The Half Has Never Been Told: Slavery and the Making of American Capitalism (48 page)

Yet while the people in their majesty removed their hats, and Jackson bowed, Jackson still had on his own hat. Under it Jackson couldn’t help also carrying another set of programs. In fact, he often carried his ideas
in
his hat—seeds of thought jotted on scraps of paper and shoved into the interior band. And as his speech went on, Jackson signaled four policies that were
destined to seed more slave labor camps on the southwestern frontier. These were not necessarily incompatible with the hopes and principles of common white men. But their outcomes would also deliver both financial benefits and unintended consequences to the entrepreneurs of the frontier.

First, Jackson announced that he planned to address the Indian issue according to the “feelings” of his countrymen.
Almost 50,000 native people still lived on and held title to 100 million acres of land in Georgia, Alabama, Mississippi, and Florida. The “feeling” of Jackson’s countrymen was that they wanted that land in order to launch expanded cotton-and-slavery-induced booms. And over the next eight years, Jackson’s administrations forced all the surviving Indian tribes across the Mississippi to free
up more land for white—and black—settlement.
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Jackson also said that “with foreign nations it will be my study to preserve peace and to cultivate friendship on fair and honorable terms,” but he had already made it known that he believed that with the Louisiana Purchase, the United States had actually also bought most of what eventually became the state of Texas. The independent nation of Mexico
claimed this territory, but Jackson wanted to redraw the boundary line that the United States and Spain had negotiated in 1819 to incorporate most of today’s Texas as a new frontier for cotton seed.
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Jackson also mentioned his desire to adjust the tariff levied on foreign manufactured goods by the most recent Congress in 1828. This unwieldy compromise subsidized America’s still-weak manufacturing
sector by levying import duties, such as the 280 percent surcharge on cotton broadcloth. American factories could undersell some British goods, but the consumer paid the cost. Although the tariff protected some of Jackson’s northern supporters, it hurt southern planter-entrepreneurs by taxing their consumption. South Carolina politicians were already pushing for a showdown over the issue. In
his speech, Jackson suggested that the tariff was too high.
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Then there was “reform,” Jackson’s amorphous fourth goal. He was evasive in the short speech about what reforms he meant. Jackson would soon charge that the executive branch’s Adams-era holdovers—a hundred or so clerks—embodied corruption. But we know that the president was more concerned about the Second Bank of the United States.
Many branches of the B.U.S. had deployed financial resources in the service of the Adams campaign, and Jackson wasn’t going to forget that. And although the B.U.S. had stabilized the nation’s financial structure, allowing many to recover from the Panic of 1819, many other Americans were not getting wealthier. Most of those Americans had voted for Jackson. He left the harshest B.U.S. lines out of
his inaugural address, but he would soon launch attacks on the bank, attacks pitched as a reform program that enhanced the egalitarianism of white manhood citizenship.
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So Jackson closed. Then he strode down the steps and through the crowd to the rowdiest inauguration party in history. That evening, thousands of his excited supporters crowded into the White House, overwhelming attempts at crowd
control. They drank and ate everything, broke furniture, teacups, and noses, and almost smothered their hero against the back wall of the house. Jackson had to escape through a back window. He spent the night back at the hotel. The party raged on without him, for, as Washington hostess Margaret Bayard Smith sniffed, it was indeed “the People’s Day.”
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The inauguration set the stage for four years
of raucous conflict. Among other things, Jackson faced down half the members of his Cabinet because they and their wives labeled the wife of another a whore. And though Congress moved toward lowering tariffs, it didn’t move quickly enough for South Carolina politicians, who claimed that they could nullify the federal law. Some historians have claimed that the nullification movement anticipated
the disunion threats of the South in the 1850s—threats that were issued in response to northern attempts to block the expansion of slavery—but this is false hindsight. In the late 1820s, South Carolina whites were scared. They had not mentally recovered from the alleged Denmark Vesey slave conspiracy of 1822, and they also sensed their decline relative to the southwestern region. In fact, few west
of South Carolina supported threats of disunion, and in the winter of 1832–1833, Jackson demolished the logic of nullification in a brilliant defense of nationalism.
