Next time you’re in a window seat in a flight over the center of America, take a look at the landscape below. You’ll see long lines, made by roads and fences and the edges of fields, stretching to the horizon, north and south, east and west, cutting the farmland into little squares. Fly over Europe or Asia, or for that matter most of the eastern United States, and the lines that divide farm from farm curve and meander, tracing the contour of hills and the banks of rivers and streams. This gridding of America has nothing to do with the relative flatness of the Heartland. Rather it is the product of a scientific system for structuring society, developed in the earliest days of the United States.
At the end of the Revolutionary War, America’s citizens found themselves with clear new borders, not only around the 13 states along the Atlantic but extending also around the lands that would later form Ohio, Indiana, Illinois, Michigan, Wisconsin, and northeast Minnesota. These lands, long claimed by France, then for a time by Britain, had been transferred—at least according to European law—to U.S. control by the Treaty of Paris. One of the first acts of the new Continental Congress was to draw a plan to bring these territories into the Union as new states.
Here again we see the hand and mind of Jefferson at work, as he was the person Congress charged with sketching the plan. This made sense in two respects. Jefferson himself had been trained in surveying and cartography by his father, and the citizens of his state of Virginia had recently ceded to the federal government their claim to much of the land that made up these territories. The result, known as the Northwest Ordinance, was revolutionary in many ways, starting with the very surveys themselves. To our ears today the instructions in the act sound like plain common sense. “The plats of the townships … shall be marked by subdivisions into lots of one mile square, or 640 acres … and numbered from 1 to 36 … The lines shall be measured with a chain; shall be plainly marked by chaps on the trees, and exactly described on a plat.”1 But in the mid-1780s this rational process for the transformation of meadows, forests, and hills into largely exchangeable squares of “property” was largely new. And the system of public surveys that Jefferson and his colleagues devised would be emulated around the world.2
The Ordinance was, more importantly, also revolutionary in the ends it sought. The document was the first great positive attempt by the citizens of the new nation to achieve the promise of rough equality made in the Declaration, and to do so according to the revolutionaries’ carefully conceived idea of the citizen. The immediate aim of the authors of the Ordinance was to provide tens of thousands of American families with enough land to raise crops and livestock sufficient to feed themselves, and to trade in nearby markets for the tools, clothing, housewares, and books they required. The result was a decision to provide each family, for a reasonable price, with 160 acres of land, or a “quarter-section” of each of the newly marked-off squares. Thus the revolutionaries would also achieve a yet-more-primary aim—of transforming the men in these families into fully “independent” citizens.
American democracy is full of contradictions, and often they are tragic. Even as men in the cities of the East carefully traced lines across their parchment maps, other men and women and children lived in towns and villages and settlements, farming and hunting these lands that for centuries or more had been their home. Although some of the men in the East felt a vague sense of stewardship over the people already on the land, the system of settlement American leaders put into place also opened the way to the exploitation, displacement, confinement, and murder of many of these people. And the political leaders fully understood this at the time. As Secretary of War Henry Knox wrote in 1794, “our modes of population have been more destructive to the Indian natives than the conduct of the conquerors of Mexico and Peru.”3
This was no mere accident of history. It was not an inevitable collision of peoples with different views of how to organize society and live in the world, and the outcome was not preordained. On the contrary, as the historian Jerry Ostler has compellingly argued, the text of the Ordinance essentially “legalized wars of ‘extirpation’ or ‘extermination,’ terms synonymous with genocide by most definitions.” Although the Ordinance theoretically compels the U.S. government to observe the “utmost good faith … towards the Indians” and promises never to disturb “their property, rights, and liberty,” Ostler notes that the Ordinance also “legalized genocidal war against” the Indians should they “reject” the “gift of civilization.”4 At its very best, American policy, as Richard White writes in The Middle Ground, never aimed at anything more than “amalgamation and imperial benevolence” and at enabling Americans to believe they were acting for the “greatest good” of the Indians even as they “demanded more and more land.” In Aziz Rana’s useful framing, it was a “settler empire” in which the “liberty” of some people depended on the “subordination” of others.5
But the lesson here is not simply that American democracy stands on these graves. The Northwest Ordinance was in fact many projects rolled into one. It was a document of empire—claiming absolute sovereignty over lands, in perpetuity, where other people lived, based on claims the founders knew full well were based ultimately only on might. It was a statement of national defense against the European empires—Britain, France, Spain—then playing for control of these same lands. And it was a desperate fiscal measure to provide a bankrupt government with a pittance of revenue from the sale of these “public” lands.
