This was not all. The bank offered the freed slaves a feeling of racial pride and dignity. Years later, Frederick Douglass recounted his overwhelming wonder upon seeing the black bank employees at the Washington office:
In passing it on the street I often peeped into its spacious windows, and looked down the row of its gentlemanly and elegantly dressed colored clerks, with their pens behind their ears and button-hole bouquets in their coat-fronts, and felt my very eyes enriched. It was a sight I had never expected to see. I was amazed with the facility with which they counted the money. They threw off the thousands with the dexterity, if not the accuracy of old fashioned clerks. The whole thing was beautiful. I had read of this bank when I lived in Rochester, and had indeed been solicited to become one of its trustees, and had reluctantly consented to do so; but when I came to Washington and saw its magnificent brown stone front, its towering height, its perfect appointments and the fine display it made in the transaction of its business, I felt like the Queen of Sheba when she saw the riches of Solomon, that “the half had not been told me.”141
Indeed, it was a sight that Douglas, born into slavery, must have viewed as a miracle of progress. Douglass remembered one morning when he “found [him]self seated in a comfortable arm chair, with gold spectacles on [his] nose” and heard himself referred to as “President of the Freedmen’s Bank." It made him reflect on “the contrast between Frederick the slave boy, running about at [his master’s home] with only a tow linen shirt to cover him, and Frederick— President of a bank—counting its assets by [the] millions."142 For the new bank president and the depositors, the bank held a promise of the independence, respect, and power that was not yet within their grasp.
Such was the allure of counterfeit capitalism—it had such a convincing semblance to the real thing that it was able to conceal the fact that blacks were still being consumed by capitalism as opposed to fully participating in capital production. The reality of Reconstruction was that the southern plantation economy still exploited black labor, and through the Freedmen’s Bank, the northern capitalist economy also exploited black capital. The bank was an effective decoy, but blacks were not in control of their economic destiny.
The credit arrangements of the South also had the veneer of selfdetermination and freedom, but this turned out to be yet another form of bondage. Without wealth or land, the majority of black southerners turned toward sharecropping arrangement to make a living.143 Legally, the sharecroppers were freedmen and the white plantation owners were their landlords; in reality, the arrangement was fraught with many of the tensions and inequalities of their former relationship. “The strong economic chain between master and slave had not been broken by the stroke of Lincoln’s pen," said an observer at the turn of the century.144 Physical bondage was replaced by debt bondage.
Sharecroppers paid for the land, supplies, and tools using credit, and they paid back their debts with their crop yields, typically with nothing left to spare. Usually the landlord did the calculations himself, and the illiterate debtor would have to trust that he had made no surplus year after year.145 Each plantation became its own system of banking and debt collection as blacks lost access to the democratically accountable justice systems of the state. Moses Burge, whose father was a sharecropper in Georgia, explained, “We went barefooted. My feet been frostbitten lots of times. My dad couldn’t afford to buy no shoes. He’d get in debt and he’d figure every year he going to get out . . . [then] they’d tell you, ‘You bought so and so.’
They get through figuring it up you lacking $100 of coming clear. What the hell could you do? You living on his place, you couldn’t walk off."146 Nor could he dispute the debt for fear of violence or worse.
W. E. B. Du Bois, who conducted extensive interviews and data collection on sharecropping arrangements, called it “a system of peonage that kept [blacks] in debt virtually from cradle to grave."147 Sharecroppers paid exorbitant interest for their supplies, and all “wages" or “payments" were in the form of “store credit" to be redeemed at the local store, where money rarely changed hands and account keeping was loose. These merchants were “a curious institution,—part banker, part landlord" or “part banker, and part despot."148 Even black landowners were at the mercy of their creditors, on whom they relied for their supplies. Any unwelcomed behavior, like voting Republican or speaking out in any way, could imperil one’s access to a loan.149
High debt made sharecroppers plant more cotton, which was the only crop they could sell for money to pay down their debt, which meant that they had less land and resources to grow crops that could feed their families. The cotton traders could not have been happier with the outcome.150 Not only did the United States retain its position as the world’s top cotton exporter, but the new system produced even more cotton than before the war.151 But for sharecroppers, the credit cycle ensured both perpetual debt and perpetual poverty and a singular focus on cotton production.152 To be sure, white yeomen farmers were also sucked into the cotton / debt cycle.
