------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (October 2007)
H.W. Brands, _The Money Men: Capitalism, Democracy, and the Hundred
Years' War over the American Dollar_. New York: W.W. Norton, 2006.
239 pp. $24 (hardcover), ISBN: 978-0-393-06184-0.
Reviewed for EH.NET by David J. Cowen, Quasar Capital Partners.
The previous twenty-one works of H.W. Brands, the Dickson Allen
Anderson Centennial Professor of History at the University of Texas,
have covered a wide range of topics and eras. His books have spanned
the gamut of American history, from the eighteenth century and a
biography of Benjamin Franklin to the nineteenth century and a
history of the California Gold Rush, and then on to the twentieth
century and a discourse on the United States in the Middle East. He
is a comfortable storyteller and this extends to biography, with
tomes to his credit about Andrew Jackson and Woodrow Wilson. In his
most recent work, _The Money Men: Capitalism, Democracy, and the
Hundred Years' War over the American Dollar_, Brands combines his
skill sets of biography and history to render a flowing work about
early American finance, a period covering roughly the beginning of
the finance system under the stewardship of Alexander Hamilton to the
1907 financial panic and its aftermath.
The opening chapter logically starts with Hamilton and is called "The
Aristocracy of Capital." It moves quickly through his early years on
Nevis and days as a young officer in the continental army. The theme
that remains constant is that Hamilton "contended that economics
ruled the world, eventually if not at once" (p. 21). The resourceful
Hamilton is followed as he seizes the opportunity where others might
see failure; for instance Brands describes Hamilton's leadership
after the conclusion of the Revolutionary War at the Annapolis
Convention, which laid the groundwork for the Constitutional
Convention; and the subsequent creation of the National Government,
when his appointment as Secretary of the Treasury led to his
promotion of funding and bank legislation. Brands does not break any
new ground on these topics and is simply retelling the story. He
reminds us that Hamilton's funding and banking plans were an
all-or-nothing proposition for "wound one limb and the whole tree
shrinks and decays" (p. 46). Given Brands' writing style, which is
telling a broader story, it is inevitable that some matters will be
marginalized or forgotten. For instance, he has omitted any mention
of the creation of the Mint, which defined the dollar as the measure
of money.
In the second chapter called "The Bank War," we are introduced to the
two warring factions: the capitalists championed by Hamilton and the
democrats led by Thomas Jefferson. Brands opts to gloss over the
stormy closure of the First Bank, simply rolls the discussion forward
quickly to the Second Bank, and focuses on the autocratic President,
Nicholas Biddle, representing capitalism, versus President Andrew
Jackson, representative of the democrats. The fabled Bank War moves
quickly and is an enjoyable read. In some parts of the book Brands
leans too heavily on quotes, some of which fill over half a page, but
here the quotes add to the action in what is history articulated in
an enjoyable fashion. As Brands explains, it became personal between
the two as Jackson thundered that "The Bank ... is trying to kill me,
but I will kill it!" (p. 91). With Jackson's victory "the lesson
seemed clear ... when democracy and capitalism collided at the ballot
box, democracy won" (p. 85). When Jackson gave the order to withdraw
federal deposits and redeploy them to state banks, Biddle, to his
eternal shame, exacerbated tensions by constricting bank loans and
curtailing money. Brands labels Biddle the bad apple, devoting much
space pinning the blame on him, and hence championing democracy
rather than capitalism. But here is where we need clarification, for
there is another way to look at the aftermath of the Bank War: it was
not democracy vs. capitalism, but rather with the reshuffling of the
Federal deposits it was simply the State Banks winning at the expense
of the Federal Bank, or one brand of capitalism versus another brand
of capitalism. Furthermore, he has lumped both Bank Wars together;
however, recall that the First Bank was a Federalist institution
destroyed by the Jeffersonian Republicans, and yet these were the
same Republicans who pushed for and chartered the Second Bank when in
the wake of the War of 1812 the nation's finances were asunder.
The third chapter, entitled "The Bonds of the Union," discusses the
strong growth and revolutions in transportation, industry and markets
seen in the years roughly between 1825 and 1850. It was about
connectivity, brought about by canals and then the railroads,
bringing together distant locales to the eastern seaboard, and the
wealth that was subsequently produced for the few. Brand next
presents the California Gold Rush and that precious metal is
introduced, which provides segue into our third 'money man,'
financier Jay Cooke. He became synonymous with the selling of war
bonds at a time when the cost of the war to the Union was $1 million
per day. Cooke's ingenious plan to sidestep the banks and sell bonds
directly to the public exceeded all expectations and Brands tell us
"Cooke may have become the person most vital to the Union war effort,
after Lincoln" (p. 121). By the final tally, Cooke & Company placed a
staggering $1 billion plus in U.S. Government Bonds.
The fourth chapter is called "The Great Gold Conspiracy" and is the
shortest chapter in the book. We meet again Jay Cooke, who in concert
with Jim Fisk, Jr. and Jay Gould, attempted to corner the market in
gold in 1869. The plan ended in disaster when the government stepped
in to sell to the bulls, but Gould escaped ruin when he
surreptitiously switched allegiances and himself became a seller. We
learn more about the mechanics of the market in this chapter: and not
just the gold market but also how the equity market functioned in
this age of railroad wars, with various consortiums and individual
operators looking for personal gains at the expense of any level of
morality and legislation. But capitalism is a loser in this chapter
for we learn about its seamier side as the standards of insider
trading and stock manipulation are revealed.