What we also see in the Ordinance is one of the foundational statements in the establishment of the American System of Liberty. The particular approach America’s first citizens took to distributing these lands amounts to nothing less than a conscious effort to mass manufacture more citizens, through the chopping up of vast stretches of landscape into citizen-sized properties and the subsidization of their sale. The approach pioneered here provided a pattern for how Americans would make and protect liberty and democracy for many generations to come. Indeed, for the next two centuries, in some ways straight to today, this figure, of 160 acres, would prove one of the most important definitions of what it meant to be an independent citizen in America. As the Missouri senator Thomas Hart Benton summarized the goal in 1854, “The freeholder … is the natural supporter of a free government, and it should be the policy of republics to multiply their freeholders as it is the policy of monarchies to multiply tenants.”6
In the specific case of farmland, we see the number 160 return time and again over well more than a century in various plans to “develop” America’s lands. We see it in the Preemption Acts of 1830 and 1841, which aimed to regulate the distribution of land to squatters.7 We see it in the Homestead Act of 1862, which extended the practices of the Northwest Ordinance to as-yet-undeveloped lands west of the Mississippi River. We see it in the Southern Homestead Act of 1866, which aimed to distribute public lands in Florida, Louisiana, Alabama, Mississippi, and Arkansas to formerly enslaved black citizens, and to landless whites who had remained loyal to the Union (this project largely failed during the southern war against Reconstruction).8 We see it in the Timber Culture Act of 1872, the Desert Land Act of 1877, and the Reclamation Act of 1902, all of which tailored these rules to lands not fit for traditional cultivation of grains.9 In all these programs, Congress, in distributing the land—or the water that made the land economically valuable—limited any one family to 160 acres.10
The mid-nineteenth century was also a time when the federal government gave hundreds of thousands of acres to large corporations, especially railroads, to subsidize construction of this vital new infrastructure. Here too the patterns put into place in the Northwest Ordinance helped shape and control these monopoly powers. The Pacific Railroad Act of 1862, for instance, promised to give the corporations that built a railroad to California land the equivalent of 40 farmsteads of 160 acres each for every mile constructed, then structured the deal to encourage the selling of these plots to settlers.11
As recently as 1950 we see this 160-acre limit holding strong. The same year Sam Walton drove through the checkerboard landscape of Arkansas into Bentonville, Congress tried to raise the amount of public irrigation water available to any one farmer in Colorado’s San Luis Valley to enough to work 480 acres. President Harry Truman, who for years had ploughed the soil on small farms in Missouri and who proved to be one of the most democratic-minded presidents in American history, vetoed the bill.12
And the model worked, at least measured by the original aim of keeping America’s farmlands largely in the hands of families. In 1850, America’s farms averaged 203 acres each; in 1860, 199 acres; in 1870, 153 acres.13 During the New Deal of the 1930s, the size of the average farm covered by the Farm Tenant Act was 133 acres.14 Further, this dividing of land into citizen-sized farmsteads would prove a basic model for how to divvy up many other forms of property in America. This included the store that Sam Walton bought in the early 1950s; the idea here being that the business of retail should also be broken into citizen-sized plots much like the business of farming. And this model included most manufacturing or service businesses that were not made radically more efficient by enclosure within the walls of vast, centralized, highly capitalized factories.
In the last chapter we saw how the concept of the individual as a citizen and the identification of a core set of interlocking liberties clarified a line of reasoning about the relationship between the individual and various forms of property. In this chapter, we will look at the institutions America’s new citizens established to create, protect, and develop these various forms of property, in ways that promoted individual liberty. In other words, we will look at how these new citizens set about structuring their new society to achieve their ultimate political, moral, and spiritual ends.
On August 7, 1789, the first Congress elected under the new Constitution enacted the Ordinance as one of the first laws of the new nation. America’s first president, George Washington, soon signed the law into effect.15 Although Americans today have largely forgotten the Northwest Ordinance, for much of our history many citizens celebrated the act as nothing less than “a charter for freedom.”16 Or as the Massachusetts senator George Frisbie Hoar put it at the time of its centennial, “The Ordinance … is one of the three title deeds of American constitutional liberty.”17
In the years before the Revolution, when all power traced back ultimately to the sovereign, many writers in the colonies and Britain defined liberty mainly as an absence of government. The “traditional dogma,” as one historian has put it, held “that freedom meant release from the authority of government.”18
This dogma remains as strong, if not stronger, today. As we’ll discuss in chapter seven, supporters of modern libertarianism have spent a great deal of money promoting the idea that the state should do nothing more than serve as a “night watchman” and, at most, guard against crimes like murder and rape.19
To be sure, at the time of the Revolution many Americans did want mainly to be left alone, to retreat to their homestead, hang a “no trespassing” sign, and rest a long rifle across their knees. Yet the majority of America’s revolutionaries also clearly aimed at something far grander than what the political theorist Philip Pettit calls “the absence of interference” with the individual “by arbitrary powers.”20
As we saw in the previous chapter, the Declaration of Independence created a radical new understanding of who is the state, by establishing that “we” are the state, each citizen holding an equal share of sovereignty. The Declaration also created a radical new understanding of the purpose of the state. In America, the purpose is, ultimately, to protect against all dangerous concentrations of power at home and abroad—be it the great landlord or the British East India Company.
What we see in the Ordinance is a guide to how the founders expected America’s new citizens to use their state. The result is a vision of the state as not merely a sharpened broadax to bring down every so often upon the extraordinarily powerful. Rather, Americans from the first saw their state as a tool they could use to actively structure the character both of their society and of the individuals within it. Indeed, the Ordinance—one of the first expressions of America’s new national Congress—shows in great detail how America’s first citizens consciously and intentionally aimed to use the American System of Liberty to design a particular type of nation and a particular type of citizen.
In addition to the Ordinance’s division of farmland into citizen-sized farms and its distribution of these 160-acre plots to the citizens themselves, this design includes:
Almost simultaneously, citizens used the Constitution also to establish the post office system as a central function of the new state. The most important public infrastructure in U.S. history, the U.S. Postal Service was designed to ensure the rapid and non-discriminatory transmission of information—political, commercial, personal—between citizen and citizen, and community and community, across the vast reaches of the new nation.26
Of vital importance, there are real differences between the American vision of the state and other visions, such as the French system put in place after the revolution of 1789, and these differences are maintained to some extent to this day. Most Americans did not envision a small cadre of trained professionals managing the state for the good of the people but rather a system in which all citizens shared in direct control. And the goal in America was not to determine how a citizen should think through various forms of public indoctrination.
Rather than impose any national curriculum, citizens instead aimed to use the state to distribute and protect the ability of citizens to learn for themselves, to debate among themselves, to make decisions among themselves, and to establish schools within their own communities. The expectation was that future generations of independent citizens would also use the state to develop and protect the systems necessary to birth subsequent generations of independent, well-informed, free-thinking citizens fully able to learn, debate, deliberate, and decide. As one promoter of the Ordinance said at the time, the aim was to distribute property and power in a way that would ensure the United States would be ruled by “an enlightened people.”27
What we see here is a vision of public progress that stands atop a vision of personal progress, both made possible by public action.
