ECONOMIC POLITICS
The enormous strides with which we paid off our war debt amazed the
world. The debt had reached its highest point in August, 1865. At that
date the figure was $2,844,649,626, or, for the interest-bearing part
alone, $2,381,530,294, The total interest-bearing debt on April 30,
1888, was only $1,038,199,762. At the end of that fiscal year, June 30,
1888, the debt, less cash in the treasury, amounted to $1,165,584,656.
Its items at this time were $222,207,050 in bonds at 4-1/2 per cent.,
payable in 1891; $714,315,450 in four per cent. bonds, payable in 1907;
four per cent. refunding certificates amounting to $141,300; the three
per cent. navy pension fund of $14,000,000, and the Pacific Railway six
per cent. bonds, $64,623,512. Thus on June 30,1888, more than half of
the largest total had been paid off, and the net debt, aside from the
Pacific Railway bonds, which that corporation was to pay, having fallen
to below a billion. The reduction proceeded for the entire twenty-three
years between the first and last dates named, at an average rate of
$62,906,975 yearly, or $5,225,581 each month, $174,186 each day, $7,258
each hour, and $120.47 each minute.
The interest-bearing legal tender notes were first paid off. Greenbacks,
or non interest-bearing legal tenders were still, October 1, 1894,
outstanding to the amount of $346,681,000; yet this division of the
debt, too, had been vastly reduced, having stood at $433,160,569 on
August 31, 1865.
To the bonded obligations of the country the policy of refunding was
early applied, bonds of high rates being called in so soon as callable,
and replaced by others bearing lower rates. The income of the Government
was so immense that it proved unfortunate to have set so late a date as
1891 for the time at which the 4-1/2's could be paid off. To fix the
date of maturity for the 4's in 1907 was, of course, worse still. The
three per cents. of 1882, which supplanted earlier issues, were
fortunately made payable at the Government's option, and on May 20,
1887, the Secretary of the Treasury issued a call for the last of them,
amounting to $19,717,500, interest to cease with the first of the next
July.
From this time there were no bonds subject to par payment at the
discretion of the Government, and as revenues were vast the surplus
began to pile up in the treasury. December 1, 1887, after every possible
obligation of the Government had been provided for, $55,258,701
remained, a sum increased by the end of that fiscal year, namely, June
30, 1888, spite of considerable amounts in long bonds purchased at high
rates, to $103,220,464, There was no method at once legal and economical
for paying this out. The Secretary could of course buy 4's and 4-1/2's
in the open market, and during 1888 this was to some extent done.
Obviously, if entered upon in a large way, it must have greatly carried
up the price of those bonds. The question how to limit the surplus, how
to keep the money of the country from becoming locked up in the treasury
and sub-treasuries of the United States, was thus a grave one, and
entered hotly into the political campaign of the last-named year.
On June 30, 1890, $109,015,750 in the 4-1/2 per cent. bonds, redeemable
September 1, 1891, were still outstanding. By April 1, 1891, they had,
by redemption or purchase, been reduced to $53,854,250, of which
one-half in value was held by national banks, to sustain their
circulation. To avoid contracting this circulation the Secretary of the
Treasury permitted holders of these bonds to retain them and receive
interest at two per cent. About $25,364,500 was so continued. Interest
on the remainder ceased at their maturity, and nearly all were soon paid
off. The bonds continued at two per cent. were all along quoted at par,
though payable at the will of the Government, revealing a national
credit never excelled in history. The national debt, less cash in the
treasury, stood on July 1, 1894, after an increase during the previous
fiscal year of $60,000,000, at $899,313,381.
The old tariff issue had emerged again soon after the end of the war.
