Mises Daily Articles
Andrew Jackson: Then and Now
The presidency of Andrew Jackson (1829–1837) was one of the most controversial and transcendent periods in US history. The two major debates that reached their peak during his time in office concerned secession and the central bank (then the Second Bank of the United States). Although Jeffersonians and libertarians generally disagree with Jackson's stance on secession, Jackson did follow in Jefferson's footsteps by bringing down the Bank.
At the time, these issues were extremely controversial from both a pragmatic and a moral perspective. Yet, over the past 100 years, the mainstream media and general public have essentially dismissed these issues to the point where they are often considered anachronistic or radical. As decades pass, do morals change so greatly? Is Jackson's main complaint of the corruption surrounding the Bank no longer relevant? Have our political leaders and government institutions become more righteous?
Jackson versus the Bank
In the 2008 Pulitzer Prize winner and New York Times bestseller American Lion, Jon Meacham notes,
Jackson believed the country was being controlled by a kind of congressional-financial-bureaucratic complex in which the needs and concerns of the unconnected were secondary to those who were on the inside. It was an oversimplified view, to be sure, but he was convinced of it, as he was convinced that he was to play the hero's role. (p. 120)
Jackson was determined to defeat all of the forces that supported the bank. He challenged the head of the Second Bank of the United States, Nicholas Biddle, by removing the government's deposits and refusing to renew the bank's charter. Meacham explains that
Biddle could not really conceive of either. His view of his own power was absolute. Presidents came and went, but the Bank, Biddle believed, was eternal. (p. 103)
Some of Jackson's tactics for bringing down the Bank were questionable; however, his relentless effort to do so highlights his character as a leader who unswervingly stood by certain principles.
In his 1832 presidential campaign, opposition to the bank was one of the main planks in his platform. He ran under the slogan "Jackson and no bank" and he received an enormous amount of support from the general population. To the public, he articulated that the Bank was "the embodiment of unfair privilege."
I was aware that the Bank question would be disapproved by all the sordid and interested who prized self-interest more than the perpetuity of our liberty, and the blessings of a free republican government … I foresaw the powerful effect, produced by this moneyed aristocracy, upon the purity of elections, and of legislation; that it was daily gaining strength, and by its secret operations was adding to it.… I have brought it before the people and I have confidence that they will do their duty. (p. 121–122)
Jackson understood the importance of having the people's support for this vital aspect of his agenda. He understood that many politicians had close relationships with the Bank, some others did not acknowledge the importance of the issue, and another group genuinely believed in a need for government to have an influence over the nation's money. Therefore, he believed that it was his obligation to educate the masses in order to gain their support. Jackson agreed with Jefferson in that the notion of a central bank ran contrary to that of a truly free society. Jefferson also stated,
I know no safe depository of the ultimate powers of the society but the people themselves; and if we think them not enlightened enough to exercise their control with a wholesome discretion, the remedy is not to take it from them, but to inform their discretion by education.
Without strong support from the general population, Jackson could not have succeeded. As part of his plea to the people, he argued that the Bank concentrated the nation's financial strength in a single institution; exposed the government to foreign influence; served mainly to make the rich richer; exercised too much control over members of Congress; and favored northeastern states over southern and western states.
The Central Bank Today
If the public responded so strongly in support of Jackson's opposition to the bank then why was the Federal Reserve introduced in 1913? Why has opposition to a central bank essentially been pushed to the side in public debate since the formation of the Fed? Do foreign interests no longer cooperate with the Fed? Does the Fed no longer have an influence over the legislative branch? Have financial institutions not come to dominate much of the nation's money and received special privileges?