Madison today is often held up by libertarians as one of the main believers in a minimal state. In truth, Madison strongly rejected the idea of liberty from government. As one biographer writes, Madison believed that “under a government of consent, properly constructed to prevent domination by faction, freedom could mean the use of power in the public interest.”28 In a 1792 essay Madison belittled the idea that “because the people may betray themselves, they ought to give themselves up, blindfold, to those who have an interest in betraying them.” The American way, he wrote, is to “conclude that the people ought to be enlightened, to be awakened, to be united, that after establishing a government they should watch over it, as well as obey it.”29
In another essay from that same year Madison explained how basing independence on property ownership, as promoted by the Northwest Ordinance, helped citizens to watch over their government. “The class of citizens who provide at once their own food and their own raiment,” he wrote, “may be viewed as the most truly independent and happy. They are more: they are the best basis of public liberty, and the strongest bulwark of public safety. It follows, that the greater the proportion of this class to the whole society, the more free, the more independent, and the more happy must be the society itself.”30
In the eighteenth century and ever since, many Americans have honestly struggled to make sense of what seems like a paradox—that the power of the state is absolute in relation to any one person or group of people, and that the only purpose of this power must be to liberate the individual to rule one’s own self and to take part in ruling one’s own community.
But for many Americans, this paradox was not hard to master, even many generations after the Revolution. Abraham Lincoln, perhaps the most famous child of the Ordinance, at the beginning of the Civil War put it thus: “It is a struggle for maintaining in the world, that form and substance of government, whose leading object is, to elevate the condition of men—to lift artificial weights from all shoulders—to clear the path of laudable pursuit for all—to afford all, an unfettered start, and a fair chance, in the race of life.”31
And a full century after the Ordinance, that most quintessential of American spirits, Walt Whitman, in his book Democratic Vistas, distilled this prime goal of state power into the simplest of statements.
The ultimate job of the American system? To “train communities through all their grades, beginning with individuals and ending there again, to rule themselves.” The reason? To make of each citizen “a separate and complete subject for freedom, worldly thrift and happiness, and for a fair chance for growth.”32
Then repeat.
In March 1776, less than four months before the Declaration, Adam Smith published The Wealth of Nations. The timing was no mere coincidence. Smith’s thinking was deeply shaped by debates in America on how to structure markets and the fight against the East India Company. As one of Smith’s biographers put it, “The American Colonies constitute the experimental evidence of the essential truth of the book, without which many of its leading positions had been little more than theory.”33 Indeed, The Wealth of Nations contains dozens of examples taken from America.
The Wealth of Nations would in turn shape thinking in America to this day. As early as 1790, Thomas Jefferson called it “the best book extant” on economic questions.34
Yet even had Smith never lived, America’s new citizens would have been more than able to make the markets of the new nation work. Contrary to the modern libertarian myth that early America was a paradise of laissez-faire, the writings and actions of the founding generation make amply clear they had learned through close study and direct experience that the market is simply another form of human institution one could use to achieve specific ends.
The basic “economic” purposes of the market were well understood in America long before the Revolution. These were: to organize the efficient exchange of goods, to rely on simple rules of supply and demand to discover a coherent price for these goods, and to make that price public. Americans had also long understood how to achieve these ends. In Britain, protecting the market against monopolizers and other cheats had since the early Middle Ages been one of the main services provided by local authorities and the king.35 In colonial America, in addition to targeting high prices, officials had also long worked to ensure the healthfulness of foods and the cleanliness of the market itself. And they were just as diligent about protecting local sellers against middlemen and other gatekeepers. The American market “could hardly be called ‘free,’” historian William Novak has written. “The urban marketplace was probably the most visible, potent expression of public control over buying and selling.”36
These regulations worked. Indeed, a main complaint of the revolutionaries was that local market systems had broken down due to the war. Abigail Adams, in a letter to husband John, in early 1777 wrote of “a general cry against the merchants, against monopolizers etc. who tis said have created a partial scarcity … not only of luxury, but even the necessaries of life.”37 In Philadelphia a year later, a newspaper published an anonymous warning: “To all FORESTALLERS and RAISERS of the prices of GOODS and PROVISIONS. Take notice that a storm is brewing again[st] you.”38
By the Revolution Americans had also developed a remarkably sophisticated understanding of markets as tools to achieve not merely economic ends but social and political—even moral—ends. In other words, the founders fully understood they could use markets to structure relationships among individuals in ways that would help them build and reinforce the new republican citizen and the new republican nation.
Three ideas especially would come to shape thinking in America about how to structure and use markets:
Markets Can Promote Equality. The Northwest Ordinance contains two key lessons about equality. First and most obvious is the general effort to limit ownership by any one citizen to 160 acres of land. It is almost impossible to imagine a better expression of “equality” than this effort to ensure not only that every citizen is independent but, at least at the starting gate, roughly equally independent. From the point of view of structuring the market itself, also important is the sharp dismissal by the authors of the Ordinance of the idea that any private corporation should govern—or be a powerful player within—the market for the sale of lands. Unlike in the development of such proprietary colonies as Virginia and Pennsylvania, or the Cooperstown region of New York, the citizens who wrote the Ordinance intended there to be no hierarchy between smaller freeholders and a dominant class of corporate masters.
Markets Can Protect the Liberty of Individuals. The most important lesson of the American rebellion against the East India Company is that the individual must have complete liberty to bring one’s properties to market and to exchange them directly with one’s neighbors. This vision of liberty traces, as we saw in the last chapter, straight to the English Parliament’s fights against the monopolies of Queen Elizabeth and King James.39 A key result of such thinking is to view the citizen foremost not as a buyer but as a producer—of crops, products, work, ideas. As a producer, the citizen’s most important interest is the liberty to sell. Over the coming generations, Americans shaped their antimonopoly laws to protect themselves as makers and sellers of things and work in ways that also helped protect themselves as buyers of things and work.
Markets Can Forge Community. This is true most obviously in that markets bring people physically together—to exchange goods. One byproduct is that people also get to talk to one another. Another is that their awareness of their mutual interdependence, one with another, is reinforced. The best depiction of such interdependence is at the beginning of The Wealth of Nations, where Smith uses a description of specialization of labor in a pin factory to illustrate how cooperation within a market system can result in vastly higher levels of production.40
Smith’s immediate political message in this passage is that when people break down barriers to trade, everyone ends up with more material wealth. But Smith also intended to communicate something more, an idea that carried over from his first book, The Theory of Moral Sentiments.41 This is a vision of society as a complex community of highly unique souls, in which markets, even while fostering the independence of the individual, also foster a hive-like interdependence that makes everyone not only more productive and wealthy but more sociable and happy.
