THE REPEAL OF THE RESUMPTION ACT.
“We are engaged in a debate which has lasted in the Anglo-Saxon world for more than two centuries, and hardly any phase of it to which we have listened in the course of the last week is new. Hardly a proposition has been heard on either side which was not made one hundred and eighty years ago in England, and almost a hundred years ago in the United States. So singularly does history repeat itself.
“That man makes a vital mistake who judges of truth in relation to financial affairs from the changing phases of public opinion. He might as well stand on the shores of the Bay of Fundy, and, from the ebb and flow of a single tide, attempt to determine the general level of the sea, as to stand on this floor and from the current of public opinion in any one debate, judge of the general level of the public mind. It is only when long spaces along the shore of the sea are taken into account, that the grand level is found, from which all heights and depths are measured. And it is only when long spaces of time are considered that we find at last the level of public opinion which we call the general judgment of mankind. From the turbulent ebb and flow of the public opinion of to-day I appeal to that settled judgment of mankind on the subject-matter of this debate.
“In the short time which is allotted to me I invite the attention of gentlemen, who do me the honor to listen, to a very remarkable fact. I suppose it will be admitted on all hands, that 1860 was a year of unusual business prosperity in the United States. It was at a time when the bounties of Providence were scattered with a liberal hand over the face of our Republic. It was a time when all classes of our community were well and profitably employed. It was a time of peace; the apprehension of our great civil war had not yet seized the minds of our people. Great crops North and South, great general prosperity marked the era.
“If one thing was settled above all other questions of financial policy in the American mind at that time, it was this, that the only sound, safe, trustworthy standard of value is coin of a standard weight and fineness, or a paper currency convertible into coin at the will of the holder. That was and had been for several generations the almost unanimous opinion of the American people. It is true there was here and there a theorist dreaming of the philosopher’s stone, dreaming of a time when paper money, which he worshiped as a kind of fetish, would be crowned as a god; but those dreamers were so few in number that they made no ripple on the current of public thought, and their theories formed no part of public opinion, and the opinion of 1860–’61 was the aggregated result of the opinions of all the foremost Americans who have left their record upon this subject.
“I make this statement without fear of contradiction, because I have carefully examined the list of illustrious names and the records they have left behind them. No man ever sat in the chair of Washington as President of the United States who has left on record any word that favors inconvertible paper money as a safe standard of value. Every President who has left a record on the subject has spoken without qualification in favor of the doctrine I have announced. No man ever sat in the chair of the Secretary of the Treasury of the United States who, if he has spoken at all on the subject, has not left on record an opinion equally strong, from Hamilton down to the days of the distinguished father of my colleague [Mr. Ewing], and to the present moment.
“The general judgment of all men who deserve to be called the leaders of American thought ought to be considered worth something in an American House of Representatives on the discussion of a great topic like this. What happened to cause a departure from this general level of public opinion? Every man knows the history. War, the imperious necessities of war, led the men of 1861–’62 to depart from the doctrine of the fathers; but they did not depart from it as a matter of choice, but compelled by overmastering necessity. Every man in the Senate and House of 1862 who voted for the greenback law, announced that he did it with the greatest possible reluctance and with the gravest apprehension for the result. Every man who spoke on the subject, from Thaddeus Stevens to the humblest member in this House, and from Fessenden to the humblest Senator, warned his country against the danger that might follow, and pledged his honor that at the earliest possible moment the country should be brought back to the old, safe-established doctrine of the fathers.
“When they made the law creating the greenbacks they incorporated into its essential provisions the most solemn pledge men could devise, that they would come back to the doctrines of the fathers. The very law that created the greenback provided for its redemption and retirement; and every time the necessities of war required an additional issue, new guarantees and new limitations were put upon the new issues to insure their ultimate redemption. They were issued upon the fundamental condition that the number should be so limited forever that under the law of contracts the courts might enforce their sanctions. The men of 1862 knew the dangers from sad experience in our history; and, like Ulysses, lashed themselves to the mast of public credit when they embarked upon the stormy and boisterous sea of inflated paper money, that they might not be beguiled by the siren song which would be sung to them when they were afloat on the wild waves.
