What was the Fuss over the National Bank?

[Sean Wilson]

The answer, bobby, was that American culture was 95% agrarian. Banking was something "new" in the colonies and thought to be of a suspicious nature. The same with corporations -- people viewed them as a kind of conspiracy. Jefferson and Madison thought the "gaming system" (finance capitalism -- banks, stocks) was nothing but a scam by "stock jobbers" and English financial interests to take away the land and hegemony of plantation farmers. Remember, the debtor-creditor relationship was rather nasty back then. They had debtors prisons and debts survived death. (If your father was a debtor, I think you inherited that obligation). As Jefferson noted, once a farmer became indebted to these institutions, you could never get out, and it almost always resulted in a "sale" (he meant bankruptcy). Remember that all of these plantation owners were indebted to Scottish and English creditors -- and financial institutions that had ties to them began to devolop in the north east, espcially
 in New York. (wall street).
   
  Also, one must remember that the colonial american economy was not very agrarian.  As a result, plantation farmers relied upon something called the "consignment system," whereby crops were sent to England to a broker, who sold them. Instead of paying plantation owners with money, the broker would execute "shopping orders" for things such as wedgewood china, leather saddles, etc., that would be shipped back to plantation owners in return. Hence, it was one big system of barter. Well, what happened is that the financial institutions always had the higher end of bargain. The farmer took the risk of bad weather, had to buy insurance against the ship sinking, was at the mercy of the prices determined by the broker, etc. Whenever there wasn't enough profit to pay for the shopping purchases, merchants sent the goods on credit and planters each year would see more indebtedness. Both Jefferson and Washington had serious debt problems due in part to the way the "consignment system."
   
  Remember also that banking and finance were relatively new institutions in the world. It was the invention of these institutions in England that allowed the British Empire to surpass the France and Span in world domination. Indeed, Alexander Hamilton knew very well that it was these English institutions that made Britain the greatest empire on the globe since Rome. That is why Hamilton saw the future of America as developing banking, finance, manufacturing, urbanization and so forth. 
   
  So, in short, the "big deal" about banking was simply who would have economic hegemony in the new world: would it be plantation farmers, who were still using the "old English" system of "land is power" -- Jefferson thought landed farming estates were the virtuous American nobility -- or would it be the new institutions that had transformed England into a world power and found and new way to segregate haves from have nots.
   
  The story of the bank is therefore the story of the transformation of land to capital liquidity as the means for dispensing social status in the new world. In short, the reason why Jefferson and Jackson opposed these institutions is that they ultimately threated the source of their power (livelihood).    


Dr. Sean Wilson, Esq. 
Penn State University 
http://ludwig.squarespace.com/home/
 		
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