Democratick Editorials: Essays in Jacksonian Political Economy

By William Leggett

Ten years after Thomas Jefferson’s death in 1826, an outspoken young editor in New York City was reformulating and extending the Jeffersonian philosophy of equal rights. William Leggett, articulating his views in the columns of the New York
Evening Post,Examiner, and
Plaindealer, gained widespread recognition as the intellectual leader of the
laissez-faire wing of Jacksonian democracy…. [From the Foreword by Lawrence H. White.]

Book Cover

Translator/Editor

Lawrence H. White, ed.

First Pub. Date

1834

Publisher

Indianapolis: Liberty Fund, Inc. Liberty Press

Pub. Date

1984

Comments

Essays first published 1834-1837.

Copyright

Portions of this edited edition are under copyright. Picture of William Leggett courtesy of United States Library of Congress. Original contains the inscription: "Engraved by Sealey, from a Painting by T. S. Cummings, N A." and includes Leggett's signature below.

SEPARATION OF BANK AND STATE

Plaindealer, May 27, 1837.

When a hurricane passes over the land, spreading its surface with wrecks, they who survive its fury, though for a while stupified with terrour, soon recover their faculties, and set about to free the soil of the shivered fragments, and reconstruct their edifices in a mode better able to sustain the violence of future tempests. We are now in this condition. A hurricane has passed over our land, and the traces of its wrath are scattered around us. We have spent a sufficient time in the inactivity of dismay, and it is now proper to bestir ourselves, and make preparations for the future. It is particularly incumbent on those who are imbued with economick principles, and animated by a sincere desire to promote the lasting good of their country, to exert themselves in forming a correct publick opinion as to the course to be pursued. We lay claim to the latter of these qualifications, and obey its promptings to urge upon our readers that plan which we think alone has the recommendation of perfect accordance with the principles of democracy, and which alone promises, as its result, “the greatest good of the greatest number.”

Our plan may be stated in a phrase of the utmost brevity; for it consists merely in the absolute separation of government from the banking and credit system. Bank and state have been hitherto joined in an unholy union, and we see the fruits of the connexion. Let us now try if we cannot divorce the ill assorted pair, and by so doing promote the prosperity of both, and of all dependant upon them.

It is to be expected that many projects, differing in their nature, motives, and objects, will be urged upon the people. Every scheme of reformation will find earnest, because interested, advocates, and most of them will probably be presented with all the advantages of eloquent exposition and plausible argument. The country constitutes the tribunal which must at last decide the question; and relying, with unbounded confidence, on the foundation which supports the democratick creed, the intelligence and integrity of the great body of the people, we await the final decision with deep interest, but without apprehension.

Among the schemes which will probably be urged, the proposition to reestablish a national bank presents itself most conspicuously. This will assume various modifications. Some will demand the reintegration, in its federal powers, of that gigantick institution which the late administration overthrew, and which now, as a state corporation, lies in wait for a favourable opportunity again to fasten itself upon the American people. Others, rejecting a scheme of resuscitating a bank so justly odious to the great body of the people, will vary their demand, and ask for a federal bank, composed of other corporators, and clothed with more limited powers. A third party, equally anxious for a vast federal engine of finance, will cloak their object under the thin disguise of “a loan office;” while others, having in view the same end essentially, will use a yet more modest appellation, and merely urge the propriety of establishing “a fiscal agent of the government.” These propositions will all naturally spring from the professed aristocracy; while another class of schemes will probably be put forward under the name of the democracy. The aim of these will be, either to raise and reconstruct the prostrated system of state banks as depositaries for the federal revenue, or to build up some new monetary agencies under state control.

Against all these plans alike we avow uncompromising hostility. They all rest on principles violative of the equal rights of man. They are all fraught with danger to popular freedom. They are all essentially the same in their intrinsick characters, differing, indeed, in modes and degrees, but all adverse to that great principle of democratick freedom, on which rest the best hopes of political philanthropy for the complete emancipation and happiness of mankind. They alike ask for exclusive privileges to a few, which are to be withheld from the many. They alike ask for powers dangerous in their very nature; powers to regulate the currency and exchanges; powers, in other words, to control every man’s business, fix the value of property at their arbitrary will, and take from labour the bread it has earned.

