The Bank of the United States, First and Second
President James Madison (1809-1817) said, “History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.” Mayer Amschel Rothschild reportedly said, “Give me control of a nation’s currency, and I care not who makes the laws.” It is true whoever said it.
Allegedly, Alexander Hamilton was an Illuminist and a Freemason, and given his actions, he probably represented the Dutch bankers who already controlled the Bank of England. Hamilton came to the colonies in 1772 from Nevis, a British colony in the West Indies. Poet and philosopher Ezra Pound states that Hamilton was “Hebrew” and “Scotch.”[219] On December 14, 1780, Hamilton married Elizabeth Schuyler, the daughter of the influential General Philip Schuyler, at the Schuyler Mansion in Albany, New York. Elizabeth’s mother was a von Rensselair, a very elite family.[220]
In as much as Hamilton probably worked as a foreign agent for the Dutch bankers, presumably the imposition of a monarchal government would occur through financial manipulations as suggested by James Madison – via abuse, intrigue, deceit or violent means. The Revolutionary War (April 19, 1775- September 3, 1783) initiated America’s public debt. Hamilton designed a debt-based financial system, similar to the system that Britain utilized. In 1779-1780, Hamilton summarized a strategy to bring about the restitution of paper credit, and establish a “permanent fund for the future exigencies of government.”[221]
Robert Morris, who was also a Freemason, was the U.S. Superintendent of Finance (1781-1784) at the end of the war. He was a Pennsylvania merchant and banker who people have extolled as “the financier of the Revolution.”[222] In 1781, during the war, Hamilton and Morris persuaded an acquiescent Congress to allow them to establish the Bank of North America, modeled after the Bank of England, which used fractional reserve banking. The Congress of the Confederation chartered this bank on December 31, 1781. It opened on January 7, 1782 as the nation’s first chartered bank.[223] The Commonwealth of Pennsylvania, the original seat of the colonial government, revoked the bank’s charter in 1785. Benjamin Franklin spent time in England and understood the intricacies and dangers associated with fractional reserve banking, and private investors controlling the issuance of a nation’s currency as used in the Bank of England. Until his death in 1791, he resisted such an arrangement in America.
All contemporary commercial banks use fractional-reserve banking, a practice wherein a bank may lend out the majority of the money that its customers deposit while maintaining a “fraction” in reserve. Banks are also obligated to relinquish all deposits on demand. This system inflates the amount of money a bank may lend, usually in the form of credit (paper) rather than actual cash. Meanwhile, the bank’s owners collect interest on the credit (indebtedness) they extend, essentially creating money of nothing. As William Paterson said, “The Bank hath benefit of interest on all moneys which it creates out of nothing.”[224] Consumers obtain credit or indebtedness based on the proceeds of their future labor and/or their current collateral assets, which the banker would seize if the consumer defaults on the interest payments. In essence, the Capitalist banker (purveyors of usury) controls labor and wages.[225]
On June 9, 1784, after the war, Alexander Hamilton had founded his own state-chartered bank, the Bank
of New York, receiving its charter in 1791. He modeled his bank after Morris’ bank and it was popular with investors.[226] State charters were often difficult to obtain but private banks did not require charters but still functioned like chartered banks except they did not issue their own currencies. Pennsylvania had outlawed private banks. Therefore, New York became the nation’s primary banking center. Alexander Brown and Sons, a private bank in New York, became Brown Brothers Harriman, a bank that maintained its private status into the twentieth century.[227] Isaac Roosevelt (1726-1794), the great-great grandfather of Franklin Delano Roosevelt was one of the bank’s co-founders and its president (1786-1791).[228] A merchant, with a store on Wall Street, he also built one of the first sugar refineries in New York City.
On September 11, 1789, George Washington appointed Hamilton as Treasury Secretary (1789-1795), according to his agreement with the international bankers.
Hamilton would finance the Confederation’s old debt by converting them into new federal bonds. He would also help establish the Bank of the United States, a corporation, patterning its charter after the Bank of England, complete with bank shares and national debt.[229] Hamilton immediately instituted what his Hamiltonian Economic Program through the issuance of three reports to Congress. On September 21, 1789, the House of Representatives commissioned Hamilton’s First Report on Public Credit, a forty- thousand-word document, which recommended the retirement of the national debt. The House presented it on January 14, 1790 proposing the federal assumption of state debt.[230] Hamilton’s Second Report on Public Credit recommended the establishment of a National Bank. On December 5, 1791, Hamilton, in Congress, presented Report on Manufactures which recommended policies to stimulate the new republic’s economy based on Mercantilism, an economic theory suggesting that a nation’s prosperity is predicated on its supply of capital assets, represented by state-held bullion (gold, silver), augmented through balanced (exports, imports) international trade. Hamilton, to promote the policies, formed the Federalist Party (1792-1816).
