Modern Democracies: USA

Revisionist historians like Howard Zinn can unroll a long catalogue of horrors that must darken any rose-tinted history of the United States — genocidal conquistadors, slavery on the southern plantations, the treatment of poor whites in the northern states, the extermination of the Indian peoples, the brutal treatment of trade union movements, the demonising of communism, the excesses of WWII, the horrors of Vietnam, the promotion of war for profit by both parties, deregulation of industries for private profiteering, the building of prisons rather than schools, environmental degradation, and the many still-unfolding financial and political scandals. But these can be seen as grievous errors or false steps on a generally uphill path to American exceptionalism. Or can be so argued, admittedly against much evidence to the contrary. But for many millions of people, nineteenth century America did offer something better. De Tocqueville recognized the dangers of democracy: {1}

'I seek to trace the novel features under which despotism may appear in the world. The first thing that strikes the observation is an innumerable multitude of men, all equal and alike, incessantly endeavouring to procure the petty and paltry pleasures with which they glut their lives. Each of them, living apart, is as a stranger to the fate of all the rest; his children and his private friends constitute to him the whole of mankind. As for the rest of his fellow citizens, he is close to them, but he does not see them; he touches them, but he does not feel them; he exists only in himself and for himself alone; and if his kindred still remain to him, he may be said at any rate to have lost his country.'

'Above this race of men stands an immense and tutelary power, which takes upon itself alone to secure their gratifications and to watch over their fate. That power is absolute, minute, regular, provident, and mild. It would be like the authority of a parent if, like that authority, its object was to prepare men for manhood; but it seeks, on the contrary, to keep them in perpetual childhood: it is well content that the people should rejoice, provided they think of nothing but rejoicing. For their happiness such a government willingly labours, but it chooses to be the sole agent and the only arbiter of that happiness; it provides for their security, foresees and supplies their necessities, facilitates their pleasures, manages their principal concerns, directs their industry, regulates the descent of property, and subdivides their inheritances: what remains, but to spare them all the care of thinking and all the trouble of living?'

But he also noted the public-spiritedness of Americans, their willingness to turn their hand to anything, the 'natural aristocracy of talent and virtue', the absence of centralized administration, the independence of the Protestant churches and the many voluntary associations and mutual aid clubs. Democracy was a continuous interplay between intermediary groups, the state and individual rights where diversity of opinion had to be tolerated because it safeguarded the common liberties of the country. To what extent, and why those principles were lost divides political commentators, but many contrarian historians blame big company capitalism or big oil for perversion of the democratic process. {2}

In reality, of course, each epoch views itself differently, often in the terms that at the time seemed most important. While nineteenth-century historians like George Bancroft celebrated the birth of a new nation united in a love of freedom, indeed a new world order that would end inequality and servitude, Richard Hildreth saw only diverse groups following their materialistic interests: landowners, shareholders, entrepreneurs, trades and groups of working men. Equally, Charles Beard's 'An Economic Interpretation of the Constitution of the United States' replaced the traditional view of the Constitution as a wise blend of theory and experience by economic 'realities', i.e. the class and property interests that underlay law, government and politics. {3}

Nonetheless, there were general expectations, summarized as: There can be no obedience to the state without representation in its government. Any allegiance is conditional on the government demonstrating its competence and practical benefits. Diverse political opinions are acceptable if they do not threaten public order or the safety of the state. Government should be transparent and representative and accountable, not overly swayed by the wealthy nor deaf to the needs of the poorest. All elites should be permeable to talent, by which old skills can be invigorated with new blood. A free press should have access to information vital to citizens' well-being, and judge governments accordingly. {4}

USA Dollar

Issues American dollar coins were issued for over two hundred years, from 1794 to 2012. The Morgan dollar issue, named after its designer, George T. Morgan, was minted over the 1878-1904 period, and again in 1921. In all, some 656,930,590 pieces were struck. At a coin weight of 26.73 g, and silver purity of 90%, that entailed 1,742 tons of silver. Annual mintings varied considerably, from 100,000 for the 1893 issue to 86,730,000 for the 1921 issues from the Philadelphia, Denver and San Francisco mints. The E PLURIBUS UNUM legend (out of many, one) appears on the Seal of the United States, and was the de facto motto of the country until 1956, when it was replaced by IN GOD WE TRUST. {5} The silver comes from American sources, and was indeed one reason for issuing the Morgan dollar — to use the large amounts of silver mined in the later nineteenth century. {5}

USA Ag one dollar. Obverse: Head of Miss Liberty wearing Phrygian cap and facing left. E. PLURIBUS. UNUM. (out of many, one) around. 1884 below head. 38.1 mm. 26.73 g. 90% silver and 10% copper.

