Abraham Lincoln and the Triumph of Mercantilism in America

0:00The second topic I picked is called Abraham Lincoln and the Triumph of Mercantilism. It is sort of the second of my Lincoln lectures. I guess we got one or two more tomorrow. And I think the starting point here is to understand that at the beginning of the American Republic, there always was a group of men in politics who wanted to bring to America the type of political economic system that existed in England and it was known as mercantilism. I'm going to give you a few definitions of that and the most famous person associated with this is Alexander Hamilton and Hamilton did many things in his involvement in politics. He was one of the authors of the Federalist Papers, he fought in the American Revolution, he was the first U.S. Treasury Secretary but one of the things he did, and he was quite a brilliant guy, is he wrote a series of reports that were very influential with George Washington and quite a few other people urging essentially the adoption of various aspects of what we economists call

1:20Mercantilism, and he wrote the most famous is probably called The Report on Manufacturers, and this is where he made a case for using tax dollars to subsidize businesses for road and canal building, and maybe a few other things. He wrote a report on public debt, there's a whole book called Hamilton's Blessing, calling The Public Debt, a blessing, making such arguments that, well, thank goodness for the ability for the central government to go into debt, otherwise we may not have been able to finance our way into World War I, or way in World War II, and all these wonderful achievements of ours, and so he made that case, public debt.

2:07One of Hamilton's arguments for public debt, by the way, was it's mostly the more affluent The government and wealthy people who will buy government bonds and therefore the affluent and wealthy people of the country will have an interest in the government. They will have an interest in the expansion of the government to make sure the government can raise enough taxes to pay off the interest and principal on their bonds. So he wanted to tie the most successful in the people in the country to the government. and that was, I think it was his main argument for why we need a public debt. And then he also wrote a report on banking, urging central banking, and this was used to justify what was called the Bank of the United States, which was really a predecessor of the Fed.

2:59And so Hamilton, in this regard, I think, was a mercantilist, because what was mercantilism? I'll give you a, this is not a textbook example, but this is a definition, but I'll give you a definition that Murray Rothbard once threw out for mercantilism. He said it is, mercantilism, quote, which reached its height in the Europe of the 17th and 18th centuries was a system of statism which employed economic fallacy to build up a Structure of Empirical State Power, Special Subsidy and Monopolistic Privilege to Individual Groups or Groups Favored by the State.

3:44Protectionism of course was a key element of mercantilism and Hamilton himself, in his report on manufacturers, made the case for protectionism. It's gone down in history as the infant industry argument, where you argue that new industries, The infant industry is needed to be subsidized by being protected from competition, and I think this is a misnomer, the infant industry. If you understand the fact that Hamilton was a brilliant man, he was one of the authors of the Federalist Papers, who understood politics more than Alexander Hamilton. He was in politics. He was a politician. His friends were all politics. He knew George Washington personally for many years.

4:30He understood politics. How could a man that wise, in the way of politics, possibly believe that you could pass protectionist laws, tariffs, and so forth, that would not then create a powerful political force in favor of keeping those laws and making them permanent? How could a man with that kind of knowledge of politics think that politics would not prevail in making these industries permanently protected or permanent forces for protectionism? And for that matter, how could a man that wise in politics think that a bank run by politicians would not be political? It would promote the public interest. It would not promote special interests.

5:19And so I've always thought it would be just a sheer impossibility that Hamilton himself actually would believe that. Well, maybe he did. It could be wrong. But it just seems totally incongruous with the idea that he was an extraordinarily politically savvy guy. But he made these sort of naive arguments that you could pass laws that would benefit a special interest like manufacturers, keeping them from foreign competition from them, and that they therefore would not lobby to make those laws permanent, which they have done. The steel industry was singled out from the very beginning, for example, as a need of the infant industry protection. And lo and behold, one of the first things George W. Bush did in 2001 was to impose 50% tariffs on steel.

6:07So apparently, in over 200 years, the steel industry hasn't grown up. for 150 years, anyways, there's still a bunch of crybabies in need of tariff protection. And it's just hard for me to believe Alexander Hamilton, a man that smart, would not have foreseen this. So I think he was making the case for protectionism, not infinite industry protection, just protection in general, you know, as far as that goes. But that's where this started. He was one of the people who wanted some form of the British system to be imported into in the United States, which is terribly ironic, because it was just that system that was a major reason for the American Revolution, you know, the Boston Tea Party and the slogan of taxation without representation, that was a protest against the British mercantile system that King George III was attempting to use to plunder the American colonists with.