“But the times have changed; new men are on deck; men who have forgotten the old pledges; and now only twelve years have passed (for as late as 1865 this House, with but six dissenting votes, resolved again to stand by the old ways and bring the country back to sound money)—only twelve years have passed, and what do we find? We find a group of theorists and doctrinaires who look upon the wisdom of the fathers as foolishness. We find some who advocate what they call “absolute money;” who declare that a piece of paper stamped a “dollar” is a dollar; that gold and silver are a part of the barbarism of the past, which ought to be forever abandoned. We hear them declaring that resumption is a delusion and a snare. We here them declaring that the eras of prosperity are the eras of paper money; and they point us to all times of inflation as a period of blessing to the people, prosperity to business; and they ask us no more to vex their ears with any allusion to the old standard, the money of the Constitution. Let the wild crop of financial literature that has sprung into life within the last twelve years witness how widely and how far we have drifted. We have lost our old moorings, have thrown overboard our old compass; we sail by alien stars, looking not for the haven, but are afloat on an unknown sea....
“No theory of currency that existed in 1860 can justify the volume now outstanding. Either our laws of trade, our laws of value, our laws of exchange, have been utterly reversed or the currency of to-day is in excess of the legitimate wants of trade. But I admit freely that no Congress is wise enough to determine how much currency the country needs. There never was a body of men wise enough to do that. The volume of currency needed, depends upon laws that are higher than Congress and higher than governments. One thing only legislation can do. It can determine the quality of the money of the country. The laws of trade alone can determine its quantity.
“In connection with this view we are met by the distinguished gentleman from Pennsylvania [Mr. Kelley] with two historical references on which he greatly relies in opposing resumption. The first is his reference to France. Follow France, says the honorable gentleman from Pennsylvania, follow France, and see how she poured out her volumes of paper money, and by it survived a great crisis and maintained her business prosperity. Oh, that the gentleman and those who vote with him would follow France! I gladly follow up his allusion to France. As a proof that we have not enough money, he notices the fact that France has always used more money than either the United States or England. I admit it. But does the gentleman not know that the traditions and habits of France are as unlike those of England and the United States as those of any two nations of the world can be in regard to the use of money? I say to the gentleman that in France, banking, as an instrument of trade, is almost unknown. There are no banks in France except the Bank of France itself. The government has been trying for twenty years to establish branches in all the eighty-nine departments, and thus far only fifty-six branches have been organized. Our national, State, and private banks number nearly ten thousand. The habits of the French people are not adapted to the use of banks as instruments of exchange. All the deposits in all the saving-banks of France are not equal to the deposits in the saving-banks of New York City alone. It is the frequent complaint of Americans who make purchases in Paris that the merchants will not accept drafts, even on the Bank of France.
“Victor Bonnet, a recent French writer, says: ‘The use of deposits, bank accounts, and checks, is still in its infancy in this country. They are very little used even in great cities, while in the rest of France they are completely unknown. It is, however, to be hoped that there will be more employed hereafter, and that here, as in England and the United States, payments will be more generally made through the medium of bankers and by transfers in account-current. If this should be the case, we shall economize both in the use of specie and of bank-notes; for it is to be observed that the use of bank-notes does not reach its fullest development except in countries where the keeping of bank accounts is universal, as is evident by comparing France in this respect with England.’
“M. Pinard, manager of the Comptoir d’Escompte, testified before the commission of inquiry, that the greatest efforts had been made by that institution to induce French merchants and shopkeepers to adopt English habits in respect to the use of checks and the keeping of bank accounts, but in vain; their prejudices were invincible. ‘It was no use reasoning with them; they would not do it, because they would not.’
“So long as the business of their country is thus done hand to hand by the use of cash, they need a much greater volume of money in proportion to their business than England or the United States.
“How is it in England? Statistics, which no man will gainsay, will show that ninety-five per cent. of all the great mercantile transactions of England is done by drafts, checks, and commercial bills and only five per cent. by the actual use of cash. The great business of commerce and trade is done by drafts and bills. Money is now only the small change of commerce. And how is it in this country? We have adopted the habits of England, and not of France, in this regard. In 1871, when I was Chairman of the Committee on Banking and Currency, I asked the Comptroller of the Currency to issue an order naming fifty-two banks which were to make an analysis of their receipts. I selected three groups: The first group were the city banks; not, however, the clearing-house banks, but the great city banks not in the clearing-house association. The second group consisted of banks in cities of the size of Toledo and Dayton, in the State of Ohio. In the third group, if I may coin a word, I selected the ‘countriest’ banks—the smallest that could be found at points away from railroads and telegraphs.
