The present system of our legislation seems founded on the total incapacity of mankind to take care of themselves or to exist without legislative enactment. Individual property must be maintained by invasions of personal rights and the "general welfare" secured by monopolies and exclusive privileges.
A campaign remark by Roger MacBride? A pungent commentary on Congress by Murray Rothbard? Or the frustrated indignation of a small businessman beset by OSHA and a dozen other government agencies?
None of the above. The observation was made March 11, 1835, by William Leggett in one of the innumerable editorials this 19th-century journalist wrote during an all too short career.
Some 140 years before the current crop of libertarians burst on the scene, Leggett was giving strident voice to a thorough-going belief in the principles we've come to associate with moderns such as Rand and Rothbard. It would be difficult to find a more consistent, cogent, or energetic advocate of liberty in American history. He attacked every conceivable type of government intervention in economic and social life. And contrary to popular opinion of the pre-Civil War era, there are few interventions today that were not already being practiced in some form back then.
Leggett was calling for laissez-faire in an age when government was being used in favor of business more often than against it. Though he was meticulously even-handed in his application of free-market principles, he was regarded by contemporaries, as he is now by most historians, to be in the labor camp. And in fact Leggett was the guru and spokesman for the New York-based Equal Rights or Locofoco party—a radical working-class spinoff from the Democratic Party. Created in 1835 as the earliest significant American labor movement, the Locofocos were probably more free-market oriented than the business community of that era.
Born in New York City in 1801, a son of Abraham Leggett—an officer during the Revolution—Leggett lived as a pioneer in Illinois for a time before taking a commission in the Navy in 1822. His naval career was cut short in 1825, when he was court-martialed for dueling with a fellow midshipman. As explained in the entry for Leggett in the Dictionary of American Biography, "His faults were chiefly hot temper and a witty, unruly tongue." For example, one of the charges against Leggett at his court martial was that the erstwhile young poet had quoted passages of Shakespeare "of highly inflammatory, rancorous and threatening import" against his captain.
But such faults were to serve Leggett well in his chosen profession. His came to be known as one of the most venomously articulate pens in the infant American newspaper world. Mencken and Pegler—and occasionally von Hoffman—are his only modern rivals at the art of ruthless, cynical commentary. After his military discharge, Leggett took up residence in New York City, where he devoted the remaining years before his untimely death in 1839 to intrepid political economic writing that enthralled some, scandalized others. He had no sacred cows. He attacked the Bank of the United States, and when Andrew Jackson destroyed that he attacked state banks. In analytical exposés that would make any Austrian economist proud, he called for an end to fractional-reserve banking and a return to gold and silver. He railed against government grants of monopoly, against tariffs, against government censorship, and against slavery.
The quotes used in this article are taken from The Collected Works of William Leggett, published in 1840, edited by his friend Theodore Sedgewick. It is regarded as the first American effort to honor the writings of a journalist.
After modest success as a poet, Leggett began writing for the New York Mirror and for his own short-lived weekly, The Critic. But his real fame and influence began when he became assistant editor and part owner with William Cullen Bryant of the New York Evening Post. During one period, June 1834 to October 1835, Leggett served as chief editor of the Evening Post while Bryant was in Europe. In Bryant's biography it is noted that when the great poet and editor returned from Europe he found "the journal without an editor, its business manager just dead, and its circulation, advertising revenue and influence disastrously injured by the ill-temper and lack of judgment with which Leggett has asserted a Locofoco Democracy, attacked monopoly and inflation and harried the Whigs." Leggett, whose ill health had prompted Bryant's return to America, was severed from the Evening Post. Even though Bryant made that paper one of the nation's strongest voices of Democratic, antimonopoly, sound-money, free-trade opinion, Leggett apparently found it too tame.
He now became editor of the Plaindealer, where he poured forth his increasingly anarchistic and abolitionist sentiment until that publication folded in September 1837. Simultaneously he found time to edit another daily, the Examiner. "How he finds time to write so much, I know not," Bryant is said to have remarked.
