Martin van Buren: What Greatness Really Means

0:00For the last two years, I've mainly been giving talks on the Civil War, based on my book Emancipating Slaves and Slaving Free Men, which I'm happy to say has sold out here, but if anybody wants a copy, come and see me after the presentation and I can arrange a special deal to send you an autographed copy. When the Mises Institute issued a call for papers, however, I knew that there was going to be a lot of competition in the realm of Lincoln bashing. And in fact, I'm contributing with my impeached Lincoln button here, but I wanted to give myself a comparative advantage among the speakers.

0:53So I decided to do something unusual, which is talk about a good president. And I think I'm the only speaker in these two days who's going to be praising presidents outside of the first talk by Professor's veteran Galloway. The title you have in the program is Martin Van Buren, What Greatness Really Means. The title I'm now using is Martin Van Buren, The American Gladstone. And what I'm going to argue is that not only was Van Buren a good president, not only was Van Buren a great president, but he was the greatest president in all of American history.

1:42Now some of you may have never even heard of Van Buren, so let me give you some background. Van Buren was first elected president in 1836. He served one term from 1837 to 1841. He was defeated for re-election in 1840. Prior to his election, he had been the heir apparent of President Andrew Jackson and in fact had served as Jackson's first secretary of state and then was a minister to England and then during Jackson's second term was vice president. Now why do I say that Van Buren is the greatest president in American history? Well, I can give you a couple of reasons why I didn't pick Van Buren.

2:27I didn't pick Van Buren because he was a New Yorker of Dutch ancestry, even though I'm a New Yorker of Dutch ancestry. And I didn't pick Van Buren because he spent his entire early political career in New York The DeWitt Clinton that you heard about yesterday in Tom DiLorenzo's talk. I picked Van Buren as the greatest president because of both his foreign policy and his domestic policy. So let me start with foreign policy because this is probably the area where a president's personal traits Policy, because this is probably the area where a president's personal traits can make the most significant difference in history's trajectory.

3:19And as you all know by now after hearing the talks for the last two days, mainstream historians tend to have a weakness for presidents who drag the country into war. And that's because being a wartime president permits displays of decisiveness and energy and these kinds of things impress mainstream historians. I on the other hand think presidents should merit recognition for avoiding war. And Martin Van Buren has the unique distinction in American history of having avoided two wars. But Ann Buren, if he had wanted, could have had a war with Mexico over Texas.

4:06The Texas Revolution, when American settlers revolted against the central government, occurred in 1836 at the end of Andrew Jackson's term. And when the Lone Star Republic was set up, expectations were high on both sides of the border that Texas would be immediately annexed to the United States. And in fact, that's what Andrew Jackson wanted. In fact, his protege, Sam Houston, was one of the leaders of the Texas Revolution. But there were two problems with Texas annexation. First of all, Mexico did not recognize Texas independence. And secondly, Texas sanctioned slavery and abolitionists were raising a hue and cry about the spread of slavery, the political and the power of the slaveocracy, and the admission of Texas into, or the annexation of Texas, threatened to bring about sectional strife within the country and possibly divide the Democratic Party, the party of Jackson and Van Buren.

5:13So Jackson went along with Van Buren, who, as I mentioned, was Jackson's heir apparent, in postponing recognition of Texas independence until after the 1836 election was over. But then Jackson began to menacingly press American claims against Mexico as a pretext for provoking war. Van Buren however did not want war in the southwest and so once Van Buren is inaugurated there's immediate reversal of policy. Van Buren begins to rebuff Texas overtures and finally announces that Texas annexation is out of the question while he is president and at the same time he deftly and patiently negotiates with Mexico over the claims issue and reaches a settlement so that by the time Van Buren leaves office the possibility of war has significantly diminished and it only re-emerges later during his successor's term when President Tyler, the machinations of both President Tyler and and John C. Calhoun bring Texas annexation back into the political limelight.

6:39But Van Buren's commitment to peace remains constant even after he's no longer president because by the time he's running, he's defeated for election in 1844 and then he's the frontrunner for the Democrat, I mean 1840, defeated for re-election in 1840, and then he's the frontrunner for the Democratic nomination in 1844, but Texas has now become a big issue. And even though he knows that it will cost him politically, Van Buren comes out against annexation of Texas unless it can be done maintaining friendly relations with Mexico. In fact, his statement said, we have a character among the nations of the earth to maintain. While the lust of power with fraud and violence in the train has led other and differently and how they constituted governments to aggression and conquest, our movements in these respects have always been regulated by reason and justice.