From today’s perspective, it’s almost impossible to imagine the depth of the hatred—even terror—many citizens felt toward the business corporation around the time of the Revolution. These fears were due in part to the old stories of Queen Elizabeth and King James using corporate monopolies to reinforce systems of arbitrary rule. They were also due to the very fresh experience of having an intermediary—the East India Company—insert itself between the seller and buyer in America in ways that empowered its executives to regulate the lives of individuals and commerce as a whole.
Far more viscerally terrifying, however, were the reports of what the East India Company had actually done in India, to the Indian people. By the early years of the American Republic, the fantastically destructive effects of the corporation’s complete monopoly control over India’s economy, combined with its mission to extract as much wealth as possible for executives and investors, had been amply detailed.
One of the most damning of all descriptions of the East India Company came in a speech by Edmund Burke, the British parliamentarian and author often credited with framing the basic principles of modern conservatism. A strong believer in constitutional restrictions on power, Burke closely studied the East India Company’s actions in America and in India. In 1783, Burke described what the corporation had done to the regions of India under its direct control.
When the company arrived in India, Burke said, Indian society was prosperous and in good order. “In all the cities were multitudes of merchants and bankers, for all occasions of monied assistance; and on the other hand, the native princes were in condition to obtain credit from them. The manufacturer was paid by the return of commodities … [T]he country was full of … inns and hospitals, where the traveller and the poor were relieved. All ranks of people had their place in the public concern, and their share in the common stock and the common prosperity.”
But, Burke continued, the East India Company introduced a new system. “It was their policy to consider hoards of money as crimes; to regard moderate rents as frauds on the [corporation]; and to view, in the lesser princes, any claim of exemption from more than settled tribute, as an act of rebellion. Accordingly, all the castles were, one after the other, plundered and destroyed. The native princes were expelled; the hospitals fell to ruin; the reservoirs of water went to decay; the merchants, bankers, and manufacturers disappeared; and sterility, indigence, and depopulation, overspread the face of these once flourishing provinces.”42
Adam Smith, in less dramatic language, agreed. From his point of view, the problem was that the corporate structure of the East India Company destroyed all sense of ownership and responsibility, not only in the investors in England but also in the executives working and living in India. The result was absolute power tied to absolute appetite, with no one at any point in this chain of command having any real interest in using the corporation’s power for anything but “plunder.” As Smith described the investors specifically: “No other sovereigns ever were, or, from the nature of things, ever could be, so perfectly indifferent about the happiness or misery of their subjects, the improvement or waste of their dominions, the glory or disgrace of their administration; as, from irresistible moral causes, the greater part of the proprietors of such a mercantile company are, and necessarily must be.”43
Partly in reaction to such stories, Americans in the first years of the new nation created very few corporations—only 33 from 1781 to 1790.44 But they soon realized there was a problem with this approach. The nearly four million people who, by 1790, lived in the 13 new states greatly needed new roads and bridges and factories to connect and build the new nation. Few individuals had sufficient funds to float big projects on their own. And most towns and states had yet to develop any real ability to tax their citizens. As a result, by the first year of Washington’s presidency, Americans had begun to explore new ways to structure corporations, ways that would provide investors with a sufficient sense of protection to convince them to put money into a venture while also providing citizens with assurances that the new corporation would not turn predatory like the East India Company.
What resulted were two different approaches to regulating corporations, only the second of which is remotely like how we manage the task today.
The first approach was simply to require that the state legislature vote to grant a charter before any corporation could begin operations. Citizens used these charters to require that corporations always serve the public interest, through close restrictions on the powers and licenses of the corporations. These included putting limits on the life of each corporation to ensure it would expire once it had served its purpose, be it the building of a bridge or the establishment of a new public service.45
The second approach was to foster competition. By early in the nineteenth century, Americans had begun to give out multiple charters for the same line of business. As the businessman and economist Samuel Blodget Jr., writing in 1806, explained the thinking, “if two baking companies are thereby permitted, bread may be cheaper in consequence; or if there are two banks thus instituted … more of the people will be favored by loans … and a further increase will reduce even the rate of interest.”46
As Americans came to perfect these twin restrictions on the corporation, citizens began to feel comfortable licensing many more corporations to do business. Between 1800 and 1817, citizens approved almost 1,800 new enterprises, with Massachusetts citizens alone creating more than in all of Europe at the time.47
By early in the nineteenth century, however, many Americans had begun to fear that the process of chartering corporations, rather than democratizing the corporation, was instead resulting in the corruption of state legislators.48 As a result, New Yorkers began to experiment with a radical new approach to corporations, one that would ultimately birth the system we know today. The idea was to let entrepreneurs simply launch a new business without any specific legislative approval at all. Investors still had to file for a corporate charter, and their enterprise was still expected to serve the public interest. But in a very American twist, the expectation was that these new corporations would be regulated more by the need to compete against other corporations within a market than by rules built into the charter.
New Yorkers first tried this “freedom to incorporate” model for manufacturing enterprises in 1811. But citizens in other states moved much more slowly. It was not until 1837 that Connecticut adopted a similar model, with New Jersey following in 1846 and Ohio in 1856.49
Indeed, Americans kept sharp restrictions on the corporation in place in almost every state until a full century after the founding. Not until after the Civil War were bankers and executives able finally to almost entirely escape America’s traditional system of strictures on the corporation. They did so by combining the new “rights” theoretically granted by the Fourteenth Amendment to the Constitution with the powers concentrated by new technologies like the railroad and new corporate structures called trusts.
But it’s important not to get too far ahead of ourselves; we will cover the late nineteenth century in the next chapter. What’s important now is to keep in mind that right into the 1870s, the American approach to regulating corporations largely succeeded not only in preventing monopoly but in keeping corporations ultimately under the people’s control.