The First Bank of the United States
Alexander Hamilton, Secretary of the Treasury, at the first session of the First Congress in 1790, officially proposed the concept of a central bank. Northern merchants and numerous New England state governments unanimously supported Hamilton’s proposal. However, the majority of the representatives from the Southern mostly agricultural states were highly suspicious of his proposal. They perceived that, for them, an agricultural economy, a central bank concentrated financial power away from the states. Nevertheless, certain people in the North strongly advocated its acceptance.
Hamilton claimed that the nation needed to establish a mint, impose an excise tax, and establish financial order and set precedents for the newly formed United States. Additionally, the nation needed to establish domestic and foreign credit and to resolve the issue of a fiat currency, previously issued by the Continental Congress just before the outbreak of the Revolutionary War, a war that created debt. When a nation incurs warfare debt, they have to initiate a system to pay it. Hamilton argued that the bank was necessary in order to provide the government with a reasonable method of collecting taxes and borrowing money. He claimed that the clause applied to the government’s endeavors that related to its constitutional powers, not just absolute powers but implied powers. In addition to the purported powers to charter and operate federal banks, the Federalists connected the clause to the General Welfare clause. The government exploited the General Welfare clause to justify their “constitutional powers” to extract taxes, borrow money and exercise virtual control over the nation’s currency.
On February 23, 1791, Alexander Hamilton invoked the Necessary and Proper Clause, Article One of the U.S. Constitution, section 8, clause 18, “The Congress shall have Power – To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by
this Constitution in the Government of the United States, or in any Department or Officer thereof” to persuade Congress to charter a central bank. He established this constitutional criterion of what is permissible according to the document.[231] The elites designed the Constitution as a vehicle to re-pay the war debt accrued by 1789. The bankers rolled over that debt, adding additional interest, and it became due in 1859, just before Lincoln’s War. They rolled it over every seventy years – 1789, 1859, 1929 and 1999. Evaluate the economic chaos in those years.
Hamilton argued, “It may be truly said of every government, as well as of that of the United States, that it has only a right, to pass such laws as are necessary and proper to accomplish the objects entrusted to it. For no government has a right to do merely what it pleases. Hence by a process of reasoning similar to that of the Secretary of State, it might be proved, that neither of the State governments has the right to incorporate a bank. It might be shown, that all the public business of the State, could be performed without a bank, and inferring thence that it was unnecessary it might be argued that it could not be done, because it is against the rule which has been just mentioned. A like mode of reasoning would prove that there was no power to incorporate the Inhabitants of a town, with a view to a more perfect police. For it is certain, that an incorporation may be dispensed with, though it is better to have one. It is to be remembered that there is no express power in any State constitution to erect corporations.”[232]
Further, Hamilton maintained, “It leaves therefore a criterion of what is constitutional, and of what is not so. This criterion is the end, to which the measure relates as a mean. If the end be clearly comprehended within any of the specified powers, and if the measure have an obvious relation to that end, and is not forbidden by any particular provision of the constitution – it may safely be deemed to come within the compass of the national authority. There is also this further criterion, which may materially assist the decision: Does the proposed measure abridge a pre-existing right of any State, or of any individual? If it does not, there is a strong presumption in favour of its constitutionality; and slighter relations to any declared object of the constitution may be permitted to turn the scale.”[233]
