against the aristocratic J. Q. Adams, but Jackson’s banking policy worked great hardship on common men and their families.
Jackson was allied with Martin Van Buren, the New York party boss, who was a tool of the world of the Astors and the New York financial community. Another member of the infamous Jackson kitchen cabinet was Amos Kendall, who had made a fortune in the telegraph business, gave the following expression to the synthetic, quasi-libertarian ideology which the Jackson group professed: “The world is governed too much. Our countrymen are beginning to demand” that the government limit itself to “protecting their persons and property, leaving them to direct their labor and capital as they please, within the moral law; getting rich or remaining poor as may result from their own management or fortune.” This was laissez-faire in the spirit of the super-rich camouflaged as a backwoods attack on the eastern plutocrats. Most of the kitchen cabinet were in fact wealthy businessmen of the monetarist-rentier type, who wanted more freedom for speculation and other predatory activities, and in this they facilitated the destabilization of the United States by the British.
Jackson and Van Buren Create the Panic of 1837
In the eight years of Jackson and the four of Van Buren that followed, the entire Hamiltonian apparatus was destroyed by a Tory counter-revolution: this included the BUS, the protective tariff, and the internal improvements policy, all of which were dismantled, with consequences which lasted all the way until the outbreak of the Civil War, a conflict which Jackson’s policies alone made irrepressible.
All this was done in the name of a demagogic populist ideology. “Relief, sir! Come not to me Sir! Go to the monster. It is folly to talk to Andrew Jackson. The government will not bow to the monster. Andrew Jackson yet lives to put his foot upon the head of the monster and crush him to the dust. Andrew Jackson would never recharter that monster of corruption. Sooner than live in a country in which such a power prevailed, he would seek asylum in the wilds of Arabia.” This was Jackson talking to a delegation of businessmen come to the White House to protest his measures against what the Jacksonians branded that “hydra of corruption,” the Second BUS. Jackson vetoed the new charter of the bank when it was renewed by Congress in 1832, and then in the spring of 1834, withdrew all the US government deposits from the bank, even though its federal charter still had two years to go. Jackson personally believed, pretended to believe, that banks were evil and should be outlawed. He proclaimed this view to the president of the BUS, Nicholas Biddle of Philadelphia, to whom he said: “I do not dislike your bank more than all banks, but ever since I read the history of the south Sea Bubble, I have been afraid of all banks.” In his veto message announcing that re-chartering the BUS was out of the question, Jackson argued that the bank was un-American because of the large number of foreign stockholders, and “undemocratic” because it placed too much “power in the hands of a few men irresponsible to the people.” It was also, according to his construction, unconstitutional.
Jackson’s western base of land speculators and wildcat bankers had good reason to resent the BUS, which was always calling on the state-chartered banks to provide gold and silver coin, or specie, to make good their bank notes received by the federal government for taxes. This tended to restrain land speculation bubbles and real estate swindles. The termination of the BUS was the prelude to the most colossal financial crisis of the US economy in the first half of the nineteenth century, a crisis of the worldwide pound sterling system to be sure, but one which the British, in the absence of a US national bank, were able to turn against the US, with tragic and long-lasting consequences.
The US funds taken out of the BUS were placed in state banks, such as the one owned by Roger Taney, Jackson’s Secretary of the Treasury. This is the same Tawney who later became Chief Justice of the US Supreme Court and argued that black Americans had no rights in the 1857 Dred Scott decision. These were called the “pet” banks. With the decline of BUS, the pet banks and state banks expanded their lending massively and also rapidly proliferated in their numbers. This led to a land boom, especially in the sale of government lands. The phrase “doing a land-office business” became a permanent part of the language. At the same time, the state and pet banks were using their new freedom to issue paper money far in excess of a normal reserve ratio, in relation to the gold and silver coin they kept. At the height of the bubble, two events converged to produce a panic of tremendous proportions. The Bank of England, seizing as a pretext the fact that the US balance of trade was collapsing, raised its discount rate, which cut off credit by British traders to American merchants. Those American merchants now needed gold and silver coin to buy from Britain, and had to withdraw all their bank deposits to get them.
