This fall, Phi Beta Kappa Visiting Scholar David Weiman delivered a lecture, "Jackson versus Hamilton: Monetary Union and the Struggle over Political Economic Sovereignty."

The redesign of the U.S. currency has inadvertently rekindled a contentious political debate that dates from the very origins of the American Republic. The two main protagonists were Alexander Hamilton and Thomas Jefferson, who famously sparred over constitutional reforms and the policies of the first Washington administration. Its current version pits Hamilton (on the $10 bill) against Andrew Jackson (on the $20). Ironically, money was a central issue in the conflict between Hamilton and Jefferson and between Hamilton’s successors and Jackson. In this talk, Weiman revisits the “money” question in the early republic.

Weiman is the Alena Wels Hirschorn ’58 Professor of Economics at Barnard College and is currently the faculty director of Barnard’s Empirical Reasoning Center. In 2014, he was honored with the Economic History Association’s Hughes Prize for Excellence in Teaching Economic History. Weiman specializes in 19th- and 20th-century U.S. economic history and the political economy of contemporary U.S. criminal justice policy. He is currently completing a paper entitled “Toward a More Perfect Monetary Union: The Civil War as a Second American Revolution,” part of a larger (co-authored) monographic study on the formation of the American monetary union from Andrew Jackson’s infamous “Bank War” to the formation of the Federal Reserve System. Weiman has also written on the origins and labor market impacts of the regime of mass incarceration.

Weiman is visiting Swarthmore as a 2016-2017 Phi Beta Kappa Visiting Scholar. Since 1956, the Phi Beta Kappa Society’s Visiting Scholar Program has offered undergraduates the opportunity to spend time with some of America’s most distinguished scholars. The purpose of the program is to contribute to the intellectual life of the institution by making possible an exchange of ideas between the visiting scholars and faculty and students. 

---

Audio Transcript

Mark Kuperberg:  Hi, my name is Mark Kuperberg and it's my pleasure to introduce David Weiman, who's this years Phi Beta Kappa Visitng Scholar. Each year the Phi Beta Kappa Society designates 15, only 15, professors nation-wide as Visiting Scholars. So, we're very lucky this year to have David Weiman accept our offer to come here and talk to us tonight.

David Weiman received his BA from Brown University, his MA from Yale University and his PHD from Stanford University. His first job as professor was Swarthmore College. After that, for reasons unknown, he went to Yale University and from there he ultimately went to Barnard College where he is now and we here is the Alene Wells Hirshhorn Professor of Economics. David is an economic historian with wide interests. One of his interests is banking and the monetary system and that's what this lecture will relate to. But he also has given a lection or discussion at the Lang Center today on mass incarceration. He's also been interested in telecommunications, the economic history of telecommunications, and southern economic history.

In addition to this public lecture, David has spoken today at the Lang Center. He's visited one class today, he's going to visit another class tomorrow. And he will be having lunch in the Economics Department Seminar Room tomorrow, for students who are interested in economic history. So, if any of you are interested in economic history come by, have lunch with David, find out what economic historians do. Without further ado it's my pleasure to introduce David Weiman.

David Weiman:   Thanks Mark, and essentially thank you for the invitation.

By the way, Mark actually spread a rumor about me. It's not really a rumor if it's true. When I was at Swarthsmore I tended to dress very well when I gave lectures. Partly because I was a bit young at the time and I thought this would enhance my credibility with the students. This is my token dressing-well [crosstalk 00:02:38] and by the way, before I forget, I'm actually wired here. I feel like I'm supposed to turn this thing on. Which I do. Let me do that so I could be recorded for posterity's sake.

Let me just say it is a thrill to be back at Swarthsmore. I am

Speaker 3:   Where's the video? Press full screen.

David Weiman: Oh.

Speaker 3:   Press window two.

David Weiman:  There it is. I guess that's it.

Back at Swarthmore I almost I actually almost called Mark to tell him, I said, "By the way I'm a Phi Beta Kappa Visiting Scholar. You invite me and I will come actually." But, needless to say, I forgot to do that, and fortunately Mark was on the ball and arranged to have me visit. He new me  actually an early, but none the less, a very memorable stage of my career. Tomorrow I will just say I'm having lunch with former Swarthsmore undergraduate who's now a PHD student. I can tell you, I had a very large number of students who actually went on to get their PHDs, and am still in close contact with them.

Today, I'm going to talk about, as Mark said, an element of U.S. monetary banking history. So it's a combination of economics and history. So [inaudible 00:04:10] putting the Phi Beta Kappa Visiting Scholar here is the fact that I also met with Columbia University history department. I actually teach graduate courses in economic history to history students. So you'll see this mixture of economics and history in this lecture.