The hardships caused by cotton and debt almost erupted into a revolution during the depression of the 1880s and 1890s. The downturn stirred the simmering angst relentless debt had created and almost upset the hard-won economic and social ordering of the South once again. Indeed, for a moment, a window opened where it seemed possible that poor whites and blacks would join together to overthrow the cotton oligarchy. Southern historian William Garrott Brown called the upheaval a “revolution," explaining, “I would use a stronger term if there were one; for no other political movement—not that of 1776, nor that of 1860-1861—ever altered Southern life so profoundly."153
The southern Populists led the political revolution. They railed against credit shortages, debt peonage, and powerful northern bankers and industrialists whose tight monetary policies they blamed for the South’s poverty. They demanded looser credit through expansion of the money supply. Specifically, they rejected the gold standard, which they believed favored Northeast bankers and constricted credit flow to the farmers of the South and West. Williams Jennings Bryan most famously articulated their cause in 1896, telling bankers that they could not crucify humanity, or southern farmers, on their “cross of gold.”154 A variety of populist coalitions including the Grangers, the Farmers Alliance, the Knights of Labor, the free sil-verites, and greenbackers demanded silver currency, labor reform, breaking up of banking monopolies—in short, an end to their debt trap.155 On a smaller scale, these groups joined together to form small cooperative banks like credit unions and building and loans. These “people’s banks” sought to counter the power of big Wall Street and London banks with local control by small farmers. In the American South and West, populism was about credit, or the lack thereof.156
Poor black and white farmers were natural allies in this fight, and the Populist Party in the South attempted to forge this alliance. “They are in the ditch just like we are,” said a Texas Populist leader.157 Thomas Watson, leader of the southern Populist Party, explained that white supremacy was a deception that blinded the poor and pitted them against each other in order to perpetuate “a monetary system which beggars you both.” The Populists urged “color tenants” to stand with white tenants and promised that the People’s Party would “wipe out the color line and put every man on his citizenship irrespective of color.”158 The Populists went further than all the other parties, including the Republican Party, with respect to racial equality. “I am in favor of giving the colored man full representation,” said the president of the Populist convention in Texas. “He is a citizen just as much as we are, and the party that acts on that fact will gain the colored vote of the south.”159 In the 1890s the Knights of Labor attempted to build the first biracial populist organization, claiming that 15 percent of their 600,000 members were black.160 Frederick Douglass had suggested just such an alliance between yeomen and freedmen in 1866—“a party . . . among the poor.”161
Just as the Reconstruction reformers had failed to break the cotton oligarchy a
nd achieve black equality, so too did the Populists. They failed because the established political parties of the North and South had already understood that sowing animosity between poor whites and poor blacks was the easiest way to maintain the status quo and to reject the costly and disruptive demands of a coalition of the poor. In the end, a racial hierarchy was preferable to class revolt. Once again, the revolution was stifled by viol ence. Public lynching, cross burnings, and the Klan vented rage and resentment at the black underclass. The war-ravaged and economically depressed South created a breeding ground ripe for racial hostility. If aggression is the result of frustration, said historian C. Vann Woodward, “then the South toward the end of the [1890s] was the perfect cultural seedbed for aggression against the minority race. Economic, political, and social frustrations had pyramided to a climax of social tensions."162
Southern planters and northern industrialists joined forces in maintaining a racial hierarchy that benefited both by preserving the status quo. Northern liberals left the divisive “Negro issue" alone and even enabled the South’s racial hierarchy for the sake of peace and unity. The most powerful and effective formula for “redeeming the South" was the “magical formula of white supremacy," which the South used unapologetically.163 Judges, politicians, and newspapers all obliged—preferring to save the union that survived the Civil War by sacrificing the rights of blacks. It became common during the 1890s to hear northern liberals profess the strength of the union and accept the South’s need to keep black labor under the fist of the state.164
In order to maintain absolute control of the levers of state power and enforce a permanent racial hierarchy, southerners worked tirelessly to keep blacks from the polls. Having to contend with the Fifteenth Amendment, innovative southern politicians created literacy tests, property ownership requirements, and poll taxes, making sure to create loopholes for poor whites through “grandfathering" clauses.165 Disenfranchisement was swift and total. Slowly and then suddenly, all the rights written into the Thirteenth, Fourteenth, and Fifteenth Amendments were nullified by southern legislatures, courts, and the paramilitary-style violence of the Klan.166
Economic and political necessity required the continued exploitation and disenfranchisement of blacks. Although white supremacy accrued justifications based on religious texts, or on moral and ethical grounds, its true intent was economic subjugation.167 As Hannah Arendt observed, “the tremendous power of persuasion inherent in [the ideology of race thinking] is not accidental. Persuasion is not possible without appeal to either experiences or desires, in other words to immediate political needs." She called race thinking a “political weapon," and so it was in the South.168
The inhuman institution of slavery required the dehumanization of black slaves, and so too did the South’s post-Reconstruction economy. U.S. congressman David A. DeArmond of Missouri described blacks as “almost too ignorant to eat, scarcely wise enough to breathe, mere existing human machines."169 Senator James K. Var-daman of Mississippi, justifying the disenfranchisement of the black vote, explained, “I am just as much opposed to Booker Washington as a voter, with all his Anglo-Saxon re-enforcements, as I am to the coconut-headed, chocolate-colored, typical little coon, Andy Dotson, who blacks my shoes every morning. Neither is fit to exercise the supreme function of citizenship."170 Senator Benjamin Tillman of South Carolina bragged in a public lecture that he did not know how many black men he had killed himself, and even advocated the extermination of the 30,000 blacks in his state.171
