Walter Coffey's Blog, page 195

Poor Ebenezer Scrooge!

Yes, as part of the Christmas season, I am taking the highly unpopular position of defending Ebenezer Scrooge. Thanks to A Christmas Carol, Scrooge has become the quintessential Christmas villain. But Scrooge is the only true victim in the story!

In Charles Dickens’s classic tale, Scrooge is the one who’s constantly harassed by people and spirits seeking to either change him or extort money from him. But why? Because he’s mean? Because he’s miserly? Because he’s selfish? If they don’t like Scrooge as he is, they are free to avoid him. But instead, the story boils down to a simple premise: spread your wealth around and we’ll stop harassing you. It sounds like they’re more interested in his money than in truly reforming him. In fact, it sounds like blackmail to me!

Scrooge Benefits the Community

As Jacob Marley says, “Mankind should have been my business.” But Marley didn’t realize that it was. Marley and Scrooge would have gone bankrupt if their business wasn’t benefiting mankind in some way. After Marley dies, customers aren’t being forced to patronize Scrooge’s business. And if enough people grew tired of Scrooge’s nasty disposition, they’d stop doing business with him, which would force him to change his ways. The free market can fix things just as easily as blackmail.

The people of the community should thank their lucky stars that there’s a man like Scrooge who is willing to use his wealth to offer loans so they can help their families. Maybe they should aspire to be as wealthy as Scrooge, and then they could go into the loan business and offer lower rates that would undercut Scrooge and force him to lower his. Everyone would benefit from such a competitive market.

Perhaps the story would have been better if Scrooge was a struggling businessman rather than a successful one. That way he could learn that in order to turn his business around, he must stop being so mean and selfish. An improved business would provide better goods and services, which would attract more customers, generate more profit, and enable Scrooge to create more jobs. Wouldn’t that be more sensible than terrorizing an old man with ghosts?

The Sloth of Bob Cratchett

Dickens portrays Bob Cratchett as a pathetic soul who can’t provide for his family on the salary that Scrooge pays him. But was Scrooge responsible for the Cratchetts having so many children without having the means to support them? If the Cratchetts are struggling to support their family, then why aren’t they busying themselves with finding more ways to generate income?

Cratchett shows no ambition to look for more work. He’d rather earn his meager salary and wait for charity rather than work harder to cover the shortfall. He isn’t even good at waiting for charity, after all, why didn’t he contact the businessmen who were trying to extort charity from Scrooge and explain why they should help him and his sick child?

Moreover, Cratchett isn’t even a good employee. If he was, then he should be able to market himself either to Scrooge’s competitors to see if they’d pay him a better salary or to Scrooge himself to see if he’d be willing to train him to improve his skill set. Cratchett’s lack of ambition and his mediocre performance indicates that he has minimal value in the workforce, which means that he’s probably being paid exactly what he’s worth!

Actually, Scrooge is doing Cratchett a favor by paying him a lower salary. If word got out that Cratchett’s salary was raised, ambitious applicants with better skills than Cratchett would petition Scrooge to hire them. Cratchett wouldn’t be able to compete with those who were better qualified, and he’d end up unemployed. So Scrooge is helping Cratchett simply by keeping him on and paying him the going salary rather than replacing him with someone who could do a better job!

Three Misguided Spirits

The worst villains of Dickens’s story are the spirits that torture Scrooge, who only asks to be left alone! If these spirits have the power to transcend time and space, then they should have the power to help Tiny Tim without involving Scrooge. Why is it Scrooge’s responsibility to care for the poor child when his parents don’t even have enough ambition to do it? How sadistic are these spirits to attack Scrooge while doing nothing for Tiny Tim?

Perhaps the story would have been better had the spirits visited Bob Cratchett instead:

The Ghost of Christmas Past could show Cratchett examples of how he became so passive, lazy, and incompetent
The Ghost of Christmas Present could show Cratchett the current consequences of his bad behavior
The Ghost of Christmas Future could show Cratchett what will happen if he doesn’t man up!

An Economics Lesson for Dickens

The only character in A Christmas Carol who produces anything of value is Scrooge, and Dickens rewards him by making him the villain. According to Dickens, Scrooge has sinned by earning money and then daring to keep it for himself. Instead of celebrating Scrooge as a successful businessman who provides goods and services that help the community, Scrooge is harassed and terrorized into giving even more to the community, including giving lazy Bob Cratchett a raise! Cratchett is portrayed as the innocent victim, even though he could market his skills elsewhere, learn new skills, or find supplemental employment if he truly wanted to provide for his family.

Dickens appeals to sympathies rather than common sense economic principles. Just because Cratchett would rather sit and hope for help than make himself more marketable doesn’t make Scrooge responsible for his misery. And just because Scrooge is wealthy doesn’t mean he earned it by exploiting the poor. Scrooge is certainly mean, selfish, and miserly, but he has the right to retain his private property without being terrorized. A Christmas Carol may be an inspirational tale of a man who finds redemption, but the only true victim of Dickens’s tale is Ebenezer Scrooge.

This Week in the Civil War: Dec 10-16, 1862

Wednesday, December 10.  In Virginia, General Ambrose Burnside’s Federal Army of the Potomac increased activity at Falmouth, indicating that an attack on Fredericksburg was imminent. In North Carolina, Confederates captured a Federal garrison at Plymouth. The U.S. House of Representatives passed a bill approving the secession of the western part of the state from Virginia. The Senate had already passed a measure creating the state of West Virginia on July 14.