Iconography Coins of other republics - France, Switzerland  - employed a similar figure of liberty but America's is distinctly her own. The mass of curls, the Phrygian cap, the ivy wreath, the ears of corn and the tiara emblazoned with liberty all serve to thicken the neck of a young woman whose serious profile might have been carved on Mount Rushmore . Note the immense strength given by the Roman profile and the firm jaw. This was not an elegant goddess or simple peasant girl, but a young American woman firmly rooted in her destiny. Her head fills the flan, and the reverse is similarly crowded, with the American (bald) eagle  bursting, as it were, from three circles: the laurel wreath, the legend and the ornament of the rim. A new age was dawning, an industrial one, in which America was to lead the world.  {6}

The New America

The Civil War left deep divisions in the country — between the north and south, the industrial states and those of the agrarian west, and between whites and freed blacks.  Congress first attempted to integrate ex-slaves into southern societies but had eventually to accept a Jim Crow compromise: blacks were nominally free but lacked the full rights and privileges of white citizens. The Federal Government also tried to bring the west into the pattern of northern commercial life, but in granting wide areas to farmers and miners was obliged to move the native Indian populations by treaty into reservations. Sporadic but fierce Indian Wars lasted to 1877, and then, as a final coda to a vanished way of life, flared out in the slaughter at Wounded Knee in 1890. Also problematic were the immigrants who had to find work and integrate into the American way of life. Over seven million came in the years between 1877 and 1900: Germans, British, Irish, Scandinavians, Chinese. Latterly came immigrants from southern Europe, equally needed for the expanding economy, but threatening the homogeneity of a predominantly Protestant country.  {7}

Industrial Growth Cheap land and relatively high wages drew many to America. Even farmers in the north-east abandoned their holdings and moved to the west or mid-west, bringing more land into cultivation between 1870 and 1900 than in the preceding three centuries. But by 1890 the economic emphasis had shifted from farming to industry and mining, and there began that migration from rural to urban areas that was to make America the world's largest manufacturing nation. Highly skilled workers maintained their wage levels, but only after strikes and violence, particularly centering on the railroads and steelworks. Thomas Edison, who helped found General Electric, is still admired, but John D. Rockefeller was universally hated for his ruthless tactics.  Equally important was overseas expansion of American interests after the 1898 annexations of Hawaii, Puerto Rico and the Philippines {7}

USA. Ag one dollar. Reverse: (bald) eagle with outstretched wings and looking left and grasping crossed arrows and laurel branch. 'In God We Trust' above and laurel wreath below.  UNITED STATES OF AMERICA . ONE DOLLAR. aound. {2} No mintmark  (Philadelphia)

Silver Mining Homesteads expanded across the country, but also important were the mining camps. Coal, iron ore and copper mining were dependent on the railways, but gold and then silver mining were not, and these operations created new towns and the bustling wealth of cities like San Fransisco. Silver mining in America began after the gold rushes, largely with the Comstock Lode of Nevada in 1858, and was furthered by the discovery of several world-class deposits, all of different geological settings. {8}

The Comstock produced some spectacularly rich orebodies in hydrothermally-altered and brecciated volcanics and intrusives of Tertiary age. {14-15} It was an epithermal deposit, where continuing high heat flows and soft ground were a hazard of mining. But deep shafts were sunk, new timbering methods introduced, and better extraction techniques developed: cyanidation and then flotation.{9}

Leadville in Colorado was initially a gold mining area, the scene of a gold rush in 1859, but silver lodes were discovered  in 1876, and by 1880 silver mining was employing 40,000 people. Silver, which occurs as veins with lead and manganese, is associated with a Carboniferous limestone karst topography and Tertiary intrusion. To 1963, the district had yielded 240 m troy ounces of silver, 3 m troy ounces of gold, 987 m tons of lead, 712 m tons of zinc and 48 m tons of copper: a major metal producer. {10}

Different again was the Coeur d'Alene mining camp of Idaho, begun with the Sunshine Mine, staked in 1884. Here the silver also occurs in veins but originates in Precambrian sediments, from which it was remobilized by Cretaceous intrusions. The whole area saw extensive silver mining, producing 1.2 bn troy ounces to date, plus considerable amounts of lead, zinc, copper and antimony {11}

The fourth major area of silver mining was Bute,  Montana, where silver veins were found peripheral to 'porphyry' copper deposits, i.e. low grade orebodies  amenable to later large-scale open-pit mining. Silver production began here in 1864, and (mostly as by-products of copper mining) became second only to the Coeur d'Alene area in quantities mined. {12}

Battle for Silver

Like many European countries, America initially had a bimetal currency: unlimited amounts of gold and silver coins were both legal tender. Values of the two metals were generally fixed at some set ratio to each other, however, originally around 15 of silver to 1 of gold.

