In great measure, no doubt, his concern with the immediate political bearings of Hamilton’s system diverted his attention from its theoretical economics. In this he was far from exceptional. On the one side, Oliver Wolcott, one of Hamilton’s most interested supporters, wrote explicitly that he attached no importance to the funding measure save as “an engine of government,” and that “without assumption, the political purposes which I have enumerated can not be attained.” On the other side, Jackson brought out the historical parallel, taken from Blackstone, of the political reasons for creating the British national debt; “because it was deemed expedient to create a new interest, called the moneyed interest, in favour of the Prince of Orange, in opposition to the landed interest which was supposed to be generally in favour of the King.” Mr. Jefferson wrote Washington to the same effect, that “this exactly marks the difference between Colonel Hamilton’s views and mine, that I would wish the debt paid tomorrow; he wishes it never to be paid, but always to be a thing wherewith to corrupt and manage the Legislature.” Of the Bank project also, he wrote in retrospect, nearly twenty years after the event, “The effect of the Funding system and of the Assumption would be temporary. It would be lost with the loss of the individual members whom it had enriched, and some engine of influence more permanent must be contrived while these myrmidons were yet in place to carry it through all opposition. This engine was the Bank of the United States.”
Perhaps naturally, then, Mr. Jefferson’s official memorandum on the constitutionality of the Bank bill does not lead into the large question of public policy exhibited by the economics of the measure. When the bill came up for the President’s signature, Washington asked the four members of his Cabinet to prepare him each a written opinion for his guidance. Hamilton wrote an affirmative opinion, of great ability; General Knox, Secretary of War, a good soldier, quite out of his depth in any matter of this kind, agreed with him. Mr. Jefferson and Edmund Randolph, the Attorney-General, wrote negative opinions. Mr. Jefferson took strictly legalistic ground, not passing from this to the ground of public policy, though it was well open to him. He enumerated the legal principles contravened by the bill, demolished the doctrine of the Federal Government’s “implied powers,” and laid down as fundamental to the Constitution the formula of the Tenth Amendment, that “all powers not delegated to the United States by the Constitution nor prohibited by it to the States, are reserved to the States or to the people.” Beyond this he did not go; it was a lawyer-like pronouncement, but in the premises hardly, perhaps, to be called statesmanlike.
It was not, at all events, the production of a man desirous of making himself the focus of a great popular movement of insurgency. It had a curious effect upon his reputation as a public man—curious, that is, until one remembers the tendency of terms originally fresh, vivid and special in their significance, to divest themselves of their original meaning, and either degenerate into mere petrifactions, or else to take on a new and different content. Mr. Jefferson’s legalistic attitude towards Hamilton’s fiscal system placed him before the country as a doctrinaire advocate of State rights and of strict Constitutional construction; whereas he was really neither. His advocacy of both was occasional. Class-interest led him almost always to the side of the smaller political unit against encroachment by the larger, because the greater the power of local self-government, as a rule, the better for the producer and the worse for the exploiter. Thus he was quite regularly for State rights against the Union, for county rights against the State, for township rights or village rights against the county, and for private rights against all. But in this he was far from doctrinaire; when the producer’s interest lay in the other direction, he promptly changed sides. He showed himself as little doctrinaire, also, towards construction of the Constitution. He was always well aware that law, even fundamental law expressed in a Constitution, is merely something that succeeds in getting itself measurably well obeyed, and that a Constitution must therefore be, in the last analysis, a device by which anything can be made to mean anything. “Some men look at Constitutions with sanctimonious reverence,” he wrote in his old age, “and deem them like the ark of the covenant, too sacred to be touched.” He had seen too much lawmaking and law-mongering to entertain any such illusions; his view was always practical. “I am certainly not an advocate for frequent and untried changes in laws and Constitutions. I think moderate imperfections had better be borne with; because when once known, we accommodate ourselves to them, and”—he adds, suggestively—“find practical means of correcting their ill effects.” As Secretary of State, in 1792, he says in an official opinion that where a phrase in the Constitution is susceptible of two meanings, “we ought certainly to adopt that which will bring upon us the fewest inconveniences.” Yet when the interest of the producer leaned that way, he could, and invariably did, stand out as stiffly as any one for the letter of the law, and for the “safe and honest meaning contemplated by the people of the United States at the time of its adoption.”