The interpretation of the Necessary and Proper Clause continued to be a point of contention and led to the formation of Democratic-Republican Party and the Federalist Party. On February 25, 1791, Congress, through the persuasion of Alexander Hamilton, created the Bank of the United States to handle the financial needs and requirements of the central government of the newly formed United States. Previously, the thirteen individual states had their own banks, currencies, financial institutions, and policies. Although the Constitution does not sanction central banks, Congress chartered the Bank of the United States for ten years. Private investors owned it. The Philadelphia-based Bank of the United States had branch offices in New York and other major East Coast cities. Unlike the commercial state-chartered banks that were required to operate within their home states, the Bank of the United States, a central bank, could operate in other states, which annoyed many state bankers. They resented the competition and the interference from the federal government. Many local merchants, preparing to establish state-chartered banks, did not want federal regulation.[234]
They established the original capital of the bank at $10 million. The government subscribed to $2 million. Then the bank, which also served as the government’s fiscal agent, loaned $2 million to the government at 6% interest, which it was to repay in ten equal installments. It permitted the public to subscribe to the remaining $8 million. Institutional investors and domestic merchants bought most of the remaining subscriptions, which the auctioneers traded on Wall Street. There was significant controversy concerning the government’s role in chartering a private company. People feared that the bank would evolve into a strong central bank like the Bank of England (1694) which monopolized the issuance of bank notes. Other banks began making deposits and using the bank as a clearinghouse.[235]
In 1793, out of the $8 million that comprised the funds of the Bank of the United States, $7 million was
mostly from British investors. By 1810, Nathan Rothschild purportedly became one of the investors in that first bank. These shareholders particularly liked to invest in financial institutions and Treasury bonds. The House of Baring, later renamed Baring Brothers & Company facilitated the majority of the British investments in the U.S. They had direct influence within the federal government when it appointed the bank as official agents of the U.S. government to represent British interests. Baring had handled the Louisiana Purchase, formalized on May 2 1803.[236]
Many people resented having what amounted to a central bank, under the control of foreigners. Some even feared that King George was a shareholder. Congress refused to re-charter the bank in 1811. Investors had made about eight percent profit per year during the twenty years. The federal government cleared $600,000 from its investment. However, people were very concerned about the bank controlling the government so the government allowed the charter to expire. Just before the eruption of the War of 1812, they returned the subscriptions to the British investors. Stephen Girard was one of the major domestic investors.[237] By1811,individualstatescharteredover120statebanks.Somehadevenbegunissuingtheir own currency. The federal government resorted to demanding specie payments in 1817. Bank owners resented having to surrender to a strong central bank.
Philadelphia resident Stephen Girard (1750-1831) made his fortune trading slaves and opium. He was a pilot, the individual on a ship who was in charge of trading.
When China banned the British from smuggling opium into the country, Stephen Girard and other Americans took over. Baring Brothers initially financed Girard who became one of America’s richest men. He put up half of the sixteen million dollars needed to finance the War of 1812 and charged a ten percent commission.[238] Baring Brothers financed the opium traffic from 1783 and maintained a close association with prominent Boston families. John Murray Forbes (1813-1898) was a Barings agent, a position earlier occupied by Stephen Girard, the father of the first American on the Hong Shang board.[239]
During the presidency of James Madison, the House of Representatives created a bill to re-charter the bank but it failed by one vote, 65 to 64, on January 24, 1811. It also failed in the Senate when Vice President George Clinton broke a tie vote on February 20, 1811. However, in 1816, Madison revived the bank as the Second Bank of the United States because of huge debts that accumulated from the War of 1812 and ineffectiveness of the state banks.
The Second Bank of the United States
By the end of the War of 1812, the financial system of the country was in chaos. Congress favored the chartering of a new bank for 20 years. On April 10, 1816, the U.S. Congress passed an act entitled An Act to Incorporate the Subscribers to the Bank of the United States, which provided for the incorporation of the Second Bank of the United States, with its main branch in Philadelphia, Pennsylvania. On February 11, 1818, the Maryland General Assembly passed legislation to impose a tax on all banks, or branches thereof, within the State of Maryland that their legislature had not chartered. Based on their law, Maryland attempted to tax all un-chartered banks and bank branches, a policy that targeted the Bank of the United States, which had a branch in Baltimore.
