Lincoln and the Trimuph of Mercantilism

0:00I'd like to add a footnote to George Bittlingmeier's talk. I once wrote a paper on antitrust in which the very last sentence was that Senator John Sherman, the author of the Sherman Antitrust Act, has arguably done more damage to the U.S. economy than did his older brother, General William Tecumseh Sherman. They were brothers and communicated quite a bit during the Civil War. My paper, many of you were at the conference last year, the anniversary conference where I gave another paper on Lincoln and it was mostly about Lincoln in office and what he did. This paper is about Lincoln's political career prior to being elected president, primarily. And the point I'd like to make is really Lincoln was the political son of Alexander Hamilton. He always was. He was always a devotee of Hamilton and Hamilton's plans for centralized by His Government.

0:53And when David Gordon was talking about Hamilton and Washington this morning, something that popped into my head, this is the kinds of things that pop into professors' heads, was a passage that I read recently about how Patrick Henry, the famous Patrick Henry who convinced Virginians to get into the Revolutionary War by saying, give me liberty or give me death, was an opponent, opponent of the U.S. Constitution because he observed that many of the proponents of the Constitution were military men and so he went around Virginia and warned his fellow Virginians that if you go along with this someday the central government is going to march down here heavily armed and rob Virginians of their liberty. This was Patrick Henry at the Constitutional Convention and so he was on the other side of the Hamiltonian system. Now the author of of Lincoln's Collected Works, Roy Basler, said that, quote, as of 1857, Lincoln had no solution to the problem of slavery except the colonization idea, which he had inherited from Henry Clay.

1:59When he spoke of respecting the Negro as a human being, his words lacked effectiveness. This is the editor of Lincoln's Collected Works. So Lincoln rarely said anything about slavery prior to 1857, and when he did, he couldn't believe him, according to the editor of his Selected Works. But what he did say a lot about, and what he devoted his entire political life to, from 1832, when he first entered politics as a candidate for the state legislature in Illinois, until 1860, was something entirely different. It was the Hamiltonian system, essentially. And I want to see what Lincoln himself said about it. A little quote here. If you can read that, when he first ran for office, this is what he said. This was his stump speech.

2:44I presume you all know who I am. I am humble Abraham Lincoln. I have been solicited by many friends to become a candidate for the legislature. My politics are short and sweet like the old woman's dance. I'm in favor of a national bank, in favor of the internal improvement system, and a high protective tariff. And he stuck to that for 30 years and never wavered. Those are the three things he fought for for 30 years. never mentioned slavery at all until 1857, hardly, and even then you couldn't believe what he said, according to the editor of his collective works. Lincoln, there's another word for this, economists have a word for this collection of policies. Central banking, internal improvements was a euphemism for corporate welfare and protectionism.

3:32The word is mercantilism, and let me offer you Murray Rothbard's definition of mercantilism from his Logic of Action book. Mercantilism, 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 imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state. That's what Lincoln stood for, that's what he always said he stood for, and that's what he achieved, ultimately. He was a Whig, and this is what the Whigs stood for, the American Whigs. And by the way, a Whig, the Whig Party was established in 1832 and it became defunct by 1856 when Daniel Webster and Henry Clay died, essentially.

4:22And the American Whigs of that time were not the same as the early American Whigs. The early American Whigs, like Thomas Jefferson, were opponents of the state as were the British Whigs. Wigs. That's why the whole term wig, as understood by Lincoln as a wig, is a deceptive term because they were in favor of state power. They weren't the opponents of state power. They're in favor of it, but they took the name that Americans knew had been tagged to Jefferson and his compatriots and called themselves wigs. So I thought that was kind of interesting. Lincoln said in 1859 He was always a Whig in politics and he eulogized Henry Clay by calling him the great parent of Whig principles and the font from which my own political views have flowed. Roy Basler said that in the eulogy one could hardly read any paragraph in the eulogy without feeling that Lincoln was consciously or unconsciously inviting comparison and contrast of himself with Henry Clay and his system of corporate welfare, protectionism and central banking.

