GREAT QUESTIONS AND GREAT ANSWERS.
“Who shall make answer on such themes as these?”
It is now appropriate to consider somewhat _in extenso_ the claims of
James A. Garfield to be regarded as a statesman. It must needs be in the
life of every public man, more particularly in the life of a
Congressman, and more particularly still in the life of him who has
risen to the rank of leader of the House, that he speak much on
questions of passing interest. Many of the topics which engage his
attention flit away with the occasion which gave them birth. They are
the issues of the day, creatures of prejudice and partisanship. Hence in
the history of the life of a public man, many paragraphs will be found
which merely recount the battles fought and victories won in the
ordinary contests of the arena.
In the most marked contrast with this, however, is another class of
questions which rise to the level of perpetual interest, affecting not
only the destinies of the hour, but pregnant with the fate of the
future. Not questions of the day are these, passing like a shadow over
the landscape of current events; but shining rather like those orbs from
whose disks the effulgence is shed which makes shadows possible. Albeit,
there are themes of statesmanship vitally affecting the life of the
nation; and only he, who in the heated arena of public life shows
himself able to grapple with such problems, is worthy of the name of
statesman.
Was James A. Garfield a statesman? In considering this question, and
finding therefor a fitting answer, it is necessary clearly to understand
what _are_ the leading themes of American statesmanship. Perhaps a fair
analysis of this great question will show that those topics of public
discussion which rise to the dignity of questions of statesmanship will
present about four leading heads:
I. Questions affecting THE NATIONALITY OF THE UNITED STATES.
II. Questions affecting THE FINANCIAL AND MONETARY SYSTEMS OF THE UNITED
STATES.
III. Questions affecting THE REVENUE AND EXPENDITURES OF THE UNITED
STATES.
IV. Questions concerning THE GENERAL CHARACTER AND TENDENCY OF AMERICAN
INSTITUTIONS.
If it be shown that James A. Garfield proved himself able to grasp and
discuss any or all of the great questions falling under this
comprehensive classification, in such a manner as to throw new light
upon them, to fix the status of public opinion regarding them, and to
that extent to build more securely than hitherto the substructure of
American greatness, then indeed is he worthy of the name of statesman.
Let us then, without fear or partiality, apply the crucial test to
Garfield’s public life, and see whether indeed he is the peer and fit
companion for the great names of our history—for Hamilton, and Adams,
and Webster, and Sumner, and Chase.
Before beginning this discussion, however, it will be necessary to
remind the reader, that in considering the claims of Garfield to the
rank of statesman under the outline presented above, the chronological
order of the narrative will be broken up, and such a grouping made of
his public speeches and papers as will best illustrate his views and
establish his rank among the great men of our country.
First, then, as to questions affecting THE NATIONALITY OF THE UNITED
STATES. What is the record of him whose life is here recounted
concerning those great and vital themes upon which rests our perpetuity
as a nation? Three utterances, his earliest, his latest, and his most
characteristic, must be taken as representatives of the entire class.
On February 1, 1866, being thirty-five years of age, he presented his
views on the general question of the restoration of the States lately in
rebellion:
THIS IS A NATION.
“The word ‘State’, as it has been used by gentlemen in this
discussion, has two meanings, as perfectly distinct as though
different words had been used to express them. The confusion arising
from applying the same word to two different and dissimilar objects,
has had very much to do with the diverse conclusions which gentlemen
have reached. They have given us the definition of a ‘state’ in the
contemplation of public or international law, and have at once
applied that definition and the conclusions based upon it, to the
States of the American Union and the effects of war upon them. Let
us examine the two meanings of the word, and endeavor to keep them
distinct in their application to the questions before us.
“Phillimore, the great English publicist, says: ‘For all the
purposes of international law, a state (_demos_, _civitas_, _volk_)
may be defined to be a people permanently occupying a fixed
territory, bound together by common laws, habits, and customs, into
one body-politic, exercising through the medium of an organized
government, independent sovereignty and control over all persons and
things within its boundaries, capable of making war and peace, and
of entering into all international relations with the other
communities of the globe.’—_Phillimore’s International Law_, vol. i,
sec. 65.
“Substantially the same definition maybe found in Grotius, book one,
chapter one, section fourteen; in Burlamaqui, volume two, part one,
chapter four, section nine; and in Vattel, book one, chapter one.
The primary point of agreement in all these authorities is, that in
contemplation of international law a state is absolutely sovereign,
acknowledging no superior on earth. In that sense the United States
is a state, a sovereign state, just as Great Britain, France, and
Russia are states.
“But what is the meaning of the word State as applied to Ohio or
Alabama? Is either of them a state in the sense of international
law? They lack all the leading requisites of such a state. They are
only the geographical subdivisions of a state; and though endowed by
the people of the United States with the rights of local
self-government, yet in all their external relations their
sovereignty is completely destroyed, being merged in the supreme
Federal Government.—_Halleck’s International Law_, sec. 16, page 71.
“Ohio can not make war; can not conclude peace; can not make a
treaty with any foreign government, can not even make a compact with
her sister States; can not regulate commerce; can not coin money;
and has no flag. These indispensable attributes of sovereignty, the
State of Ohio does not possess, nor does any other State of the
Union. We call them States for want of a better name. We call them
States, because the original Thirteen had been so designated before
the Constitution was formed, but that Constitution destroyed all the
sovereignty which those States were ever supposed to possess in
reference to external affairs.
“I submit, Mr. Speaker, that the five great publicists—Grotius,
Puffendorf, Bynkershoek, Burlamaqui, and Vattel, who have been so
often quoted in this debate, and all of whom wrote more than a
quarter of a century, and some nearly two centuries before our
Constitution was formed, can hardly be quoted as good authorities in
regard to the nature and legal relationships of the component States
of the American Union.
“Even my colleague from the Columbus District [Mr. Shellabarger], in
his very able discussion of this question, spoke as though a State
of this Union was the same as a state in the sense of international
law, with certain qualities added. I think he must admit that nearly
all the leading attributes of such a state are taken from it when it
becomes a State of the Union.
“Several gentlemen, during this debate, have quoted the well known
doctrine of international law, ‘that war annuls all existing
compacts and treaties between belligerents;’ and they have
concluded, therefore, that our war has broken the Federal bond and
dissolved the Union. This would be true, if the rebel States were
_states_ in the sense of international law—if our Government were
not a sovereign nation, but only a league between sovereign states.
I oppose to this conclusion the unanswerable proposition that this
_is_ a nation; that the rebel States are _not_ sovereign states, and
therefore their failure to achieve independence was a failure to
break the Federal bond—to dissolve the Union....
“In view of the peculiar character of our Government, in what
condition did the war leave the rebel States?”
He argued that by the admission of a State to the Union, the laws of the
United States were extended to it. _A State might violate one of these
laws, but could not annul it._ Each rebel State exerted every power to
break away from these laws, but was unable to destroy or invalidate one
of them. Each rebel State let go of the Union, but the Union did not let
go of it:
“Let the stars of heaven illustrate our constellation of States.
When God launched the planets upon their celestial pathway, He bound
them all by the resistless power of attraction to the central sun,
around which they revolved in their appointed orbits. Each may be
swept by storms, may be riven by lightnings, may be rocked by
earthquakes, may be devastated by all the terrestrial forces and
overwhelmed in ruin, but far away in the everlasting depths the
sovereign sun holds the turbulent planet in its place. This earth
may be overwhelmed until the high hills are covered by the sea; it
may tremble with earthquakes miles below the soil, but it must still
revolve in its appointed orbit. So Alabama may overwhelm all her
municipal institutions in ruin, but she can not annul the omnipotent
decrees of the sovereign people of the Union. She must be held
forever in her orbit of obedience and duty.
* * * * *
“Now, let us inquire how the surrender of the military power of the
rebellion affected the legal condition of those States. When the
rebellion collapsed, and the last armed man of the Confederacy
surrendered to our forces, I affirm that there was not in one of
those States a single government that we did or could recognize.
There was not in one of those States, from governor down to
constable, a single man whom we could recognize as authorized to
exercise any official function whatever. They had formed governments
alien and hostile to the Union. Not only had their officers taken no
oaths to support the Constitution of the United States, but they had
heaped oath upon oath to destroy it.
“I go further. I hold that there were in those States no
constitutions of any binding force and effect; none that we could
recognize. A constitution, in this case, can mean nothing less than
a constitution of government. A constitution must constitute
something, or it is no constitution. When we speak of the
constitution of Alabama, we mean the constitution of the government
of Alabama. When the rebels surrendered, there remained no
constitution in Alabama, because there remained no government. Those
States reverted into our hands by victorious war, with every
municipal right and every municipal authority utterly and completely
swept away.”
After citing from the highest authorities on the laws of war, he sums up
the legal status of the rebellious states as follows:
“1. That, by conquest, the United States obtained complete control
of the rebel territory.
“2. That every vestige of municipal authority in those States was,
by secession, rebellion, and the conquest of the rebellion, utterly
destroyed.
“3. That the state of war did not terminate with the actual
cessation of hostilities, but that, under the laws of war, it was
the duty of the President, as commander-in-chief, to establish
governments over the conquered people of the insurgent States, which
governments, no matter what may be their form, are really military
governments, deriving their sole power from the President.
“4. That the governments thus established, are valid while the state
of war continues and until Congress acts in the case.
“5. That it belongs exclusively to the legislative authority of the
Government to determine the political status of the insurgent
States, either by adopting the governments the President has
established, or by permitting the people to form others, subject to
the approval of Congress.
“It was time for Congress to act. That action should recognize,
first, the stupendous facts of the war. By the Emancipation
Proclamation we not only declared the slaves free, but pledged the
faith of the nation _to ‘maintain their freedom.’_ What is freedom?
It is no mere negative; no mere privilege of not being chained,
bought and sold, branded or scourged. It is a tangible realization
of the truths that ‘all men are created free and equal,’ and that
the sanction of just government is the ‘consent of the governed.’
“These truths can never be realized until each man has a right to be
heard in all matters concerning himself....
“I remember an incident in the history of the eastern church, as
recorded by Gibbon, volume two, chapter twenty-eight, which
illustrates the power that slavery has exercised among us. The
Christians of that day, under the lead of Theophilus, undertook to
destroy the heathen temples. Gibbon says:
“‘Theophilus proceeded to demolish the temple of Serapis without any
other difficulties than those which he found in the weight and
solidity of the materials, but these obstacles proved so insuperable
that he was obliged to leave the foundations and to content himself
with reducing the edifice itself to a heap of rubbish, a part of
which was soon afterward cleared away to make room for a church,
erected in honor of the Christian martyrs.
“‘The colossal statue of Serapis was involved in the ruin of his
temple and religion. A great number of plates of different metals,
artificially joined together, composed the majestic figure of the
deity, who touched on either side the walls of the sanctuary. The
aspect of Serapis, his sitting posture, and the scepter, which he
bore in his left hand, were extremely similar to the ordinary
representations of Jupiter. He was distinguished from Jupiter by the
basket, or bushel, which was placed on his head, and by the
emblematic monster which he held in his right hand, the head and
body of a serpent branching into three tails, which were again
terminated by the triple heads of a dog, a lion, and a wolf. It was
confidently affirmed that if any impious hand should dare to violate
the majesty of the god, the heavens and earth would instantly return
to the original chaos. An intrepid soldier, animated by zeal, and
armed with a weighty battle-ax, ascended the ladder, and even the
Christian multitude expected with some anxiety the event of the
combat. He aimed a vigorous stroke against the cheek of Serapis; the
cheek fell to the ground; the thunder was still silent, and both the
heavens and the earth continued to preserve their accustomed order
and tranquillity. The victorious soldier repeated his blows, the
huge idol was overthrown and broken in pieces, and the limbs of
Serapis were ignominiously dragged through the streets of
Alexandria. His mangled carcass was burnt in the amphitheater amid
the shouts of the populace, and many persons attributed their
conversion to this discovery of the impotence of their tutelary
deity.’