Thursday, December 11.  In Virginia, Federal engineers began constructing pontoon bridge for Burnside’s army to cross the Rappahannock River and enter Fredericksburg. The engineers were under fire from Confederate sharpshooters until Federal artillery cleared them out. Federal forces crossed into Fredericksburg on two bridges and drove the Confederates out of town. Confederate General Robert E. Lee awaited the invasion; the only mystery was where the Federals would strike. In northern Mississippi, Confederate General Nathan Bedford Forrest led about 2,500 men in a raid on Federal General Ulysses S. Grant’s communications.

Confederate General Robert E. Lee

Friday, December 12.  In Virginia, Federal troops continued crossing the Rappahannock and entering Fredericksburg. Confederate General Thomas “Stonewall” Jackson positioned his corps on Lee’s right flank, while General James Longstreet’s corps assembled on the left. It was apparent that there would be a Federal attack the next day. On the Yazoo River north of Vicksburg, Mississippi, the Federal ironclad Cairo struck a mine and sank; the crew escaped. In response to rumors of peace overtures, President Abraham Lincoln wrote to New York Mayor Fernando Wood that if the southern states ceased resistance to national authority, “the war would cease on the part of the United States.”

Saturday, December 13.  The Battle of Fredericksburg took place as the Federal Army of the Potomac attacked the Confederate Army of Northern Virginia outside town. Federal attacks on ”Stonewall” Jackson’s corps were repulsed. The Federals then attacked Longstreet’s corps positioned on a ridge outside town called Mayre’s Heights. After brutal, desperate fighting, the Federals were easily repulsed and their assault failed miserably. Ambrose Burnside’s eagerness to fight Robert E. Lee had led to one of the worst Federal defeats of the war.

In Tennessee, Confederate President Jefferson Davis continued his tour of the South by reviewing General Braxton Bragg’s Army of Tennessee at Murfreesboro and conferring with the generals.

Sunday, December 14.  In Virginia, Ambrose Burnside ordered a renewed attack on Fredericksburg, but his officers persuaded him to change his mind. Robert E. Lee was criticized in the South for failing to counterattack, even though his men were vastly outnumbered. In Washington, President Lincoln held conferences with his generals and advisers. In North Carolina, Federal forces under General John G. Foster captured Kingston. Skirmishing occurred in Tennessee, Mississippi, and Virginia.

Monday, December 15.  In Virginia, the beaten Federal Army of the Potomac completed its withdrawal back across the Rappahannock River and away from Fredericksburg. Many army officers complained about Burnside’s decisions. In Louisiana, General Benjamin Butler relinquished command of the Federal Department of the Gulf, headquartered in New Orleans. The city’s residents were ecstatic to see the controversial general leave. Skirmishing occurred in Tennessee, North Carolina, and Missouri.

Tuesday, December 16.  In Virginia, the Federal Army of the Potomac established positions on Stafford Heights overlooking the Rappahannock. In Louisiana, General Nathaniel Banks assumed command of the Federal Department of the Gulf. In North Carolina, John G. Foster’s Federals skirmished with Confederates at White Hall and Mount Olive Station. President Lincoln postponed the execution of Dakota Sioux Indians (imprisoned for conducting the Dakota Sioux uprising this summer) from December 19 to December 26.

Primary Source: The Civil War Day-by-Day by E.B. Long and Barbara Long (New York, NY: Da Capo Press, Inc., 1971)

Lincoln and Liberty

I haven’t had a chance to see Steven Spielberg’s Lincoln yet, but it’s based on Doris Kearns Goodwin’s book Team of Rivals, which I have read. The movie focuses on the part of the book describing how the Thirteenth Amendment—the permanent end of slavery—was passed.

In her book, Goodwin generally subscribes to the mainstream opinion that Lincoln wanted to get the amendment passed because he believed in freedom and equality for blacks. But this premise should be met with a healthy dose of skepticism. Lincoln was not the “Great Emancipator” that historians like Goodwin claim him to be; he was a politician above all else, which meant the same then as it does today—politics are first and people second.

The Superior Race?

Throughout his political career, Abraham Lincoln held views that would be considered virulently racist today. In his famous debates with Stephen A. Douglas prior to becoming president, Lincoln said:

“I am not nor ever have been in favor of bringing about in any way the social and political equality of the white and black races… I am not nor ever have been in favor of making voters or jurors of negroes, nor of qualifying them to hold office, nor to intermarry with white people… I as much as any man am in favor of the superior position assigned to the white race… and I will say in addition to this that there is a physical difference between the races which I believe will for ever forbid the two races living together on terms of social and political equality.”

Colonization

For most of his life, Lincoln believed that blacks and whites could not coexist: “There is a natural disgust in the minds of nearly all white people to the idea of indiscriminate amalgamation of the white and black races… A separation of the races is the only perfect preventive of amalgamation, but as an immediate separation is impossible, the next best thing is to keep them apart where they are not already together.”

Lincoln’s solution was mass deportation: “Racial separation must be effected by colonization of the country’s blacks to foreign land.”

Throughout most of the Civil War, Lincoln secretly worked on plans to ship slaves out of the country to the Caribbean, Central America, or back to Africa. Hosting a delegation of free black leaders at the White House, Lincoln asked them to support his deportation plan and explained why he felt it was the best solution to racial issues in America:

“You and we are different races. We have between us a broader difference than exists between almost any other two races. Whether it is right or wrong I need not discuss, but this physical difference is a great disadvantage to us both, as I think your race suffers very greatly, many of them, by living among us, while ours suffers from your presence. In a word, we suffer on each side. If this is admitted, it affords a reason at least why we should be separated… But for your race among us there could not be war… It is better for us both, therefore, to be separated.”