7:07And so here comes a group of men after the revolution saying, well, maybe we should adopt some of these same kinds of policies here. And Hamilton was the champion of that in his era. After his demise, several years later, Henry Clay took up the mantle. He became the champion of those things, central banking, protectionist tariffs, corporate welfare for selected businesses. And then after Henry Clay, Lincoln became the champion of that cause, and the Republican Party in general. There was another definition of mercantilism that I would offer. This one is from Edgar Lee Masters, who was the one-time law partner of Clarence Darrow, The famous American lawyer of the 1920s, Clarence Darrow, and Edgar Lee Masters became a famous playwright, he's the author of the Spoon River Anthology, among other things, and he was from Chicago, Illinois, and he wrote a book called Lincoln the Man, in his retirement I guess, and it was for years, it was published I think first in the 1930s, and it was the book critical of Lincoln back in those days,

8:30and recently republished by a foundation, and he gave a definition of mercantilism in the context of Henry Clay's version of it. As I said, Henry Clay picked up this mercantilist mantle from Hamilton, and here's how Edgar Lee Masters describes this system of Clay's. His support for protectionist tariffs, the use of tax dollars to give corporations subsidies and central banking. He says, Henry Clay was the champion of that political system which doles favors to the strong in order to win and to keep their adherence to the government. His system offered shelter to devious schemes and corrupt enterprises. He was the beloved son, figuratively speaking, not the real son, of Alexander Hamilton.

9:19With his corrupt funding schemes, his superstitions concerning the advantage of a public debt and that people taxed to make profits for enterprises that cannot stand alone. His example and his doctrines led to the creation of a party, he's talking about the Whig Party, the American Whig Party, that had no platform to announce because its principles were plunder and nothing else. And I suppose that's a good idea, if your principles are to plunder your neighbor, you We should probably keep it quiet and don't announce it too broadly. And so that's another definition and one more was a United States Senator from Virginia named John Taylor, and I'm going back in time now.

10:07This was late 19th or late 18th century. And John Taylor wrote a book called Tyranny Unmasked, which was a book all about protectionism. The tyranny was the tyranny of protectionist tariffs and the economic plunder that they imposed, for the most part. And it's kind of wordy and a little too verbose, you know, as far as the writing style of tyranny and mascos. It's been reprinted by the Liberty Fund in Indianapolis. But John Taylor was a very wise man. He understood political economy of the type we understand today. And here's what he said about this same system. He said about the British mercantilism. He said, it is undoubtedly the best which has ever appeared for extracting money from the people, and commercial restrictions, that is, tariffs, are its most effectual means for accomplishing this object.

11:02No equal mode of enriching the party of government and impoverishing the party of the people has ever been discovered. And I think he was right on the money on that, too. and so that's mercantilism was basically a system of laws and regulations that benefited a relatively small group of politically connected businesses at the expense of consumers and everybody else that's basically what British mercantilism is and this was the American version of it in American history some of the some of the people who advocated this in addition to Clay John Quincy Adams when he was president he he was an advocate of that Henry Clay Lincoln of course the opponent The very last thing James Madison did as President of the United States was to veto a bill that would have allocated $5 million to give to private corporations for the building of canals and railroads.

12:02A father of the Constitution, as he is known to many people, issued a statement saying that he can find nowhere in the Constitution where it would be allowed to use tax dollars for the activities of private corporations. James Monroe, as President, vetoed similar legislation, as did Andrew Jackson, and he bragged about it. And as did President John Tyler, who became President in 1841, who did the same thing. And you might have noticed by the names I mentioned here, all the opponents, as presidents I mentioned, were from southern states, mostly from Virginia, Virginia and Tennessee. And it's in keeping with what I said about tariffs this morning, that the opposition, for the most part, to this whole plan, mercantilism, which is not only protectionist tariffs, but corporate welfare for road canal and railroad building companies and the central bank, was always mostly from the south.

