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THE Revolutionary War ended militarily with the Battle of Yorktown in 1781, and diplomatically with the Treaty of Paris in 1783. The careers of Washington and Franklin appeared to be complete, while the economic and financial career of Robert Morris seemed likely to stretch for decades into the future. But as matters actually turned out for these three fast friends, it was Washington who was propelled into a new political career, Franklin soon died, and Morris got himself into a career-ending mess. The financial complexity and economic power of the United States did grow massively in the next several decades, but unfortunately, Robert Morris was soon unable to exert any leadership. At the end of Washington's eight years as President, the power of the Federalists, and particularly the three men most central to it, was coming to a close. John Adams had a tempestuous single term, and then Federalism was all over.
The end of the Eighteenth century marked the end of The Enlightenment and the beginning of the Industrial Revolution, accompanied by many national revolutions, not just the American one. This was a major turning point for world history. The momentum of these upheavals still continues, but it is clear that the Industrial Revolution of which the Morris banking revolution was an essential part swept the world far faster than the social and political revolution, in which he also played a pivotal role. In the banking and industrial revolution, it is universally agreed that Morris was almost always right. In the social and political world, it is conversely agreed he was quite wrong. Essentially, Morris assumed that a small minority, an aristocracy of some sort, would rule any country. Within weeks of the ratification of the new Constitution, or even somewhat in anticipation of it, America made it clear that replacing an aristocracy of inheritance with an aristocracy of merit would not satisfy the need. Morris, born illegitimate and soon an orphan, was obviously in favor of promotion based on merit. John Adams defined leadership even more narrowly; he said a gentleman was a man who went to college, and he probably meant Harvard. Nobody extended the leadership class to include Indians and slaves, but the backwoodsmen of Appalachia made it clear that power and leadership at least included them. Thomas Jefferson was the visible leader of this expansion of the franchise, but changed his mind several times. James Madison switched sides; Thomas Paine switched in the opposite direction. The leaders of Shay's Rebellion and the Whiskey Rebellion lacked coherence and consistency on this point; instead of agitating for a refined goal, they mostly seemed to be running around looking for a leader. William Findlay, on the other hand, knew what he wanted. The issue might be defined as follows: it was obvious that hereditary aristocracy was too small and too inflexible to suffice, but it was also obvious that every man a king was too inclusive. An expanded leadership class was needed, but its boundaries were indistinct and contentious. But to return to Findlay, who at least had a clear idea of what he wanted.
William Findlay was a member representing Western Pennsylvania in the State Legislature, in 1785. It would be difficult to claim any notable accomplishment in his life; he was largely uneducated. The new leadership class must, therefore, include both the uneducated and the mediocre. The Legislature at that time met in the State House, Independence Hall, in Philadelphia, where no doubt the unconventional dress and manners of backwoodsmen did not pass without audible comment. Findlay made his own political goals quite explicit; he was for paper money to facilitate land speculation which could make him rich. Wealth was a goal, but it did not confer distinction. The rights of the Indians, the rights of the descendants of William Penn, the rights of the educated class and the preservation of property were all just obstacles in the way of an ambitious man who had carefully studied the rules. Everybody's vote was as good as everybody else's, and if you shrewdly controlled a majority of them, you could do as you please. If this meat-ax approach had any rational justification, it lay in the essential selfishness of every single member of the Legislature, working as hard as he could to further his own interest. If someone controlled a majority of such votes, then the majority of the public were declaring in favor of the outcome. Those who believed in good government and the public interest were saps; the refinements of education mostly just created hypocritical liars. There was a strain of Calvinism in all this and a very large dose of Adam Smith's hidden hand of the marketplace. If you were rich, it was proof that God loved you, if you were poor, God must not think much of you, or He wouldn't have made you poor. Findlay had the votes and meant to become rich; if his opponents didn't have the votes, they could expect soon to be poor. In this particular case, the vote coming up was a motion to renew the charter of the Bank of North America. Findlay wanted it to die.
|America's first bank, the Bank of Pennsylvania|
It came down to a personal debate between Findlay, and Robert Morris. Morris had conceived and created America's first bank, the Bank of Pennsylvania. Today it would be called a bond fund, with Morris and a few of his friends put up their own money to act as leverage for loans to run the Revolutionary War. After a short time, it occurred to Morris that the money in a bank could be expanded by accepting interest-bearing public deposits and making small loans at a higher interest rate, which is the way most banks operate today. Accordingly, a new bank called the Bank of North America was chartered to serve this function, which greatly assisted in winning the Revolutionary War. There was no banking act or general law of corporations; each corporation had its individual charter, specifying what it could do and how it would be supervised. When the charter came up for renewal, Findlay saw his chance to kill it. Morris, of course, defended it, pointing out the great value to the nation of promoting commerce and maintaining a stable currency. The reply was immediate. Morris had his own money invested in the bank and only wanted to profit from it at the public expense. His protests about the good of commerce and the public interest in stable money were simply cloaking for this rich man's greed to make more money. Findlay made no secret of his interest in reverting to state-authorized paper money, which could then be used by the well-connected to buy vast lands in Ohio for speculation. There were enough other legislators present who could see welcome advantages, and by a small majority the charter was defeated.
At this point, Morris made a staggering mistake. After all, he was a simple man of no great background, largely uneducated but fortified by his ascent in society from waterfront apprentice to the highest of social positions, a friend of George Washington and Benjamin Franklin, acclaimed as a financial genius, the man who saved the Revolution, very likely the richest man in America. For many years, he had harbored not the slightest doubt of his personal genius, his absolute honesty, and total dedication to the welfare of his country. To have this reputation and accomplishment sneered at by a worthless backwoodsman, a man who would stoop to using the votes of other backwoodsmen to accomplish self-enrichment, was intolerable. Morris announced and actually did sell out his entire business interest as a merchant, at a moment when he fully understood the new nation was about to enjoy an unprecedented post-war boom. So much for his self-interest. It helps to understand that John Hancock and Henry Laurens had done the same thing in Boston and Charleston, against what we now see as a strange aristocratic tradition of prejudice against bankers and businessmen. In even the few shreds of aristocracy now surviving in Britain and Europe, the tradition persists that a true aristocrat is so independently wealthy that no self-interested temptations can attract him away from purest attention to the public good. The original source of this wealth was the King, who conferred high favor on those who served the nation well. A curious exception was made for wealth in the form of land, the only dependable store of tangible wealth, and transactions in land. Wealth was something which came from God and the King in return for public service. Land ownership was its tangible storage and transfer medium. Otherwise, grubbing around with trade and manufacture was beneath the dignity of a true gentleman.
We now know what was coming. Wealth was soon to be the reward of skill and merit, recognized by fellow citizens in the marketplace, by consensus. Findlay and his friends wholly accepted this conclusion, unfortunately skipping the merit part of it for several decades. In their view, you were entitled to the money if you had the votes. As the nation gradually recognized that rewards must be durable, and once granted were yours to have and to hold, the new nation gradually came to see the need for durable ownership of property. Unless or until the owner places it out at risk in the marketplace, legislative votes may not affect its ownership. Our system ever since has rested on the three pillars of meritorious effort, assessment of value by the free market, and respect for pre-existing property. That's quite a change from the Divine Right of Kings, and therefore quite enough material to keep two political parties agitated for a couple of centuries. And quite enough change to bewilder even so brilliant a victim as Robert Morris.
Originally published: Wednesday, October 12, 2011; most-recently modified: Tuesday, September 14, 2021