“So slavery sat in our national Capitol. Its huge bulk filled the
temple of our liberty, touching it from side to side. Mr. Lincoln,
on the 1st of January, 1863, struck it on the cheek, and the
faithless and unbelieving among us expected to see the fabric of our
institutions dissolve into chaos because their idol had fallen. He
struck it again; Congress and the States repeated the blow, and its
unsightly carcass lies rotting in our streets. The sun shines in the
heavens brighter than before. Let us remove the carcass and leave
not a vestige of the monster. We shall never have done that until we
have dared to come up to the spirit of the Pilgrim covenant of 1620,
and declare that all men shall be consulted in regard to the
disposition of their lives, liberty, and property. The Pilgrim
fathers proceeded on the doctrine that every man was supposed to
know best what he wanted, and had the right to a voice in the
disposition of himself.”
A second fact to be recognized was that 7,000,000 white men were waiting
to have their case adjudged and their political status fixed.
“As to _persons_ we must see to it that hereafter personal liberty
and personal rights are placed in the keeping of the nation; that
the right to life, liberty, and property are to be guaranteed to
citizens in reality, and not left to the caprice of mobs and
contingencies of local legislation.... As to _States_, the burden of
proof rests on each one of them, to show whether it is fit to enter
the Federal circle in full communion of privileges. Men can not
change their hearts—love what they hated, and hate what they
loved—upon the issue of a battle; but our duty is to demand that
before we admit them they shall give sufficient assurance that,
whatever they believe or wish, their action in the future shall be
such as loyal men can approve.”
How far does that speech differ from the reconstruction policy actually
adopted?
Thirteen years later, on June 27, 1879, the pending bill being one for
the appropriations for United States marshals, General Garfield said:
“Mr. Chairman: ‘To this favor’ it has come at last. The great fleet
that set out on the 18th of March, with all its freightage and
armament, is so shattered that now all the valuables it carried are
embarked in this little craft, to meet whatever fate the sea and the
storm may offer. This little bill contains the residuum of almost
every thing that has been the subject of controversy at the present
session. I will not discuss it in detail, but will speak only of its
central feature, and especially of the opinions which the discussion
of that feature has brought to the surface during the present
session. The majority in this Congress have adopted what I consider
very extreme and dangerous opinions on certain important
constitutional questions. They have not only drifted back to their
old attitude on the subject of State Sovereignty, but they have
pushed that doctrine much further than most of their predecessors
ever went before, except during the period immediately preceding the
late war.
“Let me summarize them: First, there are no national elections;
second, the United States has no voters; third, the States have the
exclusive right to control all elections of members of Congress;
fourth, the senators and representatives in Congress are State
officers, or, as they have been called during the present session,
‘embassadors’ or ‘agents’ of the State; fifth, the United States has
no authority to keep the peace anywhere within a State, and, in
fact, has no peace to keep; sixth, the United States is not a Nation
endowed with sovereign power, but is a confederacy of States;
seventh, the States are sovereignties possessing inherent supreme
powers; they are older than the Union, and as independent
sovereignties the state governments created the Union and determined
and limited the powers of the General Government.
“These declarations embody the sum total of the constitutional
doctrines which the Democracy has avowed during this extra session
of Congress. They form a body of doctrines which I do not hesitate
to say are more extreme than was ever before held on this subject,
except, perhaps, at the very crisis of secession and rebellion.
“Firmly believing that these doctrines and attempted practice of the
present Congress are erroneous and pernicious, I will state briefly
the counter-propositions:
“I affirm: first, that the Constitution of the United States was not
created by the governments of the States, but was ordained and
established by the only sovereign in this country—the common
superior of both the States and the Nation—the people themselves;
second, that the United States is a Nation, having a government
whose powers, as defined and limited by the Constitution, operate
upon all the States in their corporate capacity and upon all the
people; third, that by its legislative, executive, and judicial
authority the Nation is armed with adequate power to enforce all the
provisions of the Constitution against all opposition of individuals
or of States, at all times and all places within the Union.
“These are broad propositions; and I take the few minutes remaining
to defend them. The constitutional history of this country, or,
rather, the history of sovereignty and government in this country,
is comprised in four sharply defined epochs:
“First. Prior to the 4th day of July, 1776, sovereignty, so far as
it can be affirmed of this country, was lodged in the crown of Great
Britain. Every member of every colony (the colonists were not
citizens, but subjects) drew his legal rights from the crown of
Great Britain. ‘Every acre of land in this country was then held
mediately or immediately by grants from that crown,’ and ‘all the
civil authority then existing or exercised here flowed from the head
of the British empire.’
“Second. On the 4th day of July, 1776, the people of these colonies,
asserting their natural inherent right as sovereigns, withdrew the
sovereignty from the crown of Great Britain, and reserved it to
themselves. In so far as they delegated this national authority at
all, they delegated it to the Continental Congress assembled at
Philadelphia. That Congress, by general consent, became the supreme
government of this country—executive, judicial, and legislative in
one. During the whole of its existence it wielded the supreme power
of the new Nation.
“Third. On the 1st day of March, 1781, the same sovereign power, the
people, withdrew the authority from the Continental Congress, and
lodged it, so far as they lodged it at all, with the Confederation,
which, though a league of States, was declared to be a perpetual
union.
“Fourth. When at last our fathers found the Confederation too weak
and inefficient for the purposes of a great nation, they abolished
it, and lodged the national authority, enlarged and strengthened by
new powers, in the Constitution of the United States, where, in
spite of all assaults, it still remains. All these great acts were
done by the only sovereign in this Republic, the people themselves.
“That no one may charge that I pervert history to sustain my own
theories, I call attention to the fact that not one of the colonies
declared itself free and independent. Neither Virginia nor
Massachusetts threw off its allegiance to the British crown as a
colony. The great declaration was made not even by all the colonies
as colonies, but it was made in the name and by authority of ‘all
the good people of the colonies’ as one people.
“Mr. Chairman, the dogma of State Sovereignty, which has re-awakened
to such vigorous life in this chamber, has borne such bitter fruits
and entailed such suffering upon our people that it deserves more
particular notice. It should be noticed that the word ‘sovereignty’
can not be fitly applied to any government in this country. It is
not found in our constitution. It is a feudal word, born of the
despotism of the Middle Ages, and was unknown even in imperial Rome.
A ‘sovereign’ is a person, a prince, who has subjects that owe him
allegiance. There is no one paramount sovereign in the United
States. There is no person here who holds any title or authority
whatever, except the official authority given him by law. Americans
are not subjects, but citizens. Our only sovereign is the whole
people. To talk about the ‘inherent sovereignty’ of a corporation—an
artificial person—is to talk nonsense; and we ought to reform our
habit of speech on that subject.
“But what do gentlemen mean when they tell us that a State is
sovereign? What does sovereignty mean in its accepted use, but a
political corporation having no superior? Is a State of this Union
such a corporation? Let us test it by a few examples drawn from the
Constitution. No State of this Union can make war or conclude a
peace. Without the consent of Congress it can not raise or support
an army or a navy. It can not make a treaty with a foreign power,
nor enter into any agreement or compact with another State. It can
not levy imposts or duties on imports nor exports. It can not coin
money. It can not regulate commerce. It can not authorize a single
ship to go into commission anywhere on the high seas; if it should,
that ship would be seized as a pirate or confiscated by the laws of
the United States. A State can not emit bills of credit. It can
enact no law which makes any thing but gold and silver a legal
tender. It has no flag except the flag of the Union. And there are
many other subjects on which the States are forbidden by the
Constitution to legislative.
“How much inherent sovereignty is left in a corporation which is
thus shorn of all these great attributes of sovereignty?
“But this is not all. The Supreme Court of the United States may
declare null and void any law or any clause of the constitution of a
State which happens to be in conflict with the Constitution and laws
of the United States. Again, the States appear as plaintiffs and
defendants before the Supreme Court of the United States. They may
sue each other; and, until the Eleventh Amendment was adopted, a
citizen might sue a State. These ‘sovereigns’ may all be summoned
before their common superior to be judged. And yet they are endowed
with supreme inherent sovereignty!
“Again, the government of a State may be absolutely abolished by
Congress, in case it is not republican in form. And, finally, to cap
the climax of this absurd pretension, every right possessed by one
of these ‘sovereign’ States, every inherent sovereign right, except
the single right to equal representation in the Senate, may be taken
away, without its consent, by the vote of two-thirds of Congress and
three-fourths of the States. But, in spite of all these
disabilities, we hear them paraded as independent, sovereign States,
the creators of the Union and the dictators of its powers. How
inherently ‘sovereign’ must be that State west of the Mississippi
which the Nation bought and paid for with the public money, and
permitted to come into the Union a half century after the
Constitution was adopted! And yet we are told that the States are
inherently sovereign and created the National Government.
“The dogma of State Sovereignty in alliance with chattel slavery
made its appeal to that court of last resort where the laws are
silent, and where kings and nations appear in arms for judgment. In
that awful court of war two questions were tried: Shall slavery
live? And is a State so sovereign that it may nullify the laws and
destroy the Union? These two questions were tried on the thousand
battle-fields of the war; and if war ever ‘legislates,’ as a leading
Democrat of Ohio once wisely affirmed, then our war legislated
finally upon those subjects, and determined, beyond all controversy,
that slavery should never again live in this Republic, and that
there is not sovereignty enough in any State to authorize its people
either to destroy the Union or nullify its laws.”
Ten years ago a biographer who loved Garfield and cared for his fame
would have omitted the speech from which we are about to give extracts.
It is, however, no secret that, in 1871, General Garfield split with his
party upon what was known in contemporary politics as “The Force Bill.”
This bill was drawn, under the provisions of the Fourteenth Amendment,
to protect the Republicans of the Southern States from outrage and
murder. The President had laid before Congress a most terrible state of
affairs. The Ku-Klux Klan, that bloody and mysterious organization,
which was the terror of loyal men, and the guilty perpetrator of
unnumbered crimes, thrust its hideous head into the face of the men who
had fought for the Union. Murder, ostracism, incendiarism, bull-dozing,
intimidation, ballot-box stuffing, and a thousand other outrages were
committed. The best picture of the time is in “The Fool’s Errand.” These
things, perhaps, (we do not say so) magnified by fear, hate, and
political rancor, were too much for the Republican Congress and the men
who had worn the blue under Southern skies. There was terrible
bitterness. Revenge darkened the Northern heart. The majority in
Congress resolved to clutch the demon’s throat with the iron grip of
law. In a former chapter we spoke of the battle as an experience, and
how it perpetually reproduced itself in the mind of its participants.
The illustration of that is found in the attitude of President Grant and
the soldier majority in Congress at the time of which we are writing.
The “Force Bill” was really a tremendous battery. It was surrounded with
sulphurous smoke, and was as grim as death.