When I discovered I was going to be a Visiting Scholar, and to be honest with you, it was completely by shock. So many have asked me how did you actually get this? I just said I received a letter in the mail, which I thought was from the chapter, my Brown chapter at Phi Beta Kappa, asking me for money. To be honest, what I normally do with these letters is rip them up. Without even opening them. I happened to notice though, this was actually from Washington. So clearly, unless Brown had moved to D.C. at the time that there was something else here.

I had to figure out a topic, which I thought would be of general interest. Needless to say, this is a prelude to this talk, the Hamilton Soundtrack. You know that was an obvious example. An obvious case of the talk, or a topic, that might actually attract a larger audience. What we know about, when we speak about two rivalries, but primarily about one rivalry between Jackson and Hamilton. Needless to say, these are not historical rivalries, per se because, obviously, the individuals did not overlap.

So one is this truly a historical rivalry. We've got who's going to be on the money? And that's probably the one that's received the most attention. When the Secretary of the Treasury recently announced the redesign of the $10 bill, and they were going to drop Alexander Hamilton from there. It was kind of a ground swell of support. Some ... actually, even popular support for Hamilton. Of course, the only reason why there could be popular support for Hamilton at this stage, was precisely because a lot of people had seen the musical and decided that Hamilton should stay on the dollar bill. Then of course, Jackson has had a somewhat checkered history. There are all sorts of good reasons for dropping him, his face from a prominent position on our money.

I don't trivialize this matter. Money and monetary symbols are important. Actually, one of the significant benefits of having your own money, is to have your own symbols. I was actually curious about this question, because the Euro zone, in Europe, right. European countries dispense with their own money, but some [inaudible 00:06:29] turn over to the back face of every European currency, each country can still put on its national symbols given the significance of that.

I just wanted to illustrate briefly, if you look at sort of going way, way back in American history, and this is part of a gee whiz I bet you didn't know this. Colonial governments were actually issuing their own currencies throughout the 18th century and I would say this is actually a product for the student here. This is actually my son's term paper for an American history class. What he was writing about was the significance of the rattle snake in the colonial history of the United States. So I thought, that's interesting. I said, "Did the rattle snake show up on the currencies?" If that's so symbolically important as a sign of the American rebellion, but also the revolutions against the established British order and the rattle snake lurking in the bushes ready to strike, you know? Did they kind of personify that in their money? And sure enough, they did. You can see a picture of this rattle snake attacking the lion with its obvious symbolism.

But of course, once the United States became independent the rattle snake was clearly not an appropriate symbol for this new republic, so we get the eagle. And so, over this period, roughly that was the point of this paper, sort of somewhere in the early republic this transformation. So today, the fact that we put, you know, we've changed the face literally of the 20 dollar bill is really keeping with the long standing tradition of decorating your money with what are the most relevant current cultural symbols.

But I'm going to deal with another rivalry, which I will refer to as the historian's rivalry between Jackson and Hamilton. This one time Jackson does come up short once again. So Hamilton is deemed by some, including a colleague of mine at NYU, as the architect of modern American financial system. So I do this a little bit like an originalist argument about the constitution. That the constitution as it was written by the founders and really established the American political order. And of course, we shouldn't actually, sort of, deviate from that word. The notion that was it true that somehow this American financial, monetary financial system, was established at this one critical moment in American history. From this perspective Jackson's seen as an anti-modern [inaudible 00:08:56] whom basically demolished one of the critical lynch pins of the Hamiltonian system.

What was called the National Bank at the time, it's now, we tend to refer to it as the Bank of the United States. If gone to the Federal Center in Philadelphia you'll know there is a current a building, the Second Bank of the United States, which is now a portrait gallery. The first bank was demolished [inaudible 00:09:26]. He destroys the second bank and ushers in a period that many view as period of monetary chaos. What I would like to suggest is that, in least in terms of monetary history, maybe this critique of Jackson's a bit too harsh. I kind of see the two as really representing polar positions in American political economic history. Struggles over the centralization and decentralization of political economic power.

Hamilton is really, you can think of Hamilton, I do actually, as a quintessential mercantilist, who sought to centralize political economic power at the center, that is in the Federal Government. Clearly part of his objective was to create a more perfect economic union. But in true mercantilist fashion, ultimately the goal was to create a more perfect, that is to say, integrated political union. And to see an economic union as the means to this political end. And of course, Jackson, especially as a southerner and a southern slave holder, was a champion of states rights, of local control.

This issue gets played out along a variety of mentions we're most familiar with the slavery debate and that clearly is the most prominent instance of the struggle over central federal power versus the state's rights. But it turns out, and this is actually, really an enlightening discovery, I was reading a classic work on American banking history by Bray Hammond. A little regarded passage he says, "Next to slavery, banking policy was the most contentious issue of states rights in the early republic." And I thought about that a lot and I realized, that's exactly true. When Hamilton erects this sort of National Bank he's really seeking to centralize power to create, in fact, what I would call a monetary union. To sort of create a common currency region throughout the United States and to centralize monetary power at the federal level. That is important not just for its economic benefits, but it conveys a great deal of sovereign power to the central government to have to control of the reigns over monetary policy.