Economists are much divided on the issue of bimetallism, some arguing that having two metal supplies made bullion shortages less likely, and so reduced the threat of economic deflation. Others see the interplay of two metals as inherently unstable.  When prices of outside supplies of either metal are subject to the vagaries of supply and demand, the currency is at risk from Greshams Law: bad drives out good. If the gold content of a twenty dollar piece much exceeded its international face value (with respect to silver) that coin would be melted down and/or spirited abroad, regardless of the penalties applying. As gold left the country, so silver would come flooding in, putting pressure on silver prices. {13}

The matter became a burning political issue in the closing years of the 19th century. Silver had been demonetised in the Fourth Coinage Act of 1873, which put America on the gold standard, and favoured east coast banks and businesses over mid-west miners and farmers. Deprived of its demand for coinage, silver lost value, and  many silver mines closed. A tightened money supply also required farmers and small businessmen to depend more on bank loans. The Bland-Alison Act of 1878 ameliorated matters somewhat, as it guaranteed the use of silver in large issues of silver dollars. Banks were required to keep silver dollars as reserves, though in practice they issued silver certificates, and these were often used to purchase gold. But the American economy still depended on its banking system, and matters were especially acute in the Panic 1893, when falling prices brought high unemployment to industrial areas and ruin to farmers. Attempts to rectify the silver situation had come with the Sherman Act of 1890, which set the official silver to gold ratio at 15.988 to 1, and required the US Government to continue buying silver to repay debts. But the silver was in fact purchased with gold notes, which caused on a run on gold reserves, and may have contributed to the resulting panic. {14}

William Jennings Bryan, the newly-elected leader of the Democratic Party, took up the cause of silver, denouncing the heavy devaluation of property that had resulted from silver devaluation, and the US$ 200 m in gold paid annually to British banks as interest on loans. The election was closely fought, but Bryan was defeated by William McKinley in 1896, and again in 1900. McKinley had the support of big business and the major banks, but the deflationary effects of the gold standard had been to some extent offset by the cyanide process, which allowed leaner gold ores to be worked, and the goldrushes of South Africa (1887) and Australia (1896), which greatly expanded gold supplies.{15}

Those critical of banks see undemocratic powers at work in McKinley's victories,  but President  Kennedy's re-use of silver certificates  seems an unlikely reason for his assassination:   such certificates did not evade Fed control, and Kennedy had more serious enemies than the banks.{16}

But a silver currency still generates controversy. Mainstream authors concede that mistakes were made in times when economics was in its infancy, but argue that banks and government were well intentioned and acted prudently.  Contrarian authors point to take-over fraud and press scares. At its simplest, ignoring many aspects over which expert opinion differs, we can see different ways of looking at money. To east coast communities, the silver miners were 'minting their own money', evading regulation by the banking community, which was necessarily  international in nature and closely allied with big business and federal government. Silver did indeed loosen the local money supply, creating business expansion — and sometimes inflation — but it is worth noting that the new supplies of gold came  from South Africa and Australia, i.e. from overseas, controlled by British mining companies and banks. Silver was an American currency, and not inevitably inflationary  if output of local goods and services could keep pace with silver dollar issues. In fact the local colonial currencies of the American states brought about widespread prosperity, and economic misery when they were outlawed by the British Government. The key factor, as Modern Money Theory emphasises, is who controls the money supply — the banks, federal government or labourers by the toil of their own hands? The first runs an economy on debt, and the last by local exchange of goods and service, essentially barter. Control by the second entity, the federal government, can make money supply more democratic, desseminating prosperity throughout the country, but is also subject to other agendas. Some are overt: the stated policies of elected governments, for example. Some are  more shadowy, however, notably actions of international banks and big businesses, which are not necessarily American in purpose: the  Fed today is a consortium of private banks, for example, and probably more steered by BIS considerations than Washington concerns. {17}

References and Further Reading

Need the 43 references and 2 illustration sources? Please consider the inexpensive ebook.