The Morrill tariff of 1861 about restored the rates of 1846, and even
those rates had, on many things, been very decidedly increased during
the war. Still further protective duties had been laid in the course of
the war, called compensating duties, to offset the internal revenues
which burdened manufacturers in various ways. After the war the internal
taxes were nearly all swept away at the earliest possible moment, until,
after July 1, 1883, only spirits, fermented liquors, tobacco, banks and
bankers yielded internal revenue. Customs duties were also removed from
nearly all so-called revenue articles, as spices, tea, and coffee, not
produced in this country--the tax, therefore, not being of a protective
nature. Slight reductions were, indeed, made in protective duties, first
in 1872--replaced, however, almost entirely in 1875--and again in 1883.
The act of 1883 lowered protection less than appeared, and its rates on
woollens, high grade cottons, iron ore, steel, and a few other articles,
were now made even higher than the same had previously borne. It will be
seen that our policy during the years under survey was to limit national
income sufficiently without lowering or removing any protective duties.
In the republican platform of 1888 this policy was explicitly avowed. At
that time, as next to nothing could at present be done to pay off the
national indebtedness, both parties had to admit that some measure was
needed to lessen the revenue. The republican plan was to effect the
reduction mainly by lowering or removing the remaining internal taxes,
the democratic to secure the same result by changes in customs duties,
cutting down rates and enlarging the free list. President Cleveland's
message to Congress in December 1887, stated the issue with great
clearness, and this issue was the main one which divided the two parties
in the presidential election of the ensuing year.
Anticipating a little we may remark in this place that the Republicans,
having acquired control of all three legislative branches of the
Government, passed, in 1890, the McKinley Tariff Act, considerably
raising rates, though somewhat enlarging the free list. It removed the
duty from raw sugar, affixing a bounty to the production of sugar in the
United States. But in 1892 the Democrats again acquired power, electing
Mr. Cleveland and controlling the Senate. In 1894 they passed the
Wilson-Senate Tariff Act, greatly reducing rates in general, and
free-listing the important commodities of wool, salt, and lumber. Raw
sugar was now taxed again, and the bounty upon its production abolished.
The revenue question in this campaign was not a little complicated by
the existence of numerous and powerful Trusts, which anti-protectionists
believed to be fostered by our high tariff. The Trust System arose about
1876, and in the course of a few years almost every great enterprise in
the land was carried on under the form of a trust. The principal
corporations or men engaged in an industry would enter into combination,
more or less informal, for the regulation of production and prices.
Usually the result was an elevation of prices, and where the trust
constituted a necessary monopoly this rise might be indefinitely
perpetuated. High tariff as well as low tariff newspapers made great
outcry against these monopolies. The latter urged that a reduced tariff,
forcing these businesses more into competition with corresponding
producers abroad, was the only thing needful to break their solidarity
and consequent power. Advocates of high tariff denied this.
The old silver dollar, "the Dollar of the Fathers," had, until 1873,
never ceased to be full legal tender, although it had since 1853 been
too valuable as compared with the gold dollar to circulate much. In 1873
a law was passed demonetizing it, and making gold the exclusive form of
United States hard money. The new German Empire did the same this very
year. There at once began a great apparent depreciation of silver in
comparison with gold at the historic ratio. For a long time this change
involved no decrease in the value or purchasing power of silver even in
the form of bullion, but consisted rather in a rise of the value of
gold.
In view of this, as all the Government bonds outstanding in 1873 had
been made payable in coin, it was as good as universally believed in
most sections of the Union that the demonetizing of silver, if persisted
in, would work hardship to taxpayers in liquidating the national debt. A
bill was therefore brought forward, and in 1878 passed, restoring to the
silver dollar its full legal tender character. In this legislation,
however, so great was the then disparity in value between gold and
silver at the ratio of 16 to 1, Congress did not venture to give back to
the white metal the right of free coinage, but instead required the
Secretary of the Treasury to purchase monthly not less than $2,000,000
worth of silver and coin it into dollars.
The act was disapproved by President Hayes, but immediately passed over
his veto, February 28, 1878. The advocates of gold monometallism
believed that the issue of these dollars would speedily drive gold from
the country. Owing to the limitation of the new coinage no such effect
was experienced, and the silver dollars, or the certificates
representing them, floated at par with gold, which, indeed, far from
leaving the country, was imported in vast amounts nearly every year.