But to the rule General Garfield was an exception. At the close of the
war, he said, we passed into another political epoch. He believed in the
Nation, but the calm balance of his mind refused assent to any extreme
measure. There was no wavering on the supremacy of the Nation. But after
all this was a Republic, and despotism, the one extreme, was as fatal as
disunion, the other. General Garfield opposed the extreme parts of the
“Force Bill.” He looked to the future of our country as well as the
past. We summarize his elaborate speech:
THE FORCE BILL.
“Mr. Speaker: I am not able to understand the mental organization of
the man who can consider this bill, and the subject of which it
treats, as free from very great difficulties. He must be a man of
very moderate abilities, whose ignorance is bliss, or a man of
transcendant genius whom no difficulties can daunt and whose clear
vision no cloud obscures.
“The distinguished gentleman [Mr. Shellabarger] who introduced the
bill from the committee, very appropriately said that it requires us
to enter upon unexplored territory. That territory, Mr. Speaker, is
the neutral ground of all political philosophy; the neutral ground
for which rival theories have been struggling in all ages. There are
two ideas so utterly antagonistic that, when in any nation, either
has gained absolute and complete possession of that neutral ground,
the ruin of that nation has invariably followed. The one is that
despotism which swallows and absorbs all power in a single-central
government; the other is that extreme doctrine of local sovereignty
which makes nationality impossible, and resolves a general
government into anarchy and chaos. It makes but little difference,
as to the final result, which of these ideas drives the other from
the field; in either case ruin follows.
“The result exhibited by the one was seen in the Amphictyonic and
Achæan leagues of ancient Greece, of which Madison, in the twentieth
number of the _Federalist_, says:
“‘The inevitable result of all was imbecility in the government,
discord among the provinces, foreign influences and indignities, a
precarious existence in peace, and peculiar calamities in war.’
“This is a fitting description of all nations which have carried the
doctrine of local self-government so far as to exclude the doctrine
of nationality. They were not nations, but mere leagues, bound
together by common consent, ready to fall to pieces at the demand of
any refractory member. The opposing idea was never better
illustrated than when Louis XIV. entered the French Assembly, booted
and spurred, and girded with the sword of ancestral kings, and said
to the Deputies of France: ‘The State! I am the State!’
“Between these opposite and extreme theories of government, the
people have been tossed from century to century; and it has been
only when these ideas have been in reasonable equipoise, when this
neutral ground has been held in joint occupancy, and usurped by
neither, that popular liberty and national life have been possible.
How many striking illustrations of this do we see in the history of
France! The deposition of Louis XIV., followed by the Reign of
Terror, when liberty had run mad and France was a vast scene of
blood and ruin! We see it again in our day. Only a few years ago,
the theory of personal government had placed in the hands of
Napoleon III., absolute and irresponsible power. The communes of
France were crushed, and local liberty existed no longer. Then
followed Sedan and the rest. On the first day of last month, when
France was trying to rebuild her ruined Government, when the
Prussian cannon had scarcely ceased thundering against the walls of
Paris, a deputy of France rose in the National Assembly and moved,
as the first step toward the safety of his country, that a committee
of thirty should be chosen, to be called the Committee of
Decentralization. But it was too late to save France from the
fearful reaction from despotism. The news comes to us, under the
sea, that on Saturday last, the cry was ringing through France:
‘Death to the Priests!’ and ‘Death to the Rich!’ and the swords of
the citizens of that new republic are now wet with each other’s
blood.
EQUIPOISE OF OUR GOVERNMENT.
“The records of time show no nobler or wiser work done by human
hands than that of our fathers when they framed this Republic.
Beginning in a wilderness world, they wrought unfettered by
precedent, untrammeled by custom, unawed by kings or dynasties. With
the history of other nations before them, they surveyed the new
field. In the progress of their work they encountered these
antagonistic ideas to which I have referred. They attempted to trace
through that neutral ground the boundary line across which neither
force should pass. The result of their labors is our Constitution
and frame of government. I never contemplate the result without
feeling that there was more than mortal wisdom in the men who
produced it. It has seemed to me that they borrowed their thought
from Him who constructed the universe and put it in motion. For
nothing more aptly describes the character of our Republic than the
solar system, launched into space by the hand of the Creator, where
the central sun is the great power around which revolve all the
planets in their appointed orbits. But while the sun holds in the
grasp of its attractive power the whole system, and imparts its
light and heat to all, yet each individual planet is under the sway
of laws peculiar to itself.
“Under the sway of terrestrial laws, winds blow, waters flow, and
all the tenantries of the planet live and move. So, sir, the States
move on in their orbits of duty and obedience, bound to the central
Government by this Constitution, which is their supreme law, while
each State is making laws and regulations of its own, developing its
own energies, maintaining its own industries, managing its local
affairs in its own way, subject only to the supreme but beneficent
control of the Union. When States Rights ran mad, put on the form of
secession, and attempted to drag the States out of Union, we saw the
grand lessons taught, in all the battles of the late war, that a
State could no more be hurled from the Union, without ruin to the
Nation, than could a planet be thrown from its orbit without
dragging after it, to chaos and ruin, the whole solar universe.
“Sir, the great war for the Union has vindicated the centripetal
power of the Nation, and has exploded, forever I trust, the
disorganizing theory of State Sovereignty, which slavery attempted
to impose upon this country. But we should never forget that there
is danger in the opposite direction. The destruction, or serious
crippling of the principle of local government, would be as fatal to
liberty as secession would have been fatal to the Union.
“The first experiment which our fathers tried in government-making
after the War of Independence was a failure, because the central
power conferred in the Articles of Confederation was not strong
enough. The second, though nobly conceived, became almost a failure,
because slavery attempted so to interpret the Constitution as to
reduce the nation again to a confederacy, a mere league between
sovereign States. But we have now vindicated and secured the
centripetal power; let us see that the centrifugal force is not
destroyed, but that the grand and beautiful equipoise may be
maintained.
“It will not be denied that before the adoption of the last three
amendments, it was the settled interpretation of the Constitution
that the protection of the life and property of private citizens
belonged to the State governments entirely.... Now three amendments
have been added to the Constitution, and it will not be denied that
each of these amendments has changed the relation of Congress to the
citizens of the States.”
Garfield spoke with his eye on the future: “This debate will become
historic as the earliest legislative interpretation of the Fourteenth
Amendment,” he said. He reviewed the debates accompanying the adoption
of the Fourteenth Amendment. Two propositions had been before Congress.
The essential parts of the one adopted were—
“The Congress shall have power to enforce by appropriate
legislation, the following provisions, to wit:
“No State shall make or enforce any law which shall abridge the
privileges or immunities of citizens of the United States; nor shall
any State deprive any person of life, liberty, or property without
due process of law, nor deny to any person within its jurisdiction
the equal protection of the laws.
“And this is the rejected clause:
“The Congress shall have power to make all laws which may be
necessary and proper to secure to the citizens in these several
States equal protection in the rights of life, liberty, and
property.
“The one exerts its force directly upon the States, laying
restriction and limitations upon their power, and enabling Congress
to enforce these limitations. The other, the rejected proposition,
would have brought the power of Congress to bear directly upon the
citizens, and contained a clear grant of power to Congress to
legislate directly for the protection of life, liberty, and property
within the States. The first limited, but did not oust the
jurisdiction of the State over these subjects. The second gave
Congress plenary power to cover the whole subject with its
jurisdiction, and, as it seems to me, to the exclusion of the State
authorities.
“Mr. Speaker, unless we ignore both the history and the language of
these clauses we can not, by any reasonable interpretation, give to
the section as it stands in the Constitution, the force and effect
of the rejected clause.”
Then followed an exhaustive discussion of the different clauses of the
Fourteenth Amendment, after which he passed to the provisions of the
pending bill. Southern outrages had been stated by the President to
exist. The trouble was not unequal laws, but their maladministration and
denial of protection under them. This demanded legislation. But Congress
had no power to assume original jurisdiction of the matter. It could
only define and declare the offense, and should employ no terms which
asserted the power of Congress to take jurisdiction, _until such denial
of rights was clearly made_. Passing then to the extreme and most
objectionable parts of the bill he said:
“But, Mr. Speaker, there is one provision in the fourth section
which appears to me both unwise and unnecessary. It is proposed not
only to authorize the suspension of the privileges of the writ of
_habeas corpus_, but to authorize the declaration of martial law in
the disturbed districts.
“I do not deny, but I affirm, the right of Congress to authorize the
suspension of the privileges of the writ of _habeas corpus_
whenever, in cases of rebellion or invasion, the public safety may
require it. Such action has been, and may again be, necessary to the
safety of the Republic; but I call the attention of the House to the
fact that never but once in the history of this Government has
Congress suspended the great privileges of this writ, and then it
was not done until after two years of war had closed all the
ordinary tribunals of justice in the rebellious districts, and the
great armies of the Union, extending from Maryland to the Mexican
line, were engaged in a death-struggle with the armies of the
rebellion. It was not until the third day of March, 1863, that the
Congress of the United States found the situation so full of peril
as to make it their duty to suspend this greatest privilege enjoyed
by Anglo-Saxon people. Are we ready to say that an equal peril
confronts us to-day?
“My objections to authorizing this suspension implies no distrust of
the wisdom or patriotism of the President. I do not believe he would
employ this power were we to confer it upon him; and if he did
employ it, I do not doubt he would use it with justice and wisdom.
But what we do on this occasion will be quoted as a precedent
hereafter, when other men with other purposes may desire to confer
this power on another President for purposes that may not aid in
securing public liberty and public peace.
“But this section provides no safeguard for citizens who may be
arrested during the suspension of the writ. There is no limit to the
time during which men may be held as prisoners. Nothing in the
section requires them to be delivered over to the courts. Nothing in
it gives them any other protection than the will of the commander
who orders their arrest.”
* * * * *
“But, sir, this fourth section goes a hundred bow-shots farther than
any similar legislation of Congress during the wildest day of the
rebellion. It authorizes the declaration of martial law. We are
called upon to provide by law for the suspension of all law! Do
gentlemen remember what martial law is? Refer to the digest of
opinions of the Judge Advocate-General of the United States, and you
will find a terse definition which gleams like a flash of a
sword-blade. The Judge Advocate says: ‘Martial law is the will of
the general who commands the army.’ And Congress is here asked to
declare martial law. Why, sir, it is the pride and boast of England
that martial law has not existed in that country since the Petition
of Right in the thirty-first year of Charles II. Three years ago the
Lord Chief-Justice of England came down from the high court over
which he was presiding to review the charge of another judge to the
grand jury, and he there announced that the power to declare martial
law no longer existed in England. In 1867, the same judge, in the
case of the Queen _vs_ Nelson, uttered this sentence:
“‘There is no such law in existence as martial law, and no power in
the Crown to proclaim it.’
“In a recent treatise, entitled _The Nation_, a work of great power
and research, the author, Mr. Mulford, says: ‘The declaration of
martial law, or the suspension of _habeas corpus_, is the
intermission of the ordinary course of law, and of the tribunals to
which an appeal may be made. It places the locality included in its
operations no longer under the government of law. It interrupts the
process of rights and the procedure of courts and restricts the
independence of civil administration. There is substituted for these
the intention of the individual. To this there is in the civil order
no formal limitation. In its immediate action it allows beyond
itself no obligation and acknowledges no responsibility. Its command
or its decree is the only law; its movement may be secret, and its
decisions are opened to the inquiry of no judge and the
investigation of no tribunal. There is no positive power which may
act, or be called upon to act, to stay its caprice or to check its
arbitrary career since judgment and execution are in its own
command, and the normal action and administration is suspended and
the organized force of the whole is subordinate to it.’