By contrast, consistent with the State's Rights doctrine, Jackson saw to shift that focus of power to the states and to have states be able to conduct, in effect their independent monetary policy. I would say that, my research actually all shows up after this period I'm discussing right now, but if you went to the United States, if you were living in the United States in the 1840s or 1850s what you would discover was a country in which you would confront multiple currencies. Thousands of different currencies issued by state, by banks chartered by state governments. All circulating as a means of payment throughout the country. What's more, if you wanted to make a transaction between states, say from Philadelphia, maybe not to New York, but say Philadelphia to Virginia you would see exchange rates not unlike the foreign exchange rates that we encounter when we travel abroad.

These are actually, it's a very different environment and it's only by the way in the Civil War that we start to see the consolidation of the American monetary union through, in this case, the formation of a common currency. I will have a little bit to talk about when we ... The variant about the Civil War and to say there's another unheralded figure in this entire narrative and that is Salmon Chase. He was secretary treasurer of the treasury under Lincoln and was the architect of the first union of the United States.

There are a bunch of lessons that I think are actually relevant to today. One actually particular to the Euro zone. If you look at the broad sweep of the history of the evolution of the American Monetary Union and this uneven shift back and forth from central to decentralized organization, what you would conclude is that the American Monetary Union was not built in a day. That is it was not just the brain child of Alexander Hamilton or any set of individuals, but it evolved gradually and unevenly over more than a century. If the Euro zone is suffering from problems today, we have to recognize that, to be honest, it's less than 20 years old. There are lots of growing pains and the particular message is to reference one of my own research projects on the 1907 banking panic. That panic was so severe that it turns out that localities were issuing their own currencies, in it's after math. So, you know, we haven't actually, Europe has devolved and dissolved European union to that form. But that sort of is what happened as the American Monetary Union was actually the throws of very severe banking panic.

Also, the tensions between central, the federal government and state and local governments, which are so prominent, to be honest, in the debates today and really you involve the question: Where is the locust of sovereignty in the United States? Clearly, these are age old questions that date back even before the formation of the United States as an independent country.

Let me give you a brief outline, it's a bit of a complicated argument and I apologize in advance, I don't know whether it's effective as a power point presentation, which I will say, is not really my specialty. I tend to just have a bunch of images when I present stuff like this to my class and then I talk through it. But I figured I would just give you a guidepost to where I'm headed. I'm going to look a little bit ... I'm going to begin before the Revolution, the War of Independence and the formation of the United States and especially the document constitution. So to sort of see the back ground, all of these struggles, the conflict between the colonies and the crown over monetary policy.

So again, it's not the "No taxation without representation." But, it is actually one of more contentious issues that arise during revolutionary era period. Having the colonies trying to issue their own currencies and especially states after independence, during the confederation period when fighting the war of independence this created a sufficient amount of monetary disruption that the founders felt it necessary to include in the constitution very explicit causes, clauses about who gets to control the money. Now I will tell that constitutional background, the constitutions incomplete and specifying the balance of power between states and the federal government over the control over money. That's part of the issue against, plaguing up over this republic period.

Now I'll talk a little bit about Hamilton's mercantile vision and again focus her on so called National Banker. Would say it's the first bank of the United States and, just be clear, often times I will use the BUS. It's kind of how we refer to it in economic history literature. But it was really seen as the lynch pin of this monetary system. It was going to be the glue that was going to hold together all of the banks within the country to sort of form what we say is a more perfect union. Meaning effectively a common currency that's regulated in some way by a central bank. A central bank like institution. The National Bank was really just a quasi central bank.

Then I'm going to talk about two critiques of the Hamiltonian program. The one that arises actually at the time of Jefferson and Madison. I include this, it's not exactly relevant to the topic to be perfectly honest, but it actually does, again, identify a long standing strain of what is now a current policy question about the corporation. The concerns about the corporation and its political power and it's potentially corrupting influence of the American political economy. Actually it dates all the way back Adam Smith was a kind of critic of corporations. But it gets picked up by Jefferson and Madison in response to Hamilton's proposal for the federal government to incorporate a national bank.

This is called charterism, anti-charterism at the time. This was a first, if you will, for a criticism critique of the Hamiltonian system. Jefferson and Madison famously lose this debate so, the bank was chartered. Then Jackson comes along and declares war against the Second Bank of the United States and succeeds in basically dismantling that bank. Ushering a period we call, we refer as free banking in the U.S. and I will explain that a little bit later on. Then eventually, by 18- the late 1850s, there is a new movement to create a new national bank or, at least, a new national currency and that gets established in what we call the National Banking Acts of ... the NBA, I'm not heralding the beginning of the basketballs ... Professional Basketball season, but it's the National Banking Acts.