5:29Banking. Lincoln was a master politician. Despite what many of you may have been taught in elementary school or have read in the popular literature, Lincoln was a pro. He was a real pro and he idolized Henry Clay. I've read several biographies of Henry Clay over the past year and I've come to the conclusion that I think of him as sort of a combination of Tip O'Neill, Danny Rostenkowski and Bill Clinton all rolled into one. Henry Clay, he was a political Lincoln was a genius, which is to say he was a maniac of some sort and a man to be feared, but he was such a genius in politics that he was first elected in 1811 and one year later was voted Speaker of the House of Representatives. He was such a natural.

6:16This is the man who Lincoln idolized. Lincoln was a skilled politician. David Donald, who is a Pulitzer Prize winning biographer of Lincoln, said that Lincoln was, quote, The Master Wire Puller who operated the state political organization first of the Whig Party and after its decay, that of the Republicans. He spent virtually his entire political career prior to 1860 just doing the dirty work of politics. And let me read you one thing. This is a letter that he sent out to all the Whig Party hacks in Illinois. He said, this is what you do. He was directing them. Divide your county into small districts and appoint in each one a subcommittee. Make a perfect list of all the voters and ascertain with certainty for whom they will vote. Designate doubtful voters in separate lines indicating their probable choice.

7:01Each subcommittee must keep a constant watch on the doubtful voters and have them talked to by those in whom they have the most confidence. Also, WIC documents must be given them on election day. On and on and on. He did this for 30 years. He was just the consummate politician. So that after 30 years of this, essentially, David Donald said that Lincoln, quote, had maneuvered himself into a position where he controlled the party machinery platform and candidates in one of the pivotal states of the Union. And another biographer called him, quote, the smartest parliamentarian and the cunningest log roller in the Illinois legislature. So Lincoln was not a guileless, naive, unsophisticated backwoodsman and rail splitter. He was slick. Slick Abe doesn't have a ring to it, but he was slick.

7:49One example, one anecdote of how slick he was is, you know, here he is the master wire puller, the master politician, the biggest conniver in Washington. That's what a master politician is. A group of Pennsylvania congressmen visited him in the White House, and Lincoln said this to them, quote, you know, I never was a contriver. I don't know much about how things are done in politics, end quote, Abraham Lincoln as president. And so he used these tremendous political skills and he was a political genius and a silver tongue genius at that. And that's a dangerous competition for a politician to be a silver tongue political genius in no matter who you are.

8:35Lincoln, so what did he apply this genius to? He was a central bank crusader. The one thing that the Whigs crusaded for, even before there were Whigs, from the time of Alexander Hamilton, was a central bank and they considered Andrew Jackson to be the Antichrist because Andrew Jackson destroyed the second bank of the United States in 1833 and Lincoln as a member of The Speaker of the State Legislature in Illinois was the head of the Whig Party by 1838. He had worked himself up to the top man in the Whig Party and he was very influential. The Whigs were very influential within the State Legislature and at that time they were opposed to gold as a basis of the monetary system and were in favor of fiat money and the national banking system and if they couldn't get that, they couldn't get a national banking system, they wanted state banks to issue paper money.

9:35to be the basis of the monetary system. The legislature in Illinois was about to allow to lapse a law that permitted the payment to the bank in paper money. So they were going to go back to hard money. Lincoln and the Whigs in Illinois did everything they could to stop this. They opposed even investigation of the State Bank of Illinois. They didn't even want it to be audited by anybody. And at one particular time in late December of of 1840. The legislature was about to vote to let this law lapse and go in the direction of hard money and Lincoln bolted for the door and his Whig compatriots followed him and they didn't want there to be a quorum to take a vote on this. The door was locked and it was guarded by an armed guard. So Lincoln walked across the room and jumped out the window. It was a first floor window and all of his Whig followers like Lemmings all jumped The Democrats began ridiculing him by calling him Leaping Lincoln and his Flying Brethren after that.

