The Agrarian Crusade: A Chronicle of the Farmer in Politics

by Solon J. Buck

The Greenback Interlude

Whatever may have been the causes of the collapse of the Granger movement in 1875 and 1876, returning prosperity for the Western farmer was certainly not one of them, for the general agricultural depression showed no signs of lifting until nearly the end of the decade. During the Granger period the farmer attempted to increase his narrow margin of profit or to turn a deficit into a profit by decreasing the cost of transportation and eliminating the middleman. Failing in this attempt, he decided that the remedy for the situation was to be found in increasing the prices for his products and checking the appreciation of his debts by increasing the amount of money in circulation.

This demand for currency inflation was by no means new when it was taken up by the Western farmers. It had played a prominent part in American history from colonial days, especially in periods of depression and in the less prosperous sections of the ever advancing frontier. During the Civil War, inflation was actually accomplished through the issue of over $400,000,000 in legal-tender notes known as "greenbacks." No definite time for the redemption of these notes was specified, and they quickly declined in value as compared with gold. At the close of the war a paper dollar was worth only about half its face value in gold. An attempt was made to raise the relative value of the greenbacks and to prepare for the resumption of specie payments by retiring the paper money from circulation as rapidly as possible. This policy meant, of course, a contraction of the volume of currency and consequently met with immediate opposition. In February, 1868, Congress prohibited the further retirement of greenbacks and left to the discretion of the Secretary of the Treasury the reissue of the $44,000,000 which had been retired. Only small amounts were reissued, however, until after the panic of 1873; and when Congress attempted, in April, 1874, to force a permanent increase of the currency to $400,000,000, President Grant vetoed the bill.

Closely related to the currency problem was that of the medium to be used in the payment of the principal of bonds issued during the Civil War. When the bonds were sold, it was generally understood that they would be redeemed in gold or its equivalent. Some of the issues, however, were covered by no specific declaration to that effect, and a considerable sentiment arose in favor of redeeming them with currency, or lawful money, as it was called.

These questions were not party issues at first, and there was no clear-cut division upon them between the two old parties throughout the period. The alinement was by class and section rather than by party; and inflationists and advocates of the redemption of the bonds in currency were to be found not only among the rank and file but also among the leaders of both parties. The failure of either the Democrats or the Republicans to take a decided stand on these questions resulted, as so often before, in the development of third parties which made them the main planks in the new platform.

The first attempts at organized political activity in behalf of greenbackism came not from the farmers of the West but from the laboring men of the East, whose growing class consciousness resulted in the organization of the National Labor Union in 1868. Accompanying, if not resulting from the Government's policy of contraction, came a fall of prices and widespread unemployment. It is not strange, therefore, that this body at once declared itself in favor of inflation. The plan proposed was what was known as the "American System of Finance": money was to be issued only by the Government and in the form of legal-tender paper redeemable only with bonds bearing a low rate of interest, these bonds in turn to be convertible into greenbacks at the option of the holder. The National Labor Union recommended the nomination of workingmen's candidates for offices and made arrangements for the organization of a National Labor party. This convened in Columbus in February, 1872, adopted a Greenback platform, and nominated David Davis of Illinois as its candidate for the presidency. After the nomination of Horace Greeley by the Liberal Republicans, Davis declined this nomination, and the executive committee of his party then decided that it was too late to name another candidate.

This early period of inflation propaganda has been described as "the social reform period, or the wage-earners' period of greenbackism, as distinguished from the inflationist, or farmers' period that followed." The primary objects of the labor reformers were, it appears, to lower the rate of interest on money and to reduce taxation by the transformation of the war debt into interconvertible bonds. The farmers, on the other hand, were interested primarily in the expansion of the currency in the hope that this would result in higher prices for their products. It was not until the panic of 1873 had intensified the agricultural depression and the Granger movement had failed to relieve the situation that the farmers of the West took hold of greenbackism and made it a major political issue.

The independent parties of the Granger period, as a rule, were not in favor of inflation. Their platforms in some cases demanded a speedy return to specie payment. In 1873 Ignatius Donnelly, in a pamphlet entitled Facts for the Granges, declared: "There is too much paper money. The currency is diluted—watered—weakened.… We have no interest in an inflated money market.… As we have to sell our wheat at the world's price, it is our interest that everything we buy should be at the world's price. Specie payments would practically add eighteen cents to the price of every bushel of wheat we have to sell!" In Indiana and Illinois, however, the independent parties were captured by the Greenbackers, and the Indiana party issued the call for the conference at Indianapolis in November, 1874, which led to the organization of the National Greenback party.

This conference was attended by representatives from seven States and included several who had been prominent in the Labor Reform movement. "The political Moses of the 'New Party,'" according to the Chicago Tribune, was James Buchanan of Indianapolis, a lawyer "with an ability and shrewdness that compel respect, however much his theories may be ridiculed and abused." He was also the editor of the Sun, a weekly paper which supported the farmers' movement. The platform committee of the conference reported in favor of "a new political organization of the people, by the people, and for the people, to restrain the aggressions of combined capital upon the rights and interests of the masses, to reduce taxation, correct abuses, and to purify all departments of the Government." The most important issue before the people was declared to be "the proper solution of the money question," meaning thereby the issue of greenbacks interconvertible with bonds. A national convention of the party was called to meet at Cleveland on March 11, 1875.

The Cleveland convention, attended by representatives of twelve States, completed the organization of the Independent party, as it was officially named, and made arrangements for the nominating convention. This was held at Indianapolis on May 17, 1876, with 240 delegates representing eighteen States. Ignatius Donnelly, who had apparently changed his mind on the currency question since 1873, was the temporary president. The platform contained the usual endorsement of a circulating medium composed of legal-tender notes interconvertible with bonds but gave first place to a demand for "the immediate and unconditional repeal of the specie-resumption act." This measure, passed by Congress in January, 1875, had fixed January 1, 1879, as the date when the Government would redeem greenbacks at their face value in coin. Although the act made provision for the permanent retirement of only a part of the greenbacks from circulation, the new party denounced it as a "suicidal and destructive policy of contraction." Another plank in the platform, and one of special interest in view of the later free silver agitation, was a protest against the sale of bonds for the purpose of purchasing silver to be substituted for the fractional currency of war times. This measure, it was asserted, "although well calculated to enrich owners of silver mines … will still further oppress, in taxation, an already overburdened people."