After 1880 the money in circulation in the United States was gold coin,
silver coin gold certificates, greenbacks or United States notes, and
the notes of the national banks. The so-called Sherman Law, of 1890,
added a new category, the treasury notes issued in payment for silver
bullion. It stopped the compulsory coinage of full-tender silver, though
continuing and much increasing the purchase of silver bullion by the
Government. The repeal of the purchase clause of this law, in 1893, put
an end to the acquisition of silver by the United States.
January 1, 1879, the next year after the silver bill was passed, the
United States, under the Resumption Act of January 14, 1875, began again
the payment, which had been suspended ever since 1862, of specie in
liquidation of greenbacks. The possibility of this had been under
discussion for some years, and was disbelieved in by many thoughtful
financiers and public men. The credit of the momentous step was mostly
due to John Sherman, Secretary of the Treasury in the cabinet of
President Hayes. He believed resumption to be as possible as it was
important. By the sale of 4-1/2 per cent. bonds redeemable in 1891, he
had accumulated before the appointed day $ 138,000,000 of coin, nearly
all in gold, amounting to about forty per cent. of the greenbacks then
outstanding.
Resumption proved easier than even he anticipated. The greenbacks had
risen to par--the first time in seventeen years--December 18th,
thirteen days before the date fixed for beginning gold payments, and
when the day arrived only straggling applications for coin were made,
less in amount than was asked for in greenbacks as interest by
bondholders, who could have demanded coin. During the entire year only
$11,456,536 in greenbacks were offered for redemption, while over
$250,000,000 in them were paid out in coin obligations. It was found
that people preferred paper to metal money, and had no wish for gold
instead of notes when assured that the exchange could be made at their
option. Notwithstanding our acceptance of greenbacks for
customs--$109,467,456 during 1879--the treasury at the end of that year
experienced a dearth of these and a plethora of coin, having actually to
force debtors to receive hard money.
Such popularity of the greenbacks stimulated to fresh life the "fiat
greenback" theory, long in vogue and very influential in many parts of
the country. Its pith lay in the proposition that money requires in its
material no intrinsic value, its worth and purchasing power coming
entirely from the "fiat" of the government issuing it, so that paper
money put forth by authority of a solvent and powerful government will
be the peer of gold. This idea was the rallying point of the National
Labor Greenback Party, organized at its Indianapolis convention, May 17,
1876, when Peter Cooper was put in nomination for President. At the
subsequent presidential election in November, he received 82,640 votes.
The next year his party polled 187,095 votes; in 1878, 1,000,365.
From the moment of its issue, there had been in the country many who
went to the opposite extreme with reference to the greenback. They
believed it unconstitutional and pernicious, a menace to the nation's
credit and financial weal. The question came to the Supreme Court during
the war, and this form of contracting debt on the part of the Government
was then justified as a war measure. When the war was over the question
whether the greenback's legal tender quality could still be maintained,
also had to be passed upon by the court. The first decision was in the
negative, but it was subsequently reversed. Still a third question was
whether a man could be forced to take greenbacks in liquidation of debt
after the resumption of specie payments. This was tried out in the
famous case of Juilliard vs. Greenman, and the decision was, as on the
other two occasions, in favor of the greenback. In spite of all this,
however, the zeal for the fiat or non-promissory theory and practice of
paper money almost totally died away after about 1880.
