American Eloquence Volume IV Part 9

Secondly, it is said that a nation should be independent of foreign nations, lest in time of war it might find itself helpless or defenceless. Free trade, it is charged, makes a people dependent upon foreigners. But traffic is exchange. Foreign products do not come into a country unless domestic products go out. This dependence, therefore, is mutual. By trade with foreign nations they are as dependent upon us as we upon them, and in the event of a disturbance of peace the nation with which we would be at war would lose just as much as we would lose, and both as to the war would in that regard stand upon terms of equality. It must not be forgotten that the obstruction of trade between nations is one of the greatest occasions of war. It frequently gives rise to misunderstandings which result in serious conflicts. By removing these obstacles and making trade as free as possible, nations are brought closer together, the interests of their people become intermingled, business a.s.sociations are formed between them, which go far to keep down national dispute, and prevent the wars in which the dependent nation is said to be so helpless. j.a.pan and China have for centuries practised the protective theory of independence of foreigners, and yet, in a war with other nations, they would be the most helpless people in the world.

That nation is the most independent which knows most of, and trades most with, the world, and by such knowledge and trade is able to avail itself of the products of the skill, intellect, and genius of all the nations of the earth.

A third erroneous impression sought to be made upon the public mind is that whatever increases the amount of labor in a country is a benefit to it. Protection, it is argued, will increase the amount of labor, and therefore will increase a country's prosperity. The error in this proposition lies in mistaking the true nature of labor. It regards it as the end, not as the means to an end. Men do not labor merely for the sake of labor, but that out of its products they may derive support and comfort for themselves and those dependent upon them. The result, therefore, does not depend upon the amount of labor done, but upon the value of the product. That country, therefore, is the most prosperous which enables the laborer to obtain the greatest possible value for the product of his toil, not that which imposes the greatest labor upon him.

If this were not the case men were better off before the appliances of steam as motive power were discovered, or railroads were built, or the telegraph was invented. The man who invents a labor-saving machine is a public enemy; and he would be a public benefactor who would restore the good old times when the farmer never had a leisure day, and the sun never set on the toil of the mechanic. No, Mr. Chairman, it is the desire of every laborer to get the maximum of result from the minimum of effort. That system, therefore, can be of no advantage to him which, while it gives him employment, robs him of its fruits. This, it will be seen, protection does, while free trade, giving him unrestricted control of the product of his labor, enables him to get the fullest value for it in markets of his own selection.

The protectionist, relying upon the propositions I have thus hurriedly discussed, urges many specious reasons for his system, to a few of which only do I intend to call attention to-day.

In the first place, it is urged that protection will develop the resources of a country, which without it would remain undeveloped.

Of course this, to be of advantage to a country, must be a general aggregate increase of development, for if it be an increase of some resources as a result of diminution in others, the people as a whole can be no better off after protection than before. But the general resources cannot be increased by a tariff. There can only be such an increase by an addition to the disposable capital of the country to be applied to the development of resources. But legislation cannot make this. If it could it would only be necessary to enact laws indefinitely to increase capital indefinitely. But, if any legislation could accomplish this, it would not be protective legislation. As already shown, the theory of protection is to make prices higher, in order to make business profitable. This necessarily increases the expense of production, which keeps foreign capital away, because it can be employed in the protected industries more profit-ably elsewhere. The domestic capital, therefore, must be relied upon for the proposed development. As legislation cannot increase that capital, if it be tempted by the higher prices to the business protected, it must be taken from some other business or investment. If there are more workers in factories there will be fewer artisans. If there are more workers in shops there will be fewer farmers. If there are more in the towns there will be fewer in the country. The only effect of protection, therefore, in this point of view, can be to take capital from some employment to put it into another, that the aggregate disposable capital cannot be increased, nor the aggregate development of the resources of a country be greater with a tariff than without.