Again, you might be familiar with this. PNB, Philadelphia National Bank. So the national bank that's part of the names of many banks around the country has its origins in 1863 with the passage of the National Currency Act. It gets amended a couple of times and they're all bundled together to call this NBA. But the significance is during the Civil War, under Republican RUle, Republicans a kind of mercantless program that's actually, in fact, more effective and more centralizing that anything Hamilton himself might have envisioned. It does successfully establish a common currency. So the credit there, as I said, goes to Chase. Chase will be sort of immortalized and then Chase Bank, JB Morgan Chase now, although that was named in his honor that was not a bank that he was either the owner or manager of.

Let me give a revolutionary era constitutional background. I just want to read the constitution momentarily. Every time I teach US Economic History I make sure that my students read the constitution a little bit. So I guess, in response to some, I guess it was criticism that arose in this campaign. The question is "Have you read the constitution?" At least I can say my students have read parts of it. They haven't read it in its entirety.

We are looking at Article I, especially section eight. Which specifies the powers of the congress, which include particular monetary concerns. The context for that is colonial governments experiments in monetary policy. They refer to it as bills of credit. I actually got interested in this because they really do represent a significant exercise of local sovereignty in a period when the crown is trying to consolidate its hold over the colonies. I want to look briefly at, you know, did this colonial experiment and fiat paper money, did it work? And why do we care? Then, one of its major effects, which the constitution sought to resolve.

So to start the monetary clauses, in case you haven't read the constitution recently, here we go. The Congress shall have the power and their whole slew of powers enumerated here. One is to borrow money on the credit of the United States. I'm not going to talk about that directly although I would say it is actually important. The bank had a very important role to play in sort of managing the debt of the United States. But the one I'm most interested in is the power to coin money regulates its value. And foreign corns. And then, as an aside fix the standard weights and measures. I threw that in, by the way, because you can see fixing the standards of weights and measures, as far as Congress was concerned, was pretty much the same thing as fixing the value of money.

This is really about national standard setting. It's setting a national monetary standard along with trying to figure out what it is and how it should, you know, correspond to. Why do they do that? The answer goes back to ... Oh, one other thing, Article One, Section Ten, and here the other explicit monetary clause is that states are prohibited from issuing bills of credit, which is this fiat paper currency. That's about as much of a picture we get. Or guidance from the constitution on monetary policy. This is really a picture of colonial currency. This comes out of the Massachusets Colony. You can see they were printing currency as early as 1690 and this is a 1741 version between the crown, before the crown cracks down on their particular monetary issues. And you will see the impact of that. I mean in today's terms basically the crown sort of imposes something like a currency board, if you're familiar with that, on Massachusets, but not on other colonies.

The idea here ... Again, the reason why I think of these as so important in terms of their politics and role of money in the effect of political sovereignty is that quite literally these colonial governments are using their monetary issues as a means to exercise some control, political control, over their territory. And it comes up in a number of ways. For example, if they're fighting wars and they need a funding to fight the war. The most basic element of sovereignty is easily the sort of securing your borders. They would typically issue lots of money as way of paying solders or paying for their supplies. Then, the way they would manage their monetary policy, is they would tax their citizens and they would gradually collect the money through taxation. And usually the currency will specify an exchange rate. The exchange rate is the rate, which the government will actually accept the money in exchange for paying off their taxes.

In a sense, as long as there is a balance between issuing the money and then redeeming it through taxes, actually it turns out to be a very effective, stable monetary policy. I want to show you an example, a very effective one. So I gave this talk in Virginia, for whatever reason I had very good data on New York and Pennsylvania. I used New York at that point. I guess I was a bit chauvinism on my part. Since I'm here in Pennsylvania, I thought I would bless you with a picture of how your state managed its fiat currency policies during a period from 1730 to 1774. What I mean, this is a really very prudent monetary policy because, we've been saying it's a non inflationary monetary policy. Cause it's able to maintain a relatively fixed exchange rate between the colonial money and British pound sterling.

If you just, sort of, you're looking at the ... So this is the exchange rate, you can see a relative exchange, sort of stable exchange rate, somewhere around 165 Massachusets pounds versus 100 pounds sterling. And notice that they're able to maintain this relative stability, so this deviation, plus or minus four percent around the mean. Again, it's a pretty, relatively speaking, and looking at exchange rates throughout this period, you would say this is pretty comparable to what we observe in more developed markets. They've got fairly significant gyrations in money supply, but nonetheless there is confidence in this currency that it will ultimately be redeemed at the par value set by the government. That's a good case, that's a case of a very effective monetary policy.