Ever since the often intense political rivalry between Thomas Jefferson and Alexander Hamilton in the 1790s, many historians have tried to fit these two men into a simple framework, with Hamilton as the brilliant financier who set the United States on firm financial footing and Jefferson as the naïve preacher of a moneyless agrarian idyll. As one recent biographer wrote, Hamilton’s prowess at “monetiz[ing]” the economy made American “society fluid and open to merit, [and made] industry both rewarding and necessary.”50 Jefferson, by contrast, was an “oppositionist” who “codified” a “knee-jerk pattern of response to government policies.”51
It’s certainly true that Jefferson and Madison and other democratic republicans viewed Hamilton and his allies as a threat to all efforts to establish a democracy of rough equality in America. They believed Hamilton intended to use control over America’s banking system not only to concentrate the capital necessary to develop the nation but to concentrate political power and control in his own hands and those of his banker friends and allies.52
There was ample reason for this fear. Fresh in their minds was the “reign of the financier” Robert Morris, the Philadelphia merchant and banker who in the early 1780s dominated federal politics and who was once charged by the Pennsylvania government with being a “pecuniary dictator.”53 Then there were Hamilton’s own schemes while he served in government. This included his complex plan to encourage speculators to buy up debts the government owed to Revolutionary War soldiers, at pennies on the dollar, then arrange for the government to redeem the debts in full. Not only did Hamilton’s plan aim to vastly enrich these few financiers at the direct expense of true patriots, and the public at large, it also aimed to turn these financiers into appendages of government, eager to do favors for those in power so as to protect their properties. To many Americans, Hamilton’s financial system looked much like the corrupt system of patronage and use of banking power perfected in Britain by Robert Walpole in the early eighteenth century.54
As Madison described Hamilton’s plan to Jefferson in 1791, “the stock-jobbers will become the praetorian band of the Government, at once its tool and its tyrant; bribed by its largesses, and overawing it by clamors and combinations.”55 Writing years later, Jefferson adopted a tone only slightly less outraged. “Hamilton’s financial system,” he wrote, “had two objects, 1st, as a puzzle, to exclude popular understanding and inquiry; 2nd, as a machine for the corruption of the legislature.”56
In the event, the democratic republicans responded not by seeking to tamp down or restrain the business of banking but by working with allies in individual states to promote a radical democratization and decentralization of the business of banking. Their basic idea was that the more banks and bankers there were, and the more widely they and their capital were spread across the states, the harder it would be for any one banker or group of bankers in New York or Philadelphia to concentrate real power. Further, the democratic republicans believed that more banks would mean more money available to more people to build new farms and businesses. In all, Americans established at least 25 private banks between 1790 and 1800, 62 between 1801 and 1811, and a total of more than 300 banks by 1820.57
The one type of bank America’s democratic republicans did not want to see was a federally chartered bank. Many believed the federal government lacked the capacity to guard against the use of such a bank to corrupt members of Congress and state legislators in ways that would concentrate dangerous amounts of power.
In the early 1830s this thinking resulted in a decision by President Andrew Jackson to oppose renewal of the federal charter for the Second Bank of the United States, run by the Philadelphia financier Nicholas Biddle. In theory, Biddle’s bank was supposed to serve as a sort of privately run “central bank” able to regulate money supply and interest rates across the United States. But Jackson and others believed Biddle had figured out how to distribute credit in ways that corrupted policymakers and centralized power much in the tradition of Hamilton a generation earlier.
The Jackson administration ultimately prevailed in what came to be known as the Bank War. But victory came at a huge cost. During the fight the administration found itself opposed by a wide variety of powerful men who feared Biddle’s power or sought to curry his favor. Then Biddle responded to his loss by pulling back credit from across the country, helping trigger a devastating economic crash in 1834, which in turn contributed to the great Panic of 1837, perhaps the worst depression in American history until the 1930s.58 One victim of this depression was the highly progressive administration of President Martin Van Buren, who had served one term as Jackson’s vice president and who moved into the White House just as the panic took hold.
Even years later, in a history of American political parties he published in 1867, Van Buren’s rage at the bankers was palpable. Hamilton “established the money power on precisely the same foundations upon which it had been raised in England,” Van Buren wrote. “A party adhering inflexibly to the leading principle of that school … survived his own overthrow, is still in existence, and will continue to exist as long as ours remains a free Government, and as long as the characters and dispositions of men remain what they are. To combat the democratic spirit of the country was the object of its original establishment, an object which it has pursued with unflagging diligence.”59
It was not until early in the twentieth century, during the administration of Woodrow Wilson, that the American people would again attempt to create a central bank, and then only when they believed they had designed a framework of federal regulation able to prevent any sort of favoritism or concentration of personal power and had built an executive branch strong enough and smart enough to do so.
America’s revolutionaries may have aimed to create a new society, even a new type of individual. Yet these utopians were also extreme cynics with a very dark view of the rivalry and selfishness that governed human behavior even at moments of deadly threat. This cynicism was the product of their own experiences in America’s Revolutionary War, when the new government had to fight avarice and sloth and cowardice to feed, clothe, and arm soldiers even as they froze in the field.
As Madison put it in The Federalist Papers, “the nature of man” has “rendered them much more disposed to vex and oppress each other than to co-operate for their common good.” Madison’s views did not mellow with age. Near the end of his life he wrote, “Man is known to be a selfish, as well as a social being. Respect for character, though often a salutary restraint, is but too often overruled by other motives … We all know that conscience is not a sufficient safeguard; and besides, that conscience itself may be deluded.”60
In the words of one of Thomas Paine’s biographers, the revolutionaries “worked from the idea that the driving force behind every political development, the key determinant of every political controversy, is power. Power was understood as the exercise of dominion by some men over the lives of others, and it was seen as a permanent temptation in human affairs.”61
Hence, what we see in the new citizens’ careful thinking about how to use markets, corporations, banks, and the state is an effort to structure these human institutions in ways that would allow them to better direct and deflect economic and political power, or in other words the competition that is inevitable in all human society, in ways that would enable them actually to achieve their utopian vision.