But, secondly, it is said that protection increases the number of industries, thereby diversifying labor and making a variety in the occupations of a people who otherwise might be confined to a single branch of employment. This argument proceeds upon the a.s.sumption that there would be no diversification of labor without protection. In other words, it is a.s.sumed that but for protection our people would devote themselves to agriculture. This, however, is not true. Even if a community were purely agricultural, the necessities of the situation would make diversification of industry. There must be blacksmiths, and shoemakers, and millers, and merchants, and carpenters, and other artisans. To each one of these employments, as population increases, more and more will devote themselves, and with each year new demands will spring up, which will create new industries to supply them. I was born in the midst of a splendid farming country. The business of nine tenths of the people of my native county was farming. My intelligent boyhood was spent there from 1850 to 1860, when there was no tariff for protection. There were thriving towns for the general trading. There were woollen mills and operatives. There were flouring mills and millers. There were iron founders and their employes. There were artisans of every description. There were grocers and merchants, with every variety of goods and wares for sale; there were banks and bankers; there was all the diversification of industry that a thriving, industrious, and intelligent community required; not established by protection nor by government aid, but growing naturally out of the wants and necessities of the people. Such a diversification is always healthful, because it is natural, and will continue so long as the people are industrious and thrifty. The diversification which protection makes is forced and artificial. Suppose protection had come to my native county to further diversify industries. It would have begun by giving higher prices to some industry already established, or profits greater than the average rate to some new industry which it would have started.

This would have disturbed the natural order. It would necessarily have embarra.s.sed some interests to help the protected ones. The loss in the most favorable view would have been equal to the gain, and besides trade would inevitably have been annoyed by the obstruction of its natural channels.

The worst feature of this kind of diversified industry is that the protected ones never willingly give up the government aid. They scare at compet.i.tion as a child at a ghost. As soon as the markets seem against them, they rush to Congress for further help. They are never content with the protection they have; they are always eager for more. In this dependence upon the government bounty the persons protected learn to distrust themselves; and protection therefore inevitably destroys that manly, st.u.r.dy spirit of individuality and independence which should characterize the successful American business man.

Thirdly, it is said that protection gives increased employment to labor and enhances the wages of workingmen. For a long time no position was more strenuously insisted upon by the advocates of the protective system than that the wages of labor would be increased under it. At this point in the discussion I shall only undertake to show that it is impossible that protection should produce this result. What determines the amount of wages paid? Some maintain that it is the amount of the wage fund existing at the time that the labor is done. Under this theory it is claimed that, at any given time, there is a certain amount of capital to be applied to the payment of wages, as certain and fixed as though its amount had been determined in advance. Others maintain that the amount of wages is fixed by what the laborer makes, or, in other words, by the product of his work, and that, therefore, his wage is determined by the efficiency of his labor alone. Both these views are partly true. The wages of the laborer are undoubtedly determined by the efficiency of his work, but the aggregate amount paid for labor cannot exceed the amount properly chargeable to the wage fund without in a little time diminis.h.i.+ng the profits of production and ultimately the quant.i.ty of labor employed.'

But, whichever theory be true, it is clear that protection can add nothing to the amount of wages. It cannot increase the amount of capital applicable to the payment of wages, unless it can be shown that the aggregate capital of a country can be increased by legislation; nor can it add to the efficiency of labor, for that depends upon individual effort exclusively. A man who makes little in a day now may in a year make much more in the same time; his labor has become more efficient.

Whether this shalt be done depends on the taste, temperament, application, apt.i.tude, and skill of the individual. No one will pretend that protection can increase the aggregate of these qualities in the labor of the country. The result is that it is impossible for protection, either by adding to the wage fund or by increasing the efficiency of labor, to enhance the wages of laboring men, a theory which I shall shortly show is incontrovertibly established by the facts.

I will now, Mr. Chairman, briefly present a few of the princ.i.p.al objections to a tariff for protection. As has been shown, the basis of protection is an increase in the price of the protected products. Who pays this increased price? I shall not stop now to consider the argument often urged that it is paid by the foreign producer, because it can be easily shown to the contrary by every one's experience. I shall for this argument a.s.sume it as demonstrated that the increase of price which protection makes is paid by the consumer. This suggests the first great objection to protection, that it compels the consumer to pay more for goods than they are really worth, ostensibly to help the business of a producer. Now consumers const.i.tute the vast majority of the people. The producers of protected articles are few in comparison with them. It is true that most men are both producers and consumers. But, for the great majority, there is little or no protection for what they produce, but large protection for what they consume. The tariff is princ.i.p.ally levied upon woollen goods, lumber, furniture, stoves and other manufactured articles of iron, and upon sugar and salt. The necessities of life are weighted with the burden. It is out of the necessities of the people, therefore, that the money is realized to support the protective system.