A large part of why a central bank was successfully reintroduced in 1913 was due to support from the mainstream media and academia. As most of Europe had already adopted a paper currency system, the media and academic community had already developed flawed, yet highly accepted, arguments supporting the need for a paper standard and a central bank. In the United States, many of the bankers pushing for a central bank used their own financial power to influence the media, academics, and politicians. In addition, Woodrow Wilson did not inform the general population of the negative aspects of a secretive bank with full control over the nation's money supply. In 1913, he did not make statements like Jackson's:
It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. (p. 210)
In fact, after the Fed was established in 1913, very few presidents have even mentioned the issue of monetary policy, which dominated the political stage throughout the entire 19th century. Monetary policy was debated by every 19th-century president, yet the debate essentially came to a standstill after the Fed was built.
Most modern-day politicians will argue that there is no need to discuss monetary policy because the Fed has performed well. However, Austrian economists can point to many flaws in US monetary policy since the Fed's creation, not least the fact that the dollar has lost 97 percent of its purchasing power since 1913.
Senator DeMint of South Carolina recently asked Fed chairman Ben Bernanke several questions regarding the actual performance of the Fed based on its duties stated in 2005:
"Fostering stability of the financial system and containing systemic risk that may arise in the financial markets."
"Supervising and regulating the banking system to promote the safety and soundness of the nation's banking system and financial system."
"Conducting the nation's monetary policy in pursuit of the statutory objective of maximum employment."
Chairman Bernanke cannot claim to have performed these duties well. In fact, the US unemployment rate is currently over 10 percent. Therefore, given that the Fed has failed to achieve its objectives stated in 1913 and its duties as stated by Bernanke in 2005, the Fed has recently been subjected to significant pressure. This pressure has been spearheaded by Ron Paul, who could be compared to Andrew Jackson in certain ways. Ron Paul has been successful in educating the public just as Jackson was in the 1830s. The main objective of Ron Paul's recent criticisms is to expose the operations of the Fed to the American people.
Ben Bernanke and supporters of the Fed have done their best to protect the status quo, just as did their predecessors during Jackson's time in office:
On Monday, October 7, 1833, Biddle held a board meeting in Philadelphia. He would, he said, call in loans and restrict credit in order to create a popular backlash against Jackson. It was a bald, bold maneuver — and one that played into Jackson's caricature of the Bank as an aristocratic institution more interested in self-perpetuation than in the good of the country. (p. 269)
Is 2010 much different than 1833? Are there not certain individuals closely tied to the bank who are more interested in self-perpetuation than in the good of the country?
The largest branch of the Federal Reserve, in New York, is surrounded by huge buildings such as JP Morgan Chase (often referred to as The Rockefeller Bank), Brown Brothers Harriman (financial tycoons since before Andrew Jackson) and Goldman Sachs (a few blocks away). Jamie Dimon, CEO of JP Morgan Chase, is currently a "Class A" director of the New York Fed. In fact, this position has been consistently held by Wall Street elites, including David Rockefeller of JP Morgan Chase, John C. Whitehead of Goldman Sachs, and many others. Not only do the heads of banks spend time inside the Federal Reserve building, but Fed employees also conduct their duties in the offices of neighboring banks, since the Fed building does not have adequate space to accommodate all its employees.
(Coincidentally, during the recent financial crisis, not only did Goldman Sachs and JP Morgan Chase perform very well trading derivatives but the two banks made it through the crisis virtually unscathed.)
If Jackson's assertion of corruption surrounding the bank in the 1830s was enough to stir the public's interest, why is this no longer a concern to the general public in 2010? If Andrew Jackson currently held the role of president, he would certainly attempt to abolish the bank altogether. Yet the bank is now much larger, much more powerful, and perhaps even more secretive.
Today's Fed not only operates in secret from the congress and the people but it has also managed to avoid criticisms from the mainstream media. Fortunately, a few political figures such as Congressman Paul and Senator DeMint have taken a Jacksonian stance. They have been very effective in stirring concerns among the general population. Most importantly, they stand as firm on this issue as Jackson himself. In 1833, after removing government deposits from the Bank, he exclaimed,
I tell you I will never restore the deposits. I will never recharter the United States Bank.… Here I am receiving one or two anonymous letters every day threatening me with assassination.… Is Andrew Jackson to bow the knee to the golden calf? (p. 272)