10:42This is a famous story, all the biographies of Lincoln have this story, but they usually don't tell it in the context of hard money versus inflationism. It's just sort of a cute story that he jumped out of a window there. So that's just one example of how in the early days he was fighting for inflationism in central banking, or at least against hard money. Lincoln was a lifelong protectionist and he made many speeches that were just downright foolish and stupid, if you look at him, even from the standards of the economics of that time, absurd. For example, he argued that protectionist tariffs would not harm the average consumer at all, because they would only be collected from, quote, those whose pride, whose abundance of means, prompt them to spurn the manufacturers of our own country and to strut around in British cloaks and coats and pantaloons.

11:39He told a reporter that, quote, he could not tell the reason, but he was sure that protectionist terrorists would make everything the farmers bought cheaper somehow. Like I said, absurdities. He was a devotee of an economist named Henry C. Carey, who all the wigs were, who wrote protectionist creeds. from Pennsylvania, of course, being a big protectionist, and Lincoln made another stump speech that took some of Kerry's work and said that free trade would supposedly increase the costs and prices because so much useless labor would be employed transporting goods from one country to another. By that logic, of course, it would be illegitimate for anyone in Ohio and Indiana to import things into Illinois as useless labor importing things into Illinois.

12:33Lincoln also believes in a crude version of the Marxian labor theory of value. He announced in one speech that free trade perpetuated a system whereby, Some have labored and others have, without labor, enjoyed a large portion of the fruits to secure to each laborer the whole product of his labor, or as nearly as possible, is a most worthy object of any good government. As an interesting anecdote, during the Civil War, Lincoln did receive several letters of support from Karl Marx himself. I have no idea whether Karl Marx ever read his speeches on the labor theory of value or not, but he was a big fan of Lincoln's.

13:18Protectionism, the second plank of the WIG platform. The third thing was corporate welfare. Lincoln tried this out using his dominant position in the Illinois legislature, his influence in the Illinois legislature. He was the main mover and shaker behind a $12 million appropriation for an incredible boondoggle in the early 40s, early 1840s. Here's what they planned. Imagine a politician proposing this today. Every river and stream was to be widened, deepened, and made navigable. A canal to connect the Illinois River and Lake Michigan was to be dug. Cities were to spring up everywhere. Capital from abroad was to come pouring in. Attracted by the glowing reports of marvelous progress and great internal wealth, people were to come swarming in by colonies. Until the end, it was imposed by this legislature under the guise of improvements in terms of economic growth.

14:18and Internal Improvements became so monumental in size, it is little wonder that at intervals for years afterward, the monster of debt repudiation often showed its hideous face above the waves of popular indignation. George Nicolet and George Hay were Lincoln's personal secretaries in the White House. They were also law students who studied the law in his law office in Springfield. And they said that the market was cluttered with Illinois bonds, one banker and one broker after another, to whose hands they had been recklessly confided in New York and London failed or made away with the proceeds of the sales. So the bond dealers were just stealing all this money and taking away with it. Nicolay and Hayes say, after spending $12 million, nothing was left of the brilliant schemes of the historic legislature of 1836, but a load of debt which crippled for many years the energies of the people.

15:15Herndon went on to say that the internal improvement system, the adoption of which Lincoln had played such a prominent part, had collapsed with the result that Illinois was left with an enormous debt and an empty treasury. So it was an unmitigated disaster financially, but it was a huge political success for the Whigs because they proved that they were able to dish out $12 million in patronage. And this is what shows you the importance of a central bank. This is why the Whigs and Lincoln wanted a central bank. If you do this sort of thing, you can win political support by dishing out all this patronage, but there's a cost in that the taxes must be raised to pay for it all.

16:00But if you can dish out the support without the taxes, that is by printing money, it's like magic. The Whigs understood that 150, 170 years ago. This was their dream. Money for nothing. And so that is exactly why they so tenaciously clung to the central bank issue for years and years and years. After this whole disaster was over, Lincoln confided to a friend that what he really aspired to become, this is in the late 1830s, what he really aspired to Become was in his words, quote, the DeWitt Clinton of Illinois. DeWitt Clinton, no relation to Bill Clinton, I don't think. DeWitt Clinton. Who was DeWitt Clinton? This is what Abraham Lincoln wanted to be. DeWitt Clinton was the governor of New York. Paul Johnson in his recent biography of the history of the American people said that DeWitt Clinton, quote, invented the spoils system whereby an incoming governor turned out all officeholders and rewarded So Lincoln aspired, by his own words, to be a midwestern boss tweed, a political string-puller and patronage dispenser, or the godfather of Illinois politics.