I say, Mr. Chairman, that it is beyond the sphere of true governmental power to tax one man to help the business of another. It is, by power, taking money from one to give it to another. This is robbery, nothing more nor less. When a man earns a dollar it is his own; and no power of reasoning can justify the legislative power in taking it from him except for the uses of the government.

Yet, Mr. Chairman, the present tariff takes hundreds of millions of dollars every year from the farmer, the laborer, and other consumers, under the claim of enriching the manufacturer. It may not be much for each one to contribute, yet in the aggregate it is an enormous sum. For many, too, it is very much. The statistics will show that every head of a family who receives four hundred dollars a year in wages pays at least one hundred dollars on account of protection. Put such a tax on all incomes and the country would be in a ferment of excitement until it was removed. But it is upon the poor and lowly that the tax is placed, and their voices are not often heard in shaping the policies of tariff legislation. I repeat, the product of one's labor is his own. It is his highest right, subject only to the necessities of the government, to do with it as he pleases. Protection invades, destroys that right. It ought to be destroyed, until every American freeman can spend his money where it will be of the most service to him.

To ill.u.s.trate the cost of protection to the consumer, consider its operation in increasing the price of two or three of the leading articles protected. Take paper for example. The duty on that commodity is twenty per cent. ad valorem. Most of the articles which enter into its manufacture or are required in the process of making it are increased in price by protection. The result is that the price of paper to the consumer is increased nearly fifteen per cent.; that is, if the tariff were taken off paper and the articles used in its manufacture, paper would be fifteen per cent. cheaper to the buyer. The paper-mills for five years have produced nearly one hundred millions of dollars'

worth of paper a year. The consumers have been compelled to pay fifteen millions a year to the manufacturer more than the paper could have been bought for without the tariff. In five years this has amounted to $75,000,000, an immense sum paid to protection. It is a tax upon books and newspapers; it is a tax upon intelligence; it is a premium upon ignorance. So heavy had the burden of this tax become that every newspaper man in the district I have the honor to represent has appealed to Congress to take the duty off. The government has derived little revenue from the paper duty. It has gone almost entirely to the manufacturer, who himself has not been benefited as antic.i.p.ated, as will presently be seen. These burdens have been imposed to protect the paper manufacturer against the foreigner, in face of the confident prediction made by one of the most experienced paper men in the country, that if all protection were taken off paper and the material used in its manufacture, the manufacturer would be able to successfully compete with the foreigner in nearly every desirable market in the world.

Take blankets also for example. The tariff on coa.r.s.e blankets is nearly one hundred per cent. ad valorem. They can be bought in most of the markets of the world for two dollars a pair. Yet our poor, who use the most of that grade of blankets, are compelled to pay about four dollars a pair. The government derives little revenue from it, as the importation of these blankets for years has been trifling. This tax has been a heavy burden upon the poor during this severe winter, a tax running into the millions to support protection. Heaven save a country from a system which begrudges to the s.h.i.+vering poor the blankets to make them comfortable in the winter and the cold!

Secondly, protection has diminished the income of the laborer from his wages. The first factor in the ascertainment of the value of wages is their purchasing power, or how much can be bought with them. If in one country the wages are five dollars a day and in another only one dollar, if the laborer can in the one country with the one dollar, purchase more of the necessary articles required in daily consumption, he, in fact, is better paid than the former in the other who gets five dollars a day.

Admit for a moment that protection raises the wages of the laborer, it also raises the price of nearly all the necessaries of life, and what he makes in wages he more than loses in the increase of prices of what he is obliged to buy. As already stated, a head of a family who earns $400 per year is compelled to pay $100 more for what he needs, on account of protection. What difference is it to him whether the $100 are taken out of his wages before they are paid, or taken from him afterward in the increased price of articles he cannot get along without? In both cases he really receives only $300 for his year's labor. The statistics show that the average increased cost of twelve articles most required in daily consumption in 1874 over 1860 was ninety-two per cent., while the average increase of wages of eight artisans, cabinet-makers, coopers, carpenters, painters, shoemakers, tail-ors, tanners, and tinsmiths, was only sixty per cent., demonstrating that the purchasing power of labor had under protection in thirteen years depreciated 19.5 per cent.

