Empire of Liberty: A History of the Early Republic, 1789-1815
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THE REMOVAL OF THE NATIONAL CAPITAL in 1800 from Philadelphia to the rural wilderness of the Federal City on the Potomac accentuated the transformation of power. It dramatized the Republicans’ attempt to separate the national government from intimate involvement in the society. “Congress were almost overawed by the city [of Philadelphia],” recalled Matthew Lyon of his experiences as a congressman in the 1790 s; “measures were dictated by that city.” Lyon even referred to the sources of influence as “a commanding lobby,” one of the first instances of the term being used in this modern sense. Other congressmen had also feared the influence of Philadelphia’s lobbyists. “We talk of our independence,” Nathaniel Macon of North Carolina reminded his congressional colleagues, “but every man in Congress, when at Philadelphia, knew that city had more than its proportional weight in the councils of the Union.” To prevent this kind of social and commercial pressure, many of the Republicans aimed to erect the very kind of government that Hamilton in Federalist No. 27 had warned against, “a government at a distance and out of sight” that could “hardly be expected to interest the sensations of the people.”36
The new capital, as a British diplomat noted, was “like no other in the world.” It was surrounded by woods, its streets were muddy and filled with tree stumps, its landscape was swampy and mosquito infested, and its unfinished government buildings stood like Roman ruins in a deserted ancient city. Although one could easily could get mired in the red mud of Pennsylvania Avenue, “excellent snipe shooting and even partridge shooting was to be had on each side of the main avenue and even close under the wall of the Capitol.”37 Cows grazed on the Mall, and Pierre L’Enfant’s splendid squares were used as vegetable gardens. Not a single merchant house stood in the city, nor anything in the way of clubs or theaters. Land auctions were held, but few bids were made. Washington’s hopes for a national university in the city went begging. The Potomac was dredged, bridges were built, but still no trade, no business, came to the capital. The bulk of the tiny population seemed to be on poor relief.
The Federal City remained such a primitive and desolate village that, in the words of the secretary of the British legation, “one may take a ride of several hours within the precincts without meeting a single individual to disturb one’s meditations.”38 Since houses were scattered and had no street numbers and the few existing roads had no lamps and often trailed off into cow paths, people easily got lost. If it had been completed, the Capitol would have been imposing, but the Senate and House chambers stood in unfinished isolation, joined by only a covered boardwalk. Inside the Capitol, the design and workmanship were so poor that columns split, roofs leaked, and portions of the ceilings collapsed. Still, Jefferson lived with the hope, as he said in 1808, that “the work when finished will be a durable and honorable monument of our infant republic, and will bear favorable comparison with the remains of the same kind of the ancient republics of Greece and Rome.”39
The “President’s Palace,” as the White House was originally called, was the largest house in the country and, because of Washington’s influence, was as impressive as the Capitol, but it was equally unfinished. For years its grounds resembled a construction site with workmen’s shacks, privies, and old brick-kilns scattered about, so cluttered, in fact, that visitors to the President’s House were always in danger of falling into a pit or stumbling into a heap of rubbish. Because of the unwillingness of the parsimonious Republican Congress to spend money, everything in the capital remained unfinished, complained the English-trained architect Benjamin Latrobe, who had migrated to the United States in 1796 and had become surveyor of public buildings under Jefferson.40
In other words, this new and remote capital, the city of Washington in the District of Columbia, utterly failed to attract the population, the commerce, and the social and cultural life that were needed to make what its original planners had boldly expected, the Rome of the New World. Instead of acquiring the population of one hundred sixty thousand that one of the city’s commissioners had predicted “as a matter of course in a few years,” Washington remained for the next two decades an out-of-the-way village of less than ten thousand inhabitants whose principal business was the keeping of boardinghouses.41 Situated on a marsh, the Federal City fully deserved the many jibes of visitors, including that of the Irish poet Thomas Moore:
This fam’d metropolis, where fancy sees
Squares in morasses, obelisks in trees;
Which traveling fools and gazetteers adorn
With shrines unbuilt and heroes yet unborn,