The most desperate and extensive strike that had yet occurred in this
country was that of 1877, by the employees of the principal railway
trunk lines, the Baltimore and Ohio, the Pennsylvania, the Erie, the New
York Central, and their western prolongations. At a preconcerted time
junctions and other main points were seized. Freight traffic on the
roads named was entirely suspended, and the passenger and mail service
greatly impeded. When new employees sought to work, militia and United
States troops had to be called out to preserve order. Baltimore and
Pittsburgh were each the scene of a bloody riot. At the latter place,
where the mob was immense and most furious, the militia were overcome
and besieged in a roundhouse, which it was then attempted to burn by
lighting oil cars and pushing them against it. Fortunately the soldiers
escaped across the river. The torch was applied freely and with dreadful
effect. Machine-shops, warehouses, and 2,000 freight-cars were pillaged
or burnt. The loss of property was estimated at $10,000,000. In
disturbances at Chicago nineteen were killed, at Baltimore nine, at
Reading thirteen, and thrice as many wounded. One hundred thousand
laborers were believed to have taken part in the movement, and at one
time or another 6,000 or 7,000 miles of road were in their power. The
agitation began on July 14th and was serious till the 27th, but had
mostly died away by the end of the month, the laborers nearly all
returning to their work.
Hosts of Pennsylvania miners went out along with the railroad men. The
railway strike itself was largely sympathetic, the ten per cent.
reduction in wages assigned as its cause applying to comparatively few.
The next decade witnessed continual troubles of this sort, though rarely
if in any case so serious, between wage-workers and their employers in
nearly all industries. The worst ones befell the manufacturing portions
of the country. Strikes and lock-outs were part of the news almost every
day. The causes were various. One lay in the vast numbers of immigrants
hither and the low, ignorant character of many of them--clay for the
hand of the first unscrupulous demagogue.
Another cause was the wide and sedulous inculcation in this country of
the communist and anarchist doctrines long prevalent in Europe.
Influences concurrent with both these were the actual injustice and the
proud, overbearing manner of many employers. Capital had been mismanaged
and wasted. The war had brought unearned fortunes to many, sudden wealth
to a much larger number, while the unexampled prosperity of the country
raised up in a perfectly normal manner a wealthy class, the like of
which, in number and power, our country had never known before. As
therefore immigration along with much else multiplied the poor, the
eternal, angry strife of wealth with poverty, of high with low, of
classes with masses, crossed over from Europe and began on our shores.
The rise of trusts and gigantic corporations was connected with this
struggle. Corporations worth nigh half a billion dollars apiece were
able to buy or defy legislatures and make or break laws as they pleased;
and as such corporations, instead of individuals, more and more became
the employers of labor, not only did the old-time kindliness between
help and hirers die out, but men the most cool and intelligent feared
the new power as a menace to democracy. Strikes therefore commanded
large public sympathy. Stock-watering and other vicious practices,
involving the ruin of corporations themselves by the few holders of a
majority of the shares, in order to re-purchase the property for next to
nothing, contributed to this hostility; as did the presence in many
great corporations of foreign capital and capitalists, and also the
mutual favoritism of corporations, showing itself, for instance, in
special freight rates to privileged concerns. Minor interests and
individual employees, powerless against these Titan agencies by any of
the old legal processes, resorted to counter organization.
The Patrons of Husbandry grew up in the West, with influence longer than
the Order's nominal life, of which the often unwise "Granger" railroad
legislation was one sign. In the East trades-unions secured rank
development, and the Knights of Labor, intended as a sort of Union of
them all, attained in 1887 a membership of a million. The manufacturers'
"black list," to prevent any "agitator" laborer from securing work, was
answered by the "boycott," to keep the products of obnoxious
establishments from finding sale. Labor organizations, so strong, often
tyrannized over their own members, and boycotting became a nuisance that
had to be abated by law.
Labor agitation had of late years become greatly easier owing to the
extraordinarily increased percentage of our urban population. In 1790
only 3.3 per cent. of the people in the country lived in places of 8,000
inhabitants and upward, and so late as 1840 only 8.5 per cent. In 1850
the percentage was 12.5; in 1860, 16.1; in 1870, 20.9; in 1880, 22.5;
and in 1890, 29.2. The year 1880 saw within our borders twenty cities
each with a population of over 100,000; 286 each with over 8,000. In
1890 there were twenty-eight cities each having 100,000 inhabitants or
more, and 448 having 8,000 or more. It was mostly manufacturing and
mechanical industry which thus brought these hordes of human beings
together.