Here, I will show you a very bad case. This is actually Massachusets. Here you've got monetary inflation. Inflationary Monetary Policy read over, this axis you can see the spike in the money supply and corresponding the sharp depreciation of the Massachusets money, vis-a-vi Great Britain and so Great Britain clamps down on their monetary policy in 1751, which begins part of the revolutionary movement in the colony tried to reassert some monetary power. You're using monetary authority in some cases provenly, in some cases not. Basically this is all to secure some kind of sovereign objective. Whether it's fighting a war, for economists in the room will say they're also it seems to be their using things as basically counter-[inaudible 00:26:26] monetary policy. This the kind of, what we in today call Cainsian Monetary Policy well before Cains every wrote.

In some cases they are using them as a vehicle for economic development. Issuing them through mortgage banks that are helping to fund territorial expansion. The one problem in the mix, it turns out, is the colony of Rhode Island. If anyone here is from Rhode Island I apologize, I guess we're not singling them out, but they have a notoriously, sort of, reckless monetary policy in which they tentatively issue money profusely. The fortunate thing for them it can seep over state boundaries. In effect, they are able to impose the cost of their inflationary monetary policy on other states, other colonies at the time. And this was clearly the matter that concerned the founders most greatly. That's why they clamped down on these bills of credit in the constitution.

Just to give you an idea of the problem that was created, created by all this monetary profusion, this is just an example of exchange rates. You can't really read this, it's not really legible. But it just goes to show you, if you're a merchant that's operating in say, New Jersey, between Philadelphia and New York, you're confronting a table of exchange widths like this. Handling a whole slew of money and trying to figure what exactly it is your getting paid in and what it's worth. That's the revolutionary system and with the constitution Hamilton kind of elaborates this program of financial banking development.

Let me talk briefly about this. There are limits to the constitution as specified in the monetary clauses. So Hamilton actually erects a compromise. He creates what I will call a mixed federal/state public/private banking monetary system. There are a couple of dimensions. Here it is the federal/state dimension. Then there's a public/private dimension as well. The federal government specifies the value, the fundamental value, of money or the monetary standard. In economics terms that's the unit of account. The United States has at least nominally a common unit of account. But what it's silent about is actually who gets to issue the money. Today we don't even think of the station between the unit of account and the money because they're kind paid one to one. Literally one dollar to one dollar. But it doesn't have to be that way.

Here we have a unit of account, that's set by the federal government. But then, states are given a great deal of leeway in regulating local monetary supplies. And they do that by chartering banks and giving those banks the authority to issue currency that can circulate at least nominally dollar for dollar in exchange for gold or silver, the fundamental monetary units of the United States. Now, just because, in principle the banks are supposed to redeem their currency at hard dollar for dollar, doesn't mean they actually do that. So Hamilton's solution to that problem was to create this National Bank. The National Bank, actually at least fundamentally its role was as the Treasury's bank, which means it's very large. It gets to branch across state lines in order to manage the Treasury's transactions businesses. But in doing so, it's able to, at least initially and then later on in the 1820s to regulate the money issues coming out of all of these state banks and effect the private established monetary unit.

 There is doing these periods, in the fact of common currency in the form of the currency ... The currency is actually issued by the National Bank. Let me just talk briefly about the balance between the public money system and the private money system. So public money are just the gold coins and silver coins minted by the Treasury and that do circulate, but gold coins tend to be used in high value transactions so they aren't a means of local payment. Silver do circulate, but their circulation varies over time.

What I'm showing here, this is the percentage of specie, official money to the total money supply, in the United States. From about 1820 to 1850. The bottom line is that throughout this period the share varies from about 20 percent to initially, it drops down that gold and silver is only five percent of the total money stock by the early 1830s. It jumps up to about 30 percent or about a third sometime in the 1840s and '50s. But the bottom line is the vast majority of money circulating in the United States are these bank notes chartered, issued by state chartered banks. We really have, for the most part, a private monetary system. And by the way that is no different than today. Most of our money takes the form of bank deposits, which you think of as private money although more tightly regulated by interstate governments or the Federal Government, Federal Reserve.

Here is the National Bank, this sort of seen as a kind of drawing, representation of what the first bank looked like. When I was here I actually ... I had talked ... Tori and I had talked about thinking of a project about banking architecture and what is the image banks are trying to convey. Not just in terms of imagery over money, but also how they designed their buildings. I had just come from Stanford, so from California. I was kind of struck, you look at a bank like this and it's clearly sending a message. Then, I recall, there was a shopping center right near Stanford and I noticed there was a bank that was in trailer home and I thought, "Only under the FDIC could banks be located in a, literally moving vehicles actually." So you would have thought [inaudible 00:32:34] endeavor.

Again, they key thing about the bank is it size. It's got a capitalization of about 10 million dollars from its on set in the early 1790s. The entire banking system at that time had capitalization of about five million dollars. So this is a huge bank, relative to the size of the entire banking system. And of course, because of its size, it does convey with that bank a great deal of power. It also comes from the fact the bank was able to branch across state lines. You can see these are just locations of banks, branches and this initially they're concentrated along the coast. Cause their main job is to collect customs payment, tariff payments, charges on imports to the U.S. and then to kind of circulate them around, especially back to D.C., for transactions by the federal government.