“Sir, this provision means war, or it means nothing; and I ask this
House whether we are now ready to take this step? Shall we ‘cry
havoc and let slip the dogs of war?’
“I have taken a humble part in one war, and I hope I shall always be
ready to do any duty that the necessities of the country may require
of me; but I am not willing to talk war or to declare war in advance
of the terrible necessity. Are there no measures within our reach
which may aid in preventing war? When a savage war lately threatened
our Western frontiers we sent our Commissioners of Peace in the hope
of avoiding war. Have we done all in our power to avoid that which
this section contemplates? I hope the committee will bring a
companion measure that looks toward peace and enable us to send the
olive branch with the sword.”
This speech marked the separation of General Garfield from the Stalwart
wing of the Republican party. It was never forgiven nor forgotten. It
showed his balance of mind, his avoidance of extremes. The time when he
delivered it was one of extremes. It was an epoch of reaction. It was
verging toward the period when Sumner and Adams and Greeley were to
forsake the party they had helped to create. It was a time when the
fierce passions of war were beginning to find an opponent in the
struggling instinct of reunion and peace. It was a time when the great
radicals, who had fought slavery to its death, were to swing to the
other extreme of loving gush and apologetic forgiveness toward a South
which sat crouching in the Temple of Liberty, still maddened with the
wild insanity of war. It was a time, on the other hand, when the great
war leaders, gorged with the bloody spoils of victory, were to know no
forgiveness, no forgetfulness, but to plant the iron heel of despotism
upon the prostrate and bleeding foe. In this time of extremes General
Garfield took the middle course. He remained a true Republican, but he
recoiled from brutalism toward the South. Now that the passions of the
hour have passed away, we believe that his speech on the enforcement of
the Fourteenth Amendment will stand as the wisest utterance of the
times. It rises above the level of partisanship to that of
statesmanship. In the midst of the tempest of popular excitement over
Southern outrages he was calm. As he afterwards said in his nominating
speech at Chicago:
“It is not the billows, but the calm level of the sea from which all
heights and depths are measured. When the storm has passed and the
hour of calm settles on the ocean, when sunlight bathes its smooth
surface, then the astronomer and surveyor takes the level from which
he measures all terrestrial heights and depths.”
This was the secret of all of Garfield’s views. In spite of political
fears and dogmas, in spite of partisan doubts and dismay, he was right.
Therefore, in his answers to the great questions affecting the
nationality of the United States, James A. Garfield is entitled to the
historic rank of statesman.
We will next inquire to what rank Garfield’s utterances on questions
affecting THE FINANCIAL AND MONETARY SYSTEMS OF THE UNITED STATES
BELONG. It has been noticed that this and the succeeding topic formed
General Garfield’s specialty. In the epoch in which he lived they were
the paramount themes of politics. He himself called the financial
question the modern political Sphinx. For the last eight years,
inflation, hard money, greenbacks, etc., had been discussed from every
point of the compass, in every key and to every tune. Men thought it was
a new thing. Years before the public clamor, General Garfield took his
position on the financial question. He foresaw and foretold the
experience of the country before the public mind had rolled its heavy
eyes toward the subject. It has been claimed that on the financial
question Garfield was ten years ahead of his generation; that he was a
pioneer and leader in every sense in the advance toward the resumption
of specie payments and a stable currency. Not in 1874, when the first
great inflation bill ran its rapid career, nor in 1876, nor 1878, when
the advocates of paper money had organized themselves into a political
party, did he come forward with arguments on the currency for the first
time. It was in 1866 that he turned the first furrow in Congress. On
March 16th of that year, he enunciated, in a short but vigorous speech,
the basal principles of finance, which in later efforts he was to
elaborate and fortify with every argument or authority which could
appeal to the human understanding. From that first position Garfield
never receded. Not for a moment did he cease to regard irredeemable and
inflated paper currency an unmixed evil, and resumption as the main end
of the legislation of the epoch. His speeches on finance cover the
entire field, and are very numerous. From two or three we present
copious extracts. On May 15, 1868, he delivered a speech which was, and
is, a complete manual of the principles of sound financial policy:
“I am aware that financial subjects are dull and uninviting in
comparison with those heroic themes which have absorbed the
attention of Congress for the last five years. To turn from the
consideration of armies and navies, victories and defeats, to the
array of figures which exhibits the debt, expenditure, taxation, and
industry of the nation, requires no little courage and self-denial;
but to these questions we must come, and to their solution Congress,
political parties, and all thoughtful citizens must give their best
efforts for many years to come.
“In April, 1861, there began in this country an industrial
revolution, not yet completed, as gigantic in its proportions, and
as far-reaching in its consequences, as the political and military
revolution through which we have passed. As the first step to any
intelligent discussion of the currency, it is necessary to examine
the character and progress of that industrial revolution.
“The year 1860 was one of remarkable prosperity in all branches of
business. For seventy years no Federal tax-gatherer had ever been
seen among the laboring population of the United States. Our public
debt was less than sixty-five million dollars. The annual
expenditures of the Government, including interest on the public
debt, were less than sixty-four million dollars. The revenues from
customs alone amounted to six-sevenths of the expenditures. The
value of our agricultural products for that year amounted to
$1,625,000,000. Our cotton crop alone was two billion one hundred
and fifty-five million pounds, and we supplied to the markets of the
world seven-eighths of all the cotton consumed. Our merchant marine
engaged in foreign trade amounted to two million five hundred and
forty-six thousand two hundred and thirty-seven tons, and promised
soon to rival the immense carrying trade of England.
“Let us now observe the effect of the war on the various departments
of business. From the moment the first hostile gun was fired, the
Federal and State governments became gigantic consumers. As far as
production was concerned, eleven States were completely separated
from the Union. Two million laborers, more than one-third of the
adult population of the Northern States, were withdrawn from the
ranks of producers, and became only consumers of wealth. The Federal
Government became an insatiable devourer. Leaving out of account the
vast sums expended by States, counties, cities, towns, and
individuals, for the payment of bounties, for the relief of sick and
wounded soldiers and their families, and omitting the losses, which
can never be estimated, of property destroyed by hostile armies, I
shall speak only of expenditures which appear on the books of the
Federal Treasury. From the 30th of June, 1861, to the 30th of June,
1865, there were paid out of the Federal Treasury $3,340,996,211,
making an aggregate during these four years of more than
$836,000,000 per annum.
“From the official records of the Treasury Department it appears
that, from the beginning of the American Revolution in 1775 to the
beginning of the late rebellion, the total expenditures of the
Government for all purposes, including the assumed war debts of the
States, amounted to $2,250,000,000. The expenditure of four years of
the rebellion were nearly $1,100,000,000 more than all the other
Federal expenses since the Declaration of Independence. The debt of
England, which had its origin in the revolution of 1688, and was
increased by more than one hundred years of war and other political
disasters, had reached in 1793 the sum of $1,268,000,000. During the
twenty-two years that followed, while England was engaged in a life
and death struggle with Napoleon (the greatest war in history save
our own), $3,056,000,000 were added to her debt. In our four years
of war we spent $300,000,000 more than the amount by which England
increased her debt in twenty-two years of war; almost as much as she
had increased it in one hundred and twenty-five years of war. Now,
the enormous demand which this expenditure created for all the
products of industry stimulated to an unparalleled degree every
department of business. The plow, furnace, mill, loom, railroad,
steamboat, telegraph—all were driven to their utmost capacity.
Warehouses were emptied; and the great reserves of supply, which all
nations in a normal state keep on hand, were exhausted to meet the
demands of the great consumer. For many months the Government
swallowed three millions per day of the products of industry. Under
the pressure of this demand, prices rose rapidly in every department
of business. Labor every-where found quick and abundant returns. Old
debts were canceled, and great fortunes were made.
“For the transaction of this enormous business an increased amount
of currency was needed; but I doubt if any member of this House can
be found bold enough to deny that the deluge of Treasury notes
poured upon the country during the war was far greater even than the
great demands of business. Let it not be forgotten, however, that
the chief object of these issues was not to increase the currency of
the country. They were authorized with great reluctance, and under
the pressure of overwhelming necessity, as a temporary expedient to
meet the demands of the Treasury. They were really forced loans in
the form of Treasury notes. By the act of July 17, 1861, an issue of
demand notes was authorized to the amount of $50,000,000. By the act
of August 5, 1861, this amount was increased $50,000,000 more. By
the act of February 25, 1862, an additional issue of $150,000,000
was authorized. On the 17th of the same month, an unlimited issue of
fractional currency was authorized. On the 17th of January, 1873, an
issue of $150,000,000 more was authorized, which was increased
$50,000,000 by the act of March 3d of the same year. This act also
authorized the issue of one and two years’ Treasury notes, bearing
interest at five per cent., to be a legal tender for their face, to
the amount of $400,000,000. By the act of June 30, 1864, an issue of
six per cent. compound-interest notes, to be a legal tender for
their face, was authorized, to the amount of $200,000,000. In
addition to this, many other forms of paper obligation were
authorized, which, though not a legal tender, performed many of the
functions of currency. By the act of March 1, 1862, the issue of an
unlimited amount of certificates of indebtedness was authorized, and
within ninety days after the passage of the act there had been
issued and were outstanding of these certificates more than
$156,000,000. Of course these issues were not all outstanding at the
same time, but the acts show how great was the necessity for loans
during the war.
“The law which made the vast volume of United States notes a legal
tender operated as an act of general bankruptcy. The man who loaned
$1,000 in July, 1861, payable in three years, was compelled by this
law to accept at maturity, as a full discharge of the debt, an
amount of currency equal in value to $350 of the money he loaned.
Private indebtedness was every-where canceled. Rising prices
increased the profits of business, but this prosperity was caused by
the great demand for products, and not by the abundance of paper
money. As a means of transacting the vast business of the country, a
great volume of currency was indispensable, and its importance can
not well be overestimated. But let us not be led into the fatal
error of supposing that paper money created the business or produced
the wealth. As well might it be alleged that our rivers and canals
produce the grain which they float to market. Like currency, the
channels of commerce stimulate production, but can not nullify the
inexorable law of demand and supply.
“Mr. Chairman, I have endeavored to trace the progress of our
industrial revolution in passing from peace to war. In returning
from war to peace all the conditions were reversed. At once the
Government ceased to be an all-devouring consumer. Nearly two
million able-bodied men were discharged from the army and navy and
enrolled in the ranks of the producers. The expenditures of the
Government, which, for the fiscal year ending June 30, 1865,
amounted to $1,290,000,000, were reduced to $520,000,000 in 1866; to
$346,000,000 in 1867; and, if the retrenchment measures recommended
by the Special Commissioner of the Revenue be adopted, another year
will bring them below $300,000,000.
“Thus during the first year after the war the demands of the Federal
Government as a consumer decreased sixty per cent.; and in the
second year the decrease had reached seventy-four per cent., with a
fair prospect of a still further reduction.
“The recoil of this sudden change would have produced great
financial disaster in 1866, but for the fact that there was still
open to industry the work of replacing the wasted reserves of
supply, which, in all countries in a healthy state of business, are
estimated to be sufficient for two years. During 1866, the fall in
price of all articles of industry amounted to an average of ten per
cent. One year ago a table was prepared, at my request, by Mr.