James McCulloch, a Federal cashier at the Baltimore Branch of the Second Bank of the United States refused to pay a $15,000 annual fee as required by the state. John James, an opportunistic informer, filed a lawsuit. He hoped to collect one-half of the fines according to the provisions of the statute. Lawyers appealed the case in the Maryland Court of Appeals where the state of Maryland argued, “The Constitution is silent on the subject of banks.” The state of Maryland contended that because the Constitution did not authorize the federal government to charter a bank, the Bank of the United States was unconstitutional. The court favored the state of Maryland. Then the lawyers appealed the case in the
Supreme Court. This resulted in the lawsuit, James McCulloch versus The State of Maryland, in the U.S. Supreme Court where lawyers argued the case on February 22, 1819.[240]
On March 6, 1819, John Marshall ruled in favor of Congress, stating that it had a right to establish a corporation, an entity with numerous private investors. Although the word bank is not in the Constitution, he stated that if the federal government permitted Maryland to tax the bank then states could assume the power to alter the Constitution. Thus, it would be an admission that the states were more powerful than the federal government. Therefore, in a landmark decision, Marshall and the court ruled that the Bank of the United States was legal and not subject to state taxes in any state which had a branch. That court case increased the credibility and investor confidence in the Second Bank. He argued, “The result is a conviction that the states have no power, by taxation or otherwise, to retard, impede, burden, or in any manner control, the operations of the constitutional laws enacted by Congress to carry into execution the powers vested in the general government.” This case affected the states’ rights debate for four decades.[241]
The Court argued that the word “necessary” in the Necessary and Proper Clause does not refer to the only way of doing something. Controversy erupted regarding this clause during the discussions of the proposed constitution. Delegates, critical of this phrase, opposed ratifying the Constitution. Instead, Justice Marshall argued, it applies to innumerable procedures for implementing all constitutionally established powers. Justice Marshall clarified, “Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional.”[242]
Consequently, Congress determined that the Second Bank of the United States was a valid institution based on that important decision which stipulated that Congress could delegate their constitutional power to others to create a bank or a corporation. John Marshall, the Chief Justice just happened to own stock in the Second Bank.[243] Evidently, like today’s close financial collaboration between military contractors and Congress, people did not question the apparent conflict of interest.
The new charter allowed the president to appoint five of the twenty-five directors. British investors, bankers, and U.S. citizens, frequently using government bonds to purchase shares invested in the bank. Bankers at the state-chartered banks resented what appeared to be a central bank that could establish branches in every state. The Bank of the United States (BUS) accumulated state bank notes and then demanded specie for them, which allowed them to exchange paper for gold or silver. Officials at the state banks viewed this as an attempt to curtail their ability to create their own notes and coin their own money. [244] Congress chartered the Second Bank of the United States for twenty years. After two bank presidents, officials appointed Nicholas Biddle as president. State banks and frontiersmen criticized the bank as it catered to the Eastern commercial classes. However, this bank was still in Philadelphia, not New York City, at least not yet.
New York City, the Center of Mercantilism
The best way to manage a country is to draw part of the nation closer to the “evil system of mercantilism” in accordance with Adam Smith’s prediction. This is effective even if another part of the country prefers a more agricultural type of society.[245]
In the eighteenth century, Britain’s Lancashire mills received their cotton from the Mediterranean, the West Indies, India and Brazil. After the American Revolution, farmers in Carolina began growing more cotton, which they exported to Liverpool or Havre through New York instead of using direct shuttles from Charleston, Savannah, Mobile, or New Orleans. New Yorkers, with their coastal packet lines, developed the “cotton triangle,” cotton transported from the south to New York and then to Europe, which added an extra 200 miles from which the Northerners could collect a heavy toll and extra charges for unloading and
reloading. New Yorkers could not feasibly handle direct eastbound shipments without this unusual arrangement. The cotton supplied the New Yorkers with a lucrative eastbound cargo. The return trip brought European exports back to New York, a large proportion of which the New York merchants sent coastwise to the southern states. New Yorkers also had a financial interest in the direct shipments of cotton from southern ports.[246]
Eli Whitney’s invention of the cotton gin increased productivity, which led to expanded planting. By 1806, the U.S. exceeded the West Indies as a cotton source. By 1810, cotton exports to Britain accounted for more than half of their cotton imports. After the War of 1812, New York, previously overshadowed commercially by Boston, was in a position to advance the cotton triangle to include other commodities.[247] Between 1815 and 1860, freight activity through the port of New York experienced significant growth. It was a landlocked harbor, had deep water and was close to the open sea.[248] New Yorkers sold flour, their biggest export, and other food products to the sugar-producing islands, the southern European nations and along the Atlantic seaboard.[249]