12:57The southern politicians were mostly where the deep suspicion was of this sort of thing. And the proponents were mostly from the northern states. And there's kind of an interesting story about this. It was Hamilton and his Federalists who first championed this. And then Hamilton, of course, died in a duel with Aaron Burr in 1804. And then by the 1820s, Henry Clay was picking up on this. picking up the Hamiltonian mercantilist mantle, but he wasn't succeeding, so we went all through the 1820s and all through the 1830s and president after president kept vetoing all of this. Andrew Jackson defunded the Bank of the United States in the early 1830s.

13:46Free trade reigned for the most part until 1857 after the Tariff of Abominations episode. There were some state and local governments that subsidized canal building and railroad building, but it was such a corrupt mess in every single state in America that used tax dollars to give to corporations to build these things, that by 1860, Massachusetts was the only state left that had not altered its constitution to prohibit using tax dollars for any purpose for a corporation to give any corporation tax dollars for any purpose. Massachusetts was the only state that still permitted that because state after state after state had done this and it had been so inefficient and so corrupt that it just created a financial debacle everywhere that this was tried. And so, and there were no big federal programs like this. There were a lot of politicians who wanted these and there were some southern Some politicians, of course, involved in this.

14:48They wanted a federally funded railroad to go through the southern states. A lot of them did. And so there was a big dispute over that, over where this railroad would go if it were ever to be built with federal tax dollars. But an interesting story was in 1840, when Lew Rockwell's favorite president, William Henry Harrison, was elected. He's Lew's favorite president because he died a month after he took office, and so he could The Whigs led by Henry Clay thought they were finally in the catbird seat because a Whig was elected president.

15:36Henry Clay was sort of domineering. He thought he could control the Congress. So he could get a central bank through, he thought. He could get a protectionist tariff back. He could get the tariff of abominations put through again. And they were going to start subsidizing the building of railroads and canals and roads. But it turned out that the Vice President, John Tyler, who took over when Harrison died, Henry Clay was a states rights Jeffersonian, he was from Virginia and he vetoed everything, he vetoed the bank bill, he vetoed internal improvements, he was a free trader and so Henry Clay orchestrated the burning of John Tyler in effigy in front of the White House and they kicked him out of the Whig party and so John Tyler no longer had a political party affiliation even though he was president of the United States for the rest of the next three and a half years.

16:32So, Henry Clay just threw one big fit over all of this, and to add to insult to injury, the Bank of the United States finally died out, and in its place was put something called the Independent Treasury System, which Jeffrey Hummel, who wrote a very good book called Emancipating Slaves and Slaving Free Men, and there's a lot of economics in it. It's a book on the Civil War, but Jeff knows a lot of economics, and Austrian economics and so it's very highly recommended but he argues that this is so-called independent treasury system which lasted roughly from the early 1840s until 1862 when it was replaced by Lincoln's National Currency Acts was it was called the era of free banking and it was the closest America ever came at least in that century to a free market in money. It wasn't perfect, it was money backed by Gold and Silver, but it was probably the most stable monetary system we've ever had, even though it wasn't perfect. There were some problems. There's no perfection on Earth,

17:40of course. But anyway, Hummel makes a good case that it was probably the most stable monetary system America has ever had, but that was replaced during the Lincoln administration, which I'll talk about tomorrow, by the National Currency Act. So that was kind of a funny story. When I started researching I read a biography of John Tyler and the biographer, the man named Oliver Chitwood, said that really the main reason they picked Tyler as vice president is that Tyler too rhymed with the word tippy canoe. For those of you who went to American public schools, you might have learned that the campaign slogan was tippy canoe and Tyler too. Harrison was apparently a famous general in the Battle of Tippy Canoe way back when.

18:27around 1813, something like that, and so that was the campaign slogan. So Tyler's biographer says that's the main reason he was chosen as vice president, and they never thought he would actually become president, but he did. And so they failed again, so they failed to achieve this. Lincoln himself was always a proponent of all these things. In my book, I quote him when he went the first time The first time he ever ran for political office, he made a speech to the people in Springfield, Illinois explaining why he was getting involved in politics. This was in 1832. He said this, I presume you all know who I am. I am humble Abraham Lincoln.