The South was not alone in enforcing the racial and economic order. The U.S. Supreme Court also fell in line, though instead of inflammatory language, they used sophisticated constitutional interpretation to deprive blacks of their rights. In 1883, the Supreme Court declared the Civil Rights Act of 1875—a law that would have fined businesses for racial discrimination—unconstitutional. The Court held that the law was an infringement on freedom and was unnecessary since slavery had already been over for twenty years. It was time for blacks to stand on their own two feet without the help of the state. Justice Joseph Bradley wrote in the majority opinion, “When a man has emerged from slavery, and, by the aid of beneficent legislation, has shaken off the inseparable concomitants of that state, there must be some stage in the progress of his elevation when he takes the rank of a mere citizen and ceases to be the special favorite of the laws, and when his rights as a citizen or a man are to be protected in the ordinary modes by which other men’s rights are protected."172 Since 2,000 blacks would be lynched over the next several years for alleged crimes without any due process, it was premature to declare that their rights were being protected by ordinary modes of justice.173
In a series of decisions between 1873 and 1898, including the Slaughterhouse Cases, United States v Reese, and United States v
Cruikshank, the Supreme Court weakened the rights of black citizens and their ability to contest racism. The Supreme Court was not just reconciling the North and the South, but navigating federal and state tensions that had simmered to a boiling point during the Civil War. Each of these cases gave states power over the treatment of their citizens and weakened federal oversight. In two 1890 cases, Louisville, New Orleans, and Texas Railroad v. Mississippi, the Court ruled that states were permitted to segregate their carriers.174 In Williams v. Mississippi, the Court cleared the way for southern states to disenfranchise black voters. And then in 1896, Plessy v. Ferguson dealt the most devastating and long-lasting blow by blessing the doctrine of “separate but equal,” which legitimatized Jim Crow laws and segregation for half a century.175 By the time the Supreme Court was finished, the Equal Protection Clause of the Fourteenth Amendment was deprived of all meaning. In fact, for the next century, it came up more to defend corporations against state overreach than it did black men and women against the hostile arm of the state. These cases moved the law toward protection of property as the primary objective as opposed to protection of blacks from violence.176 According to one historian, by 1900, “the slave law of the South may have been dead, but it ruled us from its grave.”177
Jim Crow laws, virtually absent during Reconstruction, now proliferated and governed all social interaction between the races. Doors and walls were painted with “white only” signs and different entrances were created at public venues, worksites, and common spaces. A typical code was the South Carolina law that prohibited textile workers from working in the same room or using the same entrances, exits, pay windows, doorways, stairways, or windows at the same time as black workers. White bathrooms, drinking fountains, glasses, and buckets were not to be used by blacks at any time.178 These laws, both written and unwritten, effectively cut blacks out of public life. Jim Crow was the dead and heavy hand of slavery pushing down a new generation of blacks born free. It was the defining feature of southern life after Reconstruction, and each citizen was implicated in its enforcement.179
Once the Supreme Court deprived blacks of their rights to due process, southern courts and police became tools of oppression and the maintenance of the new social and economic order. The legislatures made Jim Crow the rule of law, police enforced it, and courts punished violators. Blacks lived in a police state in the South with the tacit approval of the Supreme Court.180 Added to that were the constant, random, and vicious acts of terrorism—the “Southern trees that began to bear strange fruit, Blood on the leaves and blood at the root."181 All of which was condoned, enforced, and perpetuated by state power.
Capitalism without Capital
Most were not so lucky. The Great Depression broug
Civil Rights Dreams, Economic Nightmares
Nixon asked Secretary of Commerce Maurice Stans, a
The Free Market Confronts Black Poverty
The Color of Money Matters
Epilogue
Chapter 3 The Rise of Black Banking
49. The Presidential Nominating Conventions, Congr
99. Ibid.
Wealth: of black versus white families, 1, 249, 34
C
apitalism without Capital
Because race was used as a political weapon to marginalize and exploit blacks, race also created a vibrant community. As modern writer Ta-Nehisi Coates put it, “They made us into a race. We made ourselves into a people."1 Blocked from the political process by law and violence, black communities formed their own institutions. There were charities to care for the poor and insurance funds to protect against risk. There were fraternal societies for social and cultural events and travel agencies that facilitated excursions to celebrate a variety of black holidays and celebrations such as Ju-neteeth and Freedom Day. All of these institutions were created because Jim Crow pushed blacks out of white society, but they all became focal points of racial pride and solidarity.2
Post-Reconstruction, the first wave of black institutions were mutual aid societies or fraternal societies, which provided a variety of essential services. Churches were usually the central pillars that hosted an array of ancillary social and economic institutions.3 By the turn of the century, practically every black church was linked with at least one or more “benevolent societies." In the 1880s, churches began creating insurance-like funds, but their administration was unsophisticated. They were not based on actuarial models that took account of risk probabilities. They often took on people who were sick and elderly and did not charge enough in premiums to stay solvent. These early insurance funds looked more like charities than businesses, and most quickly ran out of funds.4 By the turn of the century, however, these funds separated from the church and became more sophisticated and profitable.5
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