President Washington's Dilemma, or The Birth of US Capitalism

Capitalism is born and the stage becomes set for an insidious contest among ordinary citizens to accumulate the trappings of material wealth, as a symbol of success and status for other ordinary citizens.  Does this system facilitate the pursuit of happiness?  Or, was it implemented simply to fulfill a numbers game?  You decide.

President George Washington was faced with quite a dilemma.  The new constitution of 1789 was not intended to embody a particular economic theory.  The difficulty was in weighing the advice of his cabinet members, which was at odds.  On the one side was the financial plan of his Secretary of the Treasury, Alexander Hamilton, and on the other the opposition of his Secretary of State, Thomas Jefferson.

Discussed previously and summarized briefly here, Hamilton’s financial plan set forth a banking system structured on the successful British model of capitalism. It specified, among other things, the creation of a central banking system under one supreme National Bank.  This bank was to be in corporation form, chartered under the authority of the new federal government of the US (today seen in the form of the Federal Reserve, headed by Benjamin Bernanke).

Hamilton’s plan conceived a new class of speculative wealth and money-making, endorsed by the full faith and credit of the US government.  Members of Congress, as well as the bankers and speculators, all more or less positioned on the inside, were the earliest plan subscribers and beneficiaries.  By and through its undertaking the new federal government created a system of preference for the so called moneyed class over the remaining classes of society that were not moneyed.

In contrast, Jefferson represented a class of citizens whose prosperity was derived from a farming economy.  As such, he objected strenuously to Hamilton’s plan, since it created an artificial class of wealth with certain inherent privileges to certain of its benefactors, which were not the privileges of all citizens.  As such, it clashed with and violated Jefferson’s ideals, which were in direct conflict.  Specifically, in Jefferson’s opinion, Hamilton’s

system flowed from principles adverse to liberty, and was calculated to undermine and demolish the republic, by creating an influence of his department (i.e.: Treasury, within the executive branch) over members of the legislature (i.e.: Congress).

As Hamilton well knew, the “influence” to which Jefferson was referring, and which Hamilton’s banking system created, was inherently susceptible to corruption, according to the laws of human nature.  In permitting some to hold for life, some hereditary, an influence by patronage or corruption over the popular legislative branch, the free election of the people would be reduced to a minimum.  The government would consequently be narrowed into fewer hands and approximated to a hereditary form.

Economically, according to Jefferson, Hamilton’s plan meant the need for a paradigm shift to restore simple republican principles.  In this context, a traditional, “real” economy had to be restored, where a bushel of wheat was worth whatever a bushel of wheat was worth at the particular time it was brought to market.  This was opposed to a contrived, artificial, futures trading economy of corrupt Wall Street money speculators that Hamilton’s plan created, attracted and nurtured.  Once unleashed, the ominous, dark side of human nature was unfortunately showcased in full display.

And so here was President Washington’s dilemma in full view.  In the end, the president endorsed Hamilton’s plan, based on a balancing of interests.  On the one hand, the idea was that the plan would do the greatest amount of good for the greatest number of people (on the “happiness” scale!).  On the other hand, the plan would invariably cause collateral damage to the system, however small it would likely be portrayed.  Yes, in the end it was simply a numbers game.

As early as July 4, 1792, in the time period immediately preceding Washington’s re-election to a second Presidential term, a proponent of Thomas Jefferson published a provocative article.  A set of rules were set forth “‘for changing a limited republican government into an unlimited hereditary one’, the most important of these being to increase the national debt and establish a bank.”  However, by the time he had his turn as chief executive, and with the popular support to do as he wished, Thomas Jefferson performed an interesting about face.  Although he viewed the national bank as both an unnecessary and corruptive influence, he chose to extend its charter, on the evolving theory, simply, that “the ends be legitimate.”

The stage had thus been set, and would be intensified later by the material progress of the Industrial Revolution, for the US to become the greatest and most wealthy goods producing machine in the world.  Well, one where wars would no longer be fought, at least internally, over God, thanks to the 1^st Amendment’s expression of freedom of religion.  This was the positive aspect.  We know the negative ramifications. And, consider this inevitable clash: When capitalism is intermingled with the principles of Jefferson’s separation of church and state, the new standard of worship for American society is no longer God, but money.

It certainly turned out to be a wise decision --- for empire.  But reducing the Almighty to secondary status would not be without continuing moral consequences.  For a nation which prided its foundation on Christian principles, was it the right decision?  If as it is argued by many that America has lost its way, is the self-interest component which has become so pronounced the primary culprit?  Is the ordinary citizen “happy” that noble virtues like compassion and mercy yield to organized corruption which expresses the moral sickness of a greedy society?

-Michael D’Angelo

Unintended Consequences (Part Two)

(Note: This is the second segment in a two part series. The first segment noted how sometimes our best intentions merely produce unintended consequences. A national law in the 1850s regarding slavery and another in the 1960s concerning immigration did not play out as their proponents had wished. Do current events contain the seeds of future unintended consequences?...)

While ending the immigration-limiting European (i.e. - white) quota system, the Immigration Act of 1965, in reality, had the opposite, unintended effect, opening the floodgates of immigration to other countries, many from the so called “third world” arena which embodied people of color. Today, 1 in 5 immigrants is Mexican, fulfilling a critical need to perform a whole host of new occupations in the proliferating service industries, while 1 in 4 immigrants is Asian. This places today’s era at the apex in terms of immigrants as a percentage of the total US population. The law is consequently understood to be one of the high water marks of late 20th-century American liberalism, although perhaps not what the Great Society liberals had quite intended.

Latin Americans, or Latinos as they are sometimes called, are the fastest growing ethnic group in the US today. Some look to be white, others black. And they are also all shades of color in between. Defying simple generalization, they are mainly identified as, first, Spanish-speaking and, second, Roman Catholic. Today, Latinos make up about 13% of the US population. It is estimated to be fully 50% by the year 2050. Would Congress still have passed the law had it been aware of the consequences?

In the second decade of the 21st century, it is apparent that the intent of the governing class may be far removed from the reality on the ground in at least a couple of instances.

In 2010 the US Supreme Court ruled that corporate funding of independent political broadcasts in candidate elections cannot be limited. The Court reasoned that to limit that spending would violate the 1st amendment of corporations, which it viewed the same way as people under the law. The ruling was a jolt to those who have been battling to curtail the corrupting influence of money in the political system.

Some say the high court’s decision has created an unwelcome new path for wealthy interests to exert corruptive influence on the democratic election process. But as the 2012 presidential election cycle unfolds, the grassroots political small dollar contributions to the candidacy of the populist President Barack Obama continue to pour in. The Obama re-election campaign seems to be having little difficulty in keeping up with the one percenters who would bankroll its defeat. Is this a case of unintended consequences, for reasons which are not yet altogether clear?

Finally, the US Supreme Court will soon decide on the legality of the new 2010 national health care law (more commonly known as Obamacare), whose passage had escaped every American leader tackling the issue dating back more than 100 years. The plain fact is that a significant number of what estimates project to be the 30 million Americans who will be able to obtain health insurance coverage for the first time under the new law are ordinary citizens of color.

Already, seismic tremors can be felt from a potentially adverse ruling from the conservative US Supreme Court, which some say is itching for an excuse to strike down the new healthcare law. An actual adverse decision, however, has the potential to expand the tremors to the magnitude of a political earthquake. Would it be one with unintended consequences?

-Michael D’Angelo