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April 30 - June 7, 2020
In reality, the gold standard was neither ancient nor natural. Both the international gold standard and American dependence on a fiat currency were new and revolutionary. The British, who formally adopted the gold standard in 1819, were virtually alone until the 1860s when others followed. Like the United States, most nations had previously relied on various forms of bimetallism or silver-backed currencies. The unprecedented increase in gold supplies that began with the discoveries in California and Australia had driven silver out of circulation in Europe and made a gold standard practicable.
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March 1869, Congress passed the Public Credit Act, promising to redeem the war bonds in gold. The next year Congress authorized the refunding of the national debt.
Congress bolstered the public credit with repayment spread out over a much longer period.
The gold standard depended on a country having access to enough gold to redeem its currency on demand. When London controlled a large proportion of that gold, Great Britain and the Bank of England acquired inordinate influence over the fiscal and economic policies of other governments.
Free trade was as sacred as the gold standard to orthodox liberals, and the tariff joined fiat currency as a bête noire.
The tariff drew a sharp line between liberals and Republican Party regulars who put protection of American industries at the heart of their economic policy.
North Carolina Gov. William W. Holden reacted forcefully to the murder of Wyatt Outlaw and the atrocities that followed. In part he duplicated actions in Arkansas where in 1868 the governor had mobilized the militia, including black soldiers, to smash the Klan, but Holden would neither rely on a predominantly black militia to protect black people nor trust white juries in the affected areas. Holden declared martial law, mobilized largely white Unionists of western North Carolina, and suppressed the Klan in nine counties.
The guilt of the defendants on the conspiracy charges was hardly in doubt, but larger constitutional issues concerned the meaning of the Fourteenth Amendment. Did it extend only to acts of the federal government or also to acts by the states, individuals, and associations? And in the prosecution of a federal crime, could a federal court try common law crimes, such as murder, traditionally reserved to state courts?
Pike was right about two things, and wrong about most everything else. First, reflecting the population of the state, more than half the men elected to state and public office in South Carolina between 1867 and 1876 were black, although being black made various shades of skin color a disguise for a quite diverse and factionalized group of people. Second, the government was corrupt, but it was not particularly corrupt when measured against other governments of the era. He was wrong in seeing black politicians as the pliant tools of whites, wrong in failing to recognize the considerable
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Against the better classes, liberals counterpoised the dangerous classes. The very rich were part of the dangerous classes, but the more urgent threats came from immigrants and black people,
When liberals soured on democracy, they had the immigrant poor—particularly the Irish—in mind.
As novelists and reformers would detail for the rest of the century, immigrants and workers lived in a city at once grand and horrible. It was a place, as nineteenth-century writers put it, of palaces and hovels.
In New York the antebellum merchant elite with their ties to the South, cotton, and the Democratic Party yielded to a new class whose wealth came from industry and finance. Some of the industrialists and railroad men, Cornelius Vanderbilt for one, had made their money in New York. Others like Huntington moved to New York to be closer to investment banks and to Washington, D.C. A second tier of wealth—lawyers and high executives—surrounded them, and leading families intermarried. The bourgeoisie in the 1860s and 1870s considered themselves the epitome of the better classes.
Before Tweed’s arrival and after his departure, the state of New York did everything it could to weaken New York City. The state legislature sapped the city government’s power by controlling its charter and loading it with independent commissions. This was not unique; city governments lost power throughout much of the Gilded Age.
Tweed held no city office himself, but he was a state senator and chair of the senate’s State Finance Committee. The governor felt Tammany’s influence. Employing the so-called Black Horse Cavalry—a group of Republican and Democratic legislators for sale to the highest bidder—Tweed managed the legislature.
Charters and contracts for public works rewarded his allies among businessmen and bankers regardless of whether they were Republican or Democrat. All was financed through the sale of city bonds, negotiated by the city’s bankers. The city was a vast corrupt bargain that, until the early 1870s, brought profits and low taxes to business, and plunder to Tammany Hall, which ensured its power by distributing some of the take to its members through contracts, jobs, and charity.
Divisions within Tammany, however, produced a new auditor, who was bitter over money he thought the ring owed him. He eventually released inside information to the New York Times. The backlash over the Orange riots in July 1871 coincided with the Times’ publication of the leaked information under the blaring headline “Gigantic Frauds of the Ring Exposed.” The evidence alarmed European bankers, who ceased underwriting city bonds.
The Committee of Seventy that organized the opposition to Tweed was a diverse group, but liberal reformers were among them, and it was the liberals who first injected a critical antidemocratic element into the attack on the Tweed Ring. They gradually altered the committee’s republican language into a rhetoric of class conflict.