The 1830's were stormy years. America had developed its own peculiar form of aristocracy, the focal point of which was the small banking community. President Jackson succeeded in destroying the second incarnation of Federal central banking, and he distributed the government's deposits among some 80 "pet banks." In that day bank charters, like all corporate charters, were grants of privilege from state legislatures. These charters, conveying the right to print money to a selected few politically powerful institutions, were paid for in hard cash: "that peculiar species of argument with legislators…which, with very many men, constitutes the main ground of their desire to get into the legislature."
In an attack on the use of special legislation for special interests, published in the November 21, 1834, Evening Post, Leggett summarized the libertarian philosophy very aptly.
Governments have no right to interfere with the pursuits of individuals…by offering encouragements and granting privileges to any particular class of industry, or any select bodies of men, inasmuch as all classes of industry and all men are equally important to the general welfare, and equally entitled to protection.…Whenever a Government assumes the power of discriminating between the different classes of the community, it becomes, in effect, the arbiter of their prosperity.…It then becomes the great regulator of the profits of every species of industry, and reduces men from a dependence on their own exertions, to a dependence on the caprices of their Government.
For Leggett, the bottom line in judging the actions of government was the effect they would have on labor—a considerably broader category in early 19th-century parlance. The disenfranchised worker of that day, who was forbidden to organize to bargain collectively, was hit heavily by tariff walls that drove up prices and by fraudulent or exclusionary banking practices. And more ambitious citizens were preempted from many fields of entrepreneurship through the systematic denial of the benefits of incorporation to all but a few with political pull. Leggett, during the brief period of his writing, saw through the sophistry of arguments against free trade and sound money, and he gave the general citizenry the big picture on how the nascent U.S. corporate state was harming them.
Leggett's favorite targets were bank corporations, which he attacked as particularly evil cases of the legislative special-charter racket. While advocating the passage of a general law for joint-stock partnerships, he withheld his endorsement of general incorporation of banks until the advent of sound banking principles. In this respect, Leggett was a real precursor of the Austrian, Rothbardian position on money and banking—namely, that fractional reserve banking is both inflationary and fraudulent.
Beginning at least as early as 1814, states had allowed banks to break confidence with their depositors and default on their obligations by "suspending specie payments"—that is, refusing to redeem their banknotes in gold or silver. This enabled banks to create deposits at will by issuing more notes ("warehouse receipts" for specie) than they had gold or silver to back, thus creating windfall earnings on fictitious paper.
Leggett wrote prodigiously and contemptuously about this "fractional reserve banking," as it would come to be called. In a December 1834 editorial titled "The Monopoly Banking System," he identified the true nature and motive of this practice.
No set of men would desire a bank charter merely to authorize them to lend their money capital at the common rate of interest; for they would have no difficulty doing that without a charter, and without incurring the heavy expense incident to banking business. The object of a bank charter is to enable those holding it to lend their credit at interest, and to lend their credit too, to twice and sometimes three times the amount of their actual capital.
In the state of New York, as elsewhere, the banking system had become particularly enmeshed with the political authorities because of the state's need of a liberal credit machine to finance ambitious internal improvements like the Erie Canal. A state-sponsored cartel of banks had been created by the Democratic political machine (the Albany Regency). It was bolstered by a mutual insurance scheme known as the Safety Fund, which sought to protect all banks from the consequences of their own inflationary deposit and note creation. Commenting on this tightly held bank cartel, Leggett wrote in the December 1834 Evening Post:
The people of this state fondly imagine that they govern themselves; but they do not! They are led about by the unseen but strong bands of chartered companies. They are fastened down by the minute but effectual fetters of banking institutions. They are governed by bank directors, bank stockholders, and bank minions. They are under the influence of bank monopolies, with a host of associate and subordinate agents, the other incorporated companies depending on bank assistance for their means of operation. These evil influences are scattered throughout our community in every quarter of the state. They give the tone to our meetings; they name our candidates for the legislature; they secure their reelection; they control them when elected.
While longing for the abolition of restricted banking, Leggett qualified his support of "free banking." Writing on behalf of his libertarian labor constituency, he explained:
We would not have banking thrown open to the whole community until the legislature had first taken measures to withdraw our paper circulation. As soon as society should be entirely freed, by these measures, from the habit of taking bank notes as money, we would urge the repeal of the restraining law, and place banking on as broad a basis as any other business whatever.