Coastal trade to New York included small schooners from Maine carrying lumber or from the Chesapeake hauling grain and larger vessels with cotton from the southern ports.[250] The Black Ball Line began operations the end of 1818 with regular service between New York and Liverpool. Jeremiah Thompson, who emigrated from Yorkshire in 1801, was the principal owner. By the 1820s, he was “the foremost cotton trader in the world.”[251] Thompson, wealthy merchant and ship owner, had an office on Wall Street, next door to the Bank of America.[252] Black Ball shipped British goods south and brought cotton back to New York. His colleague, Benjamin Marshall spent his winters in Georgia buying cotton from the planters, a way to direct southern commerce and profits north.[253]
New York businessmen assumed a large share of the South’s commercial activity and collected interest, commissions, freight, insurance, and additional employment for thousands, along with other secondary profits. Southerners, typically more trusting, leisurely and easygoing, ultimately realized that the New Yorkers were receiving forty cents of every dollar paid for southern cotton. New York financiers lent money for others to plant wheat or cotton and then managed the exportation of those products out of New York in ships that they either owned or financed during construction. Bankers advanced money to shopkeepers to restock or increase inventories. Farmers, shopkeepers and plantation owners all paid interest to do business, year after year. Most of the nation’s business hinged on the relationships built with New York bankers.[254]
By the 1820s, it was no secret that New York handled most of the South’s cotton shipments, the most valuable of New York’s domestic exports and the most valuable single product in British imports. In 1821, the U.S total of exports, including specie, was $54,000,000 with cotton comprising $20,000,000 with tobacco at $5,000,000 and flour at $4,000,000. In 1822, the total value of the port’s domestic exports was $9,228,000 out of which cotton represented $3,925,000. Flour, the principal northern offering, represented $794,000. Southern products represented 55% of all shipments. New Yorkers, without the south, would have been hard-pressed for eastbound cargoes on the Atlantic shuttle. By 1851, among the New York exports, excluding specie, cotton accounted for $112,000,000 or nearly 60%, with flour at $10,000,000, and tobacco at $9,000,000.[255]
They initially surveyed the Erie Canal in 1810. In 1811, a canal commission, with Chairman DeWitt Clinton, Gouverneur Morris, Stephen Van Rensselaer, and Thomas Eddy suggested constructing a canal to Lake Erie. The Erie Canal Bill, dated April 17, 1816, after the War of 1812, authorized the building of an artificial 363 mile-long waterway connecting New York City with the Great Lakes via the Hudson River. It would help settle Ohio and facilitate trade between Cleveland and other localities along the lake. The driving force behind the canal project was DeWitt Clinton, a Freemason and mayor of New York City
(1803-1815) and Governor of New York (1817 -1823, 1825-1828). In 1817, he got the legislature to appropriate over $7 million for construction via New York state bonds in addition to private investors, including Frederick Havemeyer, George Lorillard, John Jacob Astor, Landon Cheves, Nicholas Brown, Thomas P. Ives, Edward Carrington and numerous British investors. Bank customers borrowed in order to invest in the canal. By 1829, foreigners, particularly the British who valued infrastructure investments, owned more than half of the canal’s outstanding obligations of $7.9 million. They employed about 9,000 construction workers. More than 1,000 of them died during the project. Author Peter L. Bernstein says that the Erie Canal was the first step toward globalization and a worldwide complex of transportation routes. [256] In 1811, after Clinton became lieutenant governor of New York, he rented Richmond Hill, a large estate on the shores of the Hudson, from John Jacob Astor.[257] Clinton hoped that the canal project would catapult him into the White House.[258]
Patenting increased after the opening of the Erie Canal. From 1810 to 1825, the Patent Office received about 200 patents a year. By 1835, there were 700 patents and New York State led the nation in new patents. Southern New England took the lead in manufacturing after 1830 with New York as a close second.[259] Clinton saw New York City as the “granary of the world, the emporium of commerce and the seat of manufacturers.” He envisioned the whole island of Manhattan covered with inhabitants, which would constitute one “vast city.”[260]
The U.S. had received a £900,000 loan from the Rothschilds in 1839. After the Depression of 1837-1843, the U.S. saw great reform in Britain’s trade laws, including England’s repeal of the Corn Laws in 1846, which allowed tariff-free grain and America’s Walker Tariff of 1846. U.S. Politicians, like Ohio’s Senator William Allen, hoped for an expansion of lucrative free trade for U.S. agricultural and other products. By 1846, Congress began pursuing reciprocal trading agreements with other countries. President James K. Polk, a Freemason, extracted a mutual free-trade agreement with Brazil in 1847. By late 1848, the U.S. signed reciprocal trade treaties with New Granada, Peru, the Kingdom of the Two Sicilies (Italy), Belgium, Hanover and several other German states. By 1853, the U.S. made agreements with Paraguay and Argentina.[261]
Following the repeal of the Corn Laws, Britain was the “standard bearer of free trade among the nations of the world.” As officials lifted the tariffs, corn imports tripled, food prices were lower and the reduction in food costs encouraged migration away from agriculture towards the cities and factories. Consequently, Britain had an economic advantage – the coal-based industrial power in the Midlands and the vast seagoing capacity transformed export and import trade throughout the world. Agricultural workers left the farms and employment in the factories soared. Agricultural labor shrank from twenty-five percent in 1846 to about ten percent by 1900.[262]
Many of the exports for Britain moved along the Erie Canal. From 1837 to 1845, the canal carried an
average of 1.5 million tons of freight a year, with a high of 2,000,000 in 1845. American exports to
Britain from 1836 to 1846 averaged $48 million a year. Officials repealed the Corn Law in 1846. In
1847, exports to Britain totaled $87 million. From 1851 forward, exports never fell below $100 million.