17:13That's what he wanted to be. Another disaster that he created in Illinois was moving the state capitol from Vandalia to Springfield. The governor of Illinois, Thomas Ford, in 1847, explained that there was no good reason for this, other than Lincoln and the Whigs were able to collect a lot of bribe money from the businesses around Springfield, so they did it. The governor said this, it was made to cost the state about $6 million to remove the seat of government from Vandalia to Springfield, half of which would have purchased all the real estate in that town three times over, and thus by multiplying railroads by distributing money to some of the counties to be wasted of course by the county commissioners and by giving the seat of government to Springfield was the whole state bought up and bribed to approve the most senseless and disastrous policy which ever crippled the energies of a growing country.

18:07So, in his role as the head of the Whigs in the Illinois legislature, Lincoln was a walking disaster financially for the state. He helped pile tens of millions of dollars in debt on the state taxpayers, but that was the Whig agenda. There it is. That's it. They never were able to have a central bank pay for it, however, but they fought for that for the next 30 years. Now who were the Whigs? Who were the Whigs exactly? I think there's a book named by Edgar Lee Masters entitled Lincoln the Man. Edgar Lee Masters was a poet and a playwright and he was a law partner of Clarence Darrow and he wrote this book Lincoln the Man and I think he has a perfect description of exactly who the Whig party people were and the Whig party was formed in 1832 as a reaction to Andrew Jackson, and this is what Edgar Lee Masters says, who the Whigs were.

19:09And Henry Clay was their leader. Henry Clay was the champion of that political system, the Whigs, which doles favors to the strong in order to win and keep their adherents to the government. His system offered shelter to devious schemes and corrupt enterprises, and a people taxed to make profits for enterprises that cannot stand alone. His example and his doctrines led to the creation of a party that had no platform to announce because its principles were plunder and nothing else. That's why they never had a platform. These wigs adopted the tricks of the pickpocket who dresses himself like a farmer in order to move through a rural crowd unidentified while he gathers purses and watches. And I think that is an absolute perfect description of who the wigs, they stood for nothing because what they wanted was plunder.

19:54Who could say I'm for plunder, vote for me. Andrew Jackson was their mortal enemy because he was responsible for the destruction of the second bank of the United States. Andrew Jackson said about this bank, he said it is, quote, dangerous to the liberty of the American people because it represented a fantastic centralization of economic and political power under private control. Of course, we now know he was absolutely right about that. The Whigs made no bones about their desires for a central bank. It was a form of graft to them. Henry Clay left Congress in 1822 for two years to become the general counsel of the bank. He was $40,000 in debt at the time, personal debt.

20:42Clay biographer Maurice Baxter explained that Clay's income from the business and general counsel apparently amounted to what he needed. $3,000 a year from the bank as chief counsel, more for appearing in specific cases, and a sizable amount of real estate in Ohio and Kentucky in addition to the cash. When he resigned to become Secretary of State in 1825, he was pleased with his compensation, and Daniel Webster never bothered to resign. He just hit up the bank for money in return for his political support. In a letter he wrote to Nicholas Biddle, the bank's president, he said, quote, I believe my retainer has not been renewed or refreshed as usual. If it be wished that my relation to the bank should be continued, it may well be well to send me the usual retainer."

21:29End quote. Now, in the Whigs, there were Northern Whigs like Daniel Webster and Henry Clay who were statists. There were Southern Whigs like John C. Calhoun who were not as statists since The Northern Whigs hated Jackson because of the bank. The Southern Whigs, like Calhoun, hated Jackson because he was the father of the tariff of abominations of 1828. That was his bill that he signed. Henry Clay was the sponsor of that bill, by the way, and Andrew Jackson signed off on it. So it was an odd coalition, the Whigs. And they didn't know what to do. They toiled mightily to get a central bank. In 1840, they thought their time had arrived.