But protection has not even raised the nominal wages in most of the unprotected industries. I find that the wages of the farm hand, the day laborer, and the ordinary artisan are in most places now no higher than they were in 1860.

But it is confidently a.s.serted that the wages of laborers in the protected industries are higher because of protection. Admit it. I have not the figures for 1880, but in 1870 there were not 500,000 of them; but of the laborers in other industries there were 12,000,000, exclusive of those in agriculture, who were 6,000,000 more. Why should the wages of the half million be increased beyond their natural rate, while those of the others remain unchanged? More--why should the wages of the 18,000,000 be diminished that those of the half million may be increased? For an increase cannot be made in the wage rate of one cla.s.s without a proportionate decrease in that of others. But the wages of labor in protected industries are not permanently increased by protection. Another very important factor in ascertaining the value of wages is the continuance or the steadiness of the employment. Two dollars a day for half the year is no more than a dollar a day for the whole year. Employment in most protected industries is spasmodic. In the leading industries for the past ten years employment has not averaged more than three fourths of the time, and not at very high wages. Within the last year manufacturers of silk, carpets, nails and many other articles of iron, of various kinds of gla.s.sware and furniture, and coal producers have shut down their works for a part of the time, or reduced the hours of labor. Production has been too great. To stop this and prevent the reduction of profits through increasing compet.i.tion, the first thing done is to diminish the production, thus turning employes out of employment. Wages are diminished or stopped until times are flush again. With the time estimated in which the laborers are not at work, the average rate of wages for the ten years preceding 1880 did not equal the wages in similar industries for the ten years preceding 1860 under a revenue tariff. Indeed, in many branches the wages have not been so high as those received by the pauper labor, so-called, in Europe. But it is manifest that the wages in these industries cannot for any long period be higher than the average rate in the community, for, if the wages be higher, labor will crowd into the employments thus favored until the rate is brought down to the general level. So true is this, that it is admitted by many protectionists that wages are not higher in the protected industries than in others.

Thirdly, the effect of protection is disastrous to most of the protected industries themselves. We have seen that many of them have in recent years been compelled to diminish production. The cause of this is manifest. Production confines them to the American market. The high prices they are compelled to pay for protected materials which enter into the manufacture of their products disable them from going into the foreign market. The profits which they make under the first impulse of protection invite others into the same business. As a result, therefore, more goods are made than the American market can consume. Prices go down to some extent through the compet.i.tion, but rarely under the cost of production, increased, as we have seen, by the enhanced price of material required. The losses threatened by such compet.i.tion are sought to be averted by the diminution of production. Combinations of those interested are formed to stop work or reduce it until the stock on hand has been consumed. Production then begins again and continues until the same necessity calls again for the same remedy. But this remedy is arbitrary, capricious, and unsatisfactory. Some will not enter into the combination at all. Others will secretly violate the agreement from the beginning. Others still, when their surplus stock has been sold, and before the general price has risen, will begin to manufacture again.

There is no power to enforce any bargain they have made, and they find the plan only imperfectly curing the difficulty. They remain uncertain what to do, embarra.s.sed and doubtful as to the future. They have through protection violated the natural laws of supply and demand, and human regulations are powerless to relieve them from the penalty.

Take, as an ill.u.s.tration of the operation of the system, the article of paper. One of the first effects of the general tariff was to increase the price of nearly every thing the manufacturer required to make the paper. Fifteen mil-lions of dollars a year through the protection are taken from the consumer. The manufacturer himself is able to retain but a small part of it, as he is obliged to pay to some other protected industry for its products, they in turn to some others who furnished them with protected articles for their use, and so on to the end. The result is that nominal prices are raised all around; the consumers pay the fifteen millions, while n.o.body receives any substantial benefit, because what one makes in the increased price of his product he loses in the increased price he is obliged to pay for the required products of others. The consumer is the loser, and though compet.i.tion may occasionally reduce prices for him to a reasonable rate, it never to any appreciable extent compensates him for the losses he sustains through the enhanced price which the protective system inevitably causes.