“The order was that all those banks should analyze all their receipts for six consecutive days, putting into one list all that can be called cash, either in coin, greenbacks, bank-notes, or coupons; and into the other list all drafts, checks, or commercial bills. What was the result? During those six days $157,000,000 were received over the counters of those fifty-two banks; and, of that amount, $19,370,000 was in cash—twelve per cent. only in cash; and eighty-eight per cent. of that vast amount, representing every grade of business, was in checks, drafts, and commercial bills. Does a country that transacts its business in that way need as much currency afloat among the people as a country like France, without banks, without savings institutions, and whose people keep their money in hoards.
“I remember in reading one of the novels of Dumas, when an officer of the French army sent home his agent to run his farm, he loaded him down with silver enough to conduct the business for a year; there was no thought of giving him credit in a bank; but of locking in the till, at the beginning of the year, enough coin to do the business of the year. So much for the difference between the habits of France and those of Anglo-Saxon countries. Let us now consider the conduct of France during and since the German war. In July, 1870, the year before the war began, the Bank of France had outstanding $251,000,000 of paper circulation, and held in its vaults $229,000,000 of coin. When the war broke out, they were compelled immediately to issue more paper, and to make it a legal tender. They took pattern by us in their necessity, and issued paper until, on the 19th of November, 1873, four years ago next Monday, they had $602,000,000 of paper issued by the Bank of France, while the coin in the bank was reduced to $146,000,000.
“But the moment their great war was over, they did what I recommended to the gentleman from Pennsylvania [Mr. Kelley], they commenced to reduce their paper circulation, and in one year reduced it almost $100,000,000, and increased the coin circulation $120,000,000. In the year 1876 they had pushed into circulation $200,000,000 of coin, and retired nearly all their small notes. They are at this moment within fifty days of resumption of specie payments. Under their law, fifty days from to-day, France will again come into the illustrious line of nations who believe in a sound currency. I commend to the eloquent gentleman from Pennsylvania [Mr. Kelley] the example of France....
“The overwhelming and fixed opinion of England is that the cash-resumption act of 1819 was a blessing and not a curse, and that the evils which England suffered from 1821 to 1826 did not arise from the resumption of cash payments. I appeal to every great writer of acknowledged character in England for the truth of this position. I ask the gentleman to read the eighth chapter of the second book of Miss Martineau’s History of the Peace, where the case is admirably stated. I appeal also to the opinion of Parliament itself, especially to the House of Commons, which is as sensitive an index of public opinion as England knows. When they were within about eighteen months of resumption of specie payment, a motion was made, like the motion of my colleague from Ohio [Mr. Ewing], that the resumption-act bill be repealed or modified, because it was producing distress. And a number of gentlemen in the House of Commons made speeches of the same spirit as those which we have heard here within the past week. The distress among the people, the crippling of business, the alarm of the mercantile classes, all were paraded in the House of Commons, and were answered by those knights of finance whose names have become illustrious in English history. And at the end of a long debate on that proposition, on the 11th of April, 1821, a vote was taken, and the proposition was rejected by a vote of 141 to 27. In other words, by a vote of 141 to 27 the House of Commons resolved that their act for the resumption of specie payments was not causing distress, and ought not to be repealed, and ought not to be modified, except to make it more effective. As a matter of fact, it was so modified as to allow resumption to take place much sooner than was provided in the act of 1819....
“I now proceed to notice the second point that has been made in favor of this bill. It is assumed that specie payment will injure the debtor class of this country, and thereby oppress the poor; in other words, that the enforcement of the resumption law will oppress the poor and increase the riches of the rich. It is assumed that the laboring-men are in debt, and that the rich men constitute the creditor class. I deny this proposition in toto. I affirm that the vast majority of the creditors of this country are the poor people; that the vast majority of the debtors of this country are the well-to-do people—in fact, people who are moderately rich.
“As a matter of fact, the poor man, the laboring-man, can not get heavily in debt. He has not the security to offer. Men lend their money on security, and in the very nature of the case poor men can borrow but little. What then do poor men do with their small earnings? When a man has earned, out of his hard work, a hundred dollars more than he needs for current expenses, he reasons thus: ‘I can not go into business with a hundred dollars; I can not embark in trade; but, as I work, I want my money to work.’ And so he puts his small gains where they will earn something. He lends his money to a wealthier neighbor, or puts it in the savings-bank. There were, in the United States, on the first of November, 1876, forty-four hundred and seventy-five savings-banks and private banks of deposit, and their deposits amounted to $1,377,000,000, almost three-fourths of the amount of our national debt. Over two and a half millions of the citizens of the United States were depositors. In some States the deposits did not average more than $250 each. The great mass of the depositors are men and women of small means—laborers, widows, and orphans. They are the lenders of this enormous aggregate. The savings-banks, as their agents, lend it to whom? Not to the laboring poor, but to the business men who wish to enlarge their business beyond their capital. Speculators sometimes borrow it. But in the main, well-to-do business men borrow these hoardings. Thus the poor lend to the rich....