22:19William Henry Harrison was elected president. The Whigs had Henry Clay in charge of Congress. They controlled the Congress. They had a Whig in the White House. They immediately wanted to get a bank bill out there. William Henry Harrison, by the way, is Lew Rockwell's favorite The President, because he only lasted one month. He died. He died. His vice president took over. John Tyler was a southern Whig, well, a northern Whig, a southern Whig. John Tyler, according to his biographer, Oliver Chitwood, they really didn't pay much attention to who the vice president was. The Wigs immediately put in a bill for a national bank, and they didn't even consult the president, and a tariff, and a big tariff increase, didn't even ask the president, they assumed Tyler would go on with it.

23:17Well, Tyler turns out to be a Jeffersonian. He vetoed the bank bill, saying the power of Congress to create a national bank to operate per se over the Union has been a question of dispute from the origin of the government. My own opinion has been uniformly proclaimed to be against the exercise of any such power by this government. The Whigs went berserk. They rioted at the White Houses with blunderbusses, drums and trumpets, shouting a bank, a bank, Donald Tyler. And so for 20 more years, this was 1841, for 20 more years, this band of unscrupulous and imperious politicians continued promoting its views by electing former generals as their presidential candidates, General William Henry Harrison, General Zachary Taylor, General Winfield Scott, and so on.

24:03and politicians continued promoting its views by electing former generals as their presidential candidates. General William Henry Harrison, General Zachary Taylor, General Winfield Scott were all their candidates. Taylor was elected, but he died in the second year too, and so they lost another chance. He kicked the bucket. Okay, so we get to the late 1850s. The Whigs had become the Republicans. The Whig Party was defunct in 1856 and that's the year Lincoln became a Republican. And Lincoln assured his constituents that the Republicans stood for everything the Whigs always stood for, that there was no difference between them. There was just a different name, different, but it was the same collection of interest groups that had existed since the time of Hamilton The Wigs have been defeated every step along the way by American presidents beginning in James Madison who vetoed internal improvements bills and many protectionist tariff bills and the central bank such as Andrew Jackson.

25:08Lincoln was their man because Lincoln was contemptuous of the Constitution. Samuel Morrison and Henry Stoke Comminger describe Lincoln as quote a dictator from the standpoint of American constitutional law and practice. The political scientist Clinton Rossiter made the quote Lincoln dictatorship a major case study in his book, Constitutional Dictatorship. William Archibald Dunning, a historian, referred to the Lincoln administration as a quote temporary dictatorship. Even his defenders called him a benevolent dictator. He's a dictator, yeah, but he was a benevolent dictator. Among the reasons these people all called him a dictator and a destroyer of the Constitution. He conducted a war by decree for months without the consent of Congress. He suspended habeas corpus.

25:56He conscripted railroads, censored telegraph lines, imprisoned without trial as many as 30,000 northern citizens for anti-war opinions. Deported a member of Congress, Clement Volandegam of Ohio, who was a fierce opponent of the moral tariff and of the central bank for openly opposing Lincoln's income tax at a democratic party in Ohio, deported to Canada. And he shut down hundreds of northern newspapers. Even Francis Scott Key's grandson was sent to military prison without trial in Fort McHenry, of all places, where Francis Scott Key wrote the Star Spangled Banner from. and so Lincoln was their man he was contemptuous of the Constitution and it's kind of funny if you read Lincoln biographies one of the things you'll find is that he's the one president that exercised the veto the least two times he vetoed only two bills they were minor things didn't really matter too much and the interpretation most historians that I've read seem to give that is that Lincoln was so My interpretation is very different. My interpretation is this is exactly what his role was to let the Whigs, who are now calling themselves Republicans, manage domestic policy, while he did something else. Why he didn't veto their policies? Presidents had been vetoing their policies for 50 years. That was the game. Senator John Sherman, who was powerful back then, explained what a

27:26What Lincoln was supposed to do. He said, quote, those who elected Mr. Lincoln expect him to secure to free labor its just right to the territories of the United States, to protect by wise revenue laws the labor of our people, to secure the public lands to actual settlers, to develop the internal resources of the country by opening new means of communication between the Atlantic and the Pacific. That's kind of a mind-boggling collection of words, but David Donald interprets that. He says, interpreting this from the politicians Idiom into plain English. This means Lincoln and the Republicans, quote, intended to enact the high protective tariff that mothered monopoly, to pass a homestead law that invited speculators to loot the public domain and to subsidize a transcontinental railroad that afforded infinite opportunities for jobbery, end quote. And that of course is exactly what they did.

