Category Archives: History

How Did It Happen?

Does anyone ever wonder how we got the income tax?  This tax has become so universal, on international, federal, state and even local levels, that it is taken for granted, but few people seem to question its legitimacy, history, or even its purpose.

An internet search suggests a form of “wealth tax” or income tax existed in the Roman Republic, ancient Egypt, and China, but the form we know, usually imposed to finance wars, began in England in 1188, by Henry II, for the “Saladin tithe” to fund the Third Crusade.

In his landmark book, Wealth of Nations, in 1776, Adam Smith, a Scott, suggested even the King of Britain could not get away with an income tax.  Tax on interest or money is difficult to calculate without extraordinary “inquisition” into every man’s private circumstances and “would be a source of such continual and endless vexation as no people could support.”  However, a mere nine years after Smith died in 1790, British Prime Minister William Pitt the Younger formally implemented the income tax, designed to pay for the French Revolutionary War, to purchase weapons and equipment.  It was a progressive income tax and in place between 1799 and 1816, but for a short reprieve following the Peace of Amiens in 1803.  It was reintroduced in Great Britain in 1842 by Prime Minister Sir Robert Peel, who was seeking revenues for the government’s increasing budget deficits.

“A heavy progressive or graduated income tax” is the second major tenet of the The Communist Manifesto, as delineated by Karl Marx and Friedrich Engels in 1848.  The fifth tenet advocates “Centralization of credit in the hands of the State by means of a national bank with State capital and an exclusive monopoly.”

In the United States, President Abraham Lincoln instituted the first US income tax in 1861 to pay debts from his war.  It was repealed by Congress in 1872.

The Socialist Labor Party pushed for an income tax in 1887.  The Populist Party demanded it in its 1892 platform, and the Democrats, led by William Jennings Bryan, advocated for the progressive income tax law passed in 1894.   Called the William-Gorman Tariff Act (Revenue Act), it reduced tariffs and imposed a two percent income tax but only on the top ten percent of earners.  In 1895, in Pollock v. Farmers Loan and Trust Co., the Supreme Court declared the tax unconstitutional, based on the constitutional requirements that taxation be apportioned by a state’s population.

Republican Rhode Island Senator Nelson W. Aldrich, who served between 1881 and 1911, was probably the single most influential individual in creating the financial structure we know today.  As chairman of the Senate Finance Committee–which oversaw bank regulation and monetary policy–he was possibly the most powerful man in the nation from 1898 to 1911. The financial Panic of 1907, (which some believe was engineered by banker and Aldrich friend/business associate, J. Pierpont Morgan) led to the Aldrich-Vreeland Act in 1908, which was designed to make the monetary supply more elastic.  It also established the National Monetary Commission with Aldrich becoming chairman.  As chairman, he led a team of “experts” to European capitals to study their banking practices, and returned as a proponent of a national banking system.  He worked in secret with powerful bankers to develop the “Aldrich Plan,” which eventually formed the basis of the Federal Reserve Act of 1913.  The secret dealings that began in 1910 and led to the creation of the Federal Reserve system is well documented in The Creature from Jekyll Island:  A Second Look at the Federal Reserve, by G. Edward Griffin.

Aldrich, who apparently had a habit of publicly opposing things he wanted, then voted in Congress for the corporate income tax in 1909, claiming this was to insure the personal income tax would not be passed.  Ten years before, he had called the income tax “communistic.”  However, later he and President William J. Taft then agreed that a constitutional amendment would be more effective in overriding the Supreme Court’s objections the 1894 law.  Aldrich claimed he believed the 16th amendment would never be approved.

The relationship between the Federal Reserve System and the new income stream generated by the income tax is not well documented, but it resembles that of the Whiskey Tax and the nation’s first central bank in 1791.  At that time, Treasury Secretary Alexander Hamilton introduced legislation for the whiskey tax on December 13, 1790 and for the central bank the next day, on December 14, 1790.

A common thread in the two bank/taxing schemes was that they gave the federal government the authority, if not the right, to investigate every taxpayer’s personal property and bank accounts searching for infractions, and to seize property it decides has been obtained illegally.  This has set the precedent for the federal invasion into private lives that has become so prevalent today.

In the “Gilded Age,” Nelson Aldrich was well known for his close and unsavory ties to business, by which he had become personally wealthy.  He believed his power base would successfully defeat the income tax amendment.  Indeed, while they were opposed, their solidarity had broken down, so individuals like Andrew Carnegie and John D. Rockefeller (whose son John Jr., married Aldrich’s daughter Abby) formed tax-exempt foundations to shelter their wealth before the tax went into effect.

At that time the income tax was promoted as a “class tax,” with only the upper income earners affected, so the idea of wealth re-distribution appealed to lower income earners.  Only later did President Franklin D. Roosevelt expand the “class tax” to a “mass tax,” according to former IRS historian Shelley L. Davis in her book, Unbridled Power: Inside the Secret Culture of the IRS.