“There is another way in which poor men dispose of their money. A man says: ‘I can keep my wife and babies from starving while I live and have my health, but if I die they may be compelled to go over the hills to the poor-house’; and, agonized by that thought, he saves out of his hard earnings enough to take out and keep alive a small life-insurance policy, so that, if he dies, there may be something left, provided the insurance company to which he intrusts his money is honest enough to keep its pledges. And how many men do you think have done that in the United States? I do not know the number for the whole country, but I do know this, that from a late report to the insurance commissioner of the State of New York, it appears that the companies doing business in that State had 774,625 policies in force, and the face value of these policies was $1,922,000,000. I find, by looking over the returns, that in my State there are 55,000 policies outstanding; in Pennsylvania, 74,000; in Maine, 17,000; in Maryland, 25,000; and, in the State of New York, 160,090. There are, of course, some rich men insured in these companies, but the majority are poor people, for the policies do not average more than $2,200 each. What is done with the assets of these companies, which amount to $445,000,000? They are loaned out. Here again the creditor class is the poor, and the insurance companies are the agents of the poor to lend their money for them. It would be dishonorable for Congress to legislate either for the debtor class or for the creditor class alone. We ought to legislate for the whole country. But when gentlemen attempt to manufacture sentiment against the resumption act, by saying it will help the rich and hurt the poor, they are overwhelmingly answered by the facts.
“Suppose you undo the work that Congress has attempted—to resume specie payment—what will result? You will depreciate the value of the greenback. Suppose it falls ten cents on the dollar, you will have destroyed ten per cent. of the value of every deposit in the savings-banks, ten per cent. of every life-insurance policy and fire-insurance policy, of every pension to the soldier, and of every day’s wages of every laborer in the nation.
“In the census of 1870, it was estimated that on any given day there were $120,000,000 due to laborers for their unpaid wages. That is a small estimate. Let the greenback dollar come down ten per cent. and you take $12,000,000 from the men who have already earned it. In the name of every interest connected with the poor man I denounce this effort to prevent resumption. Daniel Webster never uttered a greater truth in finance than when he said that of all contrivances to cheat the laboring-classes of mankind, none was so effective as that which deluded them with an irredeemable paper money. The rich can take care of themselves, but the dead-weight of all the fluctuations and losses falls ultimately on the poor man who has only his day’s work to sell.
“I admit that in the passage from peace to war there was a great loss to one class of the community, to the creditors; and in the return to the basis of peace some loss to debtors was inevitable. This injustice was unavoidable. The loss and gain did not fall upon the same. The evil could not be balanced nor adjusted. The debtors of 1862–’65 are not the debtors of 1877. The most competent judges declare that the average life of the private debts in the United States is not more than two years. Of course, obligations may be renewed, but the average length of private debts in this country is not more than two years. Now, we have already gone two years on the road to resumption, and the country has been adjusting itself to the new condition of things. The people have expected resumption, and have already discounted most of the hardships and sufferings incident to the change. The agony is almost over; and if we now embark again upon the open sea we lose all that has been gained, and plunge the country into the necessity of venturing once more over the same boisterous ocean, with all its perils and uncertainties. I speak the deepest convictions of my mind and heart when I say that, should this resumption act be repealed and no effectual substitute be put in its place, the day is not far distant when all of us, looking back on this time from the depths of the evils which will result, will regret, with all our power to regret, the day when we again let loose the dangers of inflation upon the country.
“Although I do not believe in keeping greenbacks as a permanent currency in the United States, although I do not myself believe in the Government becoming a permanent banker, yet I am willing for one that, in order to prevent the shock to business which gentlemen fear, the $300,000,000 of greenbacks shall be allowed to remain in circulation as long as the wants of trade show manifestly that they are needed. Now, is that a great contraction? Is it contraction at all?
“Why, gentlemen, when you have brought your greenback up two and one-half cents higher in value, you will have added to your volume of money $200,000,000 of gold coin which can not circulate until greenbacks are brought to par.
“Let those who are afraid of contraction consider that and answer it.