[263]
George Bancroft entered the political realm in 1837 when Martin Van Buren appointed him as the Collector of Customs of the Port of Boston. Bancroft, from a prominent Massachusetts family, began his education at Phillips Exeter Academy and entered Harvard at age thirteen, graduated at seventeen with a scholarship to study at Heidelberg, Berlin and Göttingen where he received his doctorate in 1820. He sought out and took a five-month course from Georg Wilhelm Friedrich Hegel at the University of Berlin. On March 1, 1827, Bancroft married Sarah Hopkins Dwight, daughter of Jonathan Dwight Jr., a wealthy Massachusetts banker.[264] Bancroft, as Secretary of the Navy (1845-1846), later helped to establish the
U.S. Naval Academy at Annapolis in 1845. George Bancroft delivered the eulogy for Andrew Jackson on June 21, 1844 in Washington.[265] Military schools were established and promoted to groom a select congregation of individuals who would battle for the banking establishment. Bancroft, a Democratic diplomat, served as Minister to Britain in late 1846. He and colleagues were elated over England’s repeal of the Corn Laws. Globalists were inspired over the recent reforms that they hoped would initiate “an unprecedented and lucrative era of free trade.”[266]
Effective January 1, 1801, the Irish, after considering the proposed benefits, united with England, which meant free trade between the countries. It is amazing that the Irish would even consider such an affiliation, given England’s history of hatred toward them. In Queen Elizabeth’s time (1533-1603), nobles who received lands and governing powers in Ireland thought that it necessary to exterminate the Irish but the Crown and the feudal lords did not want to finance the extermination.[267]
That mentality remained. Britain dismantled the Irish Parliament and the British Parliament legislated for both countries. Even though Ireland had a population of 8,000,000 in 1841, they produced sufficient food, flax, and wool to take care of the needs of 18,000,000 people during the 1840s, thus they had extra to export. A potato blight devastated Ireland’s potato crop but Britain did not halt exports, a policy Ireland had implemented during previous crop blights. Per British policy, Ireland was still obligated to export numerous food items and grains to England, except for potatoes; the Irish could keep those. British officials even increased some export items during the worst part of the famine. Consequently, between the years of 1845 and 1850 the British government permitted massive starvation of the Irish people who, according to some elites, produced far too many children anyway. Statisticians estimate that 1,000,000 died of starvation and related illnesses and 1,000,000 emigrated because of the famine.
The North had a difficult time getting cheap labor, as there were insufficient people willing to work for what the elite wanted to pay. On January 1, 1847, in the City of London, Baron Lionel de Rothschild, banker Thomas Baring and Samuel Jones Lloyd, a Manchester banker met under the auspices of the British Relief Association, established to determine how to help the starving, abysmally poor Irish peasants. Famines (1845 and 1852) and imminent death, with Rothschild’s assistance, motivated them to leave their beloved Ireland. Half of all Irish immigrants disembarked at New York where they conveniently met the needs of a labor-intensive economy. From May 5, 1847, until the end of the year, a little over seven months, 52,946 Irish arrived in New York.[268] The influx of Irish immigrants also provided a block of voters who would vote with the North against the South.
The Times reported, “It was in Baron Lionel’s own room in New Court, in December 1846, that the British Relief Association was organized, Messrs. N. M. Rothschild and Sons subscribing with others the munificent sum of £1,000.” He also loaned the British government about £500,000, referred to as the Irish Famine Loan to render relief for those who did not emigrate. In 1854, Rothschild “raised a sum of £16,000,000” for Irish relief efforts.[269] He became a member of the British House of Commons in 1847, two years after the commencement of the famine, after thousands had already died of hunger.