The first step was to greatly strengthen the federal government.
The last key piece of the system America’s new citizens put into place to build and protect their new society was a full-blown institutional structure to engineer competition at all levels of society, between individual and individual, and group and group, to ensure that power in the new nation would always be subject to rule of law and never to that of man. This was of course the Constitution, with its careful system of checks and balances.62
The immediate goal of the Constitution was to concentrate more power in the federal government. Despite the Ordinance’s great positive statement of democratic purpose, fully realized, the first national government of the United States lacked the strength to enforce the vision Congress had sketched on the parchment map, and also lacked the strength to protect the nation from foreign threats. But concentrating more power in the federal government immediately raised another equally pressing question, which was how to protect the individual and the public as a whole from the power vested in this new state.
Americans did not invent the idea of checks and balances. Nearly a half century before the Constitutional Convention, the Scottish Enlightenment philosopher David Hume wrote that political thinkers had long since “established it as a maxim” that in “fixing the several checks and controls of the constitution, every man ought to be supposed a knave, and to have no other end, in all his actions, than private interest.”63 What Americans did introduce was the idea that the Constitution could be, in its entirety, structured as an antimonopoly document.
As every American schoolchild is supposed to be taught, this first generation of citizens carefully divided the power of the state into different branches of government and different houses of legislature. As we sometimes forget, the citizens also carefully engineered rivalry between their state governments and the federal government by intentionally overlapping the responsibilities of these two sovereigns. Doing so provided yet another check, in the form of the ability to—at any moment, for any reason—use the state governments to address dangerous concentrations of power within the federal government or vice versa.
What is most important for our purposes, and yet what is all-too-seldom remembered in America today, is that these first citizens viewed the Constitution itself as their most complete statement of intent to break all dangerous concentrations of power everywhere.
Over the years, many have focused on the fact that the framers did not write an express prohibition of monopoly. The intent of such an argument is to be able to declare that since the framers never put real federal limits on the power of the banker and trader, Americans today should also refrain from doing so. This theory is often based on a 1787 letter Jefferson sent to Madison, in which he famously proposed a “restriction against monopolies” in the Bill of Rights. As recently as June 2019, the head of the Antitrust Division in the Justice Department, Makan Delrahim, made exactly this argument.64
Yet it is clear that America’s first citizens believed the Constitution applied not merely to the political system but applied to the political economy as well. We see this in Madison’s statement in “Federalist 10” that the “first object of government” must be “the protection of different and unequal faculties of acquiring property.”65 It is also clear these citizens thought very much about monopoly, not least in their conscious—and at the time, somewhat contentious—establishment of two distinct types of monopoly. One was a system of patents and copyrights to protect the individual innovator from the power of the banker and trader. The other, as noted above, was the post office network, to ensure the inexpensive and neutral transmission of information—especially news—to all corners of the new nation.
A far better guide to what these citizens actually expected their new Constitution to accomplish lies in Madison’s reply to Jefferson’s interest in writing an antimonopoly clause into the Bill of Rights. Madison agreed that monopolies are “among the greatest nuisances.” But he also made clear he believed the Constitution already provided ample protections against private concentrations of power. “Monopolies are sacrifices of the many to the few … Where the power, as with us, is in the many,” the “danger cannot be very great that the few will be thus favored.”66 Jefferson soon agreed that no antimonopoly provision was necessary. Perhaps just as important is the fact that the participants in the Constitutional Convention repeatedly rejected—“by a great majority”—proposals to endow the U.S. government with the power to grant corporate charters.67
In short, these first citizens believed the Constitution—with its intricate systems for the breaking of political power—provided ample protection against economic monopoly. Further, they believed the Constitution was more than supple enough to allow citizens to adapt it to meet any conceivable economic threat or opportunity that might arise.68
In the end, America’s first citizens did more than simply engineer the most sophisticated mechanism in human history for distributing political and economic power. They also birthed a mature, and revolutionary, theory of competition within society, based on the belief that rivalry among individuals could be directed in ways that would ensure that such competition was constructive and not destructive in nature. And they established a set of principles to guide the engineering of this competition not only within government but in every place within society, at every moment.
As Madison explained in The Federalist Papers, the goal must be to trace the “policy of supplying, by opposite and rival interests, the defect of better motives … through the whole system of human affairs, private as well as public.”69
And so Americans entered the nineteenth century armed with a System of Liberty designed not only to protect the individual against all concentrations of power but to empower individuals to think and act and make and build a new world.
And so they did. All the energy of self-interest in the individual, boxed like coal fire under a boiler by these carefully wrought institutions, now powered a period of phenomenal innovation and building by America’s new citizens. In recent decades, the world has witnessed many instances of extreme material growth, in Europe after the Second World War, in Asia more recently. Yet never has the world seen anything quite like the explosion of energy in America in the first half of the nineteenth century.