19:19I've been, it's kind of like think of Bill Clinton standing there saying, I'm humble Bill Clinton. I've been solicited by many friends to become a candidate for the legislature. Anyway, my politics are short and sweet like the old woman's dance. I am in favor of a national bank, in favor of the internal improvement system, and a high protective tariff. And those are the reasons Abraham Lincoln gave for getting involved in politics. and he stuck with that for the next 28 years until becoming elected president. Now that's one of the reasons why I got involved in this whole area is that it never made sense to me that a man involved in politics off and on for 28 years with these economic issues, these three economic issues, fighting tooth and nail in the trenches of the Whig party and then the Republican party would be elected president and then just forget about it. It has nothing to do with why I'm in politics.

20:16That never made sense to me. and the reason is that it is nonsense. This was always a big part of why he was a Republican. But some of Lincoln's early antics, he made speech after speech about tariffs. As I said this morning, he claimed that he made more pro-tariff speeches than any other topic. He also stumped for candidates who were, presidential candidates who wanted a central bank and he was a big proponent of internal improvements. In Internal Improvements, he was a natural politician, and when he got into the state legislature in Illinois, he quickly became a leader of the Whig Party in Illinois, and he got the Illinois legislature, he was more responsible than anyone else, to get them to put about 11 million dollars into a vast program in 1836-37 to ostensibly build roads and canals all throughout criss-crossing the state. He wanted to make Illinois the The New York City of the West, and things like this, and if you read about this, which

21:22is available in quite a few Lincoln biographies, is that the $11 million was spent, nothing was finished, nothing, not a single canal, not a single road, much of the money was simply stolen or disappeared down a rat hole, and the state went deep in the debt for years, and maybe decades where the people of Illinois were on the hook for all of this and it was just a financial disaster for the state of Illinois but it turned out it was a great boon to Abraham Lincoln's career, political career because he was on record as being able to deliver the goods to the corporate community that he pretty much served for most of his involvement in politics. He did get 11 million dollars out of the legislature and ended up in And so, to whoever got all this money, it was not a bad deal at all.

22:19To the taxpayers, it was a rotten deal, but to all these companies that got all this money, and this was a pretty good deal. And so, to understand Lincoln's further involvement in this, of who he was, and his crusade for mercantilism, As I said, the American version of mercantilism always focused on Hamiltonianism, on this combination of corporate welfare, protectionist tariffs, and central banking. And of course, the tariffs in the central banking were to be used to pay for all the corporate welfare. That was the idea. That's where all the money would come from. And I'll talk later about how foreign military intervention was also on the back of their minds, and why they needed a central bank.

23:06But by 1860, the Illinois Central Railroad was one of the largest corporations in the world. And there's a book about Lincoln's role with the railroads. It's called Lincoln and the Railroads by John W. Starr, spelled with two R's. He's a junior, John W. Starr Jr. And in the company History, History of the Illinois Central, cited by John Starr, he says this, Mr. Lincoln was He was continuously one of the attorneys for the Illinois Central Railroad from his organization in 1849 until he was elected president. So he was always there as a key player in the Illinois Central. He was such an insider, such a corporate insider that he traveled throughout the Midwest in a private rail car with a private free pass, was an entourage of Illinois central executives following in tow and that's that was the real Lincoln that was not the Lincoln if you're an American you were taught that Abe Lincoln wore shoddy clothes and he was a rail splitter whatever that is grew up in a log cabin which by the way just about everybody did in that part of the country that in that time period was as though he was the only person in North America who grew up in a log cabin everyone did in the in the West at that point in time

24:25time. But he wore expensive suits, you know, he was a corporate big way. And in one case, Lincoln successfully defended the Illinois Central against McLean County, Illinois, which wanted to tax the corporation's property. And this is the one good thing you might ever hear me say about Lincoln. He wanted a tax case that got the Illinois Central off the hook for paying more taxes. And he sent the Illinois Central a bill for $5,000. For one in the 1850s and that was a huge sum of money put it in comparison I know at the time of the war broke out I know the governor of Illinois was being paid something like 3,500 a year as governor of Illinois so $5,000 for one case is a big chunk of money back then and the man who he gave the bill to was a vice president of the Illinois Central named George B McClellan who would later be the commander General of the Army of the Potomac, the same George McClellan, and this story is told in this book by John W. Starr, Lincoln in the Railroads, and what happened according to Starr is that McClellan told Lincoln that his board of directors back in New York City would never pay a $5,000 bill to a country lawyer from Illinois, even though he was a downtown Chicago lawyer, he wasn't a backwoods farmer.

