The Greening of America
Wednesday, November 29, 2006
THE MONEY MEN
Capitalism, Democracy, and the Hundred Years' War Over the American Dollar
By H.W. Brands
Atlas. 239 pp. $23.95
Americans are notoriously fascinated with money. We want to know who's got it, how they made it, how they're spending it -- and, of course, how we can get more of it for ourselves. We make celebrities out of moneymakers like Donald Trump. We get obsessed with money shows like "Mad Money," "For Love or Money," "Lifestyles of the Rich and Famous" and "Who Wants to Be a Millionaire." But we don't do much thinking about the money itself. It's just money. It comes in bills we shove in our wallets and coins we lose in our couches. It's held in banks that tend to change their names every few years but don't tend to run off with our savings. And it's controlled by the Federal Reserve, an institution that somehow seems boring and mysterious at the same time, and is generally ignored by those of us who don't have adjustable-rate mortgages.
It's actually a sign of great national progress that we don't have to think too deeply about our money. Because as the versatile historian H.W. Brands recounts in "The Money Men," the first five generations of Americans spent an inordinate amount of time and energy fighting over what would constitute money, how much money there would be and who would make the important decisions about money. Brands argues that "the money question" was the most persistent dilemma in U.S. politics from 1776 until 1913, when the creation of the Fed provided an answer. "No question," he writes, "touched more livelihoods and more lives more consistently, more intimately, more portentously."
Perhaps Brands overstates his case -- the race question was a pretty big deal, too -- but this breezy little book provides an elegant overview of America's early financial battles, and a strong argument that they drove the nation's development. It may sound vaguely Marxist or at least unromantic to view U.S. history through the lens of liquidity; disputes over public debt, the national bank and the gold standard don't sound as dramatic as Washington crossing the Delaware or Lincoln freeing the slaves. But Brands helps the medicine go down by weaving his narrative around five compelling characters: Alexander Hamilton, the treasury secretary who promoted national debt and a national bank; Nicholas Biddle, the national bank president who lost an epic battle to stop Andrew Jackson from killing his powerful institution; and three private financiers -- Jay Cooke, who financed the Union's Civil War effort with his innovative bond schemes; Jay Gould, who nearly ruined the economy by cornering the gold market; and J.P. Morgan, who encouraged collusion among the great industrial trusts and bailed out the treasury when it ran low on gold.
To Brands, the story of America's first century is a relatively simple one of struggle between capitalists and democrats. The capitalists, originally led by Hamilton, favored a strong federal government with a strong executive branch; the democrats, led by Thomas Jefferson, favored the states and especially feared a strong executive. The capitalists, representing merchants from the cities of the Northeast, supported a strong currency and opposed inflation on behalf of the creditor class; the democrats, speaking for common farmers and pioneers from the rural South and West, wanted a weaker currency that made it cheaper to pay back loans. The capitalists tilted toward gold, tariffs, a national bank, a loose interpretation of the Constitution and a foreign policy that favored Great Britain at the expense of France; the democrats fought them on each point.
The result was an enduring philosophical debate over government and finance, a debate that galvanized the public for decades in ways that are now reserved for issues like war and presidential promiscuity. The first fight was over the Constitution itself, with Hamilton's Federalists pushing for federal control of money and taxes, and Jefferson's Anti-Federalists warning that the stage was being set for a new King George. Brands follows the debates through Biddle's struggle with Jackson over the vast power of the national bank, and the "free silver" fights that were sparked in part by Gould's gold corner. The problem was always how to mobilize capital to help investors and industrialists develop the country without allowing them to control the country. It was ultimately Morgan's outsize influence on the economy (as well as his haughty defiance of Congress) that helped persuade Americans of the dangers of financial concentration.
The story of early America is not really as simple and money-focused as Brands makes it sound. Take his shorthand account of the nation's origins: "The British frowned on the paper issues as inflationary and in the 1760s outlawed paper money entirely. The edgy colonials soon went over the edge into revolution." Those are both true statements, but shouldn't the words "taxation" and "representation" appear somewhere in between? And while Brands is shrewd to point out that some members of Congress supported the annexation of Texas in order to ensure the security of their bonds, that certainly wasn't the main explanation for the popularity of annexation in the era of Manifest Destiny.
Still, "The Money Men" is an easily readable introduction to long-buried issues that once defined America's political culture. Today most Americans consider themselves democrats and capitalists, and now that most of us work for wages, average Americans fear inflation as much as titans of industry. We still squabble about taxes, deficits and tariffs, but we no longer debate whether, say, states should be allowed to print their own money. The money question is now irrelevant. And that just proves how important it was that we answered it correctly.