Edward Young, in the office of the Special Commissioner of the
Revenue, exhibiting a comparison of wholesale prices at New York in
December, 1865, and December, 1866. It shows that in ten leading
articles of provisions there was an average decline of twenty-two
per cent., though beef, flour, and other breadstuffs remained nearly
stationary. On cotton and woolen goods, boots, shoes, and clothing,
the decline was thirty per cent. On the products of manufacture and
mining, including coal, cordage, iron, lumber, naval stores, oils,
tallow, tin, and wool, the decline was twenty-five per cent. The
average decline on all commodities was at least ten per cent.
According to the estimates of the Special Commissioner of the
Revenue in his last report, the average decline during 1867 has
amounted at least to ten per cent. more. During the past two years
Congress has provided by law for reducing internal taxation
$100,000,000; and the act passed a few weeks ago has reduced the tax
on manufactures to the amount of $64,000,000 per annum. The repeal
of the cotton tax will make a further reduction of $20,000,000.
State and municipal taxation and expenditures have also been greatly
reduced. The work of replacing these reserves delayed the shock and
distributed its effects, but could not avert the inevitable result.
During the past two years, one by one, the various departments of
industry produced a supply equal to the demand. Then followed a
glutted market, a fall in prices, and a stagnation of business, by
which thousands of laborers were thrown out of employment.
“If to this it be added that the famine in Europe and the drought in
many of the agricultural States of the Union have kept the price of
provisions from falling as other commodities have fallen, we shall
have a sufficient explanation of the stagnation of business, and the
unusual distress among our people.
“This industrial revolution has been governed by laws beyond the
reach of Congress. No legislation could have arrested it at any
stage of its progress. The most that could possibly be done by
Congress was, to take advantage of the prosperity it occasioned to
raise a revenue for the support of the Government, and to mitigate
the severity of its subsequent pressure, by reducing the vast
machinery of war to the lowest scale possible. Manifestly nothing
can be more absurd than to suppose that the abundance of currency
produced by the prosperity of 1863, 1864, and 1865, or that the want
of it is the cause of our present stagnation.
“In order to reach a satisfactory understanding of the currency
question, it is necessary to consider somewhat fully the nature and
functions of money or any substitute for it.
“The theory of money which formed the basis of the ‘mercantile
system’ of the seventeenth and eighteenth centuries has been
rejected by all leading financiers and political economists for the
last seventy-five years. That theory asserted that money is wealth;
that the great object of every nation should be to increase its
amount of gold and silver; that this was a direct increase of
national wealth.
“It is now held as an indisputable truth that money is an instrument
of trade, and performs but two functions. It is a measure of value
and a medium of exchange.
“In cases of simple barter, where no money is used, we estimate the
relative values of the commodities to be exchanged in dollars and
cents, it being our only universal measure of value.
“As a medium of exchange, money is to all business transactions what
ships are to the transportation of merchandise. If a hundred vessels
of a given tonnage are just sufficient to carry all the commodities
between two ports, any increase of the number of vessels will
correspondingly decrease the value of each as an instrument of
commerce; any decrease below one hundred will correspondingly
increase the value of each.
“The functions of money as a medium of exchange, though more
complicated in their application, are precisely the same in
principle as the functions of the vessels in the case I have
supposed.
“If we could ascertain the total value of all the exchanges effected
in this country by means of money in any year, and could ascertain
how many dollars’ worth of such exchanges can be effected in a year
by one dollar in money, we should know how much money the country
needed for the business transactions of that year. Any decrease
below that amount will correspondingly increase the value of each
dollar as an instrument of exchange. Any increase above that amount
will correspondingly decrease the value of each dollar. If that
amount be doubled, each dollar of the whole mass will perform but
half the amount of business it did before; will be worth but half
its former value as a medium of exchange.
“Recurring to our illustration: if, instead of sailing vessels,
steam vessels were substituted, a much smaller tonnage would be
required; so, if it were found that $500,000,000 of paper, each
worth seventy cents in gold, were sufficient for the business of the
country, it is equally evident that $350,000,000 of gold substituted
for the paper would perform precisely the same amount of business.
“It should be remembered, also, that any improvement in the mode of
transacting business, by which the actual use of money is in part
dispensed with, reduces the total amount needed by the country. How
much has been accomplished in this direction by recent improvements
in banking may be seen in the operations of the clearing-houses in
our great cities.
“The records of the New York Clearing House show that from October
11, 1853, the date of its establishment, to October 11, 1867, the
exchanges amounted to nearly $180,000,000,000; to effect which, less
than $8,000,000,000 of money were used, an average of about four per
cent.; that is, exchanges were made to the amount of $100,000,000 by
the payment of $4,000,000 of money.
“It is also a settled principle that all deposits in banks, drawn
upon by checks and drafts, really serve the purpose of money.
“The amount of currency needed in the country depends, as we have
seen, upon the amount of business transacted by means of money. The
amount of business, however, is varied by many causes which are
irregular and uncertain in their operation. An Indian war, deficient
or abundant harvests, an overflow of the cotton lands of the South,
a bread famine or war in Europe, and a score of such causes entirely
beyond the reach of legislation, may make money deficient this year
and abundant next. The needed amount varies also from month to month
in the same year. More money is required in the autumn, when the
vast products of agriculture are being moved to market, than when
the great army of laborers are in winter-quarters, awaiting the
seed-time.
“When the money of the country is gold and silver, it adapts itself
to the fluctuations of business without the aid of legislation. If,
at any time, we have more than is needed, the surplus flows off to
other countries through the channels of international commerce. If
less, the deficiency is supplied through the same channels. Thus the
monetary equilibrium is maintained. So immense is the trade of the
world that the golden streams pouring from California and Australia
in the specie circulation, are soon absorbed in the great mass and
equalized throughout the world, as the waters of all the rivers are
spread upon the surface of all the seas.
“Not so, however, with an inconvertible paper currency. Excepting
the specie used in the payment of customs and the interest on our
public debt, we are cut off from the money currents of the world.
Our currency resembles rather the waters of an artificial lake,
which lie in stagnation or rise to full banks at the caprice of the
gate-keeper.
“Gold and silver abhor depreciated paper money, and will not keep
company with it. If our currency be more abundant than business
demands, not a dollar of it can go abroad; if deficient, not a
dollar of gold will come in to supply the lack. There is no
legislature on earth wise enough to adjust such a currency to the
wants of the country.
“Let us examine more minutely the effect of such a currency upon
prices. Suppose that the business transactions of the country at the
present time require $350,000,000 in gold. It is manifest that if
there are just $350,000,000 of legal-tender notes, and no other
money in the country, each dollar will perform the full functions of
a gold dollar, so far as the work of exchange is concerned. Now,
business remaining the same, let $350,000,000 more of the same kind
of notes be pressed into circulation. The whole volume, as thus
increased, can do no more than all the business. Each dollar will
accomplish just half the work that a dollar did before the increase;
but as the nominal dollar is fixed by law, the effect is shown in
prices being doubled. It requires two of these dollars to make the
same purchase that one dollar made before the increase. It would
require some time for the business of the country to adjust itself
to the new conditions, and great derangement of values would ensue;
but the result would at last be reached in all transactions which
are controlled by the law of demand and supply.
“No such change of values can occur without cost. Somebody must pay
for it. Who pays in this case? We have seen that doubling the
currency finally results in reducing the purchasing power of each
dollar one-half; hence every man who held a legal-tender note at the
time of the increase, and continued to hold it till the full effect
of the increase was produced, suffered a loss of fifty per cent. of
its value; in other words, he paid a tax to the amount of half of
all the currency in his possession. This new issue, therefore, by
depreciating the value of all the currency, cost the holders of the
old issue $175,000,000; and if the new notes were received at their
nominal value at the date of issue, their holders paid a tax of
$175,000,000 more. No more unequal or unjust mode of taxation could
possibly be devised. It would be tolerated only by being so involved
in the transactions of business as to be concealed from observation;
but it would be no less real because hidden.
“But some one may say: ‘This depreciation would fall upon
capitalists and rich men, who are able to bear it.’
“If this were true, it would be no less unjust. But, unfortunately,
the capitalists would suffer less than any other class. The new
issue would be paid in the first place in large amounts to the
creditors of the Government; it would pass from their hands before
the depreciation had taken full effect, and, passing down step by
step through the ranks of middle-men, the dead weight would fall at
last upon the laboring classes in the increased price of all the
necessaries of life. It is well known that in a general rise of
prices, wages are among the last to rise. This principle was
illustrated in the report of the Special Commissioner of the Revenue
for the year 1866. It is there shown that from the beginning of the
war to the end of 1866, the average price of all commodities had
risen ninety per cent. Wages, however, had risen but sixty per cent.
A day’s labor would purchase but two-thirds as many of the
necessaries of life as it would before. The wrong is, therefore,
inflicted on the laborer long before his income can be adjusted to
his increased expenses. It was, in view of this truth, that Daniel
Webster said, in one of his ablest speeches:
“‘Of all the contrivances for cheating the laboring classes of
mankind, none has been more effectual than that which deludes them
with paper money. This is the most effectual of inventions to
fertilize the rich man’s field by the sweat of the poor man’s brow.
Ordinary tyranny, oppression, excessive taxation, these bear lightly
on the happiness of the mass of the community, compared with a
fraudulent currency and the robberies committed by depreciated
paper.’
“The fraud committed and the burdens imposed upon the people, in the
case we have supposed, would be less intolerable if all business
transactions could be really adjusted to the new conditions; but
even this is impossible. All debts would be canceled, all contracts
fulfilled by payment in these notes—not at their real value, but for
their face. All salaries fixed by law, the pay of every soldier in
the army, of every sailor in the navy, and all pensions and
bounties, would be reduced to half their former value. In these
cases the effect is only injurious. Let it never be forgotten that
every depreciation of our currency results in robbing the one
hundred and eighty thousand pensioners, maimed heroes, crushed and
bereaved widows, and homeless orphans, who sit helpless at our feet.
And who would be benefited by this policy? A pretense of apology
might be offered for it, if the Government could save what the
people lose. But the system lacks the support of even that selfish
and immoral consideration. The depreciation caused by the over-issue
in the case we have supposed, compels the Government to pay just
that per cent. more on all the contracts it makes, on all the loans
it negotiates, on all the supplies it purchases; and to crown all,
it must at last redeem all its legal-tender notes in gold coin,
dollar for dollar. The advocates of repudiation have not yet been
bold enough to deny this.
“I have thus far considered the influence of a redundant paper
currency on the country when its trade and industry are in a healthy
and normal state. I now call attention to its effect in producing an
unhealthy expansion of business, in stimulating speculation and
extravagance, and in laying the sure foundation of commercial
revulsion and widespread ruin. This principle is too well understood
to require any elaboration here. The history of all modern nations
is full of examples. One of the ablest American writers on banks and
banking, Mr. Gouge, thus sums up the result of his researches:
“‘The history of all our bank pressures and panics has been the same
in 1825, in 1837, and in 1843; and the cause is given in these two
simple words—universal expansion.’