The Nation urged on an antidemocratic reaction. The magazine called for the formation of a vigilance committee since “the revolution of force must sooner or later follow.” It demanded the disenfranchisement of the poor and regarded municipal democracy as a “ridiculous anachronism.” Liberals abandoned the old Jacksonian/Lincolnian embrace of equality and the dream of a homogeneous citizenry that sprang from it. They promoted the writing of social and political inequality into law.
Workers should not be able to say how a corporation should be run, and citizens should not be able to say how a city was to be run. This was a predictable analogy from people who thought the market was the model for society.
Liberal Republicans had set off down the path that would reconcile them with old enemies in the South. They turned denunciations of corruption into denunciations of democracy, whose particular targets were the newly enfranchised. The denunciations of Tammany and immigrant voters echoed in the South with denunciations of carpetbaggers and black voters, which led liberals to have a new sympathy with Southern elites. The “best men,” North and South, believed that expanding the franchise was a mistake. It inevitably yielded corruption. Here were the additions to the core liberal ideology that
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The Whiskey Ring flourished by not collecting the tax on every gallon of distilled spirits; instead it issued revenue stamps in exchange for bribes. When whiskey was supposed to be taxed at $2 a gallon and sold for $1.25 a gallon, it did not take advanced math to guess something was amiss. The agents didn’t keep all of the money; they kicked back 40 percent of the profits to higher government officials, including Babcock.
For Adams and other liberals, the spoils system made a mockery of good governance and the Constitution.
Liberals in 1872 had confidence that they knew what needed to be done to reform American governance. The defeat of Tammany encouraged them to believe that their political moment had arrived. Since other liberals wrote virtually everything liberals read, they lived in a kind of echo chamber in which they mistook their own voices for the sound of America.
Greeley was a man formed by antebellum America, and he longed for a world of self-reliance and cooperation, of social mobility grounded in the independence of small property holding. He refused to accept the emerging new conditions that these old ideals faced. He recoiled from accepting a permanent, wage-earning working class.
One of the most popular campaign posters in the 1872 presidential election, “The Workingman’s Banner” pictured the Republican candidates as workingmen. Ulysses S. Grant was “The Galena Tanner,” and his vice president, Henry Wilson, was the “The Natick Shoemaker.” Grant had been a tanner, or rather, when he could not avoid it, he worked for his father, who had a tannery; Wilson had been a shoemaker, although he more accurately was the owner of a shoe factory. But these were white lies, since the line between skilled workmen and the owners of shops and small factories was still quite permeable.
For all the astonishing expansion of the railroads and the growth in manufacturing, the most important sector of the American economy remained agriculture. Only in 1880 did commerce’s 29 percent share of the economy edge out agriculture’s 28 percent share.
The Civil War’s legacy dogged Southerners. Slavery had been the basis of the Southern economy, and the South, particularly when it turned first to black codes and later to prison and convict labor, never fully gave up attempts to create new systems of coerced labor.
The South, like the Midwest, found itself starved not only of gold but also of national bank notes, whose possession in 1866 ranged between $2.50 and $8.00 per inhabitant. In the Northeast there was $77 in circulation per inhabitant. As late as 1880, the South had a quarter of the country’s population but only 10 percent of its currency.
The Republican willingness to redistribute resources to corporations was not matched by a redistribution of resources to small farmers. Only in South Carolina did the government intervene to help poor men secure depreciated lands or lands forfeited for taxes.
Many of those who fattened on federal subsidies in the West were first to the trough in the South. Isaac Sherman, who argued for laissez-faire as vehemently as anyone in the country, did not allow his economic principles to stop his investments in Southern railroads, which fed off state aid. Huntington and Scott had no scruples over subsidies, and they came running wherever they caught a whiff of them in either the South or the West.
White resentment over the railroads employing black and northern workers became attacks on the railroads themselves. It is no wonder that the eruption of Ku Klux Klan violence in the late 1860s and early 1870s centered on the railroads through interior North and South Carolina; they embodied everything many white Southerners hated.
Southern lands seemed to beg for cotton. The acidic soils of the South did not welcome wheat or even corn, which grew more abundantly elsewhere, but the South gave cotton all it required: 200 frost-free days annually, a temperature that rose above 77 degrees Fahrenheit for at least ninety days, and abundant rainfall well in excess of the 25 inches that the plant required. Until the advent of large-scale irrigation, no other place in the United States could meet those requirements.
Everything ran on cotton and credit.
The Southern economy grew, and by the 1880s it was growing at the same rate as the North’s. But by every measure, the average Southerner was poorer, was less educated, and had fewer opportunities than the average Northerner. The South became, as historian Gavin Wright has put it, “a low wage region in a high wage country.”