“Summing it all up in a word: the struggle now pending in the House is on the one hand to make the greenback better, and on the other to make it worse. The resumption act is making it better every day. Repeal that act and you make it infinitely worse. In the name of every man who wants his own when he has earned it, I demand that we do not make the wages of the poor man to shrivel in his hands after he has earned it; but that his money shall be made better and better, until the plow-holder’s money shall be as good as the bond-holder’s money; until our standard is one, and there is no longer one money for the rich and another for the poor.”
With these bits of marble chipped from the temple of his arguments on the currency question, we must content ourselves. Upon this question Garfield was undoubtedly ahead of his generation. The resumption bill which he introduced in 1868 was better than the one adopted in 1875. He presented the fundamental principles as he understood them in 1868. From them he never changed. All subsequent efforts were but their elaboration, and, at this writing, history itself is their fulfillment and demonstration.
It is easy to see that his style of speaking changed somewhat. He became more terse and epigrammatic. He condensed the philosophical parts of his speeches, and enlarged the practical parts. He became more direct in address, more sparing of ornament, and simpler in language. But this was all. He was never known to be on but one side of a question. He took his position only after the most laborious investigations and careful thought. Once taken, nothing could drive him from it. In his answers to the riddles propounded by the Sphinx of American currency and finance, James A. Garfield is entitled to a place in the gallery of fame, beside the greatest financiers known to our national history. In the future, no authority will be, or can be, higher than Garfield.
Our next inquiry relates to Garfield’s record upon questions affecting the Revenue and Expenditures of the United States. Owing to his long service on the Committees of Ways and Means and on Appropriations, these twin topics of surpassing importance continually lay like couchant lions right in his political pathway.
Of the question of revenue, the tariff is the most vital branch. On the subjects of free-trade and protection, Garfield had made up his mind while at Williams College. Professor Perry, the instructor in political economy, was an unqualified free-trader. After his usual careful investigation, Garfield took the opposite view. He formulated the following proposition: “As an abstract theory, the doctrine of Free-Trade seems to be universally true, but as a question of practicability, under a government like ours, the protective system seems to be indispensable.”
Into the defense of that proposition he threw all his energies. In his speeches on the tariff we will find but one continual elaboration of this view. The speeches are moderate and conservative, avoiding either extreme. His object was to legislate for the whole country and not for any locality or class alone. On April 1, 1870, he delivered a speech on the tariff, which is of the first rank among his earlier efforts.
It presents an interesting history of England’s tariff policy toward the colonies, a brilliant discussion of the trend of prices since the war, and closes with a review of the eventful history of tariff legislation in this country, not omitting the South Carolina nullification. The high tariffs required by the high prices prevailing during the war, he thought, should be gradually reduced. Every one knows that the advantage of a high tariff on imports is the protection it gives to American industry by keeping up the prices here, and preventing competition with the cheap labor of Europe. But it is equally true that, while keeping prices up is good for the seller, and indirectly for the laborer whom he employs, it is bad for the buyer. Free-trade makes low prices. Avoiding alike the Scylla on the one hand and the Charybdis on the other, Garfield chose a medium. He closed his speech of April 1, 1870, by an appeal against either extreme:
“I stand now where I have always stood since I have been a member of this House. I take the liberty of quoting, from the Congressional Globe of 1866, the following remarks which I then made on the subject of the tariff:
“‘We have seen that one extreme school of economists would place the price of all manufactured articles in the hands of foreign producers by rendering it impossible for our manufacturers to compete with them; while the other extreme school, by making it impossible for the foreigner to sell his competing wares in our market, would give the people no immediate check upon the prices which our manufacturers might fix for their products. I disagree with both these extremes. I hold that a properly adjusted competition between home and foreign products is the best gauge by which to regulate international trade. Duties should be so high that our manufacturers can fairly compete with the foreign product, but not so high as to enable them to drive out the foreign article, enjoy a monopoly of the trade, and regulate the price as they please. This is my doctrine of protection. If Congress pursue this line of policy steadily, we shall, year by year, approach more nearly to the basis of free-trade, because we shall be more nearly able to compete with other nations on equal terms. I am for that protection which leads to ultimate free-trade. I am for that free-trade which can only be achieved through a reasonable protection.’”
As the representative of General Garfield’s tariff speeches in these pages, we select the one of February 4, 1878. Of this speech a gentleman of high abilities and information, says: “Having read and re-read it carefully, and having read all the great speeches made in Congress for forty years before the war on this difficult question, it is my deliberate conviction that the sound American doctrine of protection has never been stated with equal clearness, breadth, and practicality.”