At about this time, Jackson, ever the foe of all banks, became alarmed by the western land bubble, and decided that the federal government must no longer accept paper money from state banks for the purchase of western lands, but only silver and gold coin, or specie. This was the Specie Circular of 1836. Since the state banks in the west had little or no precious metal coins, the land boom was brought to a catastrophic halt, collapsing into panic. Since at the same time another law was passed which distributed the federal budget surplus (which had been deposited in state banks) to the state governments, there was no hard money left for the state banks, and the entire US banking system came crashing down. By May 1837, every bank in the United States had suspended specie payment. Paper money was worthless. The states of Mississippi, Louisiana, Maryland, Pennsylvania, Indiana, and Michigan defaulted on their public debts, undermining US foreign credit for a very long time. There were calls for the federal government to assume the state debts, as under Hamilton, but these were ignored by Jackson. The states dropped out of the internal improvements business for the relevant historical future. Economic growth stagnated compared to what would have been possible under the American System.
On the tariff front, the protectionist forces were successfully judoed into an unlikely trap. A tariff bill was proposed that added counter-productive duties on the import of raw materials, not manufactured products. This bill might have been rejected, except for the change in vote of Senator Daniel Webster of Massachusetts. The new law quickly became known as the Tariff of Abominations of 1828. South Carolina, the center of British trade and influence in the south, reacted some time later by declaring this law null and void, not binding upon the state and her citizens, with the Nullification Ordinance of 1832. The state threatened to secede from the Union if Washington attempted to coerce South Carolina to observe the tariff. Henry Clay immediately proposed the Compromise Tariff of 1833, which avoided the outbreak of armed hostilities in Charleston Harbor, but this was a step away from protection and, worse, the beginning of a long decline in the protective tariff, which reached its low point in the tariff of 1857, which restored free trade on the eve of the Civil War. From 1833 to 1861, the tendency was to abandon protectionism.
With the BUS and the protective tariff fatally weakened and the nation’s finances ruined, it only remained for Jackson to end the policy of federal support for internal improvements. This he did in 1830 with the veto of the Maysville Road bill. This set a strong precedent against federal financing of roads, canals, and railroads. The destruction of the American System under Jackson was thus complete. The end of the Second BUS ushered in an entire generation of banking anarchy and monetary disorder, with rapid depreciation and with total confusion about what money itself was. Swarms of state banks emitted a debased paper currency, and were at times joined in this by cities, stores, and railroad companies. Hard money was gold and silver coin, and this specie remained very scarce. President Van Buren added the coup de grace to this situation with his Independent Treasury Act, which established the principle that the US government should have no dealings with banks of any type, but rather maintain vaults or sub-treasuries under Treasury officials, who would take in and pay out only gold and silver coin. This meant that the federal government could not regulate or otherwise control the banks, so chaos and periodic panics were made a constant feature of economic life. The divorce from the banks was applauded by the loco-focos, who also hated banks. The government collected no interest on these funds.
A bill to create a Third Bank of the United States was passed by the Congress that had been elected along with William Henry Harrison in 1840, but by the time it reached the White House Harrison was dead and the atrocious John Tyler was in power, and Tyler twice vetoed the Third BUS. His entire Whig cabinet resigned in protest, except for Daniel Webster, who stayed on in order to avoid serious trouble with the British over the Maine border, after which he also resigned.