7:36And of course, as many of you know, as a result he was defeated at the Baltimore Convention of the Democratic Party, and instead the Democrats nominated an ardent expansionist, James Knox Polk of Tennessee, who was then elected president and conducted the very war War that Van Buren had tried so hard to avoid. So that's the first war that Van Buren avoided at least during his administration. The second war was a potential war with Britain over Canada. Bill Marina yesterday mentioned that there had always been U.S. aspirations to annex Canada. Two attempts at conquest, the first during the American Revolution, the and at other times there was informal support on the part of Americans for revolts, such as the revolts that eventually brought Texas into the United States or Florida into the United States.

8:38And no sooner had Van Buren been inaugurated than revolts broke out in both Upper and Lower Canada. The Canadian authorities were able to quickly disperse organized resistance, but private American citizens lent support with recruits and provisions, and thus border incidents throughout Van Buren's term kept anti-British feeling at a fever pitch. Any one of these incidents could have provoked war, but Van Buren responded with two strong proclamations of neutrality and he immediately sent General Winfield Scott to the border. Scott was a giant man and he traveled up and down the border 800 miles in full dress uniform using little more than his personal influence to calm inflamed passions. Now no longer were passions When things calmed with respect to these revolts, then another incident broke out on the border, and this one was even more dangerous.

9:42The frontier between Maine and New Brunswick had been in dispute since 1783. And during Van Buren's term, Canadian lumberjacks began timber operations in the disputed region. Well, immediately Maine called out its militia, and the Maine and the New Brunswick militia marched to the Aroustic River in a bloodless conflict that has become known as the Aroustic War. Congress felt that war was so eminent that they authorized 50,000 volunteers, extended militia drafts to six months, and appropriated $10 million for war. But Van Buren again decided that he would prefer peace.

10:29He sent Scott to the trouble spot. Scott negotiated a truce. And eventually, the outstanding issues between Canada and the United States were settled in a treaty with Britain in 1842 under President Tyler. And what makes Van Buren's opposition to war, what makes Van Buren's commitment to Peace and Neutrality so exemplary is that he was facing advice from many people in his own party suggesting that he should get the United States involved in the war in order to distract attention from domestic difficulties, which leads us to Van Buren's domestic policies.

11:16Because Van Buren's domestic policies are dominated by an event that took place two months after he assumed office, the Panic of 1837. In the Panic of 1837, the country's 800 banks ended up suspending specie payments, which means they no longer would provide gold and silver in return for bank notes and deposits. And the country sank into a recession. Van Buren responded by calling a special session of Congress to meet in September of 1837, and in his message to the Congress, he presented a bold and acute program to handle the Depression, not with government intervention, but with government retrenchment.

12:10Let me read to you a couple of quotations from this message. By the way, this presidential message, in my opinion, is the most economically astute writing of a president ever penned. Van Buren understood the causes of the depression. He presented a proto-Austrian business cycle theory explanation, but he also recognized that the major factor in business fluctuations in the business cycle at that time was International Species Flows as orchestrated by the Bank of England. As for solutions, this is what Van Buren had to say. All communities are apt to look to government for too much.

12:56Even in our own country, where its powers and duties are so strictly limited, we are prone to do so, especially at periods of sudden embarrassment and distress. Van Buren then goes on to say, to yield to this temptation, however, would be a mistake because, all former attempts on the part of government to assume the management of domestic or foreign exchange have proved injurious. Instead, he said, what was needed was a system founded on private interest, enterprise and competition without the aid of legislative grants or regulations by law. And then at another point he says, one that embodied the Jeffersonian maximum of, quote, that the less government interference with private pursuits, the better for the general prosperity, close quote.

13:49He therefore ended the message by refraining, quote, from suggesting to Congress any specific Plan for Regulating the Exchanges of the Country, Relieving Mercantile Embarrassments, or Interfering with the Ordinary Operation of Foreign or Domestic Commerce, because their adoption would not promote the real and permanent welfare of those they might be designed to aid." Well at this point you might be wondering why did he call Congress into session at all, if he wasn't going to propose a program. And the answer is, he wanted to cut government, cut taxes, cut spending, and then there's a final feature to the program that we'll get into at a moment. But I want to emphasize how remarkable this call for cutting government is, because it's at a period when government is at already a significant low in American history.

