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OUR ECONOMIC PAST

Is There a Speaker in the House? Part I

APRIL 17, 2013 by LAWRENCE W. REED

Garfield and Cockran: Statesmen Who Mastered Money

Editor’s note: This is the first of two parts. The second will be published on FEE.org tomorrow.

Has discourse in the United States Congress sunk to dismal standards? I don’t see how a comparison of today’s Congressional Record with its antecedents in the nineteenth century could lead one to any conclusion but YES. 

My interest in American history often leads me to research congressional proceedings. When I read what members of the House and Senate were saying from the floor a hundred years or more ago, I find myself frequently amazed at the substance and erudition, even in spontaneous remarks without benefit of text. When I read what representatives and senators are saying from the floor these days—or in recent decades—I find myself asking, “What happened to the smart ones?” and “Does anybody here actually have any expertise in some subject matter?”

Not even the insults that “modern” politicians toss at each other evidence the class, depth, or wit they once did. (I admit that in November 2005 when Rep. Marion Berry, D-Ark., referred to a fellow member of the House as “this other Howdy Doody-looking nimrod,” I laughed heartily. That was funny, if not scholarly.)

Congress has always had a few nimrods in the ranks. And surely there must be some truly smart people there now, but I stand by my unscientific, gut-level observation that the place just ain’t what it used to be. I have some thoughts on why that is, but those are for another article.

On one topic—money—former Texas congressman Ron Paul came closest to matching the substance of the best from nineteenth century legislators. You could take what almost all of the rest know about the origin, nature, and history of money, slap it on a bumper sticker, and still have room for the Magna Carta. The conventional representative or senator now rarely asks the right questions and faithfully accepts all the tired clichés and errors about the stuff: It was invented by government or at least must be monopolized by it for the people’s own good. Gold doesn’t work because there’s not enough of it. Printing more paper stimulates the economy. A small group of people at a central bank can manage it because they will know how much we ought to have. The fallacies roll off the tongue like rain from a steep roof. 

All this is prelude to my main purpose, which is to share with you the wisdom and eloquence of two extraordinary congressmen from just a few generations ago. The first, James Abram Garfield of Ohio, became America’s twentieth President in 1881 (I’ve recently written about the oddities in that turn of events here.)  The second, William Bourke Cockran of New York, was regarded by many in his day as one of the finest orators the country ever produced. Let’s focus on them in that order.

In 1868, the Republican Garfield was in the third of his nine terms in the House of Representatives. He was first elected in 1862 while in the army, though he did no more campaigning than to say he would serve if that’s what the voters wanted. He was one of the most capable and learned men Ohio ever sent to Washington. Aside from his distinguished military service, he was an instructor in classical languages, a college president, and a voracious reader. His books filled every room in his home. It was his celebrated “Currency” speech before the House on May 15, 1868, that caught my attention.

Money had been a vexing issue since the start of the Civil War. Both the North and the South suspended specie payments and printed paper money by the boatloads. By war’s end, Confederate notes were worthless and northern “greenbacks” had depreciated by more than 50 percent. Some voices called for a resumption of inflation because they thought it would stimulate the economy or help debtors or both. Garfield despised currency debasement. 

Admitting at the start of his two-hour oration that “financial subjects are dull and uninviting” compared to matters of war and peace, he carried on with this admonition:

To turn from the consideration of armies and navies, victories and defeats to the long array of figures which exhibit the debt, expenditures, taxation, and industry of the nation, requires no little courage and self-denial; but to those questions we must come, and to their solution Congresses, political parties, and all thoughtful citizens must give their best efforts for many years to come. 

 
It’s boring, but necessary. And what consideration lies at the center of it all?
 
Our public debt, the greatest financial fact of this century, stands in the pathway of all parties and, like the Egyptian Sphynx, propounds its riddles. All the questions which spring out of the public debt, such as loans, bonds, tariffs, internal taxation, banking, and currency, present greater difficulties than usually come within the scope of American politics. They cannot be settled by force of numbers nor carried by assault, as an army storms the works of an enemy. Patient examination of facts, careful study of principles which do not always appear on the surface, and which involve the most difficult problems of political economy, are the weapons of this warfare.
 
Garfield noted the explosion of fiat paper money during the Civil War years. He referred to it as “the deluge of Treasury notes poured upon the country” as he cited the precise quantities authorized by Congress and on what dates. These issuances, he asserted, were tantamount to “forced loans” and “taxation” because they resulted in a depreciation suffered by everyone who held them.
 