Only when the black leaders, foreign delegations, and abolitionists voiced strong objections did Lincoln abandon his colonization plans.

Appeasement to Slavery

Rather than defend the life and liberty of blacks, Lincoln consistently defended the right of slaveholders to own slaves. When he was running for president, Lincoln had no problem with slavery where it already existed. In his inaugural address, he reiterated his campaign pledge: “I have no purpose, directly or indirectly, to interfere with the institution of slavery in the States were it exists. I believe I have no lawful right to do so, and I have no inclination to do so.”

Before becoming president, Lincoln supported the Fugitive Slave Act, one of the most repugnant laws in American history. This required citizens to help law enforcement hunt down runaway slaves and return them to their masters.

In the time between his election and inauguration in 1861, Lincoln secretly worked with Congress to pass a constitutional amendment that would have prohibited the federal government from ever interfering with slavery where it already existed. It would have also prohibited northern states from resisting the Fugitive Slave Act.

In his first inaugural address, Lincoln mentioned the amendment and his support for it: “I understand a proposed amendment to the Constitution… has passed Congress, to the effect that the federal government, shall never interfere with the domestic institutions of the States, including that of persons held in service… holding such a provision to now be implied constitutional law, I have no objection to its being made express, and irrevocable.”

The amendment was defeated, but had it passed, it would have ironically become the Thirteenth Amendment. Thus, Lincoln’s original vision for the Thirteenth Amendment was not to end slavery, but to allow slavery to continue and enforce the Fugitive Slave Act if the South would remain in the Union.

Lincoln’s True War Aim

In a letter to the New York Tribune, President Lincoln expressed his war aim, which had no regard for the natural rights of blacks to life and liberty: “My paramount object in this struggle is to save the Union… I would save it the shortest way under the Constitution. The sooner the national authority can be restored; the nearer the Union will be ‘the Union as it was’… If I could save the Union without freeing any slave I would do it, and if I could save it by freeing all the slaves I would do it; and if I could save it by freeing some and leaving others alone I would also do that…”

When Lincoln finally issued the Emancipation Proclamation, its main purpose was to weaken the Confederacy and garner foreign support in the war. Even Lincoln acknowledged that this was a wartime measure only, and he stated in the document itself that it was “an act of justice, warranted by the Constitution upon military necessity.” This was more consistent with Lincoln’s goal of preserving the Union than freeing slaves.

Abolition

The Emancipation Proclamation actually freed nobody because it only covered southern regions that were not under federal military occupation. Lincoln was perfectly willing to allow states to continue practicing slavery as long as they remained loyal to the Union. Secretary of State William Seward noted, “We show our own sympathy with slavery by emancipating slaves where we cannot reach them and holding them in bondage where we can set them free.”

Lincoln may have had personal sympathy for slaves, but he supported permanent abolition mostly as a matter of political expediency. When the “Radical” Republicans (i.e., politicians truly devoted to ending slavery) threatened to form their own party in the presidential election year of 1864, Lincoln stole their thunder by announcing support for their key issue: a constitutional amendment abolishing slavery. This kept the Radicals in the party, and after Lincoln was reelected, he joined the Radicals in pushing for abolition. In reality, the Radical Republicans (led by Thaddeus Stevens) did much more to secure passage of the Thirteenth Amendment than did Lincoln because they had been urging permanent abolition for years.

Lincoln’s Legacy

The Thirteenth Amendment became law eight months after Lincoln was killed. The promise of freedom for all Americans was finally realized, and Lincoln certainly played a role in making that happen. But the notion that Lincoln was the “Great Emancipator” is a myth. Someone truly devoted to championing the natural rights of human beings would not have allowed racial prejudice, political expediency, or military necessity to dictate whether those in bondage should be freed.

That being said, I urge everyone to go see Lincoln. But just remember that movies tend to favor entertainment over facts, just as Lincoln tended to favor politics over people.

Espionage, Sedition and Fascism in World War I

One of the most controversial laws in U.S. history was enacted in June 1917. The Espionage Act prohibited Americans from criticizing the military draft or the sale of war bonds as the U.S. prepared to enter World War I. This was the first of a series of laws that violated civil liberties, and in some ways it set a precedent for the later rise of European fascism and the contentious laws enacted by the George W. Bush administration to fight the “War on Terror.”

U.S. Propaganda Poster

The Espionage Act

After declaring war on Germany and the Central Powers in the spring of 1917, Congress sought to raise manpower and money for the war effort by enacting a military draft and selling government bonds. Many opposed the war on various grounds, and in turn they also opposed the draft and bond sales. Fearing that this opposition would hinder the war effort, President Woodrow Wilson pushed Congress to pass what became known as the Espionage Act.

The law expanded the federal definition of illegal “espionage” to include anyone who expressed political opinions construed to be helpful to U.S. enemies. This became a convenient replacement for treason, which was much more difficult to prove in court. Maximum penalties for violating the Espionage Act were 10 years in prison and a $20,000 fine.

Under this law, the postmaster general was empowered to intercept any mail that was suspected of hindering the war effort. Publications that the Wilson administration deemed in violation of the law were “deprived of mailing privilege.” Journalists could be jailed, and newsprint could be rationed for “unacceptable” publications. This was a blatant violation of the First Amendment guarantees of free speech and free press.

The Sedition Act

Despite opposition and criticism, Congress strengthened the Espionage Act in May 1918 with the Sedition Act. This prohibited speech construed to be critical of the U.S. or the military. Severe penalties were imposed on those convicted of “disloyal, profane, scurrilous, or abusive language” against the government, its actions, or its symbols (i.e., the flag).