14:46Today, federal government expenditures are about one third of the total economy's output, one third of GDP. During the 1920s, prior to the Great Depression, they were at about four percent of GDP, which is significantly lower than today, but significantly higher than when Van Buren assumed office, because when Van Buren assumed office, total federal expenditures were less than two percent of GDP, That's the level of the 1920s. In fact, few people realized that at that time the Federal Government only had two sources of revenue. There were no internal taxes. The only sources of revenue were a tariff and the sale of public lands. So this was a period in which most people not only paid no taxes to the Central Government, most American citizens would have And yet Van Buren said, we still need to cut.

15:50The most important expenditure he cut had resulted from Andrew Jackson paying off the national debt in 1835. with the national debt and this is the first and only time in American history that the national debt was entirely paid off so a huge government surplus was burgeoning and Congress decided to distribute the surplus to the states now this by the way was a part of the WIG program that Tom forgot to mention the WIGs were in favor of a national bank, high protective tariffs, internal improvements and also a 19th century version of what we today call revenue sharing and the distribution of federal money to the states.

16:38And because of the surplus, the Whigs had managed to get that through at the tail end of Jackson's administration. But with the Depression, revenue is falling and Van Buren gets the distribution entirely repealed. So expenditures start to go down and then he's even more stringent than Jackson with respect to appropriating money for internal improvements. Federal Government Expenditures on Internal Improvements go down so that during Van Buren's four years in office, Federal Government Expenditures fell in the midst of a depression from $30.9 million in 1836 to $24.3 million in 1840. Now that's over a 20% fall in nominal terms.

17:23In real terms it's not quite as much because this was a period not when prices were rising but prices were falling. In real terms, it's only about a 10% cut, but then if you adjust for the growth of the economy or population, it's still a higher cut. You know, nowadays when we talk about cutting government, we talk about first derivative cuts, cutting the rate of growth. And Murray Rothbard always used to say that he longed for the days when we had cut cuts. Well, in Van Buren's administration, no matter how you look at it, spending was cut. Real terms, nominal terms, per capita, as a percent of GDP, spending was cut, and at the same time, taxes were cut as well.

18:10So everything is going down during Van Buren's administration. The centerpiece of Van Buren's special message to Congress, however, was a courageous call for what came to be known as the Independent Treasury. And this was the capstone of Andrew Jackson's campaign against the bank. You all heard yesterday how Jackson destroyed the second bank of the U.S., what he and his advisors called the monster. But once the bank was destroyed, a problem arose. And the problem was where should the government deposit its funds? Where should it keep its money?

18:57And the temporary solution under Jackson was to put the money in state chartered banks. Now the drawback of that solution is that first of all those state chartered banks who get government deposits are in essence getting a government subsidy because they're getting government business. And this creates a further drawback because not very many politicians were willing to give state chartered bank subsidies without also regulating them. And so the radical advocates of laissez-faire and hard money in the Democratic Party wanted to bring about what they said in their own words, a separation of bank and government, A divorce of the treasury from the banks and the way to do that was set up an independent treasury in which the U.S. government would only receive gold and silver as money and only hold gold and silver in its own vaults as money and only pay out gold and silver as money and that became the main legislation that Van Buren pressed for throughout his Now, there were competing interests supporting the independent treasury because it could accommodate differing views on currency and banknotes.

20:19Both hard money advocates, those who wanted a completely metallic currency, supported the independent treasury, but also advocates of unregulated free banking also supported the independent treasury. of the Independent Treasury. And it was a long struggle, and my chapter in the book will detail the politics of the struggle, but the upshot was that the Independent Treasury passed at the end of Van Buren's turn in 1840. Now some of the benefits of the Independent Treasury. The most important benefit of the, or one of the benefits of the Independent Treasury was it brought about, for the first time, complete deregulation of the financial system at the national level. Now, it's true that under Tyler, the independent treasury was repealed, but then it was reinstated under Polk and remained in force until the Civil War, which means that essentially, up until the Civil War, the national government has no dealings whatsoever with banks or any other part of the financial system.