Proponents of the income tax used other arguments, too.  It was proposed as a more reliable method than tariffs for raising federal revenues, and gave President Woodrow Wilson justification for reducing tariffs.  Also at that time the idea of Prohibition was in the air, and advocates of Prohibition recognized the government would lose income from excise taxes on alcohol.

The 16th Amendment reads, “The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”  It was passed by Congress on July 2, 1909 and sent to the states for ratification.

It was supposedly ratified by the requisite number of states by February 13, 1913.  However, there is some question about whether it was ever properly ratified.  In 1985, William J. Benson published The Law that Never Was about the income tax.  Here, Benson claimed that in 1984 he had visited national archives and all 48 state capitals looking for records of ratification.  Not only had he found variations in wording and punctuation from the congressionally approved amendment, but he claimed some states which were certified as ratifying never did or voted against the amendment.  He said only two to four states had ratified as written.

Constitutional amendments require ratification by three-fourths of states.  In 1913, there were 48 states, so 36 would have had to ratify.  Benson found that seven states had not ratified at all.  1913 Secretary of State Philander Knox had claimed Kentucky and Tennessee ratified, but Benson said they did not.  Eight states were reported as having ratified, but Benson found no evidence of it.  Six more states did approve, but the governors or other officials required to sign did not sign.  Twenty-five states violated provisions of their own constitutions in ratification, and 29 violated state procedures.  Twenty-two states changed the wording to ratify, one state changed spelling, and 26 states changed punctuation.   Oklahoma changed the wording to say the opposite of what the amendment said.  Tennessee law required a delay until the next session but ignored it.

The American Law Division of Congress’ Congressional Research Service responded in May, 1985 to Benson’s claims.  “While it didn’t rebut Benson’s factual claims,” it said the amendment had been ratified “because Knox said it had been ratified,” says one internet source.

In 1990 Benson went to prison for tax evasion.  He served 15 months before a federal appeals panel overturned the conviction, saying a government witness had given improper testimony in the 1987 trial.  This occurred less than one month before Benson was scheduled for parole.

Benson’s book caused quite a stir, and he was selling packages based on his book to help individuals fight the Internal Revenue Service.  However, those who have used his arguments have not fared well in court.  Also, Benson himself was the loser in court rulings in 2007 and 2009 that determined his “Reliance Defense Package,” which he sold for $3500 to tax protesters, was fraudulent.

Courts have denied requests for evidentiary hearings and have refused to hear the arguments against the 16th amendment itself, claiming “Secretary Knox’ decision is now beyond review.”

In an interview in 2013, Benson remained an income-tax evader and bragged he has never gone back to prison, despite his continued outspoken crusade against the 16th amendment.

 

 

 

Advertisements

Wealth of Nations Synopsis

bkssmithwealth1776

Adam Smith’s landmark book, Wealth of Nations, published in 1776, is a 500-plus page treatise on economics, oft cited bur rarely read, except by economists and masochists like me.  If you can overlook Smith’s sing-song style, his tediousness, repetition, generalizations, vague and archaic terminology, and inconsistent reasoning, the book is worth reading, especially as a social history.  It is important to recognize that Smith writes as a spokesman for the monarchy and the wealthy stock holders, landowners, and mercantilists who made the book an immediate hit and won him a position as Commissioner of Customs in Edinburgh, Scotland.  His “commercial society” has enshrined him as the “first modern economist,” or “father of modern capitalism.”

A confluence of factors contributed to the conditions of Smith’s time.  The “industrial revolution” began in Britain with the invention of the steam engine in 1712, first used for pumping water out of coal mines.  Other inventions quickly followed, eventually leading to the growth and dominance of the British Empire, through manufacture, trade, and colonization. Another feature of 1700’s Britain involved war and military conquest.  As an island nation, with England, Scotland, and Wales united as the United Kingdom, or “Great Britain,” in 1707, it developed its sea power and had established dominance in the seas and in trading routes by the time Smith wrote Wealth of Nations.  Competition with other powers brought war and its heavy costs.

Wealth of Nations refers repeatedly to the “late war,” which presumably was the Seven Years’ War, fought between 1756 and 1763.  One of the book’s primary aims appears to be exploring the various modes of taxation the king could use to pay debts from that war.

Meanwhile, the industrial revolution was bringing a rapid shift in social and cultural dynamics, as Great Britain went from predominantly agrarian, rural society to one of urban and industrial predominance.  The textile industry was probably the first to be affected in a major way, with the invention of the spinning jenny–“jenny” is a nickname for “engine”–by Englishman James Hargreaves in 1764.

The iron industry also underwent fast transformation, and with it, the transportation industry.  Communication and banking adapted accordingly.

Because industrialization necessitated large capital investments, business ownership shifted from individuals to groups, including partnerships and corporations.  The banking industry grew by leaps and bounds after the Bank of England was first chartered in 1694.  The London Stock Exchange boomed after the Seven Years’ War.  The government became increasingly dependent on it to finance wars.

Like many of his contemporaries, including Benjamin Franklin, Thomas Jefferson, Alexander Hamilton, and George Washington, he was fascinated by machinery and its commercial potential.