Though nought but wood and [Jefferson] they see,
Where streets should run and sages ought to be!42
THE REPUBLICANS IN FACT meant to have an insignificant national government. The federal government, Jefferson declared in his first message to Congress in 1801, was “charged with the external and mutual relations only of these states.” All the rest—the “principal care of our persons, our property, and our reputation, constituting the great field of human concerns”—were to be left to the states, which Jefferson thought were the best governments in the world.43 Such a limited national government meant turning back a decade of Federalist policy in order to restore what Virginia Republican theorist John Taylor called the “pristine health” of the Constitution. The Sedition Act was allowed to lapse, and a new liberal naturalization law was adopted. Because of what Jefferson called the Federalist “scenes of favoritism” and “dissipation of treasure,” strict economy was ordered to root out corruption.44
The inherited Federalist governmental establishment was small even by eighteenth-century European standards. In 1801 the headquarters of the War Department, for example, consisted of only the secretary, an accountant, fourteen clerks, and two messengers. The secretary of state had a staff consisting of a chief clerk, six other clerks (one of whom ran the patent office), and a messenger. The attorney general did not yet even have a clerk. Nevertheless, in Jefferson’s eyes, this tiny federal bureaucracy had become “too complicated, too expensive,” and offices under the Federalists had “multiplied unnecessarily.”45
The number of offices had certainly grown over the previous decade. The listing of offices in the early 1790s took up only eleven pages; ten years later the roll filled nearly sixty pages.46 Everywhere in the previous Federalist administrations, Jefferson saw “expenses . . . for jobs not seen; agencies upon agencies in every part of the earth, and for the most useless or mischievous purposes, and all of these opening doors for fraud and embezzlement far beyond the ostensible profits of the agency.”47 Thus the roll of federal officials had to be severely cut back. All tax inspectors and collectors were eliminated, which shrank the number of treasury employees by 40 percent. The diplomatic establishment was reduced to three missions—in Britain, France, and Spain. If Jefferson could have had his way, he would have gotten rid of all the foreign missions. Like other enlightened believers in the possibility of universal peace, he longed to have only commercial connections with other nations.48
The Republicans were determined to destroy the Federalist dream of creating a modern army and navy. When Jefferson learned early in 1800 of Napoleon’s coup d’état of November 1799 that overthrew the French Republic, he did not draw the lesson the Federalists did: that too much democracy led to dictatorship. Instead, he said, “I read it as a lesson against standing armies.”49 After he took office, he made sure that the military budget was cut in half. Since the armed forces had been the largest cause of non-debt-related spending in the 1790s, amounting to nearly 40 percent of the total federal budget, this action meant a severe decrease in the overall expenditures of the national government.
Because the officer corps of the army was Federalist-dominated, it needed to be radically reformed, with the most partisan Federalist officers dismissed and the rest made loyal to the Republican administration. Although Jefferson in the 1790s had opposed the creation of a military academy, he now favored the establishment of one at West Point as a means of educating
Republican army officers, especially those whose families lacked the wealth to send their sons to college. The Military Peace Establishment Act of 1802 that laid the basis for Jefferson’s reform of the army gave the president extraordinary powers over the new academy and the Corps of Engineers charged with its operation.50
Until it could be thoroughly “republicanized,” the army, stationed in the West, was left with three thousand regulars and only 172 officers. The state militias were enough for America’s defense, said Jefferson. Although the navy’s war machine consisted of only a half-dozen frigates, Jefferson wanted to replace this semblance of a standing navy with several hundred small, shallow-draft gunboats, which were intended simply for inland waters and harbor defense. They would be the navy’s version of the militia, unquestionably designed for defense of the coastline and not for risky military ventures on the high seas. Such small, defensive ships, said Jefferson, could never “become an excitement to engage in offensive maritime war” and were unlikely to provoke naval attacks from hostile foreign powers.51 The kind of permanent military establishment the Federalists had desired was both expensive and, more important, a threat to liberty.