During the famine years, about 650,000 Irish arrived in New York where industrial jobs awaited them. The poorly paid workers, whisked from their homeland, typically labored in hazardous circumstances and led wretched lives. In the 1850s, Irish immigrants, usually with large families to support, earned $1.00 per day in the only labor that was available.[270] Like today, famine and economic destitution in one area represents cheap labor somewhere else. Similarly, in the mid-1990s, the bankers devalued the peso, which created desperation and much of the influx of Mexicans into the U.S. Irish laborers earned subsistent wages as long as industrial injuries did not incapacitate them. Available housing consisted of filthy, vermin-infested, overcrowded boarding houses in lower Manhattan at exorbitant prices. If they lost their jobs, slumlords evicted them, the poor souls, slaves of industrial labor, and confiscated their
belongings for unpaid rent. With such despair, New York experienced an increase in crime and a high infant mortality rate. The slumlord Astor family, deeply involved in the Tammany Society, owned several buildings where thousands of people existed. When the tenants rioted against the decrepit state of the buildings, the police suppressed them. John Jacob Astor III also ran “sweat shops” for the impoverished living in his Manhattan tenements.
Ten major cotton states produced 66% of the world’s cotton before Lincoln’s War. Raw cotton comprised over half of all U.S. exports. By 1850, there were about 2.3 million souls laboring on about 75,000 southern plantations. Two million out of the total number of slaves produced about 2,000,000 bales a year. Shippers sent cotton to England or to Boston for the domestic textile industry. The South had produced about 2.3 billion pounds of cotton during the growing season that ended on August 31, 1860. Approximately half of that went to Britain, which had 2,650 textile factories, mostly located in Lancashire, the heart of textile
manufacturing.[271]
Henry Lehman, age twenty-four, the son of a Würzburg cattle merchant, had arrived in America in 1844 and became an itinerate peddler. His business grew and in 1845, he moved to Montgomery, Alabama, set up a small shop and mounted a sign, H. LEHMAN. His two younger brothers, Emanuel and Mayer joined him by 1850. The brothers were all Rothschild representatives.[272] Now known as Lehman Brothers, they retailed clothes, utensils, food, and other imported articles that local cotton farmers readily purchased.[273] By 1858, Lehman brothers opened their first branch office in Manhattan where they made a fortune during Lincoln’s War. Mayer was in Montgomery, Alabama; Henry was in New Orleans and Emanuel was in New York, as a cotton broker. They situated themselves where they could best exploit the profit possibilities during the war.[274]
By 1860, New York had 4,375 factories that employed 90,204 workers. The 539 ironworks employed 10,000 laborers, all situated on the island of Manhattan, near the port. Similar industries were adjacent to each other with cabinetmakers close to numerous sawmills that processed the timber. All of this industry relied on auxiliary commerce like importers, machine shops, advertising and such. The city’s rattrap, waterless, toilet-less three closet-size-rooms tenements were home to thousands of laborers.[275] During the 1840s, the City’s population had increased by over 60%, to 515,547. In the next decade, the population jumped to 813,669, mostly the Irish famine victims.