Eventually, as the U.S. expands into the western regions, you will see branches opening up there in important commercial centers. The significance of all this, at least at this time, is given the bank size, given its ability to branch, it's at least able to create a common money and this is just an example of a $50 national bank note, 1801. This money would also be circulating a long side moneys issued by chartered banks. At least it provided a kind of competitive currency that helped to stabilize the value of the local currencies issued by local banks. During this period the bank is not exercising a lot of overt power, in regulating no issues. But by providing all customers with bank notes, starting at five dollar denominations, which back in the day, would have been still quite a large sum of money. In real terms for most individuals. But it nonetheless in business transactions it at least provides a secure currency that's immune from some of the risks of maybe using some of these local, the local currencies.

The one area where the bank's policy really mattered was helping to manage the debt. They said the bank was the vehicle by which the Federal Government paid off its debt service and redeemed all the debts from the revolutionary war. And, of course, that was actually controversial at the time because a lot of that debt ... This is just an example. A lot of that debt is being held in New York state and to some degree in Pennsylvania regardless of which states or colonies actually incurred those debt obligations. Again, under Hamilton's policies, you start to see a centralization of the ownership of the national debt, in the hands of, not surprisingly, New York financiers and Philadelphia financiers. The National Bank is implicated in this policy of centralizing wealth, which in fact, Hamilton's program does to a significant degree. Because it is actually stabilizing the value of the debt at the par that Hamilton actually set in the redemption program.

This policy, go back, this encouraged the wrath of Hamilton's opponents. They obviously opposed the centralization of debt issue, which they thought was a regional redistribution of wealth. Which it was, actually, especially southern states, southern colony states to northeastern financial centers. It was financed centered by tariff revenue so it's really imposing that burden of redeeming the debt on the entire public, although again only some benefit. But what was more concerning to them was the fact that it granted, what they thought was an extraordinary, that is anti-constitutional exercise of power, in creating private for profit corporation. So they launch this attack against the bank on constitutional grounds. What's interesting here, this is just a side note, Hamilton writes and I don't know if it's true or [inaudible 00:36:48], apparently in two days he writes this 125 page draft, delivers it to Washington. What's novel about it is he develops the principle of complied powers that we know very well, which actually showed up in the affordable care act. The Supreme Court decision about the use of the [inaudible 00:37:06] clause and it implied powers to adopt this health policy plan. Which, by the way, John Roberts rejected.

What they argue is that a private corporation is a kin to a private club. A private club concentrates wealth and power at the hands of its members. Often times it's able to then use that power to get public benefits. Usually in the form of some kind of monopoly right. Thereby essentially aggrandizing themselves at the public's expense. And they saw this as, what they call, systemic corruption. This is not necessarily any individual it benefiting, but they were really much more concerned that you were sewing the seeds to undermine the political economy by creating these islands, to use a later term, islands of conscience power that would potentially have very powerful political influence over the direction of a government policy.

There is this distinction between private corruption, for example, who benefited from the redistribution policy from the redemption of the debt? There is a great deal of speculation and sort of private benefit. Hamilton, for example, it's been cleared, his name, that he never benefited, at all, from those programs. But the question is whether there was systemic corruption in that it created this alien element that was potentially corrosive to the American political economy.

Jackson, by the way, he continues this anti-charterism tradition when he veto's the rechartering bill in the Second Bank of the United States. So I kind of love the imagery because it really does depict the anti-chartists view of the corporation as this serpent, many headed serpents, so this is a club of many members that ostensibly is combined to overthrow, in a sense, the authority of the federal government. Of course, there is Andrew with his sword. I'm going to say, at the same time the anti-chartists policy or ideology evolves from the Jefferson/Madison version to that of Jackson and Van Buren, his vice president. At that point, they're not opposed to corporations per se, but they're opposed of corporations that what are called special charters. These are corporations that have legislated the special acts or special bills that provide effectively some kind of monopoly of power to the corporation.

What they favor in its place is what we would think of today as a general corporation law. Basically anybody can form a corporation as long as they satisfy a set of standard requirements. I will say the National Banking Act of Salmon Chase is exactly a version of a national, a general incorporation law applied to banking. That particular policy originates in New York with its own banking reform in the 1840s. And you can see that essentially the federal government does in the 1860s is to nationalize the New York banking reform. To get rid of any element, again, systemic corruption by eliminating the special incorporation.

We have Jackson's bank war. Again, now we have another national bank the Second National Bank of the United States. This is the one you might be more familiar with. This is the actual building, still in that federal center. This is Nicholas Bill. I put him here because he was deemed this kind of aristocrat, right? So he has this very aristocratic portrait that kind of reinforced that image. It is again, [inaudible 00:40:53] positive for central bank. In this case much more than the First Bank of the United States. The second bank is really exercising a great deal of regulatory authority over the banking system. It does so in ways that in trying to forge this monetary union in the United States, to try and reign in the monetary authorities, powers of state governments and especially private banks chartered by state governments.