In the first pages of Wealth, Smith presents the plan for the book, summarizing that the real wealth of a nation comes down to the “annual produce of the land and labor of the society.”

He then distinguishes between towns and agriculture and glorifies machines for facilitating division of labor, thus efficiency and productivity.  He uses pin-making as an example, with speed of production due to division of labor the only criterion.

Smith claims farmers are lazy, because as one-man operations, they waste time changing tasks, whereas a group of men in a “workhouse,” each doing one small task repeatedly, are able to produce much more in the same time period.

He says “Cochin-china” is one of several Asian countries that have sea access as well as extensive canals inland, but most of their trade is internal.  He wonders why they have not sought to trade outside their own countries.

Wealth emphasizes the enduring value of labor, despite the fluctuations in metal money.  The discovery of gold and silver in the Americas caused a glut in Europe that reduced the value to a third of what it was before.  A man can only do so much labor, but that labor holds its value through all the ups and downs of markets.

Wealth gives a multiplicity of examples of how labor costs rise and fall in relation to cities versus rural, or demand—such as North America, where labor was in great demand and food relatively inexpensive—and how much a laborer must be paid to sustain himself and children to replace him.  Since 50% of children die before reaching adulthood, says Smith, we need to calculate the cost of feeding four children in every family.  Smith acknowledges that all the laws favor the employers, should the laborers strike for higher wages.

While he presses the point that nothing happens without labor, Smith is happy to squeeze the laborer into a bare subsistence wage, better to keep him working hard to make ends meet.

He cites numerous examples of relationships between labor and stocks. New land, like the colonies, attracted lots of stock capital because it was cheap, full of natural resources, and soil was rich.

Early on “corporations” restricted competition, with the king’s (or queen’s) support.  Smith says 5th of Elizabeth formalized the “Statute of Apprenticeship” that restricted practice of craft or trade to those who had apprenticed seven years.  Church wardens, mandated by the king to provide for the poor in their parishes, did everything possible to keep the poor from moving in.

Corn was the major food crop in Europe.  Smith says tobacco grows well enough in parts of Europe, but it is illegal because it’s too hard to tax individual farmers, so tobacco is imported from (primarily) Virginia and Maryland, warehoused, and resold at profit.  Sugar is in great demand, and is very expensive, imported from Caribbean colonies.  In “Cochin-china” sugar is no more expensive than ordinary food crops and is cultivated alongside them and apparently not exported much.

Labor and landlords benefit from policies that also serve the public.  Stockholders, however, are loud, moneyed, and invested in reducing competition, so they generally work against the public good.

Smith explains how money is not the same as circulating capital.  It is the “wheel” of the economic engine but has no intrinsic value.  A coin is not used up when it is exchanged for goods or services, so the same coin, each time it changes hands, buys its face value for the purchaser, who gets his coin’s “worth” in product.

He also writes about the banks, primarily of Scotland, that used paper money promissory notes in excess of gold deposits for lending.  80% paper to 20% backup.  Merchants could also get lines of credit, so were encouraged to accept that bank’s paper in trade, to promote it to friends and associates, and to spend it.  However, paper was no good in foreign countries, so gold was exported to import foreign products.

“No equal capital puts into motion a greater quantity of productive labor than that of the farmer,” says Smith.  Also, farms stay put, like retail shops, and can’t be outsourced.

He discusses how the American trade is financed by merchants in Great Britain.  He uses the example of hogsheads of tobacco from Virginia and Maryland as commodity money that is bought in excess by England and resold in other places.

But the “great commerce of every civilized society” is between country and town.  In fact, the home trade, by far the most important, was considered subsidiary to foreign trade, based on Man’s book, England’s Treasure in Foreign Trade.  Smith says the mercantile system works in many ways against the enrichment of the country.  It selectively encourages exportation and discourages importation.

He says it is a mistake to politically favor exports over imports.  Restraints on imports consist of high duties and absolute prohibitions.  Exports were encouraged by “drawbacks” (tax relief), “bounties (subsidies), advantageous treaties, and the establishment of colonies.  Smith is down on bounties.  He specifically mentions corn, because it, to him, is the commodity by which the price of everything else is measured.

He claims restraints on importation and prohibitions may be good for the home manufacturers but not for the population or the economy as a whole.  The famous “invisible hand” comes up on page 300, in which Smith mentions the folly of “statesmen” who try to control private enterprise.  He says the market will determine what is needed without government help.

Merchants and manufacturers derive the most benefit from monopolies, says he, whereas farmers and populace derive little and undoubtedly lose by them.  Corn merchants benefit more from subsidies than corn farmers.

The notion of “balance of trade” is “absurd,” and he enumerates reasons.  Smith also states that it is silly for nations to try to improve their wealth at the expense of other nations.  This leads to hostilities rather than friendly exchanges.

Smith asserts again that all wealth comes from the land, with farmers the most productive workers and everyone else subsidiary.  Those who bring raw materials to more useable form, like wool manufacturers, do not add as much value as the farmer does by cultivating the land.