25:54And so what happened was Lincoln went out and gathered statements by his fellow attorneys attesting to the fact that a $5,000 fee sounded perfectly suitable. Imagine that. Imagine getting lawyers claiming that an astronomical fee sounds okay to them. He showed up in court and the opposition lawyers for the Illinois Central, he sued them for the fee. The Illinois Central lawyers did not show up and so the judge gave him the fee by default because nobody showed up for the Illinois Central and John Starr's book, he very strongly insinuates that this was some sort of scheme by McClellan and Lincoln to rip off the board of directors of the Illinois Central for this $5,000.

26:40He doesn't say there was a kickback to McClellan, he doesn't say that in the book, but he very strongly suggests that this was some kind of scheme between the two of them to pull the wool over the eyes of these men back in New York City who were the board of directors of the Illinois Central so that Lincoln could get his fee, and so he did, and he got his fee. So Lincoln was a lobbyist, essentially, for the railroad industry. In addition to the Illinois Central, he represented the Chicago and Alton Railroad, the Ohio and Mississippi, Rock Island Railroad, the Chicago and Mississippi Railroad. He was such a big wig in the railroad industry that the New York financier Erastus Corning offered him the job of general counsel to the New York Central Railroad at a salary of $10,000 a year.

27:29This was in the 1850s, which was a huge salary, annual salary at that time in history. And he turned it down. He turned down the job of general counsel of the New York Central Railroad. I grew up in Pennsylvania, where I attended public schools, and I was taught that Lincoln spent most of his life pacing back and forth in agony worrying about the poor slaves in Alabama. This is all new to me, all this stuff. and Lincoln in one of his trips in the private rail car with the entourage he had them stop in Council Bluffs, Iowa where he had just purchased some real estate and to this day this piece of land is known as Lincoln's Hill in Council Bluffs, Iowa and he bought this real estate on the advice of an old business associate of his named Grenville Dodge. Grenville Dodge would would become the chief engineer of the government subsidized transcontinental railroads during and after the war, and he and Grenville Dodge decided that Council Bluffs, Iowa would be

28:35a good spot for the eastern terminus of the government subsidized transcontinental railroad if it were ever to be built. And so Lincoln, who was very familiar with Springfield, Illinois and Chicago, Illinois, He did not invest in real estate in Chicago, he invested in real estate in Council Bluffs, Iowa, of all places. And then when he became president, in June of 1861, when the war was on, Fort Sumter was April of 1861, the war was on, he called a special session of Congress to get the ball rolling on a Pacific Railroad bill. So it was a very high priority for him to divert, I'm using the word divert, Many millions of dollars to building a railroad to California even though there was a war on and they were asking for 75,000 and 150,000 volunteers and financing an army at that time and it took about a year for this to get all hashed out but they did of course pass the Pacific Railroad bill and in that bill the President of the United States is given the ability to determine where they'll start

29:48Yes, as to where he chose to start the building of the Transcontinental Railroad. Any wild guesses? Right, Council Bluffs, Iowa. I guess I gave too many hints to that. So he chose Council Bluffs, Iowa. So maybe this is why he turned Erastus Corning down with his mere 10,000 bucks a year for the job as General Counsel for the New York Central Railroad. So he must have made a lot of money doing that, as did a lot of other people. There's a good book about this by Dee Brown, D-E-E, it's a man's name. I know some women named Dee, and so for a while before I knew who Dee Brown was, I didn't know if it was a man or woman, but Dee Brown passed away last year.

30:37He was a historian of the American West, and he wrote a book called Here That Lonesome Whistle Blow, The History of the Transcontinental Railroads in America When Lincoln signed this specific railroad bill, he said, He assured the fortunes of a dynasty of American families, the Brewsters, the Bushnells, the Alcotts, the Harkers, the Harrisons, the Trowbridges, the Landworthies, the Reeds, the Ogdens, the Bradfords, the Noises, the Brooks, the Cornell, and dozens of others. and so there was and he surely did establish a great many fortunes of people who are involved in the financing and building of this railroad and he also D Brown also says that this northern clique of politically connected businesses D Brown writes that they quote arouse the suspicions of the South by lobbying for such huge sums of tax dollars and that's that's an John Fremont, a West Point-trained engineer from Northern California, conducted a big engineering study that concluded that the western terminus should be in Northern California, not Central California.