Although I will say it's not a fully bona-fied central bank. It can't actually perform certain critical functions. But what it does do is it does really institute a common currency regime within the territorial United States at the time. And that territory, you can see, this is sort of the boundaries of the second bank. As I said, they're still covering the coasts, because again its primary source of intake of federal funds is really through the tariffs. But especially moving west, you start to see the forming of the branch banks of the second bank in these commercial centers. But there also locations, for example land sales. During this particular period of land expansion and sales of the public domain by the federal government, another important influx of funds into the federal coffers via the Bank of the United States is actually through public land market. You've got this extensive branch network, not only becomes a vehicle for being able to monitor and regulate the local banks, it also establishes, essentially a network for moving funds efficiently throughout the country.

In effect, the second bank, and I will say I'm not critical of this, in fact it's performing a really vital role in this period, it's still a fledgling country. Transportation is very crude at the time. So just to illustrate this, and I'm not even sure how these maps were constructed, but these are travel time maps of the United States. Starting, this is 1800, 1830. I like to point out Chicago here, actually Chicago probably was not even anything in 1800, but basically, except for a military fort, or just a trading outpost. six weeks to Chicago from New York. Even by 1830 we're still talking about a three week trip. Moving money around the country, say it's actually two weeks to New Orleans, three to four. Again, even on the coast, it still takes a lot of time. A lot of travel time. A lot of risks in moving funds across pace.

What the second things does is pretty much internalize all of these flows by just adjusting ledger balances of the various branches. Debiting and crediting what each bank is taking in, and which one is paying out to the various locations, is a way of basically moving funds. That's exactly what the federal reserve is doing today as it moves funds around with the banking system. It just does so very efficiently through electronic payment system. Whereas here it is all done on these ledger books located in Philadelphia, controlled by Nicholas Bill.

In a way what it does do is in a period where travel is very costly, very risky moving funds especially. It really provides a mechanism, a kind of monetary infrastructure that really fuels economic expansion or helps to fuel during this period. This is just another map showing population densities. I will just run through this. So the problem actually with the bank ... Oh, one other point about the bank, Bill also adopts, it's not going to illustrate this here, I guess there is actually. Let me just jump forward a little bit. Bill actually adopts a relatively conservative monetary policy. Unfortunately, our evidence on the money supplies only go back to about 1820. This is a measure of money supplied per capita, per population in the United States. So this is the good old period. Again, what you notice is there is virtually no change in the per capita money supply during this period.

This is what we could say is a conservative monetary policy or accommodating monetary policy. Which is fine as long as you're in a developed economy and all you want your banks to do is essentially fund the current production and trade activities of existing establishments. But that is not the United States of the 1820s and 1830s. It is a rapidly territorially expanding country, developing country. So you actually need a corresponding, to be honest, more expansion in monetary policy to accommodate that economic expansion. A combination of factors, especially the tight reign over the money supply kept by the second Bank of the United States create a considerable amount of tension at the same time the country is developing especially these new regions. And just to make the point very clear, it wasn't even just this monetary policy in the abstract. The central banking, private banking institution in many of the frontier regions would have been a branch of the Second Bank of the United States.

In the mid-west for example, what was called the old northwest of the time, the about 80 percent of all loans in those regions were issued by the Second Bank of the United States. And in the souther equivalent, the old southwest, which would be Alabama somewhere to say Louisiana, the figures about two thirds. Basically, these regions are resisting this tight monetary policy that entrepreneurs that are trying to expand to these new territories, especially and this is where this particular diagram shows up. So you start to see the formation of all sorts of cities. You've got the large cities like Columbus and Cincinnati, but you've got a lot of these smaller interior cities that are these points of trade and production. Banks are trying to establish their own branches in these locations, but they're confronting the fact the monopoly that is restricting their entry.

This builds up the political pressure that becomes the foundation of the Jacksonian Coalition. Eventually Jackson was able to capitalize on those, that political conflict to issue his threat to veto this charter bill. He's re-elected in the 1832 campaign so he's sort of successful in this regard and the bank dies. And notice what happens when the bank dies is that whoa the money supply really jumps up, increases quite significantly. In this regard, while the Hamilton's bank actually preformed a key role and informative theory in American political economic development, at some point it literally became a barrier to its economic expansion.

Jackson's veto comes at exactly the appropriate moment to unleash what is really kind of a dramatic entrepreneurial expansion in frontier regions that leads fundamentally to the development of a really the industrial, mining industrial center of the United States, circa the 1860s and 1870s. And you can see this. This is just an index of economic activity in the United States. We don't have measures of GDP, for example, going all the way back here. But several scholars have tried to put together something called the Industrial Production Index. During this period was tangible goods production really dominates the U.S. economy, it turns out to be a fairly good [inaudible 00:48:45] to overall economic activity. Associated with expansionary monetary policy of this new free banking system without the Second Bank of the United States you see this acceleration of economic activity.