Garfield was a “hard money” man, but he was smart enough to avoid the ancient confusion that money was synonymous with wealth itself. It was a medium or a middleman, a fact that he illustrated with a clever analogy:
 
As a medium of exchange, money is to all business transactions what ships are to the transportation of merchandise. If a hundred vessels of a given tonnage are just sufficient to carry all the commodities between two ports, any increase of the number of vessels will correspondingly decrease the value of each as an instrument of commerce; any decrease below one hundred will correspondingly increase the value of each. If the number be doubled, each will carry but half its usual freight, [and] will be worth but half its former value for that trade. . . . A hundred vessels can do it all. A thousand can do no more than all.
 
This 36-year-old congressman was self-taught in the subject of money, but he understood its history and economics better than many who study it formally today. The following passage from his speech, though lengthy, is particularly noteworthy for its clarity:
 
When the money of the country is gold and silver, it adapts itself to the fluctuations of business without the aid of legislation. If, at any time, we have more than is needed, the surplus flows off to other countries through the channels of international commerce. If less, the deficiency is supplied through the same channels of international commerce. Thus the monetary equilibrium is maintained. So immense is the trade of the world that the golden streams pouring from California and Australia into the specie circulation are soon absorbed in the great mass and equalized throughout the world, as the waters of all the rivers are spread upon the surface of all the seas.
 
Not so, however, with an inconvertible paper currency. Excepting the specie used in payment of customs and the interest on our public debt, we are cut off from the money currents of the world. Our currency resembles rather the waters of an artificial lake which lie in stagnation or rise to full banks at the caprice of the gatekeeper.
 
Gold and silver abhor depreciated paper money, and will not keep company with it. If our currency be more abundant than business demands, not a dollar of it can go abroad; if deficient, not a dollar of gold will come in to supply the lack. There is no Legislature on earth wise enough to adjust such a currency to the wants of the country.
 
Garfield understood that market forces of supply and demand, framed in part by business conditions, are natural, effective, and superior to political manipulation. When government undertakes to force-feed an economy a diet of fiat paper, prices rise as a reflection of the paper’s depreciating value. He noted that this “inflation” of the money supply robs the typical laborer even more than it does the ranks of the rich, who can often find ways to minimize the consequences by shifting resources overseas or into hard assets. 
 
Garfield grasped the trade cycle effect of monetary inflation, explained so comprehensively by Austrian economists a half century later, when he observed “its effect in producing an unhealthy expansion of business, in stimulating speculation and extravagance and in laying the sure foundation of commercial revulsion and wide-spread ruin.” He cited specific financial panics in the United States and Britain since 1819 and asserted that each was preceded by a “reckless” expansion of money and credit. He even devoted at least fifteen minutes of his speech to chronicling the hyperinflation of the continental dollar during the War for Independence. He related the lessons of monetary history to the challenging economic circumstances America was facing in 1868, a state of affairs that harkens to the term “regime uncertainty” (as coined by historian Robert Higgs to describe the turbulent 1930s):
 
Now, what is our situation? There has been no day since the 25th of February, 1862, when any man could tell what would be the value of our legal-currency dollar the next month or the next day. Since that day we have substituted for a dollar the printed promise of the Government to pay a dollar. That promise we have broken. We have suspended payment, and have by law compelled the citizen to receive dishonored paper in place of money. . . . The currency, not being based upon a foundation of real and certain value, and possessing no element of self-adjustment, depends for its market value on a score of causes. It is a significant and humiliating fact that the businessmen of the nation are in constant dread of Congress. Will Congress increase the currency or contract it? Will new greenbacks be issued with which to take up the bonds; or will new bonds be issued to absorb the greenbacks? Will the national banking system be perpetuated and enlarged, or will it be abolished to enable the General Government to turn banker?
 
The nation’s financial ailments, argued Garfield, stemmed from the federal government’s monetary mischief. The antidote was not more of the very debasement of money that brought on those ailments in the first place. He concluded his speech with these words:
 
For my own part, my course is taken. In view of all the facts of our situation; of all the terrible experiences of the past, both at home and abroad; and of the united testimony of the wisest and bravest statesmen who have lived and labored during the last century, it is my firm conviction that any considerable increase in the volume of our inconvertible paper money will shatter public credit, will paralyze industry and oppress the poor; and that the gradual restoration of our ancient standard of value will lead us, by the safest and surest path, to national prosperity and the steady pursuit of peace.
 
Now that was a two-hour monetary tour de force! Garfield had established himself as man of great knowledge and conviction on some of the burning economic issues of the day. Fast forward fifteen years and we find another man who was of the other party, but was at least as solid and eloquent as Garfield on the imperative of a sound monetary standard. 
 
Tomorrow: The conclusion of “Is There a Speaker in the House? Garfield and Cockran: Statesmen Who Mastered Money."
 

ABOUT

LAWRENCE W. REED

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s. Prior to becoming FEE’s president, he served for 20 years as president of the Mackinac Center for Public Policy in Midland, Michigan. He also taught economics full-time from 1977 to 1984 at Northwood University in Michigan and chaired its department of economics from 1982 to 1984.

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