The Life and Work of James A. Garfield, Twentieth President of the United States / Embracing an Account of the Scenes and Incidents of His Boyhood; the Struggles of His Youth; the Might of His Early Manhood; His Valor As a Soldier; His Career As a Statesman; His Election to the Presidency; and the Tragic Story of His Death.

by John Clark Ridpath

“Mr. Chairman, I have endeavored to trace the progress of our industrial revolution in passing from peace to war. In returning from war to peace all the conditions were reversed. At once the Government ceased to be an all-devouring consumer. Nearly two million able-bodied men were discharged from the army and navy and enrolled in the ranks of the producers. The expenditures of the Government, which, for the fiscal year ending June 30, 1865, amounted to $1,290,000,000, were reduced to $520,000,000 in 1866; to $346,000,000 in 1867; and, if the retrenchment measures recommended by the Special Commissioner of the Revenue be adopted, another year will bring them below $300,000,000.

“Thus during the first year after the war the demands of the Federal Government as a consumer decreased sixty per cent.; and in the second year the decrease had reached seventy-four per cent., with a fair prospect of a still further reduction.

“The recoil of this sudden change would have produced great financial disaster in 1866, but for the fact that there was still open to industry the work of replacing the wasted reserves of supply, which, in all countries in a healthy state of business, are estimated to be sufficient for two years. During 1866, the fall in price of all articles of industry amounted to an average of ten per cent. One year ago a table was prepared, at my request, by Mr. Edward Young, in the office of the Special Commissioner of the Revenue, exhibiting a comparison of wholesale prices at New York in December, 1865, and December, 1866. It shows that in ten leading articles of provisions there was an average decline of twenty-two per cent., though beef, flour, and other breadstuffs remained nearly stationary. On cotton and woolen goods, boots, shoes, and clothing, the decline was thirty per cent. On the products of manufacture and mining, including coal, cordage, iron, lumber, naval stores, oils, tallow, tin, and wool, the decline was twenty-five per cent. The average decline on all commodities was at least ten per cent. According to the estimates of the Special Commissioner of the Revenue in his last report, the average decline during 1867 has amounted at least to ten per cent. more. During the past two years Congress has provided by law for reducing internal taxation $100,000,000; and the act passed a few weeks ago has reduced the tax on manufactures to the amount of $64,000,000 per annum. The repeal of the cotton tax will make a further reduction of $20,000,000. State and municipal taxation and expenditures have also been greatly reduced. The work of replacing these reserves delayed the shock and distributed its effects, but could not avert the inevitable result. During the past two years, one by one, the various departments of industry produced a supply equal to the demand. Then followed a glutted market, a fall in prices, and a stagnation of business, by which thousands of laborers were thrown out of employment.

“If to this it be added that the famine in Europe and the drought in many of the agricultural States of the Union have kept the price of provisions from falling as other commodities have fallen, we shall have a sufficient explanation of the stagnation of business, and the unusual distress among our people.

“This industrial revolution has been governed by laws beyond the reach of Congress. No legislation could have arrested it at any stage of its progress. The most that could possibly be done by Congress was, to take advantage of the prosperity it occasioned to raise a revenue for the support of the Government, and to mitigate the severity of its subsequent pressure, by reducing the vast machinery of war to the lowest scale possible. Manifestly nothing can be more absurd than to suppose that the abundance of currency produced by the prosperity of 1863, 1864, and 1865, or that the want of it is the cause of our present stagnation.

“In order to reach a satisfactory understanding of the currency question, it is necessary to consider somewhat fully the nature and functions of money or any substitute for it.

“The theory of money which formed the basis of the ‘mercantile system’ of the seventeenth and eighteenth centuries has been rejected by all leading financiers and political economists for the last seventy-five years. That theory asserted that money is wealth; that the great object of every nation should be to increase its amount of gold and silver; that this was a direct increase of national wealth.

“It is now held as an indisputable truth that money is an instrument of trade, and performs but two functions. It is a measure of value and a medium of exchange.

“In cases of simple barter, where no money is used, we estimate the relative values of the commodities to be exchanged in dollars and cents, it being our only universal measure of value.

“As a medium of exchange, money is to all business transactions what ships are to the transportation of merchandise. If a hundred vessels of a given tonnage are just sufficient to carry all the commodities between two ports, any increase of the number of vessels will correspondingly decrease the value of each as an instrument of commerce; any decrease below one hundred will correspondingly increase the value of each.