Mr. Jefferson had always a sound and clear view of the function of capital as a factor in production, always drawing a sharp distinction between capitalism and monoply. He would not have understood a condemnation of Hamilton’s system because it was capitalistic, any more than he would have sympathized with idle conjurations of a “menace of capitalism” in general. “To the existence of banks of discount for cash, as on the Continent of Europe, there can be no objection, . . . I think they should even be encouraged by allowing them a larger than legal rate on short discounts, and tapering thence in proportion as the term of discount is lengthened.” He did not object, even, to a national establishment of merchant-banking, but rather advocated it. “The States should be urged,” he wrote in 1813, “to concede to the General Government, with a saving of chartered rights, the exclusive power of establishing banks of discount for paper.” It was the monopoly-feature, the element of law-created economic privilege, to which he objected. He perceived, in short, the difference in economic status held by the industrial or merchant-banker, furnishing capital for productive enterprise, and the banker who underwrites and hawks a lien which a government imposes, through an exercise of the taxing power, upon the products of future labour.
The last of Hamilton’s fiscal measures was a protective tariff; and here again Mr. Jefferson showed a sound instinct outstripping a rather hamstrung economic interpretation. He was a natural free-trader. During the Revolution he had urged upon Franklin, then at the French court, the advisability of supporting public credit by securing “free trade by alliance with some naval power able to protect it,” and in his official report on foreign commerce, in 1793, he recurs to the same step-by-step policy. “Would even a single nation begin with the United States this system of free commerce, it would be advisable to begin it with that nation; since it is one by one only that it can be extended to all.” He saw international commerce in the large general terms of “an exchange of surpluses for wants between neighbour nations”; if this exchange could be made free, it would be a great natural stimulus to production all round—“the greatest mass possible would then be produced of those things which contribute to human life and human happiness; the numbers of mankind would be increased, and their condition bettered.”
On the other hand, he accepted the doctrine of retaliatory tariffs, apparently without perceiving that as an economic weapon, any form of tariff, boycott or embargo kicks farther than it carries, and that the best reason for a tariff is invariably a better reason against one. He never anticipated, for example, the appalling economic consequences brought indirectly upon the producer by the great embargo which he imposed upon the country in 1807. Although he correctly calls tariff-taxes “duties on consumption,” he assumes that they are paid at first hand instead of being passed along. He also assumes that taxation should be based on ability to pay, rather than on a rental-basis determined by the value of economic privilege received from government. “Taxes,” he says, “should be proportioned to what may be annu
ally spared by the individual.” The theory of taxation set forth by the Economists seems not to have stirred his usually sensitive curiosity. He regarded it as an academic matter of little interest. “Whatever may be the merit of their principles of taxation, it is not wonderful they have not prevailed; not on the questioned score of correctness, but because not acceptable to the people, whose will must be the supreme law.” Hence it is not surprising to find him accepting a revenue-tariff as a device for making the rich pay all the taxes. As the tariff-taxes “fall principally on the rich,” he writes the Comte de Moustier in 1790, “it is a general desire to make them contribute the whole money we want, if possible.” This failure to trace the actual incidence of taxation may be said to have made his own fiscal measures almost as bad for the producer, in the long-run, as Hamilton’s.