I don't want to insist finance caused growth, but it certainly accommodated growth in this case and ,what's more, I just want to come back to this one point. What's really striking and to underscore the point I want to make about the constraining impact of the Second of Bank of the United States, what's striking about the expansion of the monetary system during this system during this period is that it is fueled by equity. By the flow of capital from the northeast to these frontier regions and so that is really consistent with at least one argument that there were these significant profit potentials in these areas that were being repressed by the Second Bank of the United States. Once the second bank is dashed, you start to see this dramatic growth of banks in these territories. Significantly, the red banks are what are called free banks that chartered under this free banking general corporation.

In this regard, if you look at the history from somewhere around the 1810s to 1840s, 1850s in effect you that see there is a virtue to the Hamiltonian policy of consolidation during a period of formative economic development. Establishing this currency system that enables trade to develop in frontier territories without the risks and costs that might of been incurred because of the poor transportation system the sort of active flows of information and so forth. By the late 1820s, 1830s and 40s, right, these were really developing areas that had potentially thriving commercial centers, industrial locations. That development was actually repressed by the Second Bank of the United States. So Jackson's veto actually shows up in a timely way. To help, if you will, to help fuel or finance after this economic development.

There's a case for both Hamilton and Jackson, I guess, I'm not trying to be just judicious in this regard. But the fact is, every time I think of it, it's literally how I teach this in my classes. That there's a moment, there's a Hamiltonian moment and a Jacksonian moment. This way I kind of think of it as a dialectic of politically economic development during this period between these kind of centralizing and decentralizing phases. But I will also say Jackson's moment also runs its course especially in the Midwest. By the 1850s, and I think I going to have another diagram, yes, this. So by the 1850s, this is actually a railroad map showing you especially the new construction of railroads in the 1850s. By the 1850s this region of the country is becoming increasingly knitted into a common trading zone. In this circumstance when you've got these large flows of trade between these regions, these conditions, multiple currencies, multiply exchange rates become an increasing impediment to continued, to economic activity. This is exactly the conditions in which you would like to establish a common currency.

Interestingly, it's exactly in these areas that are being more tightly integrated into this northern common trading, potentially monetary zone. These areas you start to see pressure for a national or common currency. The irony here is this would have been the hot bed of Jacksonian democracy in the 1820s and early 1830s and now you start to see a kind of Republican and Democrats becoming Republicans and championing a common currency. But they're doing so under rather novel terms. By the way, my little map here, here's again our Chicago case, so from being six weeks in 1800 this is now just a couple days trip on a railroad by 1860.

The hero of this day actually turns out to be Sam Chase. This is by the way a typical bill. This is the common currency issued by a National Bank chartered under the 1863 National Currency Act. Notice, by the way, this is actually one of these discoveries I made actually, not in preparing this talk, but in preparing a lecture for my class. I've been teaching this course ever since I was here at Swarthmore. We are talking 1980 up til about, you know, I think it was 2005. I finally said, let me show students a picture of these National Bank Notes. I kept teaching them, because they're identical. They're completely identical, right? Well it turns out they're not identical actually. So notice, by the way, this is gots the name of the bank Green County National Bank of Carrollton, which happens to be in Illinois. And also, these are the particular symbols that the Green County National Bank wanted to embellish its currency.

It's interesting, again, and sometimes it's useful to just look at the artifacts before you open your mouth in your lecture. What's significant is it turns out they are all economically the same. It doesn't really matter what they look like. They carry this national currency kind of emblem and everyone one knows, that wherever they go in the country, this is going to be worth five dollars and it does the job. What's interesting about this particular measure for national currency is there is no national banks there. Basically the law, what it does, is it charters through the federal government, national banks. Each issuing this common currency under exactly the same general incorporation laws. Establishing in effect, money that's worth the same regardless of the location of the issuing bank.

 This is a kind of genius compromise devised in part by Chase and a couple of, well John Sherman, who is the brother of General Sherman. As well as Congressman coming from Massachusets and they devise this kind of genius system to combine elements of centralization in the common currency and decentralization in having local banks to forge this common currency system. In that sense I was kind of nominating Salmon Chase and well maybe Salmon Chase should be on our currency. Thank God for Wikipedia. I just looked up denominations of American currency and low and behold, well that is Salmon Chase. And that is the $10,000 bill. We would all like to have the Salmon Chase bill in our pockets, well not in our pockets, but somewhere. It turns out, of course, that the treasury has discontinued these large denomination notes. If you do find one it probably has a value that is probably way more than $10,000. To say that perhaps we should be writing a musical to celebrate Salmon Chase.

Thank you very much.