We see this not only in the invention of new technologies and products, which included the steamboat, fire hydrant, wire cable suspension bridge, sewing machine, combine harvester, steam shovel, vulcanized rubber, circular saw, rotary printing press, Columbiad cannon, escalator, repeating rifle, safety elevator, electrical telegraph, and lightbulb. As profoundly important were the new methods of manufacturing that Americans developed. Jefferson in a 1785 letter introduced the concept of “interchangeable parts,” which means that the gears designed for one particular watch on an assembly line will fit every other watch on that line. This concept, after being perfected by the Springfield Armory for the process of manufacturing rifles, came to provide the technological basis for American mass manufacturing and for much of America’s material prosperity. Whereas European systems of production aimed largely to serve aristocrats, this new American system of production generally aimed to serve all individuals in the nation.70
By the 1830s European travelers had begun to depict American enterprise in tones approaching awe. The French writer Alexis de Tocqueville, the most famous of these observers, wrote, “In the United States the greatest undertakings and speculations are executed without difficulty, because the whole population is engaged in productive industry … The consequence is that a stranger is constantly amazed by the immense public works executed by a nation which contains, so to speak, no rich men.” Americans, he went on, “have joined the Hudson to the Mississippi, and made the Atlantic Ocean communicate with the Gulf of Mexico, across a continent of more than five hundred leagues in extent … But what most astonishes me in the United States is not so much the marvelous grandeur of some undertakings, as the innumerable multitude of small ones.”71
Americans themselves increasingly celebrated the competitive nature of their new society and even fostered it. Elkanah Watson, the inventor of the country fair, in 1820 wrote that he had introduced prizes for livestock and crops in order to spur “envy” and “competition.” The way to a good society, he opined, was through “a general strife.”72
But the America of these years was not only or even mainly a world defined by individual rapacity and selfishness. Americans also created a fantastic array of entirely new communities that tied individuals together in new ways and toward new ends. As the historian Gordon Wood writes: “Newly independent American men and women came together to form hundreds and thousands of new voluntary associations expressive of a wide array of benevolent goals—mechanics’ societies, humane societies, societies for the prevention of pauperism, orphans asylums, missionary societies, marine societies, tract societies, Bible societies, temperance associations, Sabbatarian groups, peace societies, societies for the suppression of vice and immorality, societies for the relief of poor widows, societies for the promotion of industry, indeed societies for just about anything and everything that was good and humanitarian.”73
The result, Wood concludes, was “the most liberal, the most democratic, the most commercially minded, and the most modern people in the world.”74
But America was of course also a nation of slavery. And these innovative energies were also applied to many of the economic systems of the South. This includes Eli Whitney’s cotton gin, patented in 1794. By making it much easier to separate cotton seeds from cotton fiber, the gin cleared the way to growing and exporting vastly greater crops of cotton. The result, by the 1830s, was an international system of manufacturing and trade, centered in Britain and largely controlled by British bankers and merchants, that rested ultimately on the backs of the enslaved people and tenants in America who grew and picked that cotton.75 Although the democratic republicans in Washington may have been able to break the power of Nicholas Biddle’s Philadelphia bank, they had no hope of mastering an international system of finance that was based on the other side of the Atlantic, in London.
Then there were the social and economic effects of the Panic of 1837. Much like the Great Depression of the 1930s and the financial crisis of 2007–2008, this collapse hit poor and middle-class Americans much harder than the rich, and in many cases helped the already well-off to further concentrate control, as planters and other land monopolists drove bankrupt citizens off their farms, especially in the South.76
By the 1830s, the planters who controlled politics in the South had also begun to perfect an entirely new governing philosophy. This philosophy, centered on the use of racist theories to justify the grotesque subjugation and enslavement of human being by human being, was openly and absolutely opposed not only to the institutions of the founders but to their most fundamental principles.
We will look at the intersection of power and race in more depth in later chapters. For our purposes here, an infamous speech by Alexander H. Stephens, the vice president of the new Confederacy, in Savannah, on March 21, 1861, serves to capture just how far the lords of the South had strayed from the goals of America’s founders.
“The prevailing ideas entertained by [Jefferson] and most of the leading statesmen at the time of the formation of the old Constitution, were that the enslavement of the African was in violation of the laws of nature; that it was wrong in principle, socially, morally and politically,” Stephens said. “It was an evil they knew not well how to deal with, but the general opinion of the men of that day was that, somehow or other, in the order of Providence, the institution would be evanescent and pass away … Those ideas, however, were fundamentally wrong. They rested upon the assumption of the equality of the races … Our new government is founded upon exactly the opposite idea, its foundations are laid, its corner-stone rests upon the great truth that the Negro is not equal to the white man. That slavery—subordination to the superior race—is his natural and normal condition. This, our new government, is the first in the history of the world based upon this great physical and moral truth.”77
The structure of private monopoly power—in the nation, around the world—was made clear in January 1861, before Confederate soldiers fired the first cannon at Fort Sumter. Abraham Lincoln had been elected president, and South Carolina had announced its plans to secede from the Union. New York City mayor Fernando Wood proposed that Manhattan, Long Island, and Staten Island also secede to protect the ties between Wall Street’s bankers and the slave system. “The profits, luxuries, the necessities—nay, even the physical existence of” New York, Wood said, “depend upon continuance of slave labor and the prosperity of the slave master.”
Wood asked New York’s Common Council to declare the city “independent” so it could “make common cause with the south.” The Council approved the plan and—for a time—prohibited the passage of federal troops through the city.78
America’s democratic republican citizens understood fully the power they had to break. As the abolitionist senator from Massachusetts Charles Sumner put it, the “Money Power has joined hands with the Slave Power. Selfish, grasping, subtle, tyrannical, like its ally, it will not brook opposition. It claims the Commonwealth as its own and too successfully enlists in its support that needy talent and easy virtue which are needed to maintain its sway.”79
America’s democratic republican citizens also understood exactly the idea they had to reestablish. It was that son of free-soil Illinois, Abraham Lincoln, who expressed this challenge most simply. “We all declare for liberty; but in using the same word we do not all mean the same thing. With some the word liberty may mean for each man to do as he pleases with himself, and the product of his labor; while with others the same word may mean for some men to do as they please with other men, and the product of other men’s labor.”80
The fight, in 1861 as in 1776, was to establish liberty from all masters, everywhere.
When the fight was finally joined, the principles and institutions of the founders had created exactly the sort of citizen necessary for the moment, exactly the sort of citizen originally intended. Opposition to slavery in America traces almost to the first days of the first colonies. But it was the Declaration, with its simple statement of equality, that created a gnawing pressure that worked on the souls and minds of early citizens. As Americans struggled to create all sorts of new “properties,” the hypocrisy of defending property in man grew only more odious.