In their economic judgment on the protective system, Mr. Jefferson’s contemporaries again outran him. His Virginian neighbour, Taylor, seems to have caught sight of the fundamental principle that in international trade as well as in domestic trade, goods can be paid for only in goods or services, and that money, or any form of credit which apparently pays for them, does not really pay for them, but is merely a device for facilitating their exchange. “Currency is the medium for exchanging necessaries”—it must have goods behind it, and whatever medium has the guarantee of goods behind it is valid currency. Trade, then, should follow the natural lines set by purchase in the cheapest market and sale in the dearest; and any mechanism of interference, like a tariff, is disabling. He also saw that a tariff, by artificially raising prices to the domestic consumer, is a “distribution of property by law” —by political means, in other words, rather than by economic means. Moreover, by successive shiftings, the final incidence of this tax falls inevitably on production, for any governmental “bounties to capital are taxes upon industry.” Tightening his terms a little, the values absorbed by the “chartered monoply” created by a tariff-law, must come from somewhere, and there is nowhere for them to come from, finally, but out of production. By the last analysis somebody, in Mr. Jefferson’s phrase, must “labour the earth” to produce them.
Mr. Jefferson stood out against Hamilton in every Cabinet meeting, but he always lost. He was a poor disputant; contention of any kind was distasteful to him, as having at best a touch of vulgarity about it. Unable even formally to concur with Hamilton, as the President hoped he might, he at last told Washington that “my concurrence was of much less importance than he seemed to imagine; that I kept myself aloof from all cabal and correspondence on the subject of the Government, and saw and spoke with as few as I could. That as to a coalition with Mr. Hamilton, if by that was meant that either was to sacrifice his general system to the other, it was impossible. We had both, no doubt, formed our conclusions after the most mature consideration; and principles conscientiously adopted could not be given up on either side.” At Washington’s request he continued to hold office in an ad interim fashion for a time, but a series of stirring events in the following year, 1793, determined him; he resigned on the last day of that year, and shortly afterwards went home. Washington’s Administration was headed straight for the rocks; and Mr. Jefferson, quite indisposed to martyrdom for a cause he did not believe in, went overboard and struck out for Monticello and safety.
IV
England went into a counter-revolutionary war with the new-born French Republic in 1793. In the spring of that year, a stormy-petrel made its way from France to the United States, in the person of Edmund Charles Genêt, the first French republican minister accredited to this country. The terrible latter phase of the French Revolution was a windfall to the American economic interests represented by Hamilton, since it enabled them to manufacture a serviceable public sentiment. By holding up the Revolution as a movement for democracy, and illustrative of democracy in action, they could say a great deal for Hamilton’s general view of the people as “a great beast,” needing a strong centralized government to keep its excesses in check; and at the same time they could effectively divert attention from the economics of the French revolutionary movement, and from the economic character of the strong centralized government that they were advocating for the United States. “The Anglomen and monocrats had so artfully confounded the cause of France with that of freedom that both went down in the same scale.” To represent the French Revolution in terms of political theory, rather than in terms of economics, was highly advantageous for their immediate purposes; just as in the American Revolution it was advantageous for the New England traders to express their revolutionary doctrine in the political terms of the Declaration, rather than in terms of molasses, rum, codfish and the carrying trade, or the Virginians in terms of free land, tobacco and debts due British creditors. The idea liberated by a successful revolution is always greater than the idea actually animating it. The American and French Revolutions released upon the world the idea of the right of individual self-expression in politics; but neither was actually animated by that idea.