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Already in 1830, Jackson and his allies in Congress had proposed the Indian Removal Act, which forced southwestern Indians into present-day Oklahoma. Although some northerners criticized conquest and displacement as immoral, Congress
passed the act, authorizing Jackson’s government to
evict the remaining eastern nations. By the end of his second term, the vast majority of the Native Americans who had lived in the southwestern cotton states in 1828 had been driven from their homes.
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Before a single Cherokee or Chickasaw was driven from his homeland, however, came the day in November 1829 when B.U.S. President Nicholas Biddle
traveled from his Philadelphia headquarters to the White House. Biddle was a dapper, poetry-publishing aristocrat, as close to a Renaissance man as nineteenth-century America produced. He had rooted out the institutional dysfunction that had led to the Panic of 1819 and rebuilt the B.U.S. into a sophisticated financial machine that regulated credit-granting sectors. More than any other individual,
Biddle ensured that the massive productivity increases in frontier cotton fields since 1790 would be converted into steady nationwide economic growth. In fact, since the 1820 trough of the post-panic depression, the national economy had already grown by 38 percent. But the polished Biddle was anxious to sound out the frontier general. For Jackson’s source of power was his appeal to a newly enfranchised
majority that was congenitally suspicious of the bank’s octopus-like ability to reach into their lives.
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In the meeting, the president thanked Biddle for the bank’s help in paying off the national debt. But Jackson also said something that struck Biddle as strange: “I do not dislike your Bank any more than all banks,” said the president, “but ever since I read the history of the South Sea Bubble
I have been afraid of all banks.” Historians have used this exchange to depict Jackson as driven by a backward-looking broader cultural anxiety—the fear that the paper money printed by banks was not “real” in comparison to precious metals such as gold and silver. Yet Jackson also represented interest groups that had more practical reasons to resent Biddle’s bank. All these sources of opposition
would soon combine to fuel a confrontation between Jackson and the B.U.S. That struggle touched off a series of consequences that shaped both the process of slavery’s expansion and the political drama that is the more conventional narrative of US history from Jackson to Lincoln.
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THE LINK BETWEEN THE
cotton field and politics can be found in the strange alchemy of banks. Everyone knows that
banks take in deposits and lend out money, but they don’t always realize that when banks lend, they actually create money. We call that money
credit.
As we heard already, that means that money is based on “belief”—the root is the Latin
credere
, a verb meaning “to believe”—and people have to believe in the money for it to work, because banks lend out more money than they take in through deposits.
This money has to be paper money, which in the nineteenth century the
state-chartered banks printed themselves, or it can be numbers added to borrowers’ credit accounts on a paper ledger, loans against which the borrowers could write checks. Paper is useful, of course, because it is light. With it you can transfer large sums in an envelope, whereas even medium-sized amounts of specie are cumbersome
(recall Georgia-man John Springs’s ride north to Maryland’s Eastern Shore in 1806, in which the gold in his saddlebags beat up the sides of his horse).
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But more importantly, bank-created money has to be paper (or mere numbers on paper) because only then can money be created out of nothing. And thus only paper money can lead to real economic growth. Imagine an economy that uses only gold and
silver, also known as “specie.” A bank in such an economy could lend no more than it received in deposits, and that bank would simply be a glorified mattress. It would actually reduce the amount of money in circulation. If the money supply depended on the total amount of gold and silver dug out of the ground, the money supply would not increase as rapidly as the amount of goods and services being
produced. The price of goods would drop, and the price of loans would rise, disincentivizing investment in new production.