The “Yankee of Yankees” might, in Philadelphia, actually be a British or Irish immigrant, but the essentials did not vary much with ethnicity or nativity. These were practical men, enamored of new technologies, and they admired other practical men who got their hands dirty. They thought their ability to manage their firms depended on their grasp of constantly changing tools and problems of production. Their workers, in turn, prided themselves on their skill, knowledge, and independence. They expected their competence and their ideas of manliness to be respected.
Working alongside chemists with German Ph.D.s and a crew of craftsmen and machinists, some of them immigrants, he created an elaborately equipped invention factory whose goal was “a minor invention every ten days and a big thing every six months or so.” What made Edison more than an improving mechanic found in thousands of American factories and shops was his desire to create entire systems that were new and unique.50 How could Americans not embrace the Edison of the 1870s as free labor came under siege?
Excluding farmers, wageworkers by 1870 outnumbered the self-employed. They did not sell the products of their minds and hands. They sold their hours and days.58
In the early 1870s officials in the Massachusetts Bureau of Statistics of Labor began to link threats to the home and the wretched condition of the poor not to their moral failings or bad social influences but to the wage system. The consequences of low wages meant a man lost the benefits of home life. When a man could not support his wife, she was forced to labor, scrubbing floors or taking in laundry: “No cheerful smile greets a returning father whose six days earnings pay for but five days of meat.” Poverty “kills love and all affection, all pride of home … nay emasculates home of all its
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Such complaints reflected the assumption that the role of the economy was to produce homes and prosperity was necessary to sustain them. When men did not earn enough to support wives and children, the economy was failing.
In Chicago the city as well as the state government had enacted eight-hour-day laws, without providing mechanisms for enforcement or penalties for violating them. The issue ended up being decided on the streets. In May 1867 skilled workers turned to walkouts, demonstrations, marches, and moral suasion to induce employers to obey the law.
White spied a new danger. He regarded unions, which workers labeled “cooperation for mutual protection,” as a form of coercion. White—and more critically employers and the courts—defined contract freedom as the right of an individual to exercise free choice and initiative without unnecessary governmental restraint or outside interference.
Wages mattered to workers, but their independence and control over their work mattered even more. When Parton described the coal miner who “begins work when he likes, works as fast as he likes, or as slow, and goes home when he likes” and whose “ ‘room’ is his own against the world,” he described how American workers thought work should proceed. This was what they meant by control over work. They were republican citizens and their independence should not vanish when they entered the workplace.
Private investment banks served as brokers for the sale of bond issues from the government and railroads, and around the banks, like seabirds circling fishing boats, hovered brokers and speculators, large and small, who dealt in the paper—stocks, bonds, treasury notes, greenbacks, and financial paper of all kind—that the system produced.
Financiers such as Gould and Cooke—the investment bankers, brokers, and speculators of the postwar economy—were the people whom Americans referred to as capitalists. They distrusted them because they were alien to the world of free labor. They did not work with their hands; they did not make things. Capitalists justified the rewards they reaped by the risks that they took rather than the work they did. Without their willingness to risk their fortunes, so the argument went, there would be no progress, no jobs for workingpeople, and no prosperity.
When Gould cultivated Grant, he was attempting to avoid a quite specific risk. In 1869 Gould and “Diamond Jim” Fisk launched a complicated gold corner. They were an odd pair. Gould was shy, retiring, and most comfortable among his orchids and family, while Fisk was in every way his opposite. Fisk would be shot dead in a New York hotel lobby in 1872, the casualty of a too-successful seduction. Because the United States retained greenbacks and Europe had gone to the gold standard, exchanging greenbacks for gold was essential to American foreign commerce. The exchange took place in the Gold Room
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To make sure the government stayed on the sidelines, Gould and Fisk recruited, first, President Grant’s brother-in-law, then the always recruitable Orville Babcock—Grant’s private secretary.
Before the Civil War, Americans had democratized corporations by making corporate charters readily available and curtailing the extraordinary benefits they enjoyed, but they had not completely stripped them of the combination of public purpose and special privilege.
Because insiders controlled information that influenced the price of a railroad’s securities, they used this information to manipulate values. Those with inside information became a corporate class. They dominated Wall Street, the boards of corporations, and the banks.87
Both Democrats and Republicans comprised voters who spanned the ideological spectrum on economic and social issues. Debates over the tariff, the gold standard, corporate subsidies and regulation, and the dangers that disparities in wealth and power posed to the Republic were constant, usually intelligent, and widely followed, but positions on these issues were not strictly determined by party.
