Samuel J. (Samuel Jones) Tilden.

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money. It is not a convulsion, but a partial paralysis. There
is nothing of what is called a pressure for money, there is
no panic ; but a fear to lend except on certain security, and
a timidity in borrowing for new undertakings by most persons
of prudence or credit.

It is to be hoped that, amid these evils, the germs of a better

future are springing up, to renew in their origin

the elements of individual and social prosperity ;

but in the mean time attention is naturallv drawn to the causes


of a state of things which inflicts so much distress. Such
seasons have recurred at intervals in the experience of this and
other countries. They have usually been produced through
the destruction of large masses of capital by wars, revolutions,
conflagrations, or failures of crops, or by a temporary mania
for bad investments, or by violent reactions of credit. The
known facts of our recent business history leave no doubt as
to the origin of the state of things we are now experiencing.

Eleven years ago our country emerged from a vast civil
conflict, in which its aggregate wealth had been

*'*' * * TTT A f m

v\ aste of nation-
impaired to the extent 01 probably two thousand ai capital by

iv j n v .1 excessive govern-

miihons oi dollars by a governmental consump- mental con-
tion exceeding the whole net income of the
people; to say nothing of the destruction of property, indus-
tries, and productive capacities incident to military operations.
Never was it more necessary that peace should bring healing
on its wings.

To replace the capital destroyed, to restore the elements of
future natural growth, should have been the object of our
policy. A prompt reduction of the enormous governmental
expenditure was the first condition. A renewal of the indus-
tries of the great communities of the South, which produce
so large a share of our exports and raw material, was of great
importance. Energy, skill, and economy in production, and
frugality in private consumption, the wise conduct of business,
and a judicious application of capital and labor were essential.
These chief elements of private prosperity were dependent
upon public conditions. They were to be promoted by sound
government finance, by good methods of revenue, not un-
duly swelling the cost of the taxes to those who pay them
beyond their produce to the Treasury ; by a discreet manage-
ment of our vast fiscal operations and of the currency and
of the banking system ; by a sober and stable governmental
policy, not stimulating to speculative adventures, not incit-
ing miscalculations in business, not enhancing charges for
services and risks in commercial transactions.


How completely these conditions have been reversed during
the eleven years since the war, appears in a retrospect of the
actual events of that period.

The extravagance of our governmental consumption is illus-
Present scale of trated by a comparison of the public expenditures

governmental ex- ^/\

penditure. of 1870 five years alter the close of the war

with those of 1860 and 1850.


1850. 1860. 1870.

Gold. Gold. Currency.

Federal $40,000,000 $60,010,112 $450,000,000

State, county, city, and town . . . 43,000,000 94,186,746 280,591,521

$83,000,000 $154,196,858 $730,591,521

Population 23,191,876 31,443,321 38,558,371


Federal $1.72 $1.91 $11.67

Local 1.85 2.99 7.24

$3.57 $4.90 $18.91

The aggregate Federal taxation of the eleven years now
Aggregate taxa- closing, computed in currency from the official

tion^of eleven statements> ig more than $4,500,000,000. The

local taxation, assuming the census statement for 1870 as an
average, is more than 83,000,000,000. The aggregate taxation
exceeds 87,500,000,000.

The daily wants of the masses of mankind, even in the most
its relation to productive and prosperous countries, press closely
upon their daily earnings. It is only a small por-
tion of their current income which they are able to save and
to accumulate. In Great Britain and Ireland, despite the
wealth which their people have long been storing up, espe-
cially in machinery and moneyed capital, despite the yearly
influx of one hundred and fifty millions of dollars from in-
terest on investments in other countries, the annual growth
of wealth from the savings of all their people is not deemed


by the best authorities to exceed six or seven hundred million

The accumulated wealth of the United States is the result of
a shorter period of growth, and is less in amount. We have to
pay to foreign creditors annually, in coin, more than a hundred
million dollars. We are richer in the natural powers of the
soil, and our labor is, on the whole, more efficient. We earn
more, but have less disposition to save, and less of the habit
of saving.