“There still remains to be considered the effect of depreciated
currency on our trade with other nations. By raising prices at home
higher than they are abroad, imports are largely increased beyond
the exports; our coin must go abroad; or, what is far worse for us,
our bonds, which have also suffered depreciation, and are purchased
by foreigners at seventy cents on the dollar. During the whole
period of high prices occasioned by the war, gold and bonds have
been steadily going abroad, notwithstanding our tariff duties, which
average nearly fifty per cent. _ad valorem_. More than five hundred
million dollars of our bonds are now held in Europe, ready to be
thrown back upon us when any war or other sufficient disturbance
shall occur. No tariff rates short of actual prohibition can prevent
this outflow of gold while our currency is thus depreciated. During
these years, also, our merchant marine steadily decreased, and our
ship-building interests were nearly ruined.
“Our tonnage engaged in foreign trade, which amounted in 1859–’60 to
more than two and a-half million tons, had fallen in 1865–’66 to
less than one and a-half millions—a decrease of more than fifty per
cent.; and prices of labor and material are still too high to enable
our shipwrights to compete with foreign builders.
“From the facts already exhibited in reference to our industrial
revolution, and from the foregoing analysis of the nature and
functions of currency, it is manifest:
“1. That the remarkable prosperity of all industrial enterprises
during the war was not caused by the abundance of currency, but by
the unparalleled demand for every product of labor.
“2. That the great depression of business, the stagnation of trade,
the ‘hard times’ which have prevailed during the past year, and
which still prevail, have not been caused by an insufficient amount
of currency, but mainly by the great falling off of the demand for
all the products of labor, compared with the increased supply since
the return from war to peace.
“I subjoin a table, carefully made up from the official records,
showing the amount of paper money in the United States at the
beginning of each year from 1834 to 1868 inclusive. The fractions of
millions are omitted:
1834 $ 95,000,000
1835 104,000,000
1836 140,000,000
1837 149,000,000
1838 116,000,000
1839 135,000,000
1840 107,000,000
1841 107,000,000
1842 84,000,000
1843 59,000,000
1844 75,000,000
1845 90,000,000
1846 105,000,000
1847 106,000,000
1848 129,000,000
1849 115,000,000
1850 131,000,000
1851 155,000,000
1852 150,000,000
1853 146,000,000
1854 205,000,000
1855 187,000,000
1856 196,000,000
1857 215,000,000
1858 135,000,000
1859 193,000,000
1860 207,000,000
1861 202,000,000
1862 218,000,000
1863 529,000,000
1864 636,000,000
1865 948,000,000
1866 919,000,000
1867 852,000,000
1868 767,000,000
“The table I have submitted shows how perfect an index the currency
is of the healthy or unhealthy condition of business, and that every
great financial crisis, during the period covered by the table, has
been preceded by a great increase, and followed by a great and
sudden decrease, in the volume of paper money. _The rise and fall of
mercury in the barometer is not more surely indicative of an
atmospheric storm, than is a sudden increase or decrease of currency
indicative of financial disaster._ Within the period covered by the
table, there were four great financial and commercial crises in this
country. They occurred in 1837, 1841, 1854, and 1857. Observe the
volume of paper currency for those years: On the first day of
January, 1837, the amount had risen to $149,000,000, an increase of
nearly fifty per cent. in three years. Before the end of that year,
the reckless expansion, speculation, and over-trading which caused
the increase, had resulted in terrible collapse; and on the first of
January, 1838, the volume was reduced to $116,000,000. Wild lands,
which speculation had raised to fifteen and twenty dollars per acre,
fell to one dollar and a-half and two dollars, accompanied by a
corresponding depression in all branches of business. Immediately
after the crisis of 1841, the bank circulation decreased twenty-five
per cent., and by the end of 1842 was reduced to $58,500,000, a
decrease of nearly fifty per cent.
“At the beginning of 1853 the amount was $146,000,000. Speculation
and expansion had swelled it to $205,000,000 by the end of that
year, and thus introduced the crash of 1854. At the beginning of
1857 the paper money of the country reached its highest point of
inflation up to that time. There were nearly $215,000,000, but at
the end of that disastrous year the volume had fallen to
$135,000,000, a decrease of nearly forty per cent. in less than
twelve months. In the great crashes preceding 1837 the same
conditions are invariably seen—great expansion, followed by a
violent collapse, not only in paper money, but in loans and
discounts; and those manifestations have always been accompanied by
a corresponding fluctuation in prices.
“In the great crash of 1819, one of the severest this country ever
suffered, there was a complete prostration of business. It is
recorded in Niles’s _Register_ for 1820 that, in that year, an Ohio
miller sold four barrels of flour to raise five dollars, the amount
of his subscription to that paper. Wheat was twenty cents per
bushel, and corn ten cents. About the same time Mr. Jefferson wrote
to Nathaniel Macon:
“‘We have now no standard of value. I am asked eighteen dollars
for a yard of broadcloth which, when we had dollars, I used to
get for eighteen shillings.’
“But there is one quality of such a currency more remarkable than
all others—its strange power to delude men. The spells and
enchantments of legendary witchcraft were hardly so wonderful. Most
delusions can not be repeated; they lose their power after a full
exposure. Not so with irredeemable paper money. From the days of
John Law its history has been a repetition of the same story, with
only this difference: No nation now resorts to its use except from
overwhelming necessity; but whenever any nation is fairly embarked,
it floats on the delusive waves, and, like the lotus-eating
companions of Ulysses, wishes to return no more.
“Into this very delusion many of our fellow-citizens and many
members of this House have fallen.
“The chief cause of this new-born zeal for paper money is the same
as that which led a member of the Continental Congress to exclaim:
“‘Do you think, gentlemen, that I will consent to load my
constituents with taxes, when we can send to the printer and get
a wagon-load of money, one quire of which will pay for the
whole?’
“It is my clear conviction that the most formidable danger with
which the country is now threatened is a large increase in the
volume of paper money.
“Shall we learn nothing from experience? Shall the warnings of the
past be unheeded?”
Here followed a brilliant historical review of the experience of the
Colonies, of the Continental Congress, and of England, with paper money.
“From these considerations it appears to me that the first step
toward a settlement of our financial and industrial affairs should
be to adopt and declare to the country a fixed and definite policy,
so that industry and enterprise may be based upon confidence; so
that men may know what to expect from the Government; and, above
all, that the course of business may be so adjusted that it shall be
governed by the laws of trade, and not by the caprice of any man or
of any political party in or out of Congress....
“On the 10th of February, I introduced a bill which, if it should
become a law, will, I believe, go far toward restoring confidence
and giving stability to business, and will lay the foundation on
which a general financial policy may be based, whenever opinions are
so harmonized as to make a general policy possible.
“As the bill is short, I will quote it entire, and call attention
for a few moments to its provisions:
“‘A BILL TO PROVIDE FOR A GRADUAL RETURN TO SPECIE PAYMENTS.
“‘_Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled_: That on and
after the first day of December, 1868, the Secretary of the
Treasury be, and he is hereby, authorized and directed to pay
gold coin of the United States for any legal-tender notes of the
United States, which may be presented at the office of the
Assistant Treasurer, at New York, at the rate of one dollar in
gold for one dollar and thirty cents in legal-tender notes. On
and after the first day of January, 1869, the rate shall be one
dollar in gold for one dollar and twenty-nine cents in
legal-tender notes; and at the beginning of and during each
succeeding month, the amount of legal-tender notes required in
exchange for one dollar in gold shall be one cent less than the
amount required during the preceding month, until the exchange
becomes one dollar in gold for one dollar in legal-tender notes;
and on and after the first day of June, 1871, the Secretary of
the Treasury shall exchange gold for legal-tender notes, dollar
for dollar. _Provided_: That nothing in this act shall be so
construed as to authorize the retirement or cancellation of any
legal-tender notes of the United States.’
* * * * *
“I do not doubt that, in anticipation of the operation of this
measure, should it become a law, gold would be at 130, or lower, by
the 1st of December, and that very little would be asked for from
the Treasury, in exchange for currency. At the beginning of each
succeeding month the exchange between gold and greenbacks would be
reduced one cent, and specie payments would be fully resumed in
June, 1871. That the country is fully able to resume by that time
will hardly be denied.
“With the $100,000,000 of gold now in the Treasury, and the amount
received from customs, which averages nearly half a million per day,
it is not at all probable that we should need to borrow a dollar in
order to carry out the provisions of the law.
“But taking the most unfavorable aspect of the case, and supposing
that the Government should find it necessary to authorize a gold
loan, the expense would be trifling compared with the resulting
benefits to the country. The proposed measure would incidentally
bring all the national banks to the aid of the Government in the
work of resumption. The banks are required by law to redeem their
own notes in greenbacks. They now hold in their vaults, as a reserve
required by law, $162,000,000, of which sum $114,000,000 are
greenbacks. Being compelled to pay the same price for their own
notes as for greenbacks, they would gradually accumulate a specie
reserve, and would be compelled to keep abreast with the Government
in every step of the progress toward resumption. The necessity of
redeeming their own notes would keep their circulation nearer home,
and would more equally distribute the currency of the country which
now concentrates at the great money centers, and produces scarcity
in the rural districts.
“This measure would not at once restore the old national standard of
value, but it would give stability to business and confidence to
business men every-where. Every man who contracts a debt would know
what the value of a dollar would be when the debt became due. The
opportunity now afforded to Wall Street gamblers to run up and run
down the relative price of gold and greenbacks would be removed. The
element of chance, which now vitiates our whole industrial system,
would, in great part, be eliminated.
“If this measure be adopted it will incidentally settle several of
our most troublesome questions. It will end the war between the
contractionists and the inflationists—a war which, like that of
Marius and Sylla, may almost prove fatal to the interests of the
country, whichever side may prevail. The amount of paper money will
regulate itself, and may be unlimited, so long as every dollar is
convertible into specie at the will of the holder.
“The still more difficult question of paying our five-twenty bonds
would be avoided—completely flanked by this measure. The money paid
to the wounded soldier, and to the soldier’s widow, would soon be
made equal in value to the money paid to all other creditors of the
Government.
“It will be observed that the bill does not authorize the
cancellation or retirement of any United States notes. It is
believed that, for a time at least, the volume of the currency may
safely remain as it now is. When the measure has been in force for
some time, it will be seen whether the increased use of specie for
purposes of circulation will not allow a gradual reduction of the
legal-tender notes. This can be safely left to subsequent
legislation. It will facilitate the success of this plan if Congress
will pass a bill to legalize contracts hereafter made for the
payment of coin. If this be done, many business men will conduct
their affairs on a specie basis, and thus retain at home much of our
gold that now goes abroad.
ENGLISH PRECEDENT.
“I have not been ambitious to add another to the many financial
plans proposed to this Congress, much less have I sought to
introduce a new and untried scheme. On the contrary, I regard it a
strong commendation of this measure, that it is substantially the
same as that by which Great Britain resumed specie payments, after a
suspension of nearly a quarter of a century.
“The situation of England at that time was strikingly similar to our
present situation. She had just emerged from a great war in which
her resources had been taxed to the utmost. Business had been
expanded, and high prices prevailed. Paper money had been issued in
unusual volume, was virtually a legal-tender, and had depreciated to
the extent of twenty-five per cent. Every financial evil from which
we now suffer prevailed there, and was aggravated by having been
longer in operation. Plans and theories without end were proposed to
meet the many difficulties of the case. For ten years the Bank of
England and the majority in Parliament vehemently denied that paper
money had depreciated, notwithstanding the unanswerable report of
the Bullion Committee of 1810, and the undeniable fact that it took
twenty-five per cent. more of notes than of coin to buy an ounce of
gold.