Since Hamilton’s financial program had formed the basis of the heightened political power of the federal government, it above all had to be dismantled—at least to the extent possible. It mortified Jefferson that his government inherited “the contracted, English, half-lettered ideas of Hamilton. . . . We can pay off his debt in 15 years, but we can never get rid of his financial system.” But something could be done. All the internal excise taxes the Federalists had designed to make the people feel the energy of the national government were eliminated. For most citizens the federal presence was reduced to the delivery of the mail. Such an inconsequential and distant government, noted one observer in 1811, was “too little felt in the ordinary concerns of life to vie in any considerable degree with the nearer and more powerful influence produced by the operations of the local governments.”52
ALTHOUGH JEFFERSON’S EXTREMELY ABLE secretary of the treasury, Albert Gallatin, persuaded the reluctant president to keep the Bank of the United States, the government was under continual pressure to reduce the Bank’s influence, especially from state banking interests. When the Bank of the United States was chartered in 1791, there were only four state banks; but since then their numbers had grown and were continuing to grow dramatically, twenty-eight by 1800, eighty-seven by 1811, and 246 by 1816. Despite the hopes of some Federalists that the branches of the BUS might absorb the state banks, that had not happened. In 1791 Fisher Ames had predicted that “the state Banks will become unfriendly to that of the U.S. Causes of hatred & rivalry will abound. The state banks . . . may become dangerous instruments in the hands of state partisans.”53 Ames was correct. The proliferating state banks resented the restraints the BUS was able to place on their ability to issue paper money, and from the beginning they sought to weaken or destroy it.
Then as now banking remained a mysterious business for many Americans. Many of the Southern planters scarcely understood banking, and those Northern gentry who lived off salaries or proprietary wealth such as rents and interest from money out on loan were not much more knowledgeable. The only real money, of course, was specie or gold and silver. But since there was never enough specie and it was unwieldy to carry, the banks issued pieces of paper (that is, made loans) in their own names, promising to pay gold and silver to the bearer on demand. Yet most people, confident that the bank could redeem their notes at any time, did not bother to have them redeemed and instead passed the notes on to one another in commercial exchanges. The banks soon realized they could lend out two, three, four, or five times in paper notes the amount of gold and silver they had in their vaults to cover these notes. Since the banks made money from these loans, they had a vested interest in issuing as many notes as they could.
Opposition to the Bank of the United States came from two principal sources: from Southern agrarians like Jefferson who never understood banks and hated them, and from the entrepreneurial interests of the state banks who did not like their paper-issuing abilities restrained in any way. In 1792 Jefferson was so angry at Hamilton that he told Madison that the federal government’s chartering of the BUS, which it had no right to do, was “an act of treason” against the states, and anyone who tried to “act under colour of the authority of a foreign legislature” (that is, the federal Congress) and issue and pass notes ought to be “adjudged guilty of high treason and suffer death accordingly, by the judgment of the state courts.” Obviously this was one of those times that Madison was referring to when he said that Jefferson, like other “men of great genius,” had a habit of “expressing in strong and round terms, impressions of the moment.” Jefferson never really accepted the idea of a bank (“a source of poison and corruption”) or the paper it issued. Such paper, he said, was designed “to enrich swindlers at the expense of the honest and industrious part of the nation.” He could not comprehend how “legerdemain tricks upon paper can produce as solid wealth or hard labor in the earth. It is vain for common sense to urge that nothing can produce but nothing .”54
But the more important enemies of the BUS were the state banks. By regularly redeeming the outstanding notes of the state banks, the BUS had checked their ability to issue notes too far in excess of what they could cover with specie, that is, their reserves; and this had become a deep source of anger. In addition, the state banks resented the monopolistic position the BUS had in holding the national government’s deposits and condemned it for being Federalist and British-dominated. Jefferson agreed. If they had to exist, then, as he told Gallatin in 1803, he was “decidedly in favor of making all the banks republican by sharing [the federal government’s] deposits amongst them in proportion to the dispositions they show,” by which he meant their loyalty to the Republican cause.55 When the twenty-year charter of Hamilton’s BUS was about to expire in 1811, it was not surprising that these state banks were determined that it would not be renewed.