28:19Lincoln in office, the tariff, in 1857 it's the lowest tariff rates have ever been in American History. Four years later, they were the highest in history. The average tariff rate was 47.06% by 1862. And Frank Taussig, the historian of the American tariff system, said that long after the war, almost any increase in tariff duties demanded by domestic producers was readily made. Great fortunes were made by changes in legislation urged and brought about by those who were benefited from them. So plank number one, protectionism. In the midst of the Civil War, as of 1862, the Confederates were winning the war and Lincoln was desperate, and yet they're diverting millions of dollars to build railroads out to California.

29:10Railroad lobbyists descended on Washington in early 1862, and they created a nationalized version of the financial mess that Lincoln was involved in. The financial mess that Lincoln was involved in in Illinois that I described earlier, essentially. And this mess lasted long after Lincoln died, and of course the Grant administration was famous for all the corruption that came as a result of this, when during the Grant administrations the Speaker of the House, Shuler Colfax, who was later Grant's Vice President, was caught up in the credit mobiliar scandal as were a dozen prominent Republican congressmen, Secretary of War, Belknap was forced to resign for taking bribes, Orville Babcock, Grant's private secretary, was involved in a swindling ring, Treasury Secretary W.W. Richardson was implicated in a tax swindle, Grant's ambassador to England, Robert Schenck, had to flee England to avoid being arrested for selling Londoners' worthless stock on and on and on. Leonard Currie, the historian, remarked that following the war, following all this, other interests, desirous of demonstrating that they too were politically powerful and hence deserving of preference,

30:34hastened to the feast of corporate welfare for decades afterwards. The Central Bank was was finally created. The National Currency Acts of 1863 and 1864 created a network of nationally chartered banks and Lazarus Powell from Kentucky, a congressman, I dug up a quote from him that said something I thought that I kind of liked his quotation, his statement about the meaning of the creation finally of the central bank. He said he was an opponent of it at the time. He said central banking would enable the National Congress to destroy for Every Institution of the States and Cause All Power to be Consolidated and Concentrated Here in Washington. And I think he was absolutely right. The Clay Lincoln American system, as it was called, mercantilist system, was virtually complete at this time.

31:28And my time is almost up, but one final conclusion I would make. I wrote some quotations down, I guess I lost them or, you know, I want to make a minor connection between this and what David Gordon said earlier. Another thing popped into my head in that, you know, David Gordon mentioned that because George Washington was so revered, virtually anything he said was, you know, I'm for it because Washington's for it. Well, that to this day, that is true of Lincoln. People are still invoking Lincoln. Jack Kemp barely can ever make a speech without saying party of Lincoln, you know, I'm the party of Lincoln. And the late Mel Bradford had an interesting way of looking at this and he was a big critic of Lincoln, unlike me.

32:17And one phrase, he says one thing that came out of Lincoln's death was what he called, quote, A Durable Heritage of Pious Self-Congratulation And he quotes Robert Penn Warren as referring to this as the treasury of virtue. That is, anything that can be done in the name of Abraham Lincoln is virtuous and pious by definition. Whether it's sleazy corporate welfare schemes, inflationism, it doesn't matter. If you can connect Lincoln to it, it's a good idea. So my theme here is that mercantilism is what Lincoln was always all about, and if you really want to read up on this history, I have some good quotes from Benjamin Wade and other famous so-called abolitionists who always said the main reason they were in favor of abolition was to end the Three-Fifths Clause of the Constitution, which artificially inflated the Democratic Party's influence and to reverse that. But the end, the object, was this. The object of that was to get enough votes to pass this system. They always admitted that, as did Lincoln. Time is up.