All of this set the stage for the fatal slide toward the Civil War. The lack of a national bank and the uncertainty about money meant that while there might be some credit found for railroad building, there would be no credit for the industrial development of the slave-holding south, and no protective tariff to make such development feasible. The best way to procure the end of slavery without civil war was to create in the south an industrial counter-weight against the slave power. The key to this was the mineral wealth of coal and iron which later, in the twentieth century, made Birmingham, Alabama a great center of steel production. As Henry Carey wrote in 1861: “If Henry Clay’s tariff views had been carried out sooner there would have been no secession because the southern mineral region would long since have obtained control of the planting area.” In 1853, well before the war, Carey had written: “Let the people of Maryland and Virginia, Carolina, Kentucky and Tennessee be enabled to bring into activity their vast treasures of coal and iron ore, and to render useful their immense water-powers…” At another point, Carey referred to the hill region of the south as “one of the richest, if not absolutely the richest in the world” which with protection “would long since have been filled with furnaces and factories, and the laborers in which would have been free men, women, and children, white and black, and the several parts of the Union would have been linked together by hooks of steel that would have set at defiance every effort of the ‘wealthy capitalists’ of England for bringing about a separation.” Cassius Clay, later Lincoln’s ambassador to Russia, had the same approach. But Henry Clay’s last-ditch attempt to create the Third BUS and return to protectionism under William Henry Harrison failed when that president died in 1841 after a month in office, under most suspicious circumstances, and the Civil War came.
It is worth stressing that while slavery was a grave problem, it could have been solved without civil war in a setting of economic development. But free trade made rebellion inevitable. As Carey wrote after the Civil War: “Slavery did not make the rebellion. British free trade gave us sectionalism, and promoted the growth of slavery, and thus led to rebellion. Had Mr. Clay been elected in 1844, all the horrors of the past few years would have been avoided.” With industrialization, the southern slaveocrat power would have been forced to contend with a southern industrial-based interest. In addition, the price of food, land, and labor would have increased, and this was what the slavery men were determined to prevent.
The logic of slavery, with backing from Wall Street and the city of London, was to prevent not only the industrialization of the south but of the north as well. The goal was to stop labor from entering manufacturing, and rather to force people back to the land, with a minimum of capital, to grow food at the cheapest possible rates for the consumption of the slaves. All of this meant free trade, and no internal improvements. In addition, the peculiarity of growing cotton with gangs of slaves as a staple export crop, year in, year out, was that cotton monoculture rapidly exhausted the land, and this depreciation caused by the primitive quality of slave agriculture itself meant that cotton growing on a fixed amount of land could not be profitable in the long run, quite apart from the violent ups and downs of the world cotton market. Thus, the supporters of King Cotton had to promote the cancerous expansion of slavery not only into the territories, but also into the Caribbean and Central America. As the Trenton Gazette wrote in 1861, at the outbreak of the rebellion: “Their aim is to found a Southern Empire, which shall be composed on the southern states, Mexico, Central America, and Cuba, of which the arch-conspirators are to be the rulers.”
Thus, when a cotton boom developed in the world market during the late forties and fifties, the British, the New York financiers who were the financial middle men for the cotton crop, and the slave-holder planters themselves took advantage of the impotence of the federal government, itself the product of treason and corruption, to launch the foolhardy adventure of secession.
In the Panic of 1837, the stage had been set for depression by outgoing President Andrew Jackson’s and Secretary of the Treasury Roger Taney’s abolition of the Second Bank of the United States, by their cultivation of the state “pet” banks, by their imbecilic Specie Circular of 1836, which demanded gold payment to the federal government for the purchase of public lands, and by their improvident distribution of the Treasury surplus to the states. London’s ultimate weapon turned out to be the Bank of England bank rate. With all the American defenses sabotaged, the Bank of England sharply raised its discount rates, and gold specie and hot money liquidity fled back across the Atlantic, while British merchants and trading houses cut off their lines of credit to their American customers. In the resulting chaos, not only did private banks and businesses go bankrupt, but also the states of Mississippi, Louisiana, Maryland, Pennsylvania, Indiana, and Michigan repudiated their debts, permanently impairing US credit in the world. Internal improvements came to a halt, and the drift towards secession and civil war became more pronounced.
This happened again in the Panic of 1857, which ushered in a multi-year depression which soon turned into civil war. If the Third Bank of the United States had been created in the 1840s, the unspeakable horrors of 1861-1865 could have been avoided, while ending slavery peacefully.
It is high time to take Andrew Jackson off all US currency.