“Many insisted that paper was a better standard of value than coin.
Some denounced the attempt to return to specie as unwise, others as
impossible. William Cobbett, the famous pamphleteer, announced that
he would give himself up to be broiled on a gridiron whenever the
bank should resume cash payments; and for many years kept the
picture of a gridiron at the head of his _Political Register_, to
remind his readers of his prophecy. Every phase of the question was
discussed by the best minds of the kingdom, in and out of
Parliament, for more than ten years; and in May, 1819, under the
lead of Robert Peel, a law was passed fixing the time and mode of
resumption.
“It provided that on the 1st of February, 1820, the bank should
give, in exchange for its notes, gold bullion in quantities not less
than sixty ounces, at the rate of 81s. per ounce; that, from the 1st
of October, 1820, the rates should be 79s. 6d.; from the 1st of May,
1822, 79s. 10½d.; and on the 1st of May, 1823, the bank should
redeem all its notes in coin, whatever the amount presented. The
passage of the act gave once more a fixed and certain value to
money; and business so soon adjusted itself to the measure in
anticipation, that specie payments were fully resumed on the 1st of
May, 1821, two years before the time fixed by the law. Forty-seven
years have elapsed since then, and the verdict of history has
approved the wisdom of the act, notwithstanding the clamor and
outcry which at first assailed it. So plainly does this lesson apply
to us, that in the preface to one of the best histories of England,
recently published, the author, who is an earnest friend of the
United States, says:
“‘It seems to me that no thoughtful citizen of any nation can read
the story of the years before and after Peel’s bill of 1819,
extending over the crash of 1825–’26, without the strongest desire
that such risks and calamities may be avoided in his own country at
any sacrifice. There are several countries under the doom of
retribution for the license of an inconvertible paper currency, and
of these the United States are unhappily one. This passage of
English history may possibly help to check the levity with which the
inevitable ‘crash’ is spoken of by some, who little dream what the
horrors and griefs of such a convulsion are. It may do more if it
should show any considerable number of observers that the affairs of
the economic world are as truly and certainly under the control of
natural laws as the world of matter without and that of mind
within.’”
* * * * *
This speech is remarkable. It is wonderful. Had that resumption bill
become a law, it is possible and probable that the panic of 1873, and
the long years of distress might have been, if not avoided, at least
greatly shortened and alleviated. The argument never was and never could
be improved upon by any one. In the light of history that speech was a
prophecy. Congress procrastinated a return to specie payment. Finally
the crash came, as he had foretold. Garfield once said, “After the
battle of arms comes the battle of history.” In writing a historical
estimate of the leaders of the epoch which closed with the consummation
of specie payments, the critical historian would rightly claim that this
speech of General Garfield, in the spring of 1868, _five and a-half
years before the panic_, must take rank as a triumph of statesmanship
above every argument, no matter how able or eloquent, _made after the
panic_. In this speech Garfield showed his conservatism again in
favoring the continuation of greenbacks in circulation, the very thing
which was done over the bitter opposition of resumptionists seven years
before.
In the earlier part of the speech he showed the necessity of an
adjustable volume of currency. With specie this was easy. With paper
currency the volume could be made adjustable through banks. They were
the institutions to ease us through the straits to resumption. Their
mission was more fully elaborated in a speech of June 7, 1870. The West
and South having an insufficient number of banks, and, consequently,
lacking the currency of checks, drafts, etc., were suffering. To meet
this, he presented a bill redistributing the banks. His views are what
most concern us.
CURRENCY AND THE BANKS.
“I wish first to state a few general propositions touching the
subjects of trade and its instruments. A few simple principles form
the foundation on which rests the whole superstructure of money,
currency, and trade. They may be thus briefly stated:
“_First._ Money, which is a universal measure of value and a medium
of exchange, must not be confounded with credit currency in any of
its forms. Nothing is really money which does not of itself possess
the full amount of the value which it professes on its face to
possess. Length can only be measured by a standard which in itself
possesses length. Weight can only be measured by a standard, defined
and recognized, which in itself possesses weight. So, also, value
can only be measured by that which in itself possesses a definite
and known value. The precious metals, coined and stamped, form the
money of the world, because when thrown into the melting-pot and
cast into bars they will sell in the market as metal for the same
amount that they will pass for in the market as coined money. The
coining and stamping are but a certification by the government of
the quantity and fineness of the metal stamped. The coining
certifies to the value, but neither creates it nor adds to it.
“_Second._ Paper currency, when convertible at the will of the
holder into coin, though not in itself money, is a title to the
amount of money promised on its face; and so long as there is
perfect confidence that it is a good title for its whole amount, it
can be used as money in the payment of debts. Being lighter and more
easily carried, it is for many purposes more convenient than money,
and has become an indispensable substitute for money throughout all
civilized countries. One quality which it must possess, and without
which it loses its title to be called money, is that the promise
written on its face must be good and be kept good. The declaration
on its face must be the truth, the whole truth, and nothing but the
truth. If the promise has no value, the note itself is worthless. If
the promise affords any opportunity for doubt, uncertainty, or
delay, the note represents a vague uncertainty, and is measured only
by remaining faith in the final redemption of the promise.
“_Third._ Certificates of credit under whatever form, are among the
most efficient instruments of trade. The most common form of these
certificates is that of a check or draft. The bank is the
institution through which the check becomes so powerful an
instrument of exchange. The check is comparatively a modern
invention, whose functions and importance are not yet fully
recognized. It may represent a deposit of coin or of paper currency,
convertible or inconvertible; or may, as is more frequently the
case, represent merely a credit, secured by property in some form,
but not by money. The check is not money; yet, for the time being,
it performs all the functions of money in the payment of debts. No
greater mistake can be made than to suppose that the effective value
of currency is not directly increased by the whole amount of checks
in circulation.
“I would not for a moment lose sight of the great first necessity of
all exchanges, that they be measured by real money, the recognized
money of the world; nor of that other necessity next in importance,
that bank notes or treasury notes should represent real money;
should be of uniform value throughout the country, and should be
sufficient in amount to effect all those exchanges in which paper
money is actually used. I would keep constantly in view both these
important factors. But that is a superficial and incomplete plan of
legislation which does not include, in its provisions for the safe
and prompt transaction of business, those facilities which modern
civilization has devised, and which have so largely superseded the
use of both coin and paper money.
“The bank has become the indispensable agent and instrument of trade
throughout the civilized world, and not less in specie paying
countries than in countries cursed by an inconvertible paper
currency. Besides its function of issuing circulating notes, it
serves as a clearing-house for the transactions of its customers. It
brings the buyer and seller together, and enables them to complete
their exchanges. It brings debtors and creditors together, and
enables them to adjust their accounts. It collects the thousand
little hoards of unemployed money, and through loans and discounts
converts them into active capital. It is a reservoir which collects
in amounts available for use, the rain-drops which would otherwise
be lost by dispersion.
“I find there are still those who deny the doctrine that bank
deposits form an effective addition to the circulation. But let us
see. A bank is established at a point thirty or forty miles distant
from any other bank. Every man within that circle has been
accustomed is keep in his pocket or safe a considerable sum of money
during the year. That average amount is virtually withdrawn from
circulation, and for the time being is canceled, is dead. After a
new bank is established, a large portion of that average amount is
deposited with the bank, and a smaller amount is carried in their
safes and pockets. These accumulated deposits placed in the bank, at
once constitute a fund which can be loaned to those who need credit.
At least four-fifths of the average amount of deposits can be loaned
out, thus converting dead capital into active circulation.
“But the word deposits covers far more than the sums of actual money
placed in the bank by depositors. McLeod, in his great work on
banking, says: ‘Credits standing in bankers’ books, from whatever
source, are called deposits. Hence a deposit in banking language
always means a credit in a banker’s books in exchange for money or
securities for money,’—Vol. ii, p. 267.
“Much the largest proportion of all bank deposits are of this
class—mere credits on the books of the bank. Outside the bank, these
deposits are represented by checks and drafts. Inside the bank, they
effect settlements, and make thousands of payments by mere transfer
from one man’s account to that of another. This checking and
counter-checking and transferring of credit, amounts to a sum vastly
greater than all the deposits. No stronger illustration of the
practical use of deposits can be found than in the curious fact,
that all the heavy payments made by the merchants and dealers in the
city of Amsterdam for half a century, were made through a supposed
deposit which had entirely disappeared some fifty years before its
removal was detected. Who does not know that the six hundred
millions of dollars of deposits reported every quarter as a part of
the liabilities of the national banks, are mainly credits which the
banks have given to business men?
“No currency can meet the wants of this country unless it is founded
directly upon the demands of business, and not upon the caprice, the
ignorance, the political selfishness, of any party in power.
“What regulates now the loans and discounts and credits of our
National banks? The business of the country. The amount increases or
decreases, or remains stationary, as business is fluctuating or
steady. This is a natural form of exchange, based upon the business
of the country and regarded by its changes. And when that happy day
arrives, when the whole volume of our currency is redeemable in gold
at the will of the holder, and recognized by all nations as equal to
money, then the whole business of banking, the whole volume of
currency, the whole amount of credits, whether in the form of
checks, drafts, or bills, will be regulated by the same general
law—the business of the country.”
At last, Congress came up to the position taken by Garfield in 1868. In
1875, the Resumption Act was passed, providing that, after January 1,
1879, the United States Treasury would offer one dollar in gold for
every dollar in greenbacks presented for redemption. That this law was
ten years too late can not be doubted. The delay prolonged the agony.
But it was all that popular opinion would allow. In the interim between
1875 and 1879, every effort was made by the paper-money men to repeal
the act. Of General Garfield’s speeches in its defense, we select that
of November 16, 1877, as the type. The reader shall see whether he had
changed his views, whether the panic and hard times had disconcerted his
calculations? Let James A. Garfield speak for himself:
THE REPEAL OF THE RESUMPTION ACT.
“We are engaged in a debate which has lasted in the Anglo-Saxon
world for more than two centuries, and hardly any phase of it to
which we have listened in the course of the last week is new. Hardly
a proposition has been heard on either side which was not made one
hundred and eighty years ago in England, and almost a hundred years
ago in the United States. So singularly does history repeat itself.
“That man makes a vital mistake who judges of truth in relation to
financial affairs from the changing phases of public opinion. He
might as well stand on the shores of the Bay of Fundy, and, from the
ebb and flow of a single tide, attempt to determine the general
level of the sea, as to stand on this floor and from the current of
public opinion in any one debate, judge of the general level of the
public mind. It is only when long spaces along the shore of the sea
are taken into account, that the grand level is found, from which
all heights and depths are measured. And it is only when long spaces
of time are considered that we find at last the level of public
opinion which we call the general judgment of mankind. From the
turbulent ebb and flow of the public opinion of to-day I appeal to
that settled judgment of mankind on the subject-matter of this
debate.
“In the short time which is allotted to me I invite the attention of
gentlemen, who do me the honor to listen, to a very remarkable fact.
I suppose it will be admitted on all hands, that 1860 was a year of
unusual business prosperity in the United States. It was at a time
when the bounties of Providence were scattered with a liberal hand
over the face of our Republic. It was a time when all classes of our
community were well and profitably employed. It was a time of peace;
the apprehension of our great civil war had not yet seized the minds
of our people. Great crops North and South, great general prosperity
marked the era.
