Brands - The Money Men: Capitalism, Democracy, and the Hundred Years War Over the American Dollar

The Money Question

F or the first five generations of Americas independent historyfrom 1776 till the eve of World War Ia single question vexed American politics and the American economy more persistently than any other. Political careers were made and broken on this question; political parties rose and fell. Great wealth rewarded those who answered it correctly; bankruptcy claimed those who got it wrong. No question touched more livelihoods and more lives more consistently, more intimately, more portentously.

The question was the money question. In simplest form it asked: What constitutes money in the United States? Gold? Silver? Paper currency? Bank notes? Checks? This central question raised subsidiary questions. How much money shall there be? Who ought to control it? To what ends?

The money question has been a puzzle for every society since the first ancient hit on the idea of employing proxiesseashells, shiny rocks, rare metalsfor value. But it was a particular conundrum for the United States during the eighteenth, nineteenth, and early twentieth centuries. This period encompassed the emergence of the two institutions that made modern America what it is today: democracy and capitalism. From the start an inherent tension existed between the two. The driving force of democracy is equality, of capitalism inequality. Democratic equality begins in the political sphere but bleeds into the economic realm; capitalist inequality arises in the marketplace but encroaches upon the public square.

The money question lay at the center of the contest between democracy and capitalism. The democrats demanded that the people control the money supply, to preserve and extend equality. Money was too important to everyday lives to be left to self-interested capitalists. The capitalists countered that managing money was a talent given to few, that even if the democrats were well-meaning (a dubious premise, in many capitalist minds), their inexpertise would doom their efforts and destabilize the economy. Besides, money was property, and property needed protecting from the masses.

Had the two groupsthe democrats and the capitalistsbeen distinct, their struggle over money would have been bitter and trying enough. But in America the two groups overlapped substantially. By the middle of the nineteenth century only the archest of capitalists could gainsay democracy, at least in theory. And most American democrats were capitalists themselves, prospective capitalists, or dependent on capitalists in one way or another. In his first inaugural address, after a brutal campaign fought over the money question, among others, Thomas Jefferson declared, We are all Federalists, we are all Republicans. Jeffersons listeners knew the Federalists as the party of emerging capitalism, the Republicans as the party of nascent democracy. And they might have extrapolated his dictum to the money question and concluded, correctly, that in a fundamental sense Americans were all capitalists and all democrats. But Americans had difficulty keeping their identities straight, with the result that policies and attitudes toward money careened wildly. Capitalism charted the course for a time, then democracy, then capitalism, then democracy.

The stormy seas of finance were no place for the faint of heart, but to the intrepid they offered unparalleled opportunities to serve the cause of democracy and the imperatives of capitalismsometimes separately, sometimes together. In every generation a few such bold spirits stood out, grappling with the question on which the fate of the American political economy hung. They were geniuses and rascals, statesmen and speculators, patriots and profiteers. They were the Money Men.