Despite the opposition of President Jefferson and later President Madison to the BUS, Gallatin, who knew something about banks and had created in 1793 a state bank for Pennsylvania modeled on the BUS, urged that the Bank of the United States be issued a new charter. He knew that the issue was tricky, that the Virginia Republicans regarded the Bank as a British bank, and he worried that the question might become “blended with or affected by . . . extraneous political considerations.” As early as 1808 the Bank applied for renewal of its charter, and Gallatin earnestly supported the application, offering to enlarge the number of stockholders so as to include fewer foreigners. Congress delayed dealing with the issue until 1811. By this time the radical Republican press was excoriating Gallatin for showing “alarming symptoms in the English style.”56 Despite Gallatin’s enthusiastic backing of a new charter for the BUS, the Congress by the closest of votes denied the re-chartering, and the state banks had their victory and the national government’s deposits. Gallatin warned that the switch to the state banks would be “attended with much individual, and probably with no inconsiderable public injury,” and questioned “why an untried system should be substituted to one under which the treasury business had so long been conducted with perfect security,” but all to no avail.57
Although Gallatin later blamed the defeat more on the Republican ideologues than on pressure from the state banks, the result was that the federal government distributed its patronage among twenty-one state banks and thus effectively diluted its authority to control either the society or the economy.
With the demise of the BUS, America suddenly went wild in creating new banks. Seventy-one banks, including the BUS, had been created in the two decades between 1790 and 1811. In the next five years 175 additional state-chartered banks were established. These banks, unlike the original Bank of North America or the BUS, were not just sources of credit for government, not just commercial banks, handling short-term credit for merchants, but banks for all the different econo
mic interests of the society that wanted easy, long-term credit—mechanics and farmers as well as governments and merchants. In 1792 the Massachusetts legislature had required the second state bank it created to lend at least 20 percent of its funds to citizens living outside of the city of Boston in order that the bank “shall wholly and exclusively regard the agricultural interest.”58 The state charter setting up the Farmers and Mechanics Bank of Philadelphia in 1809 had stipulated that a majority of the directors be “farmers, mechanics, and manufacturers actually employed in their respective professions.” Many new charters had similar requirements.59
And these banks were to be located not merely in the large urban centers such as Philadelphia or Boston but also in such outlying areas as Westerly, Rhode Island, where a new bank established in 1800, called Washington Trust, justified itself by declaring that existing state banks in Providence, Newport, and Bristol were “too remote or too confined in their operations to diffuse their benefits so generally to the country as could be wished.” By 1818 the tiny state of Rhode Island, one of the most commercially advanced in the nation, had twenty-seven banks. In 1813 the Pennsylvania legislature in a single bill authorized incorporation of twenty-five new banks. After the governor vetoed this bill, the legislature in 1814 passed over the governor’s veto another bill incorporating forty-one banks. As early as 1793 John Swanwick of Philadelphia had envisioned banks sprouting up in all the provincial towns of the state. “Their number will be so far multiplied,” he told the Pennsylvania legislature, “that it will be no longer a favor to obtain discounts.” By the end of the second decade of the nineteenth century it seemed to one observer that nearly every village in the country had a bank; wherever there was a church, a tavern, and a blacksmith, one could usually find a bank as well. By 1818 Kentucky had forty-three new banks, two of them in towns that had fewer than one hundred inhabitants.60