Smith cites the duties of the sovereign.  He claims the sovereign does not have the duty or right to regulate commerce.  At the same time, he says the king’s first duty is to protect the country from other governments.

He makes the case for a standing army and says this is the only way the sovereign can maintain peace and order.  Now “civilized” societies can conquer “barbarous” societies, which don’t have the advantage of gun power.  He believes, therefore, that gun power equals civilization.

Smith mentions highways, bridges, navigable canals, coinage, and the post office as public institutions that facilitate commerce.  Post offices everywhere, he says, are valuable revenue sources for the government, with steady and immediate cash flow and low maintenance costs.

Obviously, a glaring inconsistency in Smith’s premise is between his views on free trade and his belief in the importance of a standing army.  Here we have our pseudo proponent of free trade justifying forts and garrisons in foreign countries to protect merchants’ stores.  Where these countries do not allow forts, it has been necessary to send ambassadors.  Smith believes most ambassadorships were created to protect trade.

He goes into “regulated companies,” which are open to anyone with the money, willing to submit to the rules, and trading his own stock at his own risk.  These are opposed to “joint stock” companies, which sound like publically traded companies today.  Pooled resources and pooled profits.  He says only four types of joint stock companies seem valid.  He cites:  1. The banking industry; 2. Fire and sea-risk insurance companies; 3. Canal or navigable channel companies; and 4. Those bringing water by pipe or otherwise to a great city.  He notes the Bank of England doesn’t have exclusive privilege, except that no other bank in England can employ more than six people, and the Bank of England lends to the sovereign.

The last hundred pages of the book are devoted to taxes and other potential sources of revenue for the commonwealth or sovereign.

He floats the concept of a central bank, calling it a “public bank to support public credit, and upon particular emergencies to advance to government the whole produce of a tax, to the amount, perhaps, of several millions, a year or two before it comes in.”

Smith asserts the king should be wealthier than anyone, with grand style and pomp to support his “dignity.”

He distinguishes between direct and indirect taxes, saying the former, as on land, are easily assessed.  Tax on interest or money is difficult to calculate without extraordinary “inquisition” into every man’s private circumstances and “would be a source of such continual and endless vexation as no people could support.”

“There is no art which one government sooner learns of another, than that of draining money from the pockets of the people.”

Wages on the “inferior classes of workmen” are regulated by demand for labor and the price of provisions.  As taxes on labor go up, wages must go up more, to cover the additional tax.  Manufacturers can pass these costs on to the consumer, but farmers’ landlords must absorb them.  This leads to a decrease in the demand for labor.  “Absurd and destructive as such taxes are, however, they take place in many countries.”

Smith goes into government jobs, which are much sought after, because they are highly paid and carry perquisites (perks).  Taxes on luxuries do not raise the price of other commodities, but those on necessities do, so should not be taxed. He mentions alcohol taxes as by far the most productive.

Excise taxes are generally on home goods destined for home markets and imposed on only certain items of the most general use. Excise laws discourage smuggling more effectively than customs laws.

He acknowledges that poor people, because there are more of them, consume the most, not only in quantity, but in value.

He mentions that war has required even the most frugal republics to contract great debts to maintain independence.  He says it is incorrect to assume money lent to government increases capital, because it is generally wasted, and that money would otherwise be spent on productive labor.  Also, foreigners often buy in.

“When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid.”

Wealth ends rather abruptly on the subject of public debt, saying that when it exceeds taxpayers’ ability to pay with reasonable measures, government uses unreasonable measures, such as issuing interest-free bonds for immediate expenses, or interest-only bonds that are never intended to be repaid.  He says this has “enfeebled” multiple governments.

When governments reach the point where they can’t pay the debt, they either inflate the currency or declare bankruptcy.  He says the latter is more honest, but says the entire system of debt-backed government is “pernicious.”

My take is the tradition of monarchs and overlords has led to societies in which unearned wealth is glorified and held in high esteem.  The most highly respected and emulated are those who have done the least to acquire what they have, in general terms. The very idea, The Wealth of Nations, presumes the nations own the individuals who live within their borders.

 

 

 

Hamilton’s Legacy

As the rich get richer and the poor get poorer, pundits and philosophers theorize about the problems of income inequality, social stratification, and legal injustice.  Proposed solutions flow thick and fast, most advocating government intervention or denouncing government de-regulation since the Great Depression.

The American myth of freedom, democracy, and capitalism dies hard, but the United States has never been free, democratic, or even capitalistic, unless it was before the Europeans arrived.  Stratification of society was built into the system with the arrival of the English and their traditions of monarchs and minions, the French and Spanish, and their long histories of battle and inbreeding among themselves on the European continent.

The American experiment may have represented a break from the past, but it carried with it the same patriarchal patterns of its forebears.  The “Founding Fathers” ultimately adopted a government structure that varied only slightly from that of its British progenitors.