“If one thing was settled above all other questions of financial
policy in the American mind at that time, it was this, that the only
sound, safe, trustworthy standard of value is coin of a standard
weight and fineness, or a paper currency convertible into coin at
the will of the holder. That was and had been for several
generations the almost unanimous opinion of the American people. It
is true there was here and there a theorist dreaming of the
philosopher’s stone, dreaming of a time when paper money, which he
worshiped as a kind of fetish, would be crowned as a god; but those
dreamers were so few in number that they made no ripple on the
current of public thought, and their theories formed no part of
public opinion, and the opinion of 1860–’61 was the aggregated
result of the opinions of all the foremost Americans who have left
their record upon this subject.
“I make this statement without fear of contradiction, because I have
carefully examined the list of illustrious names and the records
they have left behind them. No man ever sat in the chair of
Washington as President of the United States who has left on record
any word that favors inconvertible paper money as a safe standard of
value. Every President who has left a record on the subject has
spoken without qualification in favor of the doctrine I have
announced. No man ever sat in the chair of the Secretary of the
Treasury of the United States who, if he has spoken at all on the
subject, has not left on record an opinion equally strong, from
Hamilton down to the days of the distinguished father of my
colleague [Mr. Ewing], and to the present moment.
“The general judgment of all men who deserve to be called the
leaders of American thought ought to be considered worth something
in an American House of Representatives on the discussion of a great
topic like this. What happened to cause a departure from this
general level of public opinion? Every man knows the history. War,
the imperious necessities of war, led the men of 1861–’62 to depart
from the doctrine of the fathers; but they did not depart from it as
a matter of choice, but compelled by overmastering necessity. Every
man in the Senate and House of 1862 who voted for the greenback law,
announced that he did it with the greatest possible reluctance and
with the gravest apprehension for the result. Every man who spoke on
the subject, from Thaddeus Stevens to the humblest member in this
House, and from Fessenden to the humblest Senator, warned his
country against the danger that might follow, and pledged his honor
that at the earliest possible moment the country should be brought
back to the old, safe-established doctrine of the fathers.
“When they made the law creating the greenbacks they incorporated
into its essential provisions the most solemn pledge men could
devise, that they would come back to the doctrines of the fathers.
The very law that created the greenback provided for its redemption
and retirement; and every time the necessities of war required an
additional issue, new guarantees and new limitations were put upon
the new issues to insure their ultimate redemption. They were issued
upon the fundamental condition that the number should be so limited
forever that under the law of contracts the courts might enforce
their sanctions. The men of 1862 knew the dangers from sad
experience in our history; and, like Ulysses, lashed themselves to
the mast of public credit when they embarked upon the stormy and
boisterous sea of inflated paper money, that they might not be
beguiled by the siren song which would be sung to them when they
were afloat on the wild waves.
“But the times have changed; new men are on deck; men who have
forgotten the old pledges; and now only twelve years have passed
(for as late as 1865 this House, with but six dissenting votes,
resolved again to stand by the old ways and bring the country back
to sound money)—only twelve years have passed, and what do we find?
We find a group of theorists and doctrinaires who look upon the
wisdom of the fathers as foolishness. We find some who advocate what
they call “absolute money;” who declare that a piece of paper
stamped a “dollar” is a dollar; that gold and silver are a part of
the barbarism of the past, which ought to be forever abandoned. We
hear them declaring that resumption is a delusion and a snare. We
here them declaring that the eras of prosperity are the eras of
paper money; and they point us to all times of inflation as a period
of blessing to the people, prosperity to business; and they ask us
no more to vex their ears with any allusion to the old standard, the
money of the Constitution. Let the wild crop of financial literature
that has sprung into life within the last twelve years witness how
widely and how far we have drifted. We have lost our old moorings,
have thrown overboard our old compass; we sail by alien stars,
looking not for the haven, but are afloat on an unknown sea....
“No theory of currency that existed in 1860 can justify the volume
now outstanding. Either our laws of trade, our laws of value, our
laws of exchange, have been utterly reversed or the currency of
to-day is in excess of the legitimate wants of trade. But I admit
freely that no Congress is wise enough to determine how much
currency the country needs. There never was a body of men wise
enough to do that. The volume of currency needed, depends upon laws
that are higher than Congress and higher than governments. One thing
only legislation can do. It can determine the quality of the money
of the country. The laws of trade alone can determine its quantity.
“In connection with this view we are met by the distinguished
gentleman from Pennsylvania [Mr. Kelley] with two historical
references on which he greatly relies in opposing resumption. The
first is his reference to France. Follow France, says the honorable
gentleman from Pennsylvania, follow France, and see how she poured
out her volumes of paper money, and by it survived a great crisis
and maintained her business prosperity. Oh, that the gentleman and
those who vote with him would follow France! I gladly follow up his
allusion to France. As a proof that we have not enough money, he
notices the fact that France has always used more money than either
the United States or England. I admit it. But does the gentleman not
know that the traditions and habits of France are as unlike those of
England and the United States as those of any two nations of the
world can be in regard to the use of money? I say to the gentleman
that in France, banking, as an instrument of trade, is almost
unknown. There are no banks in France except the Bank of France
itself. The government has been trying for twenty years to establish
branches in all the eighty-nine departments, and thus far only
fifty-six branches have been organized. Our national, State, and
private banks number nearly ten thousand. The habits of the French
people are not adapted to the use of banks as instruments of
exchange. All the deposits in all the saving-banks of France are not
equal to the deposits in the saving-banks of New York City alone. It
is the frequent complaint of Americans who make purchases in Paris
that the merchants will not accept drafts, even on the Bank of
France.
“Victor Bonnet, a recent French writer, says: ‘The use of deposits,
bank accounts, and checks, is still in its infancy in this country.
They are very little used even in great cities, while in the rest of
France they are completely unknown. It is, however, to be hoped that
there will be more employed hereafter, and that here, as in England
and the United States, payments will be more generally made through
the medium of bankers and by transfers in account-current. If this
should be the case, we shall economize both in the use of specie and
of bank-notes; for it is to be observed that the use of bank-notes
does not reach its fullest development except in countries where the
keeping of bank accounts is universal, as is evident by comparing
France in this respect with England.’
“M. Pinard, manager of the Comptoir d’Escompte, testified before the
commission of inquiry, that the greatest efforts had been made by
that institution to induce French merchants and shopkeepers to adopt
English habits in respect to the use of checks and the keeping of
bank accounts, but in vain; their prejudices were invincible. ‘It
was no use reasoning with them; they would not do it, because they
would not.’
“So long as the business of their country is thus done hand to hand
by the use of cash, they need a much greater volume of money in
proportion to their business than England or the United States.
“How is it in England? Statistics, which no man will gainsay, will
show that ninety-five per cent. of all the great mercantile
transactions of England is done by drafts, checks, and commercial
bills and only five per cent. by the actual use of cash. The great
business of commerce and trade is done by drafts and bills. Money is
now only the small change of commerce. And how is it in this
country? We have adopted the habits of England, and not of France,
in this regard. In 1871, when I was Chairman of the Committee on
Banking and Currency, I asked the Comptroller of the Currency to
issue an order naming fifty-two banks which were to make an analysis
of their receipts. I selected three groups: The first group were the
city banks; not, however, the clearing-house banks, but the great
city banks not in the clearing-house association. The second group
consisted of banks in cities of the size of Toledo and Dayton, in
the State of Ohio. In the third group, if I may coin a word, I
selected the ‘countriest’ banks—the smallest that could be found at
points away from railroads and telegraphs.
“The order was that all those banks should analyze all their
receipts for six consecutive days, putting into one list all that
can be called cash, either in coin, greenbacks, bank-notes, or
coupons; and into the other list all drafts, checks, or commercial
bills. What was the result? During those six days $157,000,000 were
received over the counters of those fifty-two banks; and, of that
amount, $19,370,000 was in cash—twelve per cent. only in cash; and
eighty-eight per cent. of that vast amount, representing every grade
of business, was in checks, drafts, and commercial bills. Does a
country that transacts its business in that way need as much
currency afloat among the people as a country like France, without
banks, without savings institutions, and whose people keep their
money in hoards.
“I remember in reading one of the novels of Dumas, when an officer
of the French army sent home his agent to run his farm, he loaded
him down with silver enough to conduct the business for a year;
there was no thought of giving him credit in a bank; but of locking
in the till, at the beginning of the year, enough coin to do the
business of the year. So much for the difference between the habits
of France and those of Anglo-Saxon countries. Let us now consider
the conduct of France during and since the German war. In July,
1870, the year before the war began, the Bank of France had
outstanding $251,000,000 of paper circulation, and held in its
vaults $229,000,000 of coin. When the war broke out, they were
compelled immediately to issue more paper, and to make it a legal
tender. They took pattern by us in their necessity, and issued paper
until, on the 19th of November, 1873, four years ago next Monday,
they had $602,000,000 of paper issued by the Bank of France, while
the coin in the bank was reduced to $146,000,000.
“But the moment their great war was over, they did what I
recommended to the gentleman from Pennsylvania [Mr. Kelley], they
commenced to reduce their paper circulation, and in one year reduced
it almost $100,000,000, and increased the coin circulation
$120,000,000. In the year 1876 they had pushed into circulation
$200,000,000 of coin, and retired nearly all their small notes. They
are at this moment within fifty days of resumption of specie
payments. Under their law, fifty days from to-day, France will again
come into the illustrious line of nations who believe in a sound
currency. I commend to the eloquent gentleman from Pennsylvania [Mr.
Kelley] the example of France....
“The overwhelming and fixed opinion of England is that the
cash-resumption act of 1819 was a blessing and not a curse, and that
the evils which England suffered from 1821 to 1826 did not arise
from the resumption of cash payments. I appeal to every great writer
of acknowledged character in England for the truth of this position.
I ask the gentleman to read the eighth chapter of the second book of
Miss Martineau’s _History of the Peace_, where the case is admirably
stated. I appeal also to the opinion of Parliament itself,
especially to the House of Commons, which is as sensitive an index
of public opinion as England knows. When they were within about
eighteen months of resumption of specie payment, a motion was made,
like the motion of my colleague from Ohio [Mr. Ewing], that the
resumption-act bill be repealed or modified, because it was
producing distress. And a number of gentlemen in the House of
Commons made speeches of the same spirit as those which we have
heard here within the past week. The distress among the people, the
crippling of business, the alarm of the mercantile classes, all were
paraded in the House of Commons, and were answered by those knights
of finance whose names have become illustrious in English history.
And at the end of a long debate on that proposition, on the 11th of
April, 1821, a vote was taken, and the proposition was rejected by a
vote of 141 to 27. In other words, by a vote of 141 to 27 the House
of Commons resolved that their act for the resumption of specie
payments was not causing distress, and ought not to be repealed, and
ought not to be modified, except to make it more effective. As a
matter of fact, it was so modified as to allow resumption to take
place much sooner than was provided in the act of 1819....
“I now proceed to notice the second point that has been made in
favor of this bill. It is assumed that specie payment will injure
the debtor class of this country, and thereby oppress the poor; in
other words, that the enforcement of the resumption law will oppress
the poor and increase the riches of the rich. It is assumed that the
laboring-men are in debt, and that the rich men constitute the
creditor class. I deny this proposition _in toto_. I affirm that the
vast majority of the creditors of this country are the poor people;
that the vast majority of the debtors of this country are the
well-to-do people—in fact, people who are moderately rich.