Under this law, any criticism of the government, even in one’s own home, could result in a prison sentence. Hundreds were arrested for speaking out against the government and the war under the provisions of this act.

Enforcing the Laws

Many publications were closed down or censored under the Espionage and Sedition Acts. For example:

The Masses was censored for printing a cartoon declaring that the war was being fought to “make the world safe for capitalism.” Six editors were brought to trial but acquitted; however, jurors and lawyers stated that had the editors been German or Jewish, they would have surely been convicted.
The Nation was suppressed for criticizing labor leader Samuel Gompers.
The Public was suppressed for suggesting that the war be paid for by taxes instead of loans.
The Freeman’s Journal and Catholic Register was suppressed for reprinting Thomas Jefferson’s views that Ireland should be an independent republic.
About 75 German-language, Socialist, or Irish Nationalist publications either lost their mailing privileges or were pressured to publish nothing about the war.
Over 400 publications were denied mailing privileges at some time or another during or after the war.

In addition, many U.S. citizens were arrested and jailed for violating the Espionage and Sedition Acts. For example:

A Wisconsin state official was sentenced to two-and-a-half years in prison for criticizing a Red Cross fund-raising drive.
A Hollywood producer was sentenced to 10 years in prison for producing a film depicting British atrocities during the War for Independence.
A man was tried for arguing in his own home that he did not want to buy war bonds.
A Californian was jailed who laughed at Army recruits drilling.
A woman was jailed who greeted a Red Cross solicitor in a “hostile” way.
An editor was jailed who printed, “We must make the world safe for democracy even if we have to ‘bean’ the Goddess of Liberty to do it.”

Over 450 conscientious objectors were arrested for refusing military service.

U.S. Congressmen Victor Berger of Wisconsin, the first Socialist elected to Congress, was arrested.
Anarchist “Red” Emma Goldman was arrested.
Industrial Workers of the World leader “Big” Bill Haywood was arrested and imprisoned for expressing political opposition to the war.
Poet e.e. cummings, a volunteer in the Ambulance Corps in France, was arrested for professing a lack of hatred for the Germans. He served three-and-a-half months in a military detention camp in France.
Rose Pastor Stokes was sentenced to 10 years in prison for writing a letter to the Kansas City Star: “No government which is for profiteers can also be for the people, and I am for the people while the Government is for the profiteers.”
Socialist leader Eugene V. Debs was imprisoned for speaking out against the draft at a rally; he ran for president in 1920 from a federal prison.

The Rise of European Fascism

European fascism and totalitarianism, which flourished in Germany, Italy, and Spain in the 1920s and 1930s, were partly inspired by the U.S. government’s efforts to subvert dissent in World War I. The Espionage and Sedition Acts, combined with mandatory conscription and industrial nationalization, were all enacted in the name of preserving liberty:

Government agents urged media to spin facts and persuade people to support the war.
Industries were placed under government control to ensure adequate war production.
Dissenters and protestors were routinely harassed, assaulted, and imprisoned.
Newspapers and magazines were regularly censored or closed down for anti-war views.
Foreigners and immigrants were accused of undermining the war effort and targeted for violence.

These all occurred in the U.S. during World War I, and they would all become characteristics of fascist countries in later times.

These actions also set a precedent that would impair liberty in the U.S. to this day. Events such as the Great Depression, the space race, the energy crisis, and others (including the current economic downturn) have been compared to wars, which have enabled opportunistic politicians to enact “emergency” measures to expand government control, reduce free enterprise, and suppress civil liberties.

What This Means Today

After the September 11, 2001 attacks, Congress passed the Patriot Act with almost unanimous consent. This law gives the federal government unprecedented powers to spy on citizens suspected of plotting terrorism. Many historians have compared this law to the Espionage and Sedition Acts of 1917-1918 because of its potential threat to the constitutional rights of the people. Barack Obama, who had criticized this act before becoming president, has since approved expanding federal spying powers even further.

The Military Commissions Act of 2006 increased fears among those who value individual liberty because it empowers the federal government to jail suspected terrorists indefinitely without trial, thus eliminating the constitutional guarantee of habeas corpus (i.e., the right to be informed of charges and the right to a trial before imprisonment).

The Espionage and Sedition Acts set many bad precedents for those who cherish personal freedom as the founders of this country envisioned. They not only helped inspire the fascism that sparked World War II, but they laid the groundwork for many constitutionally questionable measures being employed in the “War on Terror” today.

This Week in the Civil War: Dec 3-9, 1862

Wednesday, December 3.  Skirmishing occurred in Tennessee and western Virginia. Three Confederate blockade runners were captured off the coast of North Carolina. In Mississippi, Federal forces under General Ulysses S. Grant continued pressing Confederates along the Yocknapatalfa River.

General Joseph E. Johnston

Thursday, December 4.  General Joseph E. Johnston assumed command of all Confederate forces in the West. Skirmishing occurred in Virginia, Tennessee, Mississippi, Arkansas, and the Indian Territory. In Minnesota, settlers attacked Indian prisoners in a continuation of the Dakota Sioux War that had erupted in August. In Kentucky, Confederates captured supplies at Prestonburg.

Friday, December 5. In Mississippi, Ulysses S. Grant’s Federal cavalry was defeated in a skirmish at Coffeeville.

Saturday, December 6.  President Abraham Lincoln ordered the execution of 39 Indians among the 393 convicted in participating in the Dakota Sioux War. Skirmishing occurred in Tennessee and Missouri.