A governmental consumption in every year, in bad as well
as good years, must be considered greatly exces- Such consumption
sive when it amounts to a share of the national s reatl > r excessive.
earnings larger than the whole people are able to save in pros-
perous times for all new investments ; for erecting dwellings
and other buildings ; for improving farms, increasing the stock
of live animals and of agricultural implements ; for all manu-
facturing and mechanical constructions and machinery ; for
all warehouses and stores, and increased supplies of merchan-
dise ; for ships, and steamers, and telegraphs, and railroads,
and their equipments ; for all objects which individual and
corporate enterprise provide for the future in the progress of
a populous and rapidly growing community.

Such taxation is in itself a monstrous evil, and its incidents
aggravate its direct injuries. When the exaction

Incidental evils.

from the people was, as in 1860, one quarter 01
its present amount per head, even if it were unscientific and
unskilful in the levy, the mischief was comparatively inconsid-
erable. But with the quadruplication of the exaction, the
difficulty of obtaining good methods of imposing it is greatly
increased, and the mischiefs of bad methods become well nigh

When governments take from the people for official expendi-
ture nearly all the surplus earnings of individuals, science and
skill in the art of taxation become necessary, necessary to
preserve and enlarge the revenue, necessary to gild the infliction
to the taxpayers. Our present situation is that we have more


than European burdens, as seen in the most costly governments
of the richest of modern nations supporting immense navies
and armies and public debts ; and to these burdens we have
conjoined an ignorance and incompetency in dealing with them
which is peculiarly our own. We have not yet acquired the
arts belonging to a system which the founders of American
government warned us against, and fondly believed would never
exist in this country.

The consequence is that the pecuniary sacrifices of the people
Sacrifice caused are not to be measured by the receipts into the

by unskilful

modes of taxation, treasury. I hey are vastly greater. A tax that
starts in its career by disturbing the natural courses of private
industry and impairing the productive power of labor, and then
comes to the consumer distended by profits of successive inter-
mediaries and by insurance against the risks of a fickle or
uncertain governmental policy and of a fluctuating govern-
mental standard of value, blights human well-being at every
step. When it reaches the hapless child of toil who buys his
bread by the single loaf and his fuel by the basket, it devours
his earnings and inflicts starvation.

Another evil of such a system of excessive taxation is that
A governmental it creates and nourishes a governmental class
sumers. with tendencies to lessen services and to enlarge

compensation, to multiply retainers, to invent jobs and foster
all forms of expenditure, tendencies unrestrained by the watch-
ful eye and firm hand of personal interest, which alone enable
private business to be carried on successfully. In other coun-
tries such a class has found itself able, sometimes by its own
influence, and sometimes in alliance with the army, to rule the
unorganized masses. In our country it has become a great
power, acting on the elections by all the methods of organi-
zation, of propagating opinion, of influence, and of corruption.
The system, like every living thing, struggles to perpetuate its
own existence.

Every useful and necessary governmental service at a proper
cost is productive labor. Every excess beyond that, so far as


it is saved by the official, merely transfers to him what belongs
to the people. So far as such excess is consumed, it is a waste
of capital as absolute as if wheat of equal value were destroyed
by fire, or gold were sunk in the ocean.

Probably such waste by governmental expenditure in the
eleven years since the war amounts to, at least, ^ r

J VV aste larger than

as much as our present national debt. national debt.

It cannot be doubted that the systematic and extreme mis-
government imposed on the States of the South M i sffovernment in
has greatly detracted from our national pros- the ^ outh -
perity. In those impoverished communities it has not stopped
with the ordinary effects of ignorant and dishonest administra-
tion. It has inflicted upon them enormous issues of fraudulent
bonds, the scanty avails of which were wasted or stolen, and
the existence of which is a public discredit, tending to bank-
ruptcy or repudiation. Its taxes, generally oppressive, in some
instances have confiscated the entire income of property, and
totally destroyed the marketable value.