32:04Fabius Stevens, Congressman from Pennsylvania, Lee Brown writes that he, quote, received a block of Union Pacific stock in exchange for his vote on the Pacific Railroad bill, and he also demanded, as a condition of his vote, the insertion of a clause requiring the all iron used in the construction and equipment of said railroad to be American Manufacture, and of course Thaddeus Stevens was an iron manufacturer from Pennsylvania. There's another Republican congressman called Oakes Ames, Dee Brown writes, who with his brother Oliver manufactured shovels in Massachusetts and became a loyal ally of the Union Pacific Bill and helped to pressure the 1864 Pacific Railway Act through the war-corrupted Congress, And it must have taken a lot of shovels to dig railroad beds from Council Bluffs, Iowa to California.

33:05And so here's a major manufacturer of shovels saying, I'll vote for that, I'll vote for that bill, just buy my shovels. During the Grant administration, the Republican speaker of the representatives, who was later Grant's vice president, Shiler Colfax, visited the Western Railroad Roots because they were for Holding a Party in His Honor. He had served as the Speaker of the House and of course that meant he diverted a lot of money to the owners and managers of these railroads. And here's what Brown says when he shows up to this, it was supposed to be a ceremony in his honor, and he shows up, he says, quote, he preferred cash above honors and back in Washington he eagerly accepted a bundle of Crédit Mibollier stock, that was the name of the Company, the crooked company they created, from his fellow congressman, Oakes Ames, and thus became a loyal friend of the Union Pacific.

34:04General John Dix, D-I-X, who was one of Lincoln's generals, Brown says, spent most of his time during the war strutting about Washington in the general's uniform, but was in reality the Washington lobbyist for the railroads, and that was pretty much his job. Bill Sherman himself was sold land at below market prices in the same area. After the war, Lincoln's old business associate, Grenville Dodge, who was the chief engineer of the whole project, he proposed making slaves of the Indians instead of killing them, and he proposed forcing them, quote, to do the grading with the army furnishing a guard to to make the Indians work and keep them from running away, end quote.

34:54Lincoln's big buddy, Grenville Dodge. But of course, the US Army decided to kill all the Indians instead of making them slaves and to put the remaining ones on reservations, concentration camps known as reservations. And of course, the campaign of genocide against the Plains Indians that took place beginning three months after the Civil War ended and run by Generals Sherman, Grant and Sheridan and Custer was very much another subsidy to the railroad industry. Sherman himself said that was the main reason for eradicating all the Indians so they could build a railroad throughout the West. In my book, I contrast this a bit to the one transcontinental railroad that was privately funded, the Great Northern by James J. Hill, who bragged in his biography that he used not a penny in government money.

35:47He even purchased the rights away, even across Indian land, with cattle, sheep, money, whatever the Indians would trade for, and of course he was much more humane and he was much more efficient in what he did. He built a much more efficient railroad, it was a shorter route and he made money. All the government-subsidized railroads at one point were bankrupt and were just mired hopelessly in inefficiency and bureaucracy, but his wasn't, the Great Northern wasn't, and it was a big money maker. And so you see whenever they would run into trouble, meaning they didn't own the land, the Transcontinental Railroad subsidized by the government would just call in the army and have them kill everybody. They even shot at the white farmers who were giving them trouble, who didn't want their land eminent domain for the railroad.

36:38And so that's what they did, that's what they did. And so that really was a form of mercantilism, the whole Indian Wars, that lasted from 1865 until 1890. In my book I quote Sherman in a letter to his son, shortly before Sherman died in 1890, bemoaning the fact that his armies did not manage to kill every last Indian in North America. They let a few escape, and he thought that was one of his big failures, he was telling I refer to this as the great triumph of mercantilism in America when this battle over protectionist tariffs and corporate welfare was waged from the time of Hamilton, with little success That's the story I told you about John Tyler and William Henry Harrison, that was a big failure for the Whigs, and then the Republicans came along and they finally succeeded putting all this into place, but it took a war for this all to happen.