Sunday, December 7.  The Battle of Prairie Grove occurred about 12 miles southwest of Fayetteville, Arkansas on Illinois Creek. Confederate General Thomas C. Hindman had hoped to destroy two Federal armies before they could unite. However, the Federals had joined forces by the time the Confederates attacked. After intense and confusing combat, the Confederates held their ground, but the bitterly cold weather forced them to withdraw during the night.

Confederate President Jefferson Davis, concerned about Vicksburg, wired General John C. Pemberton at Grenada, Mississippi, “Are you in communication with Genl. J.E. Johnston? Hope you will be re-inforced in time.” The Confederate Department of Mississippi and East Louisiana was organized with Generals Earl Van Dorn and Sterling Price commanding the First and Second Corps. Confederate John Hunt Morgan and about 1,400 men surprised and captured a Federal garrison at Hartsville, Tennessee.

Monday, December 8.  President Davis informed General Robert E. Lee that he was going west to address the dwindling Confederate prospects in Tennessee and Mississippi. Davis also expressed regret that he could offer no more manpower to Lee’s outnumbered Army of Northern Virginia.

Tuesday, December 9.  Skirmishing occurred in Tennessee, Arkansas, and Missouri. Federal expeditions began from Ozark, Missouri and from Corinth, Mississippi toward Tuscumbia, Alabama.

Primary source: The Civil War Day by Day by E.B. Long and Barbara Long (New York, NY: Da Capo Press, Inc., 1971)

The Economic Crisis of 1893

The Panic of 1893 sparked a stock market crash that turned into the worst depression in American history up to that time. There were several causes for this panic, some of which are similar to the causes of America’s economic problems today.

A bank run during the depression

The financial panic began when the Reading Railroad declared bankruptcy. Soon thereafter, “Industrial Black Friday” hit, and 24 businesses failed per day in May alone. The crisis sparked a four-year depression in which 15,000 companies and 600 banks closed down, and over $1 billion worth of bonds were defaulted. The national unemployment rate approached 20 percent.

Just as questionable lending practices and overinvestment in housing created a financial bubble that burst into crisis this past decade, the same practices in railroads created a bubble that inevitably burst in 1893. Added to the panic was the contentious debate over the value of gold and silver in the U.S. monetary system.

Gold versus Silver

The top economic issue of the time involved whether to coin silver along with gold in the U.S. currency system. Prior to the 1890s, the U.S. dollar was backed by gold, so the dollar’s value was directly related to the value of gold. Farmers and laborers opposed the gold standard because they believed that it constricted the money supply and made money scarce for them. Miners opposed the system because silver mining was booming in the West.

From this, the Sherman Silver Purchase Act was passed in 1890. This required the federal government to adopt a “bimetallic” monetary system in which the U.S. dollar would be related to either gold or silver. The value of silver was fixed at 16 ounces to one ounce of gold. But as silver mining expanded, the silver supply increased. This meant that the silver ratio should have been much higher—perhaps 20 or 25 ounces to one gold ounce—but it was not.

As the silver supply increased, people began exchanging their silver for gold, which was more traditional, stable, and valuable. This decreased the U.S. Treasury’s gold supply, and since gold was the basis of U.S. international credit, the nation’s credit rating suffered. This was very similar to the downgrading of U.S. credit in 2011—while the downgrade in 1893 was partly due to coining silver, last year’s downgrade was partly due to the excessive printing of paper money.

The credit downgrading of the early 1890s damaged business confidence, which in turn devalued the U.S. currency system.

Railroad Overexpansion

Railroad construction had been the lifeblood of the U.S. economy since the end of the Civil War. Individuals, speculators, and banks invested heavily in railroads, with many of them investing beyond their means in the hopes that the payoff would cover the debts. Like the housing crisis of today, too many people borrowed too much and expanded too fast using credit rather than tangible capital.

Eventually supply outweighed demand, and the market could no longer sustain such a high volume of railroad construction on borrowed money. Moreover, many railroads were financed through either questionable means or through the federal government (i.e., taxpayers), just as the housing market is primarily financed through the government (i.e., Fannie Mae and Freddie Mac) today.

Even worse, the overabundance of silver led to the closure of several western silver mines. These closures forced western railroads serving the mining towns to close. When the railroad bubble burst, economic chaos ensued, much like the bursting of the housing bubble this past decade.

Prominent railroads declared bankruptcy, including the Northern Pacific, the Union Pacific, the Reading, and the Erie. With less railroad construction came less need for steel manufacturing, and 32 steel companies closed their factories. Construction and manufacturing ground to a halt, and the depression arrived in full force in June 1893.

Who’s To Blame?

Like today, analysts blamed various sources. Gold supporters blamed the Silver Purchase Act for draining gold out of the Treasury and discouraging foreign investment. Silver supporters blamed the same act for not going far enough to save debt-ridden farmers with cheap silver. Samuel Gompers, head of the AFL, blamed the greed of the “capitalist class” for overextending the railroads. Still others blamed certain classes, races, religions, or another “dark, mysterious” conspiracy.

Another object of blame was the McKinley tariff, which had been enacted in 1890. This lowered the duties (i.e., taxes) on imported goods. The lower taxes meant less revenue coming into the U.S. Treasury. This helped deplete the reserves when the run on gold began.

Like the corporate bailouts today, New York banks loaned investors $6 million to halt the financial panic. And like today, this only delayed the inevitable crash. People rushed to withdraw their bank deposits, causing bank runs. Investors with high-interest bonds frantically tried to sell, causing a selling panic and making the bonds virtually worthless. The price of silver plummeted.