In a region five times as large as the British Isles and three
times as large as France, abounding in all the

Its effects.

elements of natural wealth, it has destroyed con-
fidence and credit in all transactions, diffused uncertainty and
distrust everywhere, and consumed existing capital, while re-
tarding production and paralyzing the enterprise by which such
waste might be repaired and future growth assured.

This system, after its character became known to us as well
as to those directly affected, abhorred by all the How it is main .
intellect and virtue of the communities in which tai]
it exists, and by their public opinion, has been maintained
through long years by the favor and patronage of the Federal
Government, by the moral coercion of its prestige, by the
standing menace and occasional exercise of its military power.

It is impossible that such wrongs should not react upon us.
The immediate sufferers by it are the producers In j ury to our own
of four tenths of the exported commodities, ex- pr '
eluding specie, of our whole forty millions of people, and of the


most important raw materials of our own domestic manufac-
tures. They are agricultural communities, which more than
any others sell what they produce and buy what they consume.
They are our most valuable customers for the products of our
own industries and for our merchandise, and they make us
factors in all their transactions. The State of New York,
which contains the commercial metropolis, receives the largest
injury ; but its consequences extend throughout the whole

Other influences have been at work to deteriorate the finan-
Excessive specu- cial condition of our people. The period has been
lation - full of tendencies to unsoundness in the manage-

ment of private business and in the habits of families and indi-
viduals. A series of speculative excitements has incited to
enterprises which have turned out to be unremunerative and
to investments which fail to yield revenue and have lost their
salable value. The capital embarked in such undertakings is
destroyed. Large classes find their incomes diminished and
their convertible property reduced.

Even the operations of regular business partook of the spirit
of the times, and became too much expanded.
Profits which came in part from the swelling of
nominal prices tempted those who were unexpectedly enriched
to count on their continuance and to enlarge their undertak-
ings or engagements under that illusion. One who had half
his capital invested in land and buildings and machinery (which
is called fixed capital), and half invested in raw materials and
funds to employ workmen (which is called circulating capital),
and was doing a safe and easy business, was induced, for the
purpose of enlarging that business, to double his investment in
fixed forms. He therefore needed double the circulating capi-
tal, and instead of owning it all, had to borrow it all. The
turn of the times disabled him from selling an enlarged pro-
duct, or perhaps even an equal product, or of selling without
loss ; and when he needed loans to double the amount of his
former floating capital in order to carry on his business, and


more in order to hold his product for a revival of the market,
he found that lenders had become timid. Another discovered
that an enterprise which may be good takes longer to bring
returns than he anticipated. Another began when credit was
easy, and failed to foresee how changeable that condition is ;
and even though his hopes of profit were undiminished, found
it difficult to carry his loans.

When large classes suffer under the effects of these miscal-
culations, the influence will extend more or less

i n ,1 ., . T n n -M Effects general.

to nearly all the community. A period of fall-
ing prices following a period of rising prices generates such
results. Great fluctuations in the hopes and opinion of the
public, creating vicissitudes of credit, are the secondary cause,
as they are themselves the results of some primary cause.

An outgrowth of the same morbid condition is the unusual
and unreasonable disparity now existing between Exaggerated cost
the wholesale price which the producer receives of middlemen -
and the retail price which the consumer pays. No doubt pro-
longed fluctuation in prices tends during the upward movement
to increase the charges of middlemen and to enlarge the class ;
but the root of the evil is the uncertainty and instability. The
importer adds to the price of every article he imports, the ex-
porter reduces the price he pays for every article he exports, as
insurance against the possible variation in the value of green-
backs when converted into the money of the world, and against
the possible changes of governmental policy at Washington.
Nor can it be doubted that the condition of things has been
unfavorable to economy and efficiency in the management of
business, to frugality in private expenditure, and to energy in

Such are the immediate causes which have occasioned exces-
sive and unnatural consumption of our national capital, and
which have retarded the natural processes of repair and growth
during the last eleven years. What are the ultimate causes,
and what are the remedies ?