21:22Now there's still numerous regulations at the state level, but economists are increasingly coming to the conclusion that this era of relatively free banking wasn't perfect, but was the best monetary system the United States has ever had. The second benefit of Van Buren's push for the independent treasury and his other domestic Initiative, was it thwarted all attempts to use the Depression as an excuse for expanding the role of government. With the panic of 1837 and the resulting Depression, it turned out that many states had squandered huge sums of money, funding, canals and other internal improvements.

22:15Again, we heard about this yesterday in Tom's talk. What happened during the Depression is that the states began to face financial stringency. In fact, about $40 million worth of state bonds went into default when several states actually repudiated their debts. Henry Clay saw this as a beautiful pretext for reintroducing the distribution of federal funds under a new justification, and that justification was assumption of state debts. Van Buren and the Democrats opposed that and opposed all the other relief measures promoted by the Whigs. Now, the importance of this cannot be overstated.

23:01And to appreciate it, you need to know a little bit about what's going on with the economy during this period Because there are actually two bank suspensions, and they both have the same causes, but they have differing consequences. In both cases, they're caused by the Bank of England raising the discount rate, gold flowing out of the United States and setting off a panic and bank runs in the United States. But the first panic, the one at the beginning of Van Buren's administration, followed two years of rapid rise in prices. It was a sharp contraction. It brought about a major recession. Then the economy seemed to recover, and the second bank panic hit in 1839.

23:52Now the second bank panic was not as severe as the first. Only about half the banks were forced to suspend BC payment. But it initiated a long-term monetary contraction in the United States. From 1839 to 1843, the total money supply in the United States over that four years fell by one-third. And there's only one other period in all of American history during which the money supply fell that much. And some of you know what period it was, 1929 to 1933. And many economists have drawn parallels between the two monetary contractions.

24:39Both of them are of the same magnitude. Both of them last at the same length of time. But the economic consequences of the two are dramatically different. The monetary contraction of the Great Depression, 29 to 33, resulted in 25% unemployment and a fall in output of 30%. The economy's total production fell by 30%. During the monetary contraction of 1839 to 1843, output not only did not fall, It actually went up 16%. This was a full employment deflation. And what's the reason it was a full employment deflation?

25:28Well, the answer of economists is prices were flexible. The Great Depression is the first, the most serious depression, the longest depression in American history is of course also the first depression to be met with a massive program of government intervention and those of you who read the works of Murray Rothbard know that that government intervention didn't begin with the policies of Franklin Roosevelt and his New Deal but actually began with the efforts of Herbert Hoover to hold up prices, to move heaven and earth to try to hold up prices under the theory that if you held up prices you could prevent depression. So prices were, in economist jargon, rigid downward. They couldn't fall fast enough to restore equilibrium. and the equilibrium. Whereas during Van Buren's administration, prices were flexible and they fell much more.

26:18Prices did fall from 29 to 33 during the Great Depression, but during Van Buren's administration, they fell much more. As a result, the economy was saved from an episode as severe as the Great Depression. I don't think that Van Buren deserves credit for single-handedly preventing the contraction of 1939 to 1943 from becoming another Great Depression. But he certainly held the pass against all of the special interests, the mercantile interests, the state governments, who were demanding favors from government at a crucial time, and at a time when it was politically inexpedient to do so because that's the main reason he was defeated for re-election in 1840.

27:13Now, there are a couple... Van Buren wasn't perfect, if I had a few more minutes I'd give you a couple of his flaws, but uh... I think the most important thing to recognize about Van Buren is that unlike better known champions of liberty, Thomas Jefferson and Andrew Jackson, Van Buren was more principled while in office than outside of office. There's nothing like Jefferson's despotic embargo, his unconstitutional Louisiana Purchase, his vindictive witch hunt against Aaron Burr to to disfigure Van Buren's administration. Nothing like Jackson's executive bullying of South Carolina, or of Congress, or of France. We almost got a war with France during Jackson's administration.

28:02So it's not just that Van Buren was the least bad American president. While avoiding foreign wars, he did more than maintain the domestic status quo. He reduced central authority in the face of stiff resistance, thereby helping the American economy to weather one of its most severe deflations. Now, it's commonly acknowledged that Americans at one time enjoy greater liberty than any other people on the face of the earth, if you measure liberty in terms of freedom from government coercion. And for that accomplishment, I believe that Martin Van Buren deserves as much credit as any other single individual and certainly more credit than any other American president.

28:57Thank you very much.