Today, the Federal Reserve has sought to stabilize the economy by selling bonds and printing paper money. Just as the price of silver plummeted in 1893, the value of the U.S. dollar has plummeted today. In both instances, the value of gold skyrocketed.

Public Reaction

Like today, unemployment soared as a result of the crisis and subsequent depression. Many people could not comprehend such a crash, and, like today, they were horrified about stories of Wall Street greed aligned with political corruption. Members of Congress were involved in speculation and the allocation of corporate stock. And corporate lobbyists had pushed for the reduction of certain tariffs on imports.

Banks overflowing with paper and silver money offered loans at extremely low interest rates in the hopes of stimulating the economy. But nobody was borrowing because they feared the economic future. This is like today, in which the Federal Reserve has infused banks with paper money and offered low interest rates to encourage borrowing, but fear of future economic uncertainty has prompted reluctance to borrow.

Most people blamed the coinage of silver for cheapening the monetary system. And since Democrats and Populists were the chief supporters of silver, they lost heavily in the 1894 elections. The Republicans gained more seats in that election than in any other in history. The Republican gain of 2010 came close to matching the 1894 gains, largely due to the same economic issues.

With economic uncertainty came unrest, largely in the form of protests and labor strikes. Jacob Coxey led a march of unemployed men on Washington to demand public works (i.e., “pork barrel”) projects that would create jobs. The press ridiculed them as radicals who would rather accept handouts than work. A massive strike against the Pullman Railroad Company in 1894 helped lead to the rise of the socialist movement in the U.S.

Government Response

President Grover Cleveland was among the last of the conservative Democrats who supported limited, constitutional government. This included a sound monetary system based on gold. As such, he opposed many in his party by calling for the repeal of the Silver Purchase Act.

Those opposed to repeal argued that coining more silver would provide government relief (i.e., like stimulus today) to the suffering masses. Cleveland countered that returning to the gold standard would be painful but necessary to sustain the free market.

After heated debate, Cleveland persuaded enough members of Congress to pass the Repeal of the Silver Purchase Act in October 1893. This helped boost business confidence and gradually stemmed unemployment. It also reduced runs on exchanging silver for gold, although the exchange was still being conducted at an unsustainable rate.

Bailing Out the Government

Congress had fixed $100 million as the minimum needed in the U.S. Treasury to maintain the gold standard. By 1893, reserves had fallen to $103.5 million and continued falling as more and more people exchanged their paper money, silver certificates, and silver dollars for gold. By January 1894, the Treasury’s gold reserve had fallen to $65 million.

In response, President Cleveland desperately authorized two bond sales that each generated $50 million for the Treasury in 1894. But this was not enough. When a third bond sale became necessary, Cleveland turned to Wall Street for financial help.

J.P. Morgan, the nation’s most powerful banker, agreed to bail out the federal government by loaning the Treasury 3.5 million ounces of gold. This enabled the Treasury to issue two more bond sales, one in 1895 and another in 1896. By the end of February 1896, the Treasury reserve finally climbed over the $100 million mark once more.

The Panic’s Long-Term Effects

Grover Cleveland’s support for the gold standard, coupled with his usage of perceived Wall Street greed to stabilize the gold reserves, doomed his future with the Democratic Party. After Cleveland, no conservative Democrat ever won another presidential election. Campaigning as champions of the workingmen, the Democrats fully embraced the coinage of silver in the 1896 elections. But they lost to William McKinley and the pro-gold Republicans.

Unlike today, the government did not use stimulus to address the crisis, and as a result the depression was over within four years. The repeal of silver purchasing, the gold loan, and the bond sales stabilized the economy, which gradually strengthened. The election of a pro-gold president in 1896, coupled with the discovery of gold in the Klondike in 1897, ended the depression. It also doomed the pro-silver cause.

In 1900, President McKinley signed the Gold Standard Act into law, which forever ended the coinage of silver in the U.S. monetary system. This ended in 1971 when President Richard Nixon took the U.S. off the gold standard. Since then, the currency system has been driven by paper money not backed by any precious metal, which has led to rampant devaluation and inflation.

Perhaps most importantly, the Panic of 1893 and the subsequent depression alienated many people from both the economy and the political process. This loss of confidence in the system led to the rise of Progressivism, which featured the notion that government leaders should handle the nation’s problems without the input of ordinary people. This strayed from the founders’ notion that people must always be involved in the political process to ensure their own liberty, and it has led to even further alienation. That alienation tends to expose itself most vividly in times of economic crisis and uncertainty, much like today.

Civil War Spotlight: The Fredericksburg Campaign

In November 1862, General Ambrose Burnside reorganized the Federal Army of the Potomac by placing the various corps under three “grand divisions.” Then, with President Lincoln’s approval, Burnside began a new drive on Richmond by moving his massive force from Warrenton, Virginia toward Fredericksburg. Meanwhile, Robert E. Lee’s Confederate Army of Northern Virginia reached Fredericksburg first as James Longstreet’s corps established defensive positions outside town.

U.S. General Ambrose Burnside

When the Federals reached Fredericksburg, Burnside demanded the town’s surrender. When the mayor refused, Burnside gave him 16 hours to evacuate the women, children, elderly, and infirmed before he bombarded the town. The mayor requested more time, and Burnside agreed “so long as no hostile demonstration is made from the town.” As the mayor stalled, Thomas “Stonewall” Jackson’s Confederate corps arrived from Winchester to reinforce Lee.