Many US citizens don’t know the difference between the Declaration of Independence, which we celebrate on July 4 every year, and the Constitution, which was drafted in secrecy and signed on September 17, 1787, over eleven years after the Declaration announced the United States’ independence from Britain.

In that eleven year gap, the Revolutionary War had been fought and won.  The now free colonies were struggling with debts to soldiers, domestic, and foreign investors.  The individual states had taxing power, but the loosely formed union did not.  Some states were paying off their debts, but others were lagging.  John Adams had been sent to London to negotiate credit for the fledgling country, and Thomas Jefferson had been sent to France for the same purpose, to replace Benjamin Franklin, who was aging and ill.

James Madison of Virginia and Alexander Hamilton of New York led the effort to revise the Articles of Confederation with a new Constitution that would create a strong central government, supersede state governments, and have the taxing power to pay war debts.  Once gathered at what became the Constitutional Convention in Philadelphia, though, each delegate learned the intent was to completely re-write the Articles and was sworn to strict secrecy. George Washington was unanimously elected president.  Madison sat by his side taking notes and was later acknowledged as having written the Constitution.  Alexander Hamilton was a strong advocate for a centralized government, brilliant and opinionated, an open admirer of the British model, including the monarchy, and wanted to reproduce the British system in the states.  He also extolled wealth and privilege, claiming the masses could not be trusted to manage their own affairs.  Madison was of the same general opinion.

While he initially opposed the Constitution, Hamilton later became its strongest advocate and promoter.  He induced Madison and John Jay to write with him what became the Federalist Papers, a series of anonymous essays distributed to newspapers to promote ratification by the states.  For ratification, the Philadelphia conventioneers chose to bypass state legislatures and rely on specifically convened  ratification conventions.

Hamilton played an early and profound role in shaping the early American government.  According to his biographer, Ron Chernow*, he was an illegitimate child of a dissolute couple, born in 1755 or 1757 on the British island of Nevis in the West Indies.  After his father abandoned the family and his mother died, he was employed at age 13 as a clerk and bookkeeper for wealthy British traders on St. Croix, also in the West Indies.  His employers traded in a variety of goods, but at least one shipment a year was of African slaves.  Those employers eventually financed Hamilton’s migration to the New York colony in 1773, where periodic shipments of slave-produced sugar covered his expenses.

Hamilton, who was dashing and gifted, quickly made his way into New York society, courting and marrying a daughter, Elizabeth, of the prominent Philip Schuyler.  He enlisted in George Washington’s Continental Army, gained Washington’s confidence and became his personal secretary during the Revolutionary War years.  Later, Washington granted him his one and only command, at the battle of Yorktown, where Continental and French forces defeated British General Cornwallis to win the Revolutionary War.

After the war ended, Hamilton practiced law in New York City and involved himself in politics.    He also involved himself in banking, writing the constitution for the Bank of New York in 1784, as agent for his brother-in-law, John B. Church, who was in Britain acting as a member of Parliament.  It was New York’s first bank and exists today as BNY-Mellon, billed as having the longest continually traded stock on the New York Stock Exchange.

After the Constitution was ratified, George Washington became the first US president, elected in 1788.  John Adams was elected vice president, and Hamilton became Washington’s first Treasury Secretary.  Thomas Jefferson, who was still in France, was appointed Secretary of State and confirmed by the Senate before he knew of his appointment.

Hamilton went to work immediately to take control of the nation’s finances.  The day after his confirmation as Secretary of the Treasury, he arranged for a $50,000 loan from the Bank of New York—of which he was a director–to pay salaries of Washington and Congress.  He then arranged for another $50,000 loan from the Bank of North America.  The Hamilton Tariff Act of 1789 was Congress’ second official move, after establishing rules for taking oaths of office.

By 1790, Hamilton was busy working on a plan for the federal government to assume state debts from the Revolutionary War.  In the Constitutional Convention the question of assumption had split—like the slavery issue—essentially along North-South lines, because Southern states had paid off much of their debt, while northern states, like New York, had not.  The issue dovetailed with questions about the ultimate location of the nation’s capital.  Madison, silently backed by George Washington, negotiated for a Potomac River location near Washington’s Mount Vernon plantation in exchange for agreeing that the federal government would assume the states’ debt.

Meanwhile, Hamilton was busy creating the First Bank of the United States, a central bank that could issue credit, capitalized at $10 million, 20% owned by the government and 80% owned by shareholders.  He was also looking for other sources of income and convinced Washington and Congress to support an excise tax on whiskey.  He introduced legislation for the whiskey tax on December 13, 1790 and for the central bank December 14, 1790.  At that point, Washington’s main source of income came from whiskey distillation.

Both James Madison and Thomas Jefferson vigorously opposed the central bank, calling it unconstitutional.  Madison and Hamilton had been allies before, but this difference in interpretation of the Constitution caused a rift that never healed.  Jefferson and Madison wrote letters back and forth condemning the mad stock speculation that greeted the public offering of central bank stock, and the fact that people in the Northeast could talk of nothing else.  Once again, critics claimed Hamilton demonstrated a preference for rich Northerners, as he only offered the stock through three banks, in Boston, New York, and Philadelphia.  Also, opponents pointed to the fact that three-fourths of investors were foreign.  Thirty of the approximately 85 Congressmen bought shares.

