Part 02, Chapter 39 : Leland Stanford’s Land Bank

[Liberty, June 7, 1890.]

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The introduction in congress by Leland Stanford of a bill proposing to issue one hundred millions or more of United States notes to holders of agricultural land, said notes to be secured by first mortgages on such land and to bear two percent interest, is one of the most notable events of this time, and its significance is increased by the statement of Stanford, in his speech supporting the bill, that its provisions will probably be extended ultimately to other kinds of property. This bill is pregnant with the economics (not the politics) of Anarchism. It contains the germ of the social revolution. It provides a system of government mutual banking. If it were possible to honestly and efficiently execute its provisions, it would have only to be extended to other kinds of property and to gradually lower its rate of interest from two percent (an eminently safe figure to begin with) to one percent, or one half of one percent, or whatever figure might be found sufficient to cover the cost of operating the system, in order to steadily and surely transfer a good three-fourths of the income of idle capitalists to the pockets of the wage-workers of the country. The author of this bill is so many times a millionaire that, even if every cent of his income were to be cut off, his principal would still be sufficient to support his family for generations to come, but it is none the less true that he has proposed a measure which, with the qualifications already specified, would ultimately make his descendants either paupers or toilers instead of gigantic parasites like himself. In short, Leland Stanford has indicated the only blow (considered solely in its economic aspect) that can ever reach capitalism’s heart. From his seat in the United States Senate he has told the people of this country, in effect, that the fundamental economic teaching reiterated by Liberty from the day of its first publication is vitally true and soun.(90 ¶ 1)

Unhappily his bill is vitiated by the serious defect of governmentalism. If it had simply abolished all the restrictions and taxes on banking, and had empowered all individuals and associations to do just what its passage would empower the government to do, it would not only have been significant, but, adopted by congress, it would have been the most tremendously and beneficially effective legislative measure ever recorded on a statute book. But, as it is, it is made powerless for good by the virus of political corruption that lurks within it. The bill, if passed, would be entrusted for execution either to the existing financial cabal or to some other that would become just as bad. All the beneficent results that, as an economic measure, it is calculuted to achieve would be nearly counteracted, perhaps far more than counteracted, by the cumulative evils inherent in State administration. It deprives itself, in advance, of the vitalizing power of free competition. If the experiment should be tried, the net result would probably be evil. It would fail, disastrously fail, and the failure and disaster would be falsely and stupidly attributed to its real virtue, its economic character. For perhaps another century free banking would have to bear the odium of evils generated by a form of governmental banking more or less similar to it economically. Some bad name would be affixed to the Stanford notes, and this would replace the assignat, the wild cat, and the rag baby, as a more effective scarecrow. It would be unendurably prolong the bray of those financial asses of whom the most recent typical example is furnished in the person of General M. M. Trumbull, of Chicago.^[15](90 ¶ 2)

While hoping, then, that it may never pass, let us nevertheless make the most of its introduction by using it as a text in our educational work. This may be done in one way by showing its economic similarity to Anarchistic finance and by disputing the astounding claim of originality put forward by Stanford. In his Senate speech of May 23, he said: There is no analogy between this scheme for a government of 65,000,000 people, with its boundless resources, issuing its money, secured directly by at least $2 for $1, on the best possible security that could be desired, and any other financial proposition that has ever been suggested. If Stanford said this honestly, his words show him to be both an intellectual pioneer and a literary laggard. More familiarity with the literature of the subject would show him that he has had several predecessors in this path. Col. William B. Greene used to say of Lysander Spooner’s financial proposals that their only originality lay in the fact that he had taken out a patent on them. The only originality of Stanford lies in the fact that it is made for a government of 65,000,000 of people. For governments of other sizes the same proposal has been made before. Parallel to it in all essentials, both economically and politically, are Proudhon’s Bank of Exchange and the proposal of Hugo Bilgram. Parallel to it economically are Proudhon’s Bank of the People, Greene’s Mutual Banks, and Spooner’s real estate mortgage banks. And the financial thought that underlies it is closely paralleled in the writings of Josiah Warren, Stephen Pearl Andrews, and John Ruskin. If Stanford will sit at the feet of any of these men for a time, he will rise a wiser and more modest man.(90 ¶ 3)

Like most serious matters, this affair has its amusing side. It is seen in the idolization of Stanford by the Greenbackers. This shows how ignorant these men are of their own principles. Misled by the resemblance of the proposed measure to Greenbackism in some incidental respects, they hurrah themselves hoarse over the California senator, blisfully unaware that his bill is utterly subversive of the sole essential of Greenbackism,—namely, the fiat idea. The Greenbacker is distinguished from all other men in this and only in this,—that in his eyes a dollar is a dollar because the government stamps it as such. Now in Stanford’s eyes a dollar is a dollar because it is based upon and secured by a specific piece of property that will sell in the market for at least a certain number of grains of gold. Two views more antagonistic than these it would be impossible to cite. And yet the leading organs of Greenbackism apparently regard them as identical.(90 ¶ 4)

90 n. 1. At the time when this was written General Trumbull had just been guilty, and not for the first time, of stupidly confusing mutual money with fiat money, and as his ignorance of the difference between them was utterly without excuse and yet was given voice in that tone of superiority which ignorance is wont to assume, it seemed proper to administer this rebuke, which, though conceded to be just by some of General Trumbull’s best friends, was considered by others unduly severe. The writer is not behind these last in his admiration of General Trumbull as a man and a thinker. As a publicist he is usually and unusually witty and wise; only when discussing finance does he utter absurdities that justify the epithet above applied. ↩