Lincoln visited Burnside at Belle Plain and Aquia Creek to discuss strategy. Burnside sought to launch a direct assault on Lee at Fredericksburg, but Lincoln proposed launching a three-pronged attack at Fredericksburg, at a point south of the Rappahannock River, and on the Pamunkey River. Burnside rejected Lincoln’s plan. This decision proved fateful.

This Week in the Civil War: Nov 26-Dec 2, 1862

Wednesday, November 26.  President Abraham Lincoln traveled to Virginia to confer with General Ambrose Burnside, commander of the Army of the Potomac. President Jefferson Davis wrote to Confederate state governors asking for help enrolling draftees and sending them to the various fronts, returning soldiers to the ranks who were absent without leave, and securing supplies for military use. Skirmishing occurred in Tennessee and western Virginia.

U.S. General Ambrose Burnside

Thursday, November 27.  In Virginia, President Lincoln conferred with General Burnside at Aquia Creek about the upcoming Federal offensive against General Robert E. Lee’s Confederate Army of Northern Virginia. Burnside rejected Lincoln’s plan for a three-pronged attack, instead favored a direct assault on Lee at Fredericksburg. Skirmishing occurred in Tennessee and Missouri, and Federals began an expedition near Grenada, Mississippi.

Friday, November 28.  Federal forces scored an important victory in the Trans-Mississippi Theater at Cane Hill, Arkansas. In Mississippi, skirmishing occurred at Holly Springs, where Federals were gathering supplies for their upcoming assault on Vicksburg. Skirmishing also occurred in Tennessee and Virginia.

Saturday, November 29.  General John B. Magruder assumed command of the Confederate District of Texas, New Mexico and Arizona. Skirmishing occurred in Tennessee and Mississippi.

Sunday, November 30.  Skirmishing occurred in Mississippi, and Federals began an expedition from Rolla to the Ozarks in Missouri.

Monday, December 1.  In Washington, the third session of the Thirty-seventh U.S. Congress assembled. In his annual message to Congress, President Lincoln reported that foreign relations and commerce were satisfactory, and Federal receipts were exceeding expenditures. Lincoln also proposed three constitutional amendments: 1) compensating every state that abolished slavery before 1900; 2) all slaves freed during the war would remain free and their owners (if loyal to the Union) compensated for the loss; 3) Congress would colonize all consenting freed slaves in Africa.

In Virginia, Confederate General Thomas “Stonewall” Jackson’s corps of Robert E. Lee’s Army of Northern Virginia began moving into position to Lee’s right at Fredericksburg. In Mississippi, skirmishing intensified as General Ulysses S. Grant’s Federals continued advancing toward Vicksburg. Skirmishing occurred in Tennessee and western Virginia.

Tuesday, December 2.  In Virginia, skirmishing occurred along the Rappahannock between portions of the armies under Burnside and Lee. Federal forces began a reconnaissance from Bolivar Heights to Winchester, and a skirmish occurred in the Indian Territory.

Primary Source: The Civil War Day by Day by E.B. Long and Barbara Long (New York, NY: Da Capo Press, Inc., 1971)

The Politics Behind the Moon Mission

On July 20, 1969, humans first stepped onto the moon. The event was hailed throughout the world as one of the most significant achievements in history. But what purpose did it serve?

NASA officials had been frantically working for eight years to meet the goal established by former President John F. Kennedy to have a man on the moon by the end of the 1960s. This goal was realized when about half a billion people around the world watched Neil Armstrong step down from his landing module and set foot on the moon. The U.S. fanaticism to reach the moon was not prompted by a quest for scientific knowledge or discovery, but rather by fears that the U.S.S.R. would beat them to it.

The Cold War

Following World War II, the last remaining world superpowers were the U.S. and the U.S.S.R. (Union of Soviet Socialist Republics). As the Soviets attempted to spread communism throughout the world in accordance with the doctrine of Karl Marx, Americans attempted to check the spread. This competition expanded into technological advances.

After the U.S. developed the first atomic bomb, the Soviets developed one of their own. Both powers then competed in missile development, as missiles were the most effective way to deliver an atomic attack. This led to experiments in rocket propulsion, and with this came the notion that objects could be launched into outer space.

Sputnik

Americans were horrified with the sudden news that the Soviets had successfully launched a satellite named Sputnik into outer space in 1957. Most Americans had no idea that the Soviets were even developing such technology, mainly because of Soviet media suppression. Also suppressed was the fact that the Soviets had failed at least three times prior to the launch.

The U.S. media spread hysterical stories about Soviet superiority. Many feared that if the Soviets were able to propel a satellite into space, they also had the power to propel an atomic missile onto U.S. soil. Politicians and the press declared that there was a “space gap” between the U.S. and U.S.S.R., and that the U.S. government needed to spend money to close that gap.

Senate Majority Leader and future President Lyndon Johnson warned that the Soviets would soon drop “bombs on us from space like kids dropping rocks onto cars from freeway overpasses.” However, there was no substantial evidence that the Soviets ever had the capability to launch missiles at the U.S. from space.

What most Americans didn’t know was that there was no “space gap.” In fact, the U.S. had the technology to launch a satellite of its own, but President Dwight Eisenhower had chosen not to launch one because he believed it would waste taxpayer dollars by serving no practical purpose. But the panicked frenzy caused by the media and members of Congress prompted Eisenhower to reluctantly relent.

The “Space Race”

Eisenhower approved an unprecedented government spending spree for schools to expand their curricula with greater focus on science and mathematics. The National Aeronautics and Space Administration (NASA) was also created to oversee the U.S. space program. Private efforts to explore space were outlawed; from this point forward, space exploration would be government-controlled in the name of national security.