37:51With the southern states gone, this was all rushed into place and put into place immediately. So we did have the National Currency Act, which I'm going to talk about tomorrow, or or maybe the day after tomorrow when I talk about the revolution of 1913 and we did have protectionist tariffs that lasted for decades and decades and we did have corporate welfare run amok and most of you, maybe all of you, I don't know, have read a little bit about the massive corruption of the grant administrations. Most American students, if they can remember anything, they were taught in junior high school or high school, American students anyway, about the grant presidency. Remember, the corruption attached to the railroad building of the Transcontinental Railroads.

38:38Well, that should not have been a surprise to anybody. That's exactly what happened whenever the states funded road and canal building or railroad building in the decades prior to the war. But this happened on a much bigger, much more colossal scale. And another thing that happened, I'm going to give you another quote from a historian named Leonard Currie. He wrote a book called, Blueprint for Modern America, about the domestic legislation during the war to prevent southern independence. And here's what he says about this. He says, you know, once this Pacific Railroad bill was passed, and it finally, finally became acceptable to use tax dollars to massively subsidize corporations, mercantilism became acceptable.

39:28He says this, he says, throughout the remainder of the 19th century and beyond, corporate interests, apparently insatiable, returned again and again to demand direct and indirect federal subsidies. To ensure preferential treatment and non-interference, national legislative and executive offices were corrupted and representative government made a mockery. The corruption of the grant era was sparked by the activities of those two companies and individuals connected to the Pacific Railway scheme. And, of course, the floodgates were opened to all this type of corruption that we see everywhere. And, in fact, I just saw yesterday on Lew Rockwell's website that there's a new book on this very topic.

40:15It's called The Big Rip-Off. Some of you may have read that. I can't even remember the author now, but I read the blurb for it, what's that? Tim Carney? Yeah, the big rip-off, and the blurb for it anyway says it's about all the rip-offs of the consumer created by this unholy alliance between business and government. Well, that's old-fashioned mercantilism. That's what the quote I gave you from Murray Rothbard about 17th and 18th century England, that's what it was. We did have a battle over this in the United States until the 1860s, but that battle was lost. It was won at gunpoint, and ever since then, this is what we've had. We've had mercantilism of one form or another, and it spread to other countries.

41:00Two other countries imitated us with this. And so, that's what I mean by the triumph of mercantilism in America. That's how it came about. That's this whole rotten system that Tim Carney has apparently written a whole book about now. These are the origins of it. It happened this way. And it's the triumph of Hamiltonianism. And so I've been mulling over sending my publisher a book proposal called Hamilton's Curse. Because as a counter to this book called Hamilton's Blessing. Because I think there have been too many worshipful books being written lately about Hamilton. And so that's always a red flag to me whenever any political figure or biographer is coming out. James J. Hill He has an autobiography that he's written.

42:15There's a great little book by Burton Folsom. I think it's called The Myth of the Robber Barons. It has a chapter on the building of the transcontinental railroads. And it's really a stark difference between privately financed railroad building and the government subsidized transcontinental railroads of the 19th century. The transcontinental railroads that were subsidized by the government, In order to get the votes, imagine, I'll write a map. Here's where they were built. Here's Council Bluffs. Oh, Lincoln Land, and here's San Francisco, and here's the Rocky Mountains, the government subsidized railroads, tended to be kind of like this, with lots of appendages, because Right over here was the hometown of Congressman X and here's Congressman Y and Congressman Z, who all said, as a condition of my voting for this, we need to run a line to my town over here.

43:34And so economic efficiency wasn't the priority, the priority was using politics to get taxpayers' money so we could all get rich building this railroad. And the squiggly line that I wrote, well, one of the things that Burton Folsom writes about in his account of the building the transcontinental railroads is that they did use sometimes wildly secured as circuitous routes they were you know not efficient at all because they got paid a subsidy by the mile they got a lot subsidy in terms of subsidized low interest loans and land grants by the mile so the more miles the more subsidies and he even writes about how Well, they, in the Rockies, in the wintertime, they built, you know, as long as the men could stand it in the cold weather and the snow and everything, as long as they could stand it and be there, they would be working, and he writes about how there might have been a ten-foot ice pack that they would build railroad tracks on top of, and then the spring

44:36melt would come, and the whole thing would collapse. But that was a good thing, because they just get paid double, they get paid again to build James J. Hill, the man who found a pass through the Rocky Mountains that was discovered by Lewis and Clark, and no one since then, what was that, 1803, no one since then had found this pass through the Rockies, but James J. Hill hired a man who found it, and it knocked about a hundred miles off of his roots, and you know, if your interest is making profit and being efficient, that's the kind of thing you're going to do.