The fifth chapter is entitled the "Transit of Jupiter" and we are
left guessing as to why it is called that (unfortunately it is never
answered). The chapter encompasses much ground, from the gold scandal
introduced in Chapter Four all the way through the aftermath of the
Panic of 1907, all covered in a fleeting forty pages. We see more
scandal and rapidly move from financial panic in 1873 to financial
crisis in 1893. J.P. Morgan emerges as a financier, amasser of
capital, savior of the financial system, and enigmatic greedy
capitalist all rolled into one. Morgan reorganizes the railroads and
insists on seats on the boards of the companies he invests in. He
hosts summit meetings in various industries, leading one to believe
that he alone is pulling the purse strings on the capitalist system.
Because this is top down history, we do not first hand see or feel
the pain and difficulty of the man on the street or farm impacted by
this money interest.
Brands does try to bring this struggle to the fore in the great gold
and silver debate, whereby the capitalists and hard money men line up
in favor of gold and the western farm interest and debtors prefer
silver. In short, silver was perceived as the money of the people and
gold the money of the wealthy. For Brands then "gold and silver were
simply the latest proxies in the historic contest between capitalism
and democracy, between wealth and commonwealth" (p. 175). There is a
juxtaposition between Morgan on one side, stepping in to rescue the
financial system time and again when it hiccups, and William Jennings
Bryan on the other, champion of the people, with his famous
indictment against the gold standard: "you shall not press down upon
the brow of labor this crown of thorns! You shall not crucify mankind
upon a cross of gold!" (p. 184).
The Money Trust, led by Morgan, became too pervasive and too powerful
not to escape notice. By the early twentieth century and with
Theodore Roosevelt in the White House, the handwriting was on the
wall for Morgan and the Money Men. But not before one final climatic
incident, when in 1907 a financial panic caused Morgan to ride in
again on his proverbial white horse to stem the tide. But this play
has been seen before, a system on the brink of financial ruin only to
be rescued by the same Money Men some believe caused the convulsions
in the first place. The Senate convened a committee in 1912 to look
into the 'money trust' question, hauling Morgan and others in front
of their committee. Morgan died in the next year, many believe from
the stress of being embarrassed in front of the committee.
The "Epilogue" argues how the money question concluded with the
creation of the Federal Reserve System, a central bank that could set
the interest rate level and bear ultimate responsibility for the
fiscal system. The Fed was in reality the Third Central Bank of the
United States, having birthed 77 years after the Biddle/Jackson fight
shuttered the Second Bank of the United States. Brands concludes that
in spite of the Federal Reserve's missteps in the aftermath of the
1929 Great Crash, the central bankers have done a credible job and
therefore the money question, once so central to the politics of the
United States, has been resolved and is out of the main of the
political debate.
There are only a few illustrations in the book, but the cover is
interesting, as the faces of the main subjects are in a similar vein
to the portraits of the luminaries on our currency. Of course
Hamilton is the only one of the Money Men described who is actually
on our legal tender as he graces the $10 bill, and his picture on the
cover is top billing along with Morgan. The faces of Biddle, Gould
and Cooke are smaller and relegated to the lower portion of the cover.
Brands should be applauded for writing about the money question,
which has often been overlooked in U.S. history. He tackles head-on
the intrinsic strain between democracy and capitalism for "the
driving force of democracy is equality, of capitalism inequality" (p.
16). In short, we can ask the question does capitalism have a
conscience? We are left after reading this saying that if it does, it
certainly takes a lot of turns to achieve it.
Brands' style is to liberally intersperse quotes into the text. These
quotes are cited in the end notes, which has the benefit of making
the book much easier to read. Of course, the shortcoming is for the
serious scholar who sees a quote about Hamilton such as "that power
which holds the purse strings absolutely, must rule" (p.25) and will
wonder exactly when he said this -- when he was a soldier pointing
fingers at a feckless Congress, or later when he was Secretary of the
Treasury? Turning to the end notes we see that it can come from any
part of thirteen pages in Joanne Freeman's _Writings of Alexander
Hamilton_ (2001), and as a secondary source that question is not
easily answered. A second drawback to this style is that he can
overuse quotes and therefore they lose their impact. For instance,
Brands so liberally uses quotes from a lecturer from the University
of Chicago under the nom de plume "Coin," that most of the pages
167-173 feel like a string of quotes.
This is history seen through the leadership's eyes and that makes
sense if one is writing to a general audience. This is introductory
history that is story telling, and as a result big omissions occur,
like the First Bank scrip bubble 1792 or the First Bank War
conclusion of 1811, or the irony that many Republicans liked banks,
especially if they could receive the loans of those banks for
themselves. Brands is trying to sell the point as democracy vs.
capitalism, as if one has to win. But isn't the winner the system
itself? Our democratic capitalism has produced a system of government
that has produced an amazing relative standard of living for its
citizens, and if there is a winner that is where the gold medal lies.
But these flaws are minor for the audience that Brands is trying to
reach. This book is an easy read and contains a lot of enjoyable
prose. It is a likeable and painless read for just about anyone with
an interest in American History.
David J. Cowen is an independent scholar in the New York City area.
He is the Managing Partner of Quasar Capital Partners, a macro hedge
fund. He is co-author (with Robert E. Wright) of _Financial Founding
Fathers: The Men Who Made America Rich_, published by the University
of Chicago in 2006 and of "The First Bank of the United States and
the Securities Market Crash of 1792," _Journal of Economic History_
60 (December 2000).
Copyright (c) 2007 by EH.Net. All rights reserved. This work may be
copied for non-profit educational uses if proper credit is given to
the author and the list. For other permission, please contact the
EH.Net Administrator ([log in to unmask]; Telephone: 513-529-2229).
Published by EH.Net (October 2007). All EH.Net reviews are archived
at http://www.eh.net/BookReview.
-------------- FOOTER TO EH.NET BOOK REVIEW --------------
EH.Net-Review mailing list
[log in to unmask]
http://eh.net/mailman/listinfo/eh.net-review
|