However, this “race” to space was not an equal contest. Soviet media control and lazy or naïve American journalism made the Soviet space program seem much more advanced than it truly was. The Soviets grabbed headlines by crashing a satellite onto the moon, but many failed previous attempts received little attention.

Meanwhile, U.S. officials tried downplaying the high costs of space exploration by appealing to the quest for scientific discovery. They also downplayed the fact that most U.S. rocket technology came from former Nazis who had been brought to the U.S. under Operation Paperclip to share their knowledge with U.S. scientists. German innovation played a key role in developing the technology used by NASA’s Mercury and Apollo programs.

Political Concerns

In the 1960 presidential campaign, both candidates John F. Kennedy and Richard M. Nixon supported increasing space exploration to match the Soviets. However, both privately acknowledged that such missions would accomplish little except to supposedly keep pace with the U.S.S.R., even though the U.S. was already far ahead.

When the Soviets put Yuri Gagarin into orbit around Earth after many unpublicized failures, new President Kennedy was advised not to waste money trying to match the feat because it served no practical purpose. Nevertheless, NASA’s Mercury program countered the Soviets by putting John Glenn into orbit. The feat was celebrated throughout the U.S., but few asked whether the exorbitant costs of manned spaceflight matched the benefits.

Because NASA was administered by the Pentagon, U.S. military commanders saw the space race as a strategic, not a scientific, objective. Many advised Kennedy that a moon landing would not only demonstrate U.S. technological superiority, but it would enable the U.S. to install missile launchers on the moon to be used against the U.S.S.R.

Kennedy soon informed NASA officials that putting a man on the moon was “except for defense, the top priority of the United States government. Otherwise, we shouldn’t be spending this kind of money, because I’m not that interested in space.”

The Apollo Program

The press hailed Kennedy’s “noble vision” of landing Americans on the moon in the name of science and humanity. But the fact was that Kennedy had endured several foreign relations embarrassments, and this was simply an attempt to come up with a “scientific bonanza” to beat the Soviets.

NASA officials resisted conducting a moon landing because of its exorbitant costs. Manned spaceflight cost billions of dollars more than unmanned flights due to human concerns such as oxygen, food, waste disposal, and radiation resistance. And few believed that the potential scientific discoveries would be worth these enormous costs. Nevertheless, Kennedy’s demand for a propaganda victory over the Soviets sparked the creation of the massively expensive Apollo program.

Apollo was a dangerous project, as three astronauts were killed when Apollo I caught fire during a launch simulation. After several more years and countless hours of labor and research, Apollo VIII became the first manned spacecraft to orbit the moon in 1968. This paved the way for Apollo 11 landing on the moon the following year.

President Richard Nixon said that the moon landing in July 1969 was the greatest event since the Creation. Americans congratulated each other and the astronauts were saluted in massive parades. The moon mission offered some scientific insight into Earth’s lone satellite as well as space in general. It also diffused some tension between the U.S. and U.S.S.R. over space exploration since the Soviets had nothing to match the feat. But were the benefits worth the cost?

The Costs and Benefits

The U.S. moon landing revealed that the Soviets had no moon program of their own. Knowing that they could not match the Americans, the U.S.S.R. never attempted to put a Soviet on the moon, instead focusing more on nuclear missile and submarine technology and less on space exploration. Without Soviet competition, NASA struggled through the 1970s.

The lowest estimate of the cost of Apollo 11 has been $40 billion, or $232 billion today. Proponents have argued that the price was worth the scientific achievement, but the fact was that the U.S. moon mission was pursued not for scientific advancement, but to defeat a rival and simply prove to the world that it could be done.

Moreover, the space program in general has helped lead to a massive increase in government centralization over the past half century. Billions of taxpayer dollars have been spent on U.S. space travel while the U.S. government has prevented the private development of practical civilian space voyages. And politicians have routinely used space funding for political gain; for example, it is no coincidence that Mission Control was placed in Texas, the home state of Lyndon Johnson.

Overall, the U.S. space program has proven to be just another expensive and inefficient public works program. The cost of the U.S. space program has far outweighed the benefits, which have produced no significant scientific breakthroughs or done anything to advance human liberty on Earth.

Civil War Spotlight: The Elections of Nov 1862

Federal midterm congressional elections were held in the North, which were President Abraham Lincoln’s first political test since he took office in March 1861. Victories by his fellow Republicans would signify an endorsement of Lincoln’s policies, while Democratic victories would indicate voter dissatisfaction with Lincoln’s presidency.

U.S. President Abraham Lincoln

To Lincoln’s disappointment, Democrats made substantial gains in state and congressional races in New York, New Jersey, Wisconsin, and even his home state of Illinois. These added to the Democratic gains in Pennsylvania, Ohio, and Indiana in those states’ elections in October.

Even so, the Republicans retained majorities in both the Senate and the House of Representatives with victories in New England, Michigan, California, and the border slave states. In Kentucky, candidates were threatened with arrest if they campaigned against the Lincoln administration. In Missouri, voters were required to swear loyalty to the Union before casting ballots.

The main factors accounting for the Democratic victories were war weariness, a struggling economy with soaring prices and taxes, the high cost of shipping, the possibility of a military draft, Republican infringements on civil liberties, and the fear of freed slaves coming north to compete for jobs. Moreover, northern governors resented federal infringement on their prerogatives, particularly military recruitment.

In Washington, the general perception was that northerners were dissatisfied with Lincoln. The New York Times opined that the elections showed a “vote of want of confidence” in the administration. Republican Senator James W. Grimes of Iowa said, “We are going to destruction as fast as imbecility, corruption, and the wheels of time can carry us.”