It is not to be disputed that many of the protected manufacturers have grown rich. In very many cases I think it can be demonstrated that their wealth has resulted from some patent which has given them a monopoly in particular branches of manufacturing, or from some other advantage which they have employed exclusively in their business. In such cases they would have prospered without protection as with it. I think there are few, except in the very inception of a manufacturing enterprise, or in abnormal cases growing out of war or destruction of property, or the combinations of large amounts of capital, where protection alone has enriched men. The result is the robbery of the consumer with no ultimate good to most of the protective industries.

At a meeting of the textile manufacturers in Philadelphia the other day, one of the leading men in that interest said: "The fact is that the textile manufacturers of Philadelphia, the centre of the American trade, are fast approaching a crisis, and realize that something must be done, and that soon. Cotton and woollen mills are fast springing up over the South and West, and the prospects are that we will soon lose much of our trade in the coa.r.s.e fabrics by reason of cheap compet.i.tion. The only thing we can do, therefore, is to turn our attention to the higher plane, and endeavor to make goods equal to those imported. We cannot do this now, because we have not a sufficient supply either of the culture which begets designs, or of the skill which manipulates the fibres."

What a commentary this upon protection, which has brought to such a crisis one of the chief industries protected, and which is here confessed to have failed, after twenty years, to enable it to compete even in our own markets with foreign goods of the finer quality! What is true of textile manufacturing is also true of many other industries.

What remedy, then, will afford the American manufacturer relief? Not the one here suggested of increasing the manufacture of goods of finer quality, for, aside from the impracticability of the plan, this will only aggravate the difficulty by adding to the aggregate stock in the home market. * * * The American demand cannot consume what they produce.

They must therefore enlarge their market or stop production. To adopt the latter course is to invite ruin. The market cannot be increased in this country. It must be found in other countries. Foreign markets must be sought. But these cannot be opened as long as we close our markets to their products, with which alone, in most instances, they can buy; in other words, as long as we continue the protective system.

I say, therefore, to the American manufacturer, sooner or later you must choose between the alternatives of ruin or the abandonment of protection. Why hesitate in the decision? Are not Canada and South America and Mexico your natural markets? England now supplies them with almost all the foreign goods they buy. Why should not you? Your coal and iron lie together in the mountain side, and can almost be dropped without carriage into your furnaces; while in England the miners must go thousands of feet under the earth for those products. * * * The situation is yours. Break down your protective barrier. All the world will soon do the same. Their walls will disappear when ours fall. Open every market of the world to your products; give steady employment to your laborers. In a little while you will have the reward which nature always gives to those who obey her laws, and will escape the ruin which many of your most intelligent opera-tors see impending over your industries.

I have not time to-day to more than refer to the ruinous effect of protection upon our carrying trade. In 1856, seventy-five per cent.

of the total value of our imports and exports was carried in American vessels; while in 1879 but seventeen per cent. was carried in such vessels, and in 1880 the proportion was still less. In 1855, 381 s.h.i.+ps and barks were built in the United States, while in 1879 there were only 37. It is a question of very few years at this rate until American vessels and the American flag will disappear from the high seas.

Protection has more than all else to do with the prostration of this trade. It accomplishes this result (1) by enhancing the price of the materials which enter into the construction of vessels, so that our s.h.i.+p-builders cannot compete with foreigners engaged in the same business; (2) by increasing the cost of domestic production so that American manufactured goods cannot profitably be exported; and (3) by disabling our merchants from bringing back on their return trips foreign cargoes in exchange for our products.

Nor will I say any thing as to the increase of the crime of smuggling under protection, a crime which has done incalculable harm to honest dealers, particularly on the border, and a crime out of which some of the largest fortunes in the country have been made.

There are many who will admit the abstract justice of much that I have said who profess to believe that it will not do to disturb the tariff now. But for the protectionist that time never comes. When the depression in business was universal, they said you must not disturb the tariff now, because the times are so hard and there is so much suffering. Now, when business has improved, they say you must not interfere with the tariff, because times are good and you may bring suffering again. When the present tariff was first levied it was defended as a temporary expedient only, required as a necessity by war.