We have twice tried the scheme of a federal bank, and twice found that its fruits are bitter. We have seen it fail in the objects for which it was created; and we have seen it nearly succeed in other objects, fatal to the supremacy of the popular will. As a financial agent, we have proved it impotent for the prevention of fluctuations and revulsions; as a political engine, we have proved it dreadfully potent, and by the use of the most detestable means. We have tried the scheme of state banks, also, and the result which we now behold, and which is but the repetition of former similar results, unanswerably proves its deplorable inefficiency.

This is a plain statement of incontrovertible facts. Shall we, then, have recourse anew to the same system which has so utterly failed us before; or shall we not pause to inquire if there is not another system, more in accordance with natural justice, more effectual for the specifick objects proposed, and more free, besides, from objections which, if incidental and collateral, are yet of the most serious moment? We are no enemy to banking. We are no enemy to credit, in any form it may naturally assume between man and man. We confine our enmity solely to political interference with a subject which belongs to trade, and should be left to be governed by the same principles which harmoniously regulate all the affairs to which they are applied. If competition and enterprise were left in an unbounded field, they could not run to wilder excess, than that which we deplore as the consequence of the monopoly system. If free banking should prove as bad, it could not prove worse than the scheme of exclusively privileged banks, and we should at least escape all the degrading effects of bribery, corruption, and the thousand legislative evils, which are the obvious and inevitable consequences of the present system.

But when we speak of free banking, we deal in general terms, and the reader may desire that our views should be stated somewhat more explicitly. We would have banking, then, placed on the same basis as any other business, and neither protected nor restricted by laws, any more than the commonest traffick in which man engages. This depends upon the action of the states, and the sole legislative measure necessary to accomplish it, is to repeal entirely the act known as the restraining law.
*33 We would have the federal government also separate itself wholly from all connexion with banking, recognizing nothing as money but silver and gold, and entrusting its funds to no private individual or association, voluntary or corporate, for safe keeping. The money of the government should be deposited, either in a single depositary at the commercial focus of the country, or at the principal points where collected, and officers appointed charged with the especial duty of guarding it. The various branches of the publick service should be paid with checks or drafts on these depositaries. Banking would thus be reduced to its proper field of action, as a mere auxiliary of commerce. It would not extend itself to a prodigious size, on the borrowed resources of the people, and finally bursting from its own distension, leave the government bankrupt and spread ruin and dismay through all classes of the community.

But under such a system would banks, adequate to the demands of commerce, spring into existence? With the same certainty that the demand brings supply in every other affair of trade. The demands of commerce require an immense number of ships to interchange our commodities with those of every quarter of the globe; but we need no law to say that this man shall be a shipwright and that a joiner, one a rigger and another a caulker. The supply accommodates itself to the demand under the harmonious operation of the laws of trade. It requires enormous capital to carry on certain branches of commerce, the India trade, for example. But no exclusive legislative privileges are necessary. The mere stimulus of profit, the mere fact of demand, immediately sets capital flowing in that channel.

The same universal principle would supply us with banks adequate to all the legitimate demands of commerce. Competition would regulate them more effectually than law. It would lead to their giving the greatest amount of security, and to their paying the highest rate of interest on deposites, and charging the lowest rate of discount on their loans, compatible with a reasonable profit on the investment of capital.

But would you inundate the country with an irresponsible paper currency? We have already guarded against such a result, by requiring that the government, in all its various branches of receipt and expenditure, should know nothing as money but silver and gold. This would, of necessity, always keep a sufficient amount in circulation for all the purposes of ordinary currency. If the bankers exceeded their proper limits, their notes would immediately depreciate, and thus oblige them to retrench. But in the common affairs of life, in the everyday dealings of men, a paper representative of money would be unknown. Your duties to the Custom House, your purchase of publick lands, your fees in the courts of law, and all payments to the officers and functionaries of the government, of every branch and degree, being absolutely required in
actual money, the notes of bankers would be restricted to commercial operations, gold and silver would become the common medium of ordinary traffick, and the people would at last realize the prodigious benefits of a Constitutional Currency.

32.

A four-volume biographical record of the more notorious criminals confined at London’s Newgate Prison, published 1824-28.—Ed.

SEPARATION OF BANK AND STATE

33.

This law prohibited the entry of any bank not expressly chartered by the state legislature.—Ed.

“BLEST PAPER CREDIT”

34.

John Randolph of Roanoke, Representative of Virginia, 1800-1824.—Ed.

35.

“Greedy toward others, extravagant toward himself.”—Ed.

36.

The character Jeremy Diddler, in James Kenney’s farce
Raising the Wind (1803), continually contrives to borrow money.—Ed.