Hamilton’s assistant Treasury Secretary, William Duer, could be called one of the nation’s first inside traders.  Philip Schuyler, who would become Hamilton’s father-in-law, had previously done business with Duer and had encouraged him to move from Antigua to New York.  Duer became an early friend when Hamilton immigrated to the continent.  But Duer turned out to be an inveterate gambler and stock speculator who was blamed for causing the Panic of 1892 through debt-backed stock speculation in First Bank of the United States stock. His method was to borrow heavily to make trades, hoping to sell at peak prices, but he ran out of cash and couldn’t make payments on his debts.  People panicked and started selling stock.  Hamilton then used the Treasury’s sinking fund to buy government securities anonymously, to stem the panic.

As a result of the crisis, to restore confidence, and to encourage people to start investing again, 24 stock brokers and merchants formed the New York Stock Exchange in May, 1792, by signing the so-called “Buttonwood Agreement,” under a buttonwood tree on Wall Street.  The signers agreed to trade only with each other, and to charge one-quarter percent commission on trades.  Available stock was limited to insurance companies, the Bank of New York, the First Bank of the United States, and Hamilton Bonds that Hamilton had decided to issue to pay Revolutionary War debt.

The United States has operated as a triumvirate of government, banking, and the stock market ever since.  The “Framers” of the Constitution were wealthy businessmen, planters, bankers, lawyers, and merchants, who designed a structure for exerting control over the population through laws and taxation.  While the Declaration of Independence set the states free, the Constitution bound them in economic slavery to a new taxing authority.  The links to the banking system and the New York Stock Exchange initiated the “public-private partnerships” that define the United States today.

If, in the 21st century the rich are getting richer and the poor getting poorer, it’s probably fair to say it was designed that way.  The Framers knew what they were doing.

 

*  The recent Broadway hit Hamilton is based on Chernow’s book, Alexander Hamilton, 2004.

Thoughts on Utopia

I picked up Thomas More’s classic book, Utopia, the other day.  Publsished in 1516, the book describes what More conceived of as an ideal place.  The word “utopia” is derived from the Greek, and means “no place.”

Thomas More was trained as a lawyer and worked in government service under King Henry VIII of England.  As most people know, King Henry was desperate for an heir to the throne, and his wife, Spanish Catherine of Aragon, was barren.  King Henry wanted an annulment, but this was denied by the Roman pope.  To obtain his desire, King Henry had Parliament pass a law in 1534 declaring King Henry the supreme head of the Church in England.  This eventually became the Anglican Church..

Thomas More was a devout Catholic and refused to accept King Henry as the head of the church.  For this treason, he was imprisoned and ultimately beheaded by the king in 1535.

The book, Utopia, opens with More involved in a conversation with one Peter Giles, and a traveler, Raphael.  At the time, More is on the king’s business in Antwerp.  Raphael proves to be well travelled, having visited many known and unknown kingdoms and other territories.  He shows a familiarity with many forms of government and impresses More and Giles with his comprehensive knowledge and understanding.  Giles naturally asks him why he does not enter the service of some king, as an advisor, as he could be quite useful.

Raphael refuses to consider the idea.  He says kings have advisors who are jealous of each other and of new information.  Also, kings want wars to expand their power and influence.  Working in the service of a king would amount to slavery, and Raphael prefers his freedom.

The subject of thieves comes up, and Giles notes that thieves are being hanged on a regular basis, yet there is no reduction in stealing.  Raphael says hanging for thievery is unjust, a punishment far in excess of the crime, and that the plague of thievery is created by society.  He notes that wars, for one thing, produce a multitude of maimed and mutilated former soldiers who are unable to work and have no other means of supporting themselves.  Wealthy landowners, who keep many idle hangers on, only like the healthy ones.  When their lackeys become sick, they are tossed out, with no place to go.  Add to this the fact that kings keep standing armies, even in times of peace, in order to keep prepared for eventual war.  These soldiers are not trained in any other livelihood so are without recourse should anything happen to interrupt their military careers.

Raphael goes on to say that the problem is rendered worse in England, where the wealthy have commandeered large tracts of land for the grazing of sheep.  Formerly agricultural land is fenced off, with whole towns being displaced from their former livelihoods involved in agriculture.  These people have no place to go and no alternative sources of income, so they are forced into thievery to survive.

This is prelude to the rest of the story, about the ideal civilization of Utopia, but what strikes me is how little has changed in 500 years.  Wars and displacement continue to be the primary causes of poverty, with the corporations and governments commandeering large tracts of land for such things as dams, airports, and power stations.

Ongoing discussions about the increasing disparity between rich and poor neglect to consider the most fundamental, root cause of poverty, as prominent today as in Thomas More’s time.  War and displacement debilitate the most vulnerable members of society and lead, ultimately, to the crime and violence we see in the US today.  While we don’t have actual war on our turf, we are involved in wars around the globe, to expand our US economic empire, while neglecting problems at home that are destroying the fabric of the society in which we live.