Now that a quarter of a century nearly has pa.s.sed by and peace has been restored for fifteen years, the advocates for protection are as determined to hold on to the government bounty as ever. If they are to be consulted upon the subject as to when the people shall have relief, the system will be perpetual.

It is said we must not disturb the tariff because we must raise so much revenue. I do not propose to disturb it to diminish revenue, but to increase it. The plan I propose will add one fifth at least to the revenue of the country. It is protection I propose to get rid of, not revenue. It has been well said that revenue ceases where protection begins.

It is claimed that by taking away protection you will embarra.s.s many industries by compelling them to close up and discharge their employees.

I do not believe that the changing of the present tariff to a revenue tariff will produce this result. I believe that at once every manufacturer will make more in the diminished cost of production than he will lose in the taking away of protection. But if there should be danger to any industry I would provide against it in the law which changes the tariff so that if there should be any displacement of labor there will be no loss in consequence.

No more perfect ill.u.s.tration of the effect of free trade has been shown than in the history of the United States. Very much of our prosperity is due to the fact that the productions of each State can be sold in every other State without restriction. During the war the most potent argument for the cause of the Union was found in the apprehension that disunion meant restriction of commerce, and particularly the placing of the mouth of the Mississippi River under foreign control. The war was fought, therefore, to maintain free trade, and the victory was the triumph of free trade. The Union every day exhibits the advantages of the system.

Are these due to the accident of a State being a member of that Union or to the beneficent principle of the system itself? What would prevent similar results following if, subject only to the necessities of government, it were extended to Mexico, to Canada, to South America, to the world? In such extension the United States have everything to gain, nothing to lose. This country would soon become the supply house of the world. We will soon have cattle and harvests enough for all nations.

Our cotton is everywhere in demand. It is again king. Its crown has been restored, and in all the markets of the world it waves its royal sceptre. Out of our coal and minerals can be manufactured every thing which human ingenuity can devise. Our gold and silver mines will supply the greater part of the precious metals for the use of the arts and trade.

With the opportunity of unrestricted exchange of these products, how limitless the horizon of our possibilities! Let American adventurousness and genius be free upon the high seas, to go wherever they please and bring back whatever they please, and the oceans will swarm with American sails, and the land will laugh with the plenty within its borders. The trade of Tyre and Sidon, the far extending commerce of the Venetian republic, the wealth-producing traffic of the Netherlands, will be as dreams in contrast with the stupendous reality which American enterprise will develop in our own generation. Through the humanizing influence of the trade thus encouraged, I see nations become the friends of nations, and the causes of war disappear. I see the influence of the great republic in the amelioration of the condition of the poor and the oppressed in every land, and in the moderation of the arbitrariness of power. Upon the wings of free trade will be carried the seeds of free government, to be scattered everywhere to grow and ripen into harvests of free peoples in every nation under the sun.

IX.--FINANCE AND CIVIL SERVICE REFORM.

With the election of 1876 and the inauguration of President Hayes, March 4, 1877, the Period of Reconstruction may be said to have closed. The last formal act of that period was the withdrawal of the national troops from the South by President Hayes soon after his inauguration. During the last two decades the "Southern Question," while it has been occasionally prominent in political discussions,--especially in connection with the Lodge Federal Elections Bill, 1889-91, has, nevertheless, occupied a subordinate place in public interest and attention. As an issue in serious political discussions and party divisions the question has disappeared.

In addition to the subject of the Tariff, considered in the previous section, public attention has been directed chiefly, during the last quarter of a century, to the two great subjects, Finance and Civil Service Reform.

The Financial question has been like that of the Tariff,--it has been almost a constant factor in political controversies since the organization of the Government.

