- Capitalism and Alternatives -

What's going on here?

Posted by: Samuel Day Fassbinder ( Citizens for Mustard Greens, USA ) on August 28, 1999 at 10:31:27:

In Reply to: Causality posted by Gee on August 27, 1999 at 16:45:23:

: The evaluation given in the 1837 link does provide some evidence of government causality along with other factors. the major point was that private ownership and free trade was nopt 'at fault' here.

SDF: Let's go over the history we can read in many sites on the Web: Exhibit A
Exhibit B
Exhibit C
Exhibit D
Exhibit E
Exhibit F
Exhibit G

So what happened?

1) Andrew Jackson decided as a result of his feud with Nicholas Biddle to put US money in state banks rather than in the National Bank.

2) The State banks get into the business of land speculation.

3) Government sales of land confiscated from Indians attract land speculators, which, as McGrane argues here, were widespread throughout American society at that time, and perpetrated a lot of fraud.

4) State banks start issuing large quantities of worthless money.

5) In 1836, Jackson signed a Specie Circular, which eliminates paper currency as a means of settlement for the purchase of public lands.

6) A public crisis of confidence in the banks results in the hoarding of specie. The public loses confidence in the bank's paper money, and an international depression results.

7) Van Buren took over, and stood by the Specie Circular of 1836 to avoid further currency crises. The economy stays depressed.

Well, what can we conclude?

Libertarians and anarcho-capitalists doubtless would like to throw all of the blame over to "goverment" and make "private enterprise" look pure and angelic. Did the government engage in land speculation? No, the entrepreneurs did. Did the government issue huge quantities of paper money to fuel the speculation? No, the banks did that, the government only let them do it. Did the government perpetrate fraud in promoting settlements that didn't exist for the sake of fraudulent land speculation? No, the entrepreneurs did. Did the government hoard gold and silver? No, the entrepreneurs and the banks did that.

The entrepreneurs also appear to have greatly benefitted from an economic period of prosperity in US history, from 1830 to 1836.

What was the government's role in this nonsense?

1) Jackson stores government funds in the state banks.
2) Jackson allowed the state banks to issue currency.
3) The government privatized land it had confiscated from "Indians" through fire-sale auctions (the sort of auctions sponsored by the Thatcherists who control eastern Europe today; see Laszlo Andor and Martin Summers' MARKET FAILURE for more info).
4) Jackson issues a Specie Circular, to restore a gold standard, and because he was afraid that the state banks were issuing so much paper money as to create an inflationary spiral.
5) Van Buren takes over, retains the Specie Circular, the depression accelerates and continues into the 1840s.

The libertarian blame game hardly helps us understand what's going on here. The era of land speculation appears to have accompanied a period of prosperity, but a "corrupt" period. I wouldn't say that the government played no part in aiding this prosperity.

As I have observed before, "corruption" is a logical consequence of a capitalist system, since capitalism makes of everyone an entrepreneur while providing financial security to no individual. McGrane reports upon the public's "mad haste to be rich." Financial security wouldn't accrue to individuals anyway even under a non-capitalist system; its that collectives CAN offer financial security if they aren't required to devote their resources to an "open market."

Back to 1836. The government acts to prevent a currency crisis; after all, if banks issue endless amounts of paper money, it can't be worth a lot. The public panics. The government perseveres in its adherence to a strict gold standard (something libertarians have been advocating for years). The depression continues.

The government just manipulates a portion of the "free market" economy, if the public doesn't like it, why, they can do otherwise, or vote the bastards out. There was no law requiring it, no gun pointed at anyone's head forcing him to panic in 1837. As it stands, however, capitalism is unstable, and the purer the capitalism, the more unstable it is. I don't read any endorsement of libertarian policy or anarcho-capitalist transformation here.

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