When banks create credit by lending out more money than they take in, a small store of value—deposits—gets multiplied into more. Through this miracle of leverage, wrote H. B. Trist in 1825, the newly established Bank of Louisiana had “thrown a great deal of money into circulation”
by issuing $4 million in notes. The bank lent these notes to borrowers, who then made new investments, buying land, supplies, and slaves. “The price of negroes has risen considerably,” Trist noted. Borrowers were making calculations much like those of planter-entrepreneur Alonzo Walsh. In 1823, a Louisiana merchant offered him a five-year loan of $48,000 at 10 percent annual interest. For
collateral, he’d mortgage what he called “from 90 to a 100 [
sic
] head of first rate slaves,” although some of those slaves would be bought with the money he’d borrow.
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Walsh thought he was being offered a good deal. With the work of these additional hands at Bayou Sara in Louisiana’s West Feliciana Parish, he could clear more fields, plant more cotton, and make the money to repay the loan with
interest. The merchant, who could borrow the money from the B.U.S. at 6 percent, would make 10 percent from Walsh, yielding a tidy net profit. For the larger balance sheet of the United States, this was also a good deal—assuming that economic growth is always good. In this exchange, the creation of credit would accelerate the pace of economic activity by convincing economic actors to take risks
and employ new resources. However, left to their
own devices, banks sometimes made too many loans, disrupting prices and destroying confidence in the value of money. If people became convinced that a bank’s policies were irresponsible, the result could be a “run” on the bank, in which depositors and creditors cleaned out the bank’s reserves by demanding that it “redeem” its deflated paper with
specie. Enough runs at one time would produce a panic in which all lenders demanded their money back from all banks and debtors, bringing the entire economy to a halt.
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Panic is what the B.U.S. had failed to prevent in 1819. Despite that, the Supreme Court’s famous
McCullogh v. Maryland
decision defended the bank from angry state legislatures, meaning that, like the Federal Reserve of more recent
US history, the bank had the capacity to control the supply of money in the economy. To do so, it first established its own paper notes as a reliable currency. The B.U.S. backed its $50 million (as of 1830) in circulating notes with a massive pile of gold and silver in its vaults—typically half the value of its paper money, so that everyone would know that they could take a B.U.S. bank note
to one of the B.U.S.’s twenty-five branches and receive a gold dollar in exchange. Consequently, no one ever did. In fact, merchants like slave trader Isaac Franklin often charged a premium for those Mississippi customers who paid with non-B.U.S. paper money. Believable credit gave the B.U.S. great power to stimulate the economy by lending money. In an 1832 letter, for example, Franklin wrote, “The
US Bank and the Planters Bank at this place has thrown a large amt of cash into circulation and the price of cotton has advanced a shade.” Cotton buyers felt more comfortable bidding higher for the bales that planters brought to market, and prosperity reigned.
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At the same time, the B.U.S. made certain that growth was steady and safe by forcing state-chartered banks to keep a “fractional reserve”
of gold or B.U.S. notes in their vaults. In the course of business, the B.U.S. regularly acquired huge stacks of bank notes issued by other banks. Then officers “presented” this paper to other institutions for “redemption.” When Isaac Franklin deposited $5,025 of Planters’ Bank of Mississippi notes at the Natchez branch of the B.U.S., the bank sent the notes to the Planters’ Bank and demanded
that it pay $5,025 in specie or B.U.S. This process forced smaller banks to restrain their printing and lending of money, which in turn made their bills more reliable. In 1829, for instance, bank bills from North Carolina were trading at a discount of 3.25 percent, even in far-off Baltimore. One could use a $1 bill issued by the Bank of Cape Fear, which funded Tyre Glen’s slave-trading expeditions
to Alabama, to buy 96 cents’ worth of flour, cotton, or person in Baltimore—it was not a perfect “at par” currency, but far more reliable than paper money had been during the Panic of 1819. More broadly, the
confidence instilled by the B.U.S. meant that European lenders were willing to inject their capital into American merchant firms, which in turn ensured that each year’s cotton harvest could
move smoothly from southwestern fields to the New Orleans levee to Liverpool-bound ships and finally to Manchester mills.
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