One would think we would have learned something in the past 500 years.  At least we don’t hang people for thievery, which may be a step in the right direction.  Should we begin applying our vast resources to constructive rather than destructive activity, we may begin to revitalize our debilitated national spirit and make a justifiable claim to being a civilized society.

Finishing People’s History

bkszinn2003

Seven years ago this month, I finished reading A People’s History of the United States, by Howard Zinn, 2003 edition.  I have posted blogs about the first part of this book in March, 2017 and April, 2017.  In these blogs, I have noted events described in the book, as well as my thoughts on them.  The book had a powerful effect on me, supporting and expanding my beliefs about under-reported US history.  This May, 2017 post covers the final section of the book.

FINISHING A PEOPLE’S HISTORY OF THE UNITED STATES, HOWARD ZINN

            Monday, May 3, 2010—I read some People’s History, now at World War II and how brutal the US was, dropping the nuclear bombs on Japan for no good reason except economics, killing 100,000 people in Hiroshima, mostly civilians, and 50,000 or more in Nagasaki.

Why oh why would people do this, I wondered.  It explains why people are so afraid now, why Americans are such mealy-mouthed wimps.

Thursday, May 6, 2010—I spent the afternoon reading People’s History, up to page 462.  Now into the race riots of the 1960s and 1970s, the assassinations of Malcolm X and Martin Luther King.  The FBI apparently did everything it could to intimidate King.

I can understand why people are afraid of government, and it is becoming more paranoid all the time.  I’ve always believed blacks are inherently peace-loving people, and Martin Luther King personified that spirit.

I wonder why I’m so fascinated by People’s History, because it implicates the federal government as a vicious, tyrannical bunch of mobsters since the land’s discovery.  Yes, it gives me even more data to support my beliefs.  It reveals what hasn’t worked.   Zinn focuses so intensely on the hatred and violence, though, that I wonder what ultimate purpose it serves.

While I believe the government is justifiably paranoid, I have to respect its power to hurt.  I’ve learned my lesson, I hope, about pissing the wrong people off.

As Malcolm X said, if you remain radical long enough, you win your freedom.  This is my belief, too, because I’ve come back from the “lunatic fringe” with more elbow room, maybe.

Fidel Castro in 1959 pissed the US off by confiscating land held by US corporations, then distributing it to landless peasants.  The Bay of Pigs was a manufactured crisis by John F. Kennedy and associates to stir up revolution against Castro in Cuba, but Fidel was too popular.  The US was embarrassed because its tactics, so successful everywhere else, failed with Castro.

Saturday, May 8, 2010—I read some People’s History, now up to page 490 in this 688 page book.  We’re in Vietnam now, and it is astounding.  The US has made a career of sadism, so no wonder we have a nation of victims.  We have the CIA actively stirring up trouble in a pacifist, land-based, family-and-tradition-based culture, but the CIA couldn’t seem to control the outcome, no matter how many cities and fields they bombed, people they slaughtered, or poisons they sprayed and dumped hither and yon.  They couldn’t understand how the revolutionaries managed to maintain morale, and I contend they weren’t fighting governments but for a way of life.  Ho Chi Minh, the North Korean leader, was immensely popular among the people, because he confiscated land of absentee landlords and distributed it among the landless, similar to what Castro did in Cuba.

Ngo Dinh Diem, the CIA/US plant in South Vietnam, was hated by the people, and South Vietnam was essentially a US government invention.  When Diem became an embarrassment to the US, they allowed him to be captured and assassinated.  Three weeks later, JFK was assassinated.

Castro and Ho Chi Minh understood Communism in the communal sense of the term, by giving land to the landless, and this is why the people were so willing to fight for it.  They weren’t defending ideological political battles for governments, or other people’s turf.  They were fighting for their homes, families, livelihoods, and way of life.

It amazes me the CIA could be so stupid, because it is obvious to me.  Their self-defeating, blind irrationality did more to promote Communism–in the communal sense—than any leader could have achieved alone.

Perhaps if we thought of people as belonging to the land, rather than the other way around, we would have a more solid footing.

Friday, May 14, 2010—I’ve been reading People’s History tonight, wondering how people can be so cruel for so long, such that it is institutionalized and considered normal, including the lying and deceit in government and the military.

I read about the Attica prison riot, followed by other prison riots, all turned into massacres by federal troops, FBI, and militia.  The prisoners’ non-violence was more threatening than if they had been violent.  Same with the American Indians, who occupied Alcatraz, a deserted federal prison, on a rock in the San Francistco Bay.  There were forcibly evicted from there and also from land at Wounded Knee they had by treaty; but that was given to the government under “eminent domain.”  This occurred in the 1960s or 1970s and hundreds of Indian men, women and children were slaughtered after the government tried to starve them out first.

