The Age of Andrew Jackson

Chapter Seven: “The Few at the Expense of the Many”

The Historiography of Jacksonian Economics 103 Chapter Seven “The Few at the Expense of the Many” The Historiography of Jacksonian Economics Ryan Ruckel “If we can not at once . . . make our Government what it ought to be, we can at least take a stand against all new grants of monopolies and exclusive privileges, against any prostitution of our Government to the advancement of the few at the expense of the many,” declared Andrew Jackson in his 1832 veto message. Jackson’s veto spelled the beginning of the end for the Second Bank of the United States (BUS).1 Indeed, Jackson waged a political war against the BUS, a struggle every bit as difficult as his wars against the British and the Indians, yet in his mind even more vital to the nation’s future. Twenty-first-century Americans, most of whom may never have heard of Jackson’s Bank War, have grown accustomed to a large, powerful national government and an economy more prosperous and complex than any in the history of the world. Since the creation of the Federal Reserve System in 1913, Americans have tended to see federal involvement in the economy as necessary, or at least as a necessary evil, but Jackson would have seen it as a return of “the monster,” the Second Bank of the United States. Jackson’s constituents came to hate the BUS because they thought of themselves as the political descendants of Thomas Jefferson . Jefferson’s rival, Alexander Hamilton, had called for a central bank as part of his plan for a strong national government built upon a strong national economy, and good Jeffersonians feared any concentration of political and economic power as a deadly threat ryan ruckel 104 to liberty and the Republic. For their part, Hamiltonians such as Henry Clay believed they were reading the Constitution correctly when they sought to use the power of the national government to strengthen that same government and thus ensure its survival in a dangerous world, and they feared the “mob rule” that could put dictators in power. Clay’s economic plan, known as the “American System,” called for a high tariff to protect young American industries ; for federal money to be spent on roads, bridges, and canals in order to facilitate commerce; and for a national bank to establish a national currency and stabilize the money supply. Jackson deeply mistrusted Clay, declaring that the BUS and other aspects of the American System had “arrayed section against section, interest against interest, and man against man, in a fearful commotion which threatens to shake the foundations of our Union.”2 The BUS had emerged as a solution to the dual problem of fighting the War of 1812 without a central bank and of the chaotic banking situation that surfaced after the War of 1812. By the time the war ended in 1815, the number of small banks had expanded rapidly. Banks printed their own notes and were in a headlong rush to sell loans to the thousands of settlers moving west. Both bankers and settlers hoped to make money by speculating in land values, buying large tracts of cheap land and then selling the land later at a premium. The value of the nation’s currency therefore fluctuated from place to place and from bank to bank, and the speculation in land encouraged an inflationary currency that badly needed stabilization. As a remedy, Congress chartered the BUS, a public-private institution that would provide a more uniform value for the notes in circulation. Even so, the BUS operated as a profit-making corporation. The BUS engaged in its own land speculations, and it also acted as the sole repository for federal deposits, which included monies from land sales, customs duties, and even the postal service. The BUS soon became a clearinghouse for a rapidly expanding currency energized by rampant speculation. To meet its own financial obligations coming due in 1819, the bank, under the direction of its new president, Langdon Cheves, began calling in its loans and redeem- The Historiography of Jacksonian Economics 105 ing the notes it was holding from the state-chartered banks. The sudden, drastic contraction threw the state banks into insolvency and panic. In turn, the state banks had to call in their loans and notes, which led to sudden bankruptcies, significant unemployment , and startling depreciation of currency throughout most of the United States, with the frontier areas being...