The importation of cheap labor decreased production costs, one of the North’s main pre-war contentions against the South. Now they could focus their attentions on a campaign to abolish slavery. Ironically, many states, New Jersey, Indiana, Illinois, Ohio and Oregon passed laws prohibiting free blacks from entering their state and many Northerners joined the colonization efforts. The hypocritical Northerners were committed to emancipation but wanted the freed slaves to remain in the South. The Northern elite resented the South, which had ceased to be a viable market for their slave trading. Now the Northerners trafficked human misery in the Atlantic Islands, the Caribbean and South America.[276]
Postwar, in 1870 the U.S. produced 4,300,000 bales of cotton; by 1882 the nation produced 6,900, 000 bales and by 1891 the nation grew 9,000,000 bales. Prices dropped because of the plentiful supply. The wheat situation was the same. Consequently, some industrialists sought foreign markets.[277]
The South, a Profitable Colony
In 1857, Hinton Rowan Helper, the son of a North Carolina yeoman farmer wrote The Impending Crisis of the South in which he justifiably claimed that the South was nothing but a colony of the North. Slavery benefited very few and most of the white Southerners were in a state of ignorance. The North, according to Helper, out-produced the Slave States in all edible produce and grain while the Slave States produced
cotton and tobacco, cash crops not grown in the North.[278]
Helper said that it was a well-known fact to every intelligent Southerner that they were compelled to go to the North for basic essentials. The South had no foreign trade or the mercantilism that was so prevalent in the North. The South had no cotton-mills or steamships and contributed little to literature, art or inventions. In order to find profitable employment, large numbers of Southerners moved to the West. While the North retained their natural born citizens, they also encouraged hundreds of thousands of foreigners to settle there. Southerners manufactured very little as Northerners readily met their demands for products. Therefore, Southerners found it unnecessary and were not motivated to develop industry.[279]
Helper argued that the South always claimed agricultural superiority over the North. However, comparing bushel to bushel, the North unquestionably produced more than 50% of the most valuable, eatable produce. The North showed a balance against the South, in favor of the North, of 17,423,152 bushels and a difference in value of $44,782,636.[280] Southerners were frustrated to discover that instead of having an agricultural advantage, the South was sinking deeper into poverty. Meanwhile, the rival North extracted whatever wealth remained and was achieving fame, fortune, and power. Helper wrote that they “cried out for retribution against the treacherous, slave-driving legislators, who have so basely and unpatriotically neglected the interests of their poor white constituents and bargained away the rights of posterity.” The white non-slaveholders comprised the majority, five to one, yet they had no legislative voice as the slaveholders designed the laws to benefit slavery and plantation owners. The lawmakers regarded poor whites, the majority, with less esteem than they viewed the blacks. However, their condition was often more wretched. He wrote, “A cunningly devised mockery of freedom is guaranteed to them, and that is all. To all intents and purposes they are disenfranchised, and outlawed, and the only privilege extended to them, is a shallow and circumscribed participation in the political movements that usher slaveholders into office.”[281]
Many northern industrialists demanded large protective tariffs, which affected the South in two ways – high consumer prices without the comparable benefits. They consumed a large amount of imported manufactured goods and relied on the export of their cotton and tobacco to purchase those items, mostly from England. Extra high tariffs increased consumer costs while filling the federal coffers. The federal government used those tariffs to build and maintain northern infrastructure and industry.[282] After the war, the South struggled to restore their economy and their railway system. Union soldiers deliberately destroyed private and public property, including transportation.[283]
On December 25, 1860, Robert Barnwell Rhett, from South Carolina, adamantly criticized the pending Morrill Tariff in an address to the South Carolina convention. He reiterated that Southern representation in Congress was useless in protecting them against unjust taxation. The Northerners taxed the Southerners for the exclusive benefit of the North, exactly as the people of Britain had taxed their ancestors in the British parliament. He said, “For the last forty years, the taxes laid by the Congress...have been laid with a view of subserving the interests of the North. The people of the South have been taxed by duties on imports, not for revenue, but for an object inconsistent with revenue— to promote, by prohibitions, Northern interests in the productions of their mines and manufactures.”[284] The Southern states provided about 75% of the money to operate the Federal Government, 50% of the total 75% was from Virginia, North Carolina, South Carolina and Georgia. The South received only 10% to 20% of this tariff money.
The Morrill Tariff Act of March 2, 1861 passed and increased the tariff from about 17% to 36% until the Underwood Tariff of 1913 replaced it. Officials blamed the Panic of 1857 for this tariff, saying that the free trade movement created the financial crisis. This was somewhat reminiscent of the 1828 Tariff of Abominations that ignited the Nullification Crisis.
New England industrialists controlled the North and supported the preservation of the Union, not only to
maintain but increase tariff revenue. They intended to extract southern resources to pay for the industrialization of America with little expense to the North. The revenue bills introduced in the House prior to the war were discriminatory against the South. Lincoln promised the industrialists that, if elected, he would increase the tariff rate. His war objective, to accommodate the Northern elites, was to maintain the Union, regardless of slavery. If the Union failed, they would lose millions because of their southern investments. They would also lose access to the South’s cotton, a commodity controlled by northern businessmen. Author David Williams claims, “The Union was and always had been a speculative enterprise serving those with the economic capital and political influence to control raw materials, production, markets, and labor. Resources, including those of the South, served to fuel their money- making machine.”[285]
Mercantilism versus Agrarianism
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