Nowhere did this spirit play a bigger role than in states established under the Northwest Ordinance. In addition to providing a model for dividing properties into citizen-sized plots, the act did something equally revolutionary in fencing slavery out.81 As the constitutional scholar Akhil Reed Amar has written, the Ordinance “structured a footrace between free-soilers hoping to move into the Northwest and slave owners aiming to carry their property and culture into the southwest.”82 Many, including Lincoln’s own family, came from the South in search of a land without slavery.83
By the 1840s these new states had become the center of the antislavery movement, the home of the Liberty Party, and of Van Buren’s Free Soil Party, and of the new Republican Party. To some degree, the opposition to slavery was simple self-interest. When white men came to understand slavery was not dying, and indeed that the planters had captured control of the Democratic Party, in the words of W. E. B. Du Bois they “came to oppose slavery not so much from moral as from the economic fear of being reduced by competition to the level of slaves.”84
Yet we also see in these years a reawakening to the full nature of American citizenship. In 1837, on the fiftieth anniversary of the Northwest Ordinance, Ohio citizens had celebrated “Those truly excellent laws of Congress, [which] furnished a perfect mould for well proportioned republicans.”85
And indeed, what we see here is a largely conscious fight against racism by people who fully understood that the planters were wielding race as a tool to break democracy. In his 1855 version of his autobiography, Frederick Douglass sought to unify all Americans in rebellion against both planter and banker. “The difference between the white slave, and the black slave, is this: the latter belongs to one slaveholder, and the former belongs to all the slaveholders, collectively,” Douglass wrote. “The white slave has taken from him, by indirection, what the black slave has taken from him, directly, and without ceremony. Both are plundered, and by the same plunderers.”86
Pennsylvania congressman Thaddeus Stevens, a leading abolitionist, made sure to clarify that the Civil War was a fight for equal rights for all. “This is not a white man’s Government,” Stevens said in a speech. “To say so is political blasphemy, for it violates the fundamental principles of our gospel of liberty. This is Man’s Government, the Government of all men alike; not that all men will have equal power and sway within it. Accidental circumstances, natural and acquired endowment and ability, will vary their fortunes. But equal rights to all the privileges of the Government is innate in every immortal being, no matter what the shape or color of the tabernacle which it inhabits.”87
When the southern states seceded, America’s citizens, four generations after the founding, faced their greatest test. The result, over the course of the Civil War, was that nearly a million free men would march south from the citizen-sized farms of the old Northwest.88 During these same years, the promise of equality and liberty in a land without slavery sapped the South of vast reserves of men and money, as entire regions of many southern states seceded from the Confederacy. In some instances these regions remained loyal to the Union. In other cases, soldiers simply went home, as tens of thousands of men refused to fight for the liberty of the planter.89
One of our best witnesses to how the idea of liberty worked on the minds of Americans during this struggle is again Whitman, who served both as journalist and nurse during the war. “Probably no future age can know, but I well know, how the gist of this fiercest and most resolute of the world’s warlike contentions resided exclusively in the unnamed, unknown rank and file; and how the brunt of its labor of death was, to all essential purposes, volunteer’d. The People, of their own choice, fighting, dying for their own idea, insolently attack’d by the secession-slave-power, and its very existence imperil’d.”90
But the Civil War was, of course, not merely or even mainly a white man’s fight. It was also a fight in which black men and black women set themselves free and made themselves into full American citizens.
Before the war, no one did more than Douglass to foster the idea that slaves must become full citizens, no different than any other citizen. As we saw in the last chapter, Douglass rejected the argument that the Constitution was a pro-slavery document. Douglass also made clear that the goal of black citizens must be full economic independence in the form of land, education, and rule of law; that black citizens must have the same power of the vote as white, and that the original “great principles” of America were his principles.91
But Douglass made clear he did not believe reason alone, prayer alone, simple willingness to live peacefully as a citizen on a farm or with a store alone were sufficient to break the power of the planters. He also understood that both the freeman and slave had to fight.
Just before his friend John Brown’s raid on Harpers Ferry, Douglass wrote an editorial titled “The Ballot and the Bullet.” The idea that the international system of slavery could be overthrown without war was “nonsense,” he said. The winning of “hearts and consciences” was a necessary first step. But “truth to be efficient must be uttered in action as well as in speech.”92
In the coming few years no one proved more energetic or creative than Douglass in shaping and defining the purposes of the war, in filling the ranks of the army with freemen and enslaved people who had escaped, in demanding equal pay for these men, in asserting their citizenship.
Once a black man could “get upon his person the brass letters U.S.…, an eagle on his button, and a musket on his shoulder, and bullets in his pocket, there is no power on earth … which can deny that he has earned the right of citizenship in the United States,” Douglass said in an 1863 speech.93
The result? As this most masterful maker of new citizens would put it years later, “When the recruiting officers … were going up and down the street begging for men to enlist, when the cause of the Union hung in the balance, when foreign powers were ready to recognize the South, the negro with arms of iron and fingers of steel, grasped the Union cause and held it together!”94
Thus citizens of all races and backgrounds combined to break the last relic of feudal monopoly outlaw power in America. Thus they joined to complete the full promise of 1776.
And yet, within but a few years, the greatest battles of the war began to tarnish beneath the failure of the American people to deliver to the black man precisely what it had promised to the white man in year one of the new nation: land. Although Congress moved swiftly to pass a special Homestead Act to distribute public lands in five southern states to the freed people of the South, neither the Johnson nor the Grant administrations enforced the law. Nor did Congress or the executive branch ever move to effectively break apart and redistribute the lands engrossed by the slaveholders in Virginia, the Carolinas, or Georgia.
A century later, Martin Luther King Jr. spoke of what resulted. “In 1863 the Negro was given abstract freedom expressed in luminous rhetoric. But in an agrarian economy he was given no land to make liberation concrete. After the war the government granted white settlers, without cost, millions of acres of land in the West, thus providing America’s new white peasants from Europe with an economic floor. But at the same time its oldest peasantry, the Negro, was denied everything but a legal status he could not use, could not consolidate, could not even defend.”95
Du Bois, in Black Reconstruction, cut even more swiftly to what it meant to be liberated and then left without any real property. “The slave went free, stood a brief moment in the sun, then moved back again towards slavery.”96