45:32So James J. Hill built this, and in his autobiography he brags that he did it without a dime in government money, and he's deeply resentful of the fact that all his competitors got all and all these big subsidies from the government that he had and he still had to compete against them but he still out competed against them because any change, any business decision to change the route literally required an act of congress so once you're involved in this taking money from the government for your business you have to understand that the government is going to control your business and so they became so hopelessly mired in red tape and delays that they couldn't run these things. It wasn't until after these subsidies dried up that the The American railroad industry really thrived, once it became privately financed in the latter part of the 19th century, that's when the American railroad business became really thriving.

46:22It wasn't with all this corruption and inefficiency that happened during this time. But that's a great story to read about James J. Hill. Of course, a lot of the leftists really hate him. I've written a few things on him myself, because he's a counter example to this story of pervasive market failure, that the market will not provide the capital, well the market did provide the capital to build a transcontinental railroad, and it did it much better than the government Other comments or brilliant commentaries? There's an economist who used to teach at Columbia named Carter Goodrich who wrote several The railroad industry began in the 1820s, the idea of a railroad, and there were almost no railroads in the U.S. in the 1820s.

47:38The British did it first, before we did here in the United States, but in the 1830s, 40s, and 50s there were state governments that had subsidized one way or another the building of Railroads and Roads and Canals for that matter, but it had become such a corrupt scheme like this that they had all not only passed laws but amended their constitutions to prohibit the use of tax dollars for corporations and according to Carter Goodrich, by 1860 Massachusetts was the only state left that had not done that, that had not amended its constitution to Prohibit the Use of Tax Dollars for Corporate Welfare, as we would call it now.

48:23But this didn't phase the Whigs and then the Republicans at all. This was a huge 35-year record of massive corruption and financial debacle, and they just went ahead and said, we want more of it. Because like I said earlier, to them, they were buying political power from the money Money, the elite of the country, the New York Banking, the Railroad Corporation, that's not a bad thing, that'll keep us in power forever. That's what the Whigs were all about, and Abraham Lincoln was a Whig for a much longer period of time than he was a Republican, and so to them it was let the good times roll. To the taxpayers it was an atrocity. But the Whigs always thought that if they could somehow connect themselves with the money, the elite of the country through politics, that was their key to perpetual political The Republicans remained in power essentially until Woodrow Wilson came along, even though Grover Cleveland was sort of an outlier, but even when Grover Cleveland, a Democrat, was president, the Republican policies more or less prevailed with a few exceptions for the whole remainder of the 19th century and end of the 20th century.

49:34century. I quote an historian named Richard Benzell who wrote a book called Yankee Leviathan as saying the only comparable monopoly in political power he can think of is perhaps the Bolsheviks in Russia or the political party in Mexico that was, what was it, 75 years the same party was in power, something like that. It's the only comparable thing to the Republicans of the late 19th century. So it worked. It worked marvelously for them. The word wig itself in the context of the American wig party is a fraud because the British wigs were classical liberals for the most part, libertarians, and the American wig party were interventionists.

50:24There was never any connection at all to... Well, there was some, because there were different kinds of Whigs. There were Northern Whigs and Southern Whigs, and not all Whigs were protectionist, but that's what it did turn into. By the time the party imploded in around 1852, because it was unsuccessful in doing all these things that Lincoln finally succeeded in doing. But it had the wing of the Whig Party that was the interventionist wing, I think dominated and took over, but they weren't always unanimously interventionist. There were, just like any other political party, I guess, you've got Ted Kennedy Democrats are different than say a Democrat from Alabama, at least they used to be that way anyway. And so the Whigs were kind of different.

51:11But then the Republicans took up that mantle and they were much more powerful in adopting I think mercantilism is their mantle, to be sure. Any other brilliant commentaries or words of wisdom or questions or anything? No? Well, I guess we can't just sit here and look at each other, I guess. Maybe we'll call it a day then. And thanks for coming, and we'll see you tomorrow. And I guess the bar is open, isn't it? No, just kidding, we don't have a bar here. Thank you very much.