To the people of this State these are interesting inquiries.


In 1874 our State tax was nearly sixteen million dollars ; our
New York's inter- local taxes were over forty-two million dollars.

est in these ques-

tions. Our share 01 the taxes ot the federal (jrovern-

rnent, on the average of eleven years, if computed on popula-
tion, would exceed fifty million dollars ; or if computed on
consumption, according to the estimate of the Finance Com-
mittee of the Constitutional Convention of 18G7, would for the
year exceed eighty million dollars.

The Federal Government has the direct and exclusive respon-
Action of Federal sibility for its own immense expenditure and for

Government the

ultimate cause. its calamitous policy in respect to the great pro-
ducing States of the South. It has likewise controlled the cur-
rency and the banking of the country ; it has been the principal
dealer in the precious metals ; it has conducted vast fiscal
transactions. Its financial secretary has held in his hand from
day to day the supply and the rates of the loan-market in the
centre of capital and commerce, the terms of our foreign ex-
changes, the prices of exports and imports, the quality of the
circulating medium, the fluctuating standard of values recog-
nized by law as the rule in all dealings and all contracts. By
the force of its example ; by its ascendency over opinion ac-
quired in a period of public danger, during which the people
formed the habit of following its leadership ; by its means of
propagating the ideas according to which its own operations
were conducted, by all these, as well as by the direct effects
of its action, its measures, and its policy, the Federal Govern-
ment has therefore practically dominated all business and all
industries, and created conditions which shape the conduct
of individuals in their production and consumption, and of
local governments in their expenditures, taxation, and creation
of debt.

It is natural that such a condition of men's business affairs
should be prolific of illusory and mischievous

False remedies. '

schemes lor relief. A vague notion is exten-
sively entertained that a new issue of legal-tender notes would
afford an effectual remedy. This fallacy is largely due to the


false theory pervading nearly all the literature of political
economy as to the agency which the quantity of the currency,
even when equivalent to coin, has in causing cycles of high and
low prices.

As high prices and expanded currency, and low prices and
contracted currency, have been usually found to-
gether, the effect has heen mistaken for the cause.
It is often assumed that the banks, even when redeeming their
notes in coin, can expand their issues in excess of the needs
of the community, and thereby originate and consummate a
general and prolonged rise of prices.

An analvsis of the function of the convertible bank-note, or

V /

of the processes by which cycles of high prices Anatysisofthe
occur, will equally confute this opinion. A study
of the order of the events which have happened in periods of
rising prices in England and the United States under a conver-
tible currency shows that usually the speculative movement at
all stages precedes the increase of bank-notes.

The convertible bank-note is but a small portion of the in-
struments of credit used in a commercial country. Bank-notes an in-

. significant part of

It IS adapted to the Wants Of persons Who do not credit machinery.

keep bank accounts, and the wants, in petty transactions, of
those who do keep bank accounts. It bears no interest ; and
the holder has a motive to keep on hand only so much as he
thinks he may require for expected or possible purchases or
payments, and to invest or lend the surplus so that it will
become productive.

If a bank lends its note to a borrower to make a payment
or a purchase, the use for that purpose is but for an instant.
Unless the note is received by or passed to some person who
detains it for a future purpose, it immediately goes back to
the issuer through the exchanges with other banks. It has
to be redeemed by reducing other loans, or by a temporary
loss of a portion of the usual reserve of the issuer. The life
of a bank-note is made up of a succession of instantaneous
uses, alternating with a succession of prolonged detentions.