Critics of free banking in the 19th century have charged that general incorporation, lack of regulation, and lack of central bank direction between 1832 and 1865 led to the chaos of "wildcat banking." The truth is that the "wildcat" or so-called free banking of that period was as much a mockery of the free market as was monopoly banking. The wildcat banks prospered by issuing large quantities of worthless banknotes and making it very difficult for the unlucky recipients to redeem them. Such fraud flourished under the benign neglect and often outright support of state and local governments, which sometimes used these fly-by-night institutions as convenient sources of support for their internal improvement bonds. Leggett inveighed against both abuses.
If anyone thinks that inflation is strictly a modern problem in America, consider that in the period of Leggett's greatest journalistic output (1834-37), money supply per capita (including only coins and banknotes in circulation) rose from $8.64 to $13.87 (according to the Annual Report of the Comptroller of the Currency, Dec. 4, 1916, vol. 2, p. 44). Most of the increase in banknotes was unbacked by real capital, and much of the capital was mere bonded debt of government. Many of the internal-improvements securities on which the pyramid of credit was founded would eventually be defaulted on by state and local governments.
On May 10, 1837, shortly after the Federal government had actually begun distributing a $37 million surplus among the states in a 19th-century form of revenue sharing, the inflationary bubble burst. All the banks in New York suspended specie payments, an action validated by the state for one year. Other states followed suit. Leggett, capsulizing the laissez faire philosophy of the radical Democrats and explaining cause and effect, had this to say in a Plaindealer editorial:
Banking is a good thing enough in its intrinsic nature; but government should have no connection with it, and should recognize nothing as money but silver and gold.…We are not an enemy to a paper representative of money, any more than we are to confidence between man and man in any other shape it may naturally assume, for mutual convenience in the transaction of necessary dealings.…We are not an enemy to banking.…We are an enemy only to a mixture of politics with banking; to the vain attempts to regulate the channels in which trade shall run; to that legislative intermeddling which withdraws credit from the harmonious operation of its own laws, disturbs its equal flow, and leaves the community to be at one time deluged with a cataclysm of paper money and at another exposed to all the horrors of financial drought.
To Leggett, the Panic of 1837 was caused "by the inevitable operation of monopoly legislation…the wretched charlatanry, which seeks to prop up an artificial system of credit with special statutes, and hedge it round with penalties and prohibitions." It also demonstrated "the consequences of that folly which would substitute the laws of man for those of nature, and wholly change the irreversible order of causes and effects." But would the public or the politicians learn any lessons from this latest denouement of the boom-bust cycle? "What can legislation do?" demanded Leggett. "Insult the community, by confirming the special privileges of money changers, after their own acts have declared their utter worthlessness? Enable a band of paper money depredators to prey more voraciously than before on the vitals of the people? Authorize them to pour out a fresh torrent of their promises? Will the community tolerate such an enormous fraud?"
"Let the banks perish," said Leggett. "Now is the time for the complete emancipation of trade from legislative thraldom. If this propitious moment is suffered to pass by unimproved, the fetter, now riven almost asunder, will be riveted anew, and hold us in slavery forever."
As anyone who now endures the vicissitudes of the Federal Reserve's monetary "targets" and the threats of the IRS and the FBI to the privacy of bank accounts knows, history has not taken Leggett's advice.
William Leggett—a creature, a phenomenon, of the 1830's—did not live beyond the end of that colorful decade. In 1838, he nearly succeeded in winning a Democratic nomination to Congress but was rejected as too radical on the basis of his antislavery convictions. In 1839, President Van Buren appointed him diplomatic agent to Guatemala, his friends hoping the climate would save his health. He died before sailing. He was buried in a New Rochelle cemetery, where, ironically, the Tammany Young Men's General Committee erected a monument over his grave. The fact that Leggett had had running battles with the Tammany Hall administration throughout his career is testament to the esteem in which this libertarian man of principle and integrity was held.
Steve Beckner is editor of Deaknews, a financial newsletter published by Deak & Co. He is a graduate of Duke University, where he majored in history and economics. His articles have appeared in such publications as Human Events, Boardroom Reports, and the Congressional Record.
This article originally appeared in print under the headline "Leggett".