In the promotion of this myth, however, sincerity and interest played, as they always do, alternate and indistinguishable parts. With Washington and Hamilton, sincerity was certainly uppermost; they were shocked and horrified by the Red Terror of Democracy. The sincerity of the Vice-President, John Adams, was transparent. “You never felt the terrorism of Shays’s Rebellion in Massachusetts, . . .” he wrote Mr. Jefferson plaintively, years later. “You certainly never felt the terrorism excited by Genêt in 1793, when ten thousand people in the streets of Philadelphia, day by day, threatened to drag Washington out of his house and effect a revolution in the Government, or compel it to declare war in favour of the French Revolution and against England. . . . I have no doubt you were fast asleep in philosophical tranquillity when . . . Market Street was as full of men as could stand by one another, and even before my door; when some of my domestics, in frenzy, determined to sacrifice their lives in my defence.” It was all very well for Mr. Jefferson, safe and sound in Monticello, to view the French Revolution with complacency, and stand by his declaration that “rather than it should have failed, I would have seen half the earth desolated; were there but an Adam and Eve left in every country, and left free, it would be better than it is now.” Bearing the burden and heat of the day in Philadelphia, holding off a rabble of discontented scallawags incited by a rascally French incendiary, was another matter. There was something in this, perhaps; still, Mr. Jefferson had given a pretty good account of himself in the revolutionary cause, and given it without complaint. Cornwallis had been a reality to him, and so were the hoodlums of Paris who had twice robbed his house.
The French had the measure of matters in America. They knew that no issue of academic political theory had set the country by the ears. State rights, anti-Federalism, anti-monarchism and all that kind of thing, were but the American equivalent of their own liberté, egalité, fraternité. What really had divided the country, in their view, was a mode of constitutional development inaugurated by a bold seizure of power, and designed to subordinate the economic interests of the producing class to those of the monopolist and exploiting class. The French agents in America were able men, hard-baked realists, no better and no worse than the average run of men who hold such positions. Their reports to the French Foreign Office showed that they knew their game. Fauchet, in so many words, ascribes to Hamilton’s policy the solid intrenchment of a class which “shows a threatening prospect of becoming the aristocratic order,” non-titular, indeed, but in solid substance of economic control, precisely like that which the French proletarians had just ousted; and Fauchet puts his finger firmly upon the consequent formal opposition between the producing interest, l’intérêt foncier ou agricole, and the monopolist exploiting interest, l’intérêt fiscal.
Here was something to be taken advantage of, and the French agents knew how to do it. Ternant, the predecessor of Genêt, had already embarrassed the Government by politely suggesting that it pay its debts to France. The Government mulled the matter over a
while, and as politely replied that it could not pay at the moment—France must wait until things looked up a little. Genêt pressed upon Washington the obligation of the treaty of 1778, which bound the United States to fight on the side of France, on demand, in any European war. When he received the cold shoulder, he went over the head of the Government with an appeal to the people, making himself the centre of a popular demonstration too lively to be disregarded. If the Government and its supporters could get up a great current of idealism in behalf of law and order, he could get up a counter-current of the same serviceable motive power in behalf of the warmed-over spirit of ’76. Even the glossary of ’76 was but so recently out of currency that Genêt had no trouble in putting it into circulation again, almost as good as new. He could talk in quite the old familiar phrases about liberty, natural rights, democracy and the like, and get first-rate effects with them; and all this he promptly did. He was helped, too, by several matters of economic discontent that affected even upholders of the established order; such as the British war policy of seizing neutral ships engaged in the newly-opened and highly profitable French West Indian trade, which made important commercial interests restless under what they regarded as the slackness of the Administration in protecting them.
Washington was in a tight place; he declared that he would rather be in his grave than in his present situation. War with England was impracticable, for the best of reasons. John Jay, with great acuteness, had put the whole doctrine of war in a dozen words, when he said that “nations in general will go to war whenever there is a prospect of getting anything by it;” and if the United States took the part of France against England, the dominant interests must face the prospect of loss. England, conscious of the strength of her position with these interests, was offering America every provocative indignity; yet the inexorable fact remained that trade with England was five times greater than with France, that war with England meant a stoppage of credit, depreciation of securities, a check on land-speculation—one American speculator, Robert Morris, had sold as much as a million acres of American land in England in 1791—and it would thus tend powerfully to embarrass and disintegrate the solid body of supporters which Hamilton had built up for the Government. There was good reason for Hamilton to be “panic-struck,” as Mr. Jefferson contemptuously wrote Monroe, “if we refuse our breech to every kick which Great Britain may choose to give it.”
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