The quantity that will stay out at any given time depends
mainly on the expectancy of individuals as to future trans-
actions, and, in a lesser degree, on the state of prices which
vary the amount used in the same transaction. In times of
rising speculation the wants of the community absorb a larger
quantity ; each transaction employs an amount enlarged in
proportion to the enhanced prices ; transactions become more
frequent ; and the detentions of the means of future transactions
are increased by a greater disposition to make them, and less
care to economize interest.

It is the competition of buyers which puts up prices in a
period of speculation. Bank-notes have infinitely less to do
with originating speculation, or even furnishing the means
whereby it can be sustained, than the other parts of the ma-
chinery of credit.

Bank-notes, or currency, as they are called, are but an in-
significant portion of the means of purchase or payment. The
transactions effected by check, operating to transfer bank
deposits, in the city of New York amount now in every eight
days and some years ago amounted in every five days to
as large a sum as all the legal-tenders and bank-notes in the
hands of the people of the whole United States. The payments
effected at the London Clearing House amount in every two
days to as much as the whole circulating medium of the United
Kingdom. The other instruments of credit by which business
is carried on such as book accounts, notes of hand, bills of
exchange, drafts, checks en bank deposit are thus many
times the volume of bank-notes.

Speculative purchases are nearly always initiated by the
other instruments use ^ personal credit. In such times confidence

of credit preferred. ig higl ^ and credit {& freely giyen ftnd ^^ ^

cepted. The transactions are generally made on book-accounts
or notes of hand. These are at the command of the buyers in
unlimited amount, and without delay or inconvenience. Bank
credits, called deposits, like bank-notes, can be obtained only
by borrowing. For such purposes bank-notes are used only


in small transactions and to a comparatively insignificant

The issue of bank-notes, if not limited to a fixed amount,
is generally restrained by laws which require a Bank-notes slow

and difficult of in-

deposit ol securities with the government; and crease.
the process of issue is so slow and inconvenient that a sudden
and large increase is not possible. Those that are in the hands
of the public cannot easily be collected in large amounts, but
are scattered in small sums among millions of holders through-
out a continent.

On the whole, then, it is demonstrable that bank-notes, or
currency when convertible, have less agency in

.... r .,., ,. , , .. Conclusion.

originating or iacilitatmg a general speculation
than any other portion of the vast machinery of credit of which
they form so inconsiderable a part. The false theory, that
they are the master-cause of prices and fluctuations of prices,
and that a governmental regulation of their volume will avert
the tremendous vicissitudes in business to which commercial
countries, carrying on vast credit transactions, are periodi-
cally subject, was the basis of the plan adopted in 1844 on
the re-charter of the Bank of England. The theory was then
seen, by a few of the best thinkers, to be destitute of truth ;
it has since been completely refuted by experience.

In the infancy of the very modern science of political econ-
omy a metaphor was accepted as an axiom. It

A prolific fallacy.

was said that if purchasers should suddenly find
two gold coins for one in their pockets, they would pay double
price for commodities. The proposition has no truth in it,
except by assuming as a condition the result to be proved. It
would not be true of any one buyer ; it could not be true of
all collectively, unless a fall in the value of gold had previously
happened. The increased quantity could exist only as a con-
sequence of an increased demand at the same value, or of a
decline in the cost of production. In modern times the in-
crease in wealth and commerce is many fold the increase of
population ; the medium of exchange required is vastly larger


than the accumulation of the precious inetals ; and an increased
extension of credit machinery has become necessary. Bank-
notes or other circulating credits cost as much to all, save the
issuer, as an equal value in coin ; they have to be paid for by
all who use them. If individuals prefer to use coin to even a
small proportion of their ability, or to hold their savings or
reserves in coin, if traders, commercial companies, and gov-
ernments increase their reserved stocks of bullion to even
a small percentage of the extension of their operations, the
absorption would outrun the production of the precious metals,
taking no account of the insatiable demand of the Asiatic

Online LibrarySamuel J. (Samuel Jones) TildenThe writings and speeches (Volume 1) → online text (page 22 of 52)