The financial measures of Hamilton were the chief subject of political controversy under our first administration, and they formed the basis of division for the first political parties under the Const.i.tution. The funding of the Revolutionary debt, its payment dollar for dollar without discrimination between the holders of the public securities, the a.s.sumption of the State debts by the National Government, and the establishment of the First United States Bank, these measures of Hamilton were all stoutly combated by his opponents, but they were all carried to a successful conclusion. It was the discussion on the establishment of the First United States Bank that brought from Hamilton and Jefferson their differing constructions of the Const.i.tution. In his argument to Was.h.i.+ngton in favor of the Bank, Hamilton presented his famous theory of implied powers, while Jefferson contended that the Const.i.tution should be strictly construed, and that the "sweeping clause"--"words subsidiary to limited powers"--should not be so construed as to give unlimited powers. Madison and Giles in the House presented notable arguments in support of the Jeffersonian view. For twenty years after 1791 our financial questions were chiefly questions of administration, not of legislation. In 1811 the attempt to recharter the First United States Bank was defeated in the Senate by the casting vote of Vice-President Clinton. The financial embarra.s.sments of the war of 1812, however, led to the establishment, in 1812, of the second United States Bank,--by a law very similar in its provisions to the act creating the First Bank in 1791. The bill chartering the Second United States Bank was signed by Madison, who had strenuously opposed the charter of the First Bank. The financial difficulties in which the war had involved his administration had convinced Madison that such an inst.i.tution as the Bank was a "necessary and proper" means of carrying on the fiscal affairs of the Government. The Second Bank was, however, opposed on const.i.tutional grounds, as the First had been; but in 1819 in the famous case of McCulloch vs. Maryland, the Supreme Court sustained its const.i.tutionality, Chief-Justice Marshall rendering the decision.

The Court held, in this notable decision, that the Federal Government was a government of limited powers, and these powers are not to be transcended; but wherein a power is specifically conferred Congress might exercise a sovereign and unlimited discretion as to the means necessary in carrying that power into operation.

The next important chapter in our financial history is the war upon the Second United States Bank begun and conducted to a finish by President Jackson. A bill rechartering the Bank was pa.s.sed by Congress in 1832, four years before its charter expired. Jackson vetoed this bill, chiefly on const.i.tutional grounds, in the face of Marshall's decision of 1819.

The political literature of Jackson's two administrations is full of the Bank controversy, and this literature contains contributions from Webster, Clay, Calhoun, Benton, and other of the ablest public men of the day. No subject of public discussion in that day more completely absorbed the attention of the people.

On these important subjects, which engaged public attention during the first half-century of our national history, there may be found many valuable speeches. These, however, are largely of a Const.i.tutional character. It has been since the opening of our civil war that our financial discussions have a.s.sumed their greatest interest and importance. We can attempt here only a meagre outline of the financial history of the last thirty years,--a history which suggests an almost continuous financial struggle and debate.

Leaving on one side the questions of taxation and banking, the financial discussion has presented itself under two aspects,--the issue and redemption of Government paper currency, and the Government policy toward silver coinage. The issue, the funding, and the payment of Government bonds have been incidentally connected with these questions.

The first "legal-tender" Act was approved February 25, 1862. Mr. Blaine says of this Act that it was "the most momentous financial step ever taken by Congress," and it was a step concerning which there has ever since been the most p.r.o.nounced difference of opinion. The Act provided for the issue of $150,000,000 non-interest-bearing notes, payable to bearer, in denominations of not less than $5, and legal tender in payment of all debts, public and private, except duties on imports and interest on the public debt. These notes were made exchangeable for 6 per cent. bonds and receivable for loans that might thereafter be made by the Government. Supplementary acts of July 11, 1862, and January 17, 1863, authorized additional issues of $150,000,000 each, in denominations of not less than one dollar, and the time in which to exchange the notes for bonds was limited to July 1, 1863. It was under these Acts that the legal-tender notes known as "greenbacks," now outstanding, were issued.

The retirement of the greenbacks was begun soon after the war. On April 12, 1866, an Act authorized the Secretary of the Treasury to retire and cancel not more than $10,000,000 of these notes within six months of the pa.s.sage of the Act, and $4,000,000 per month thereafter. This policy of contraction was carried out by Secretary McCulloch, who urged still more rapid contraction; but the policy was resisted by a large influence in the country, and on February 4, 1868, an Act of Congress suspending the authority of the Secretary of the Treasury to retire and cancel United States notes, became a law without the signature of the President.