Saturday, May 15, 2010—Reading books like People’s History shows I am not alone in my understanding—far from it–as people like Howard Zinn have tracked this for years and were even given a voice.  He makes no reference to the bankers’ playing both ends against the middle and leaves the stock market out of it, although he cites illegal campaign donations by specific corporations, like ITT and 3-M.

Reading about the American Indians validates my beliefs about the native American cultures, which respected the earth and all its creatures.  I wonder how much violence they had before the Europeans arrived.  I believe it was probably minimal and was developed in reaction to the European invasion and introduction of guns.

Sunday, May 16, 2010—I read more People’s History, through Ford, Carter, and Bush Sr.  All continued to serve the government/corporate marriage.  Pacifist Jimmy Carter increased defense spending significantly.  Zinn says the Democrats did more to impose regressive taxes—Carter increased payroll taxes—than the Republicans.

Zinn claims legislation like the Clean Air Act and OSHA  were deprived of teeth by subsequent caveats, administrative decree, or insufficient funding.  He does not go into the ways these bills helped the monopolists by stifling competition.

Zinn also seems to have a shallow idea of the domestic spending programs.  He implies they are good and necessary, but he doesn’t recognize they wouldn’t be necessary if the poverty weren’t artificially created by government’s social engineering.

Zinn says Ronald Reagan and Bush Sr. used CIA to interfere in Nicaragua, Panama, Granada, and El Salvador, under various pretexts.  Bush Sr. hoped to restore American confidence in the military, since the Soviet Union collapsed and was no longer an excuse, so he created a war in Iraq.  They and all their aides lied throughout.  Congress had passed limp dick legislation to pander to public disgruntlement, and to curb presidential powers, but Ford ignored it, and so did Reagan.  No one objected.  Congress looked the other way, and the Supreme Court, of course, felt no obligation to reprimand the presidents.

Wednesday, May 19, 2010—Now into the Bush Sr. years in People’s History of the United States.  Apparently HKW Bush was determined to do Desert Storm.

Zinn’s approach is becoming trite.  He emphasizes the contest between military and social spending without questioning the spending itself.  The idea that it’s a rich vs. poor issue, without understanding—as I suddenly did—that it’s a government control issue, as in controlling economic narrows.

Thursday, May 20, 2010—Down to the wire on People’s History.  We’re now into all the pacifist movements during the first Iraq war.  They were ineffective.

And on to the Clinton years.  Bill Clinton was as much a war hawk as any of them and cut social programs but not bureaucracy.

Government has appropriated unto itself responsibility for every area of people’s lives, so it needs the bureaucracy to dole out the money it has stolen, to return it piecemeal to those it deems worthy.

Zinn has some good ideas about how to rebuild America from the ground up, but he is still too tied to money, according to me.  The notion that everything must be tied to a monetary scale, like community involvement, restricts the flow of energy and diminishes the value of time, as well as other factors that have no monetary equivalent.

Friday, May 21, 2010—People’s History gives an account of the protests from many camps over the quincentennial of Columbus’ landing, on Columbus Day, 1992, so that hero has toppled from many pedestals.  The media ignored the protests.

Saturday, May 22, 2010—I finally finished People’s History.  Given his era and background, Zinn does a remarkably good job of describing the brutal history of the US and the rampant disregard for the very principles that citizens believed it stood for.  Rather than protect rights, nurture freedom, democracy and capitalism (in the human capital sense), it has made a mockery of all three, preying on a naive and gullible public to twist noble ideals into their opposites.

The current economic crisis is bringing it all to a head, I believe, because taxpayers are finding they have been used to dig their own graves.  The country is morally bankrupt, and there is no one to blame.  As the state assumed the role of lord, master, and god, acting as legal and moral judge, guard, and executioner, taxpayers must look in the mirror and see we are the state, and we are responsible for the monster it has become.

In People’s History, Zinn mentions protest against the bombing of Afghanistan following 9/11.  I remember being the only person I knew objecting to retaliatory gestures, and people around here hated me for it.

 

Ambling Through “People’s History,” Part 2

bkszinn2003April 15, 2017

Seven years ago this month, I was still reading A Peoples History of the United States,  by Howard Zinn, 2003 edition.  This is the second in a series of posts about this book, facts and my thoughts on them.  I blogged about the first 40 pages on March 7, 2017 (“Zinn on First Americans”).

Friday, April 2, 2010—I read 30 pages of  A People’s History of the United States  Now we’re into slavery from a Lincoln point of view, more or less, hinting but not stating what “freedom” meant to hoards of blacks who had no place to go and no skills except farm work, picking cotton but not selling it.

Sunday, April 4, 2010—People’s History horrifies me, as did Open Veins of Latin America.  I wonder why I persist in reading that stuff.  Am I merely looking for what’s wrong, following the trail I find so counter-productive in others?

I think I’m trying to understand how people can be so easily deceived into violating their own common sense and good judgment, on individual and mass levels, even when claiming the opposite.

My desire to trust, to give people the benefit of the doubt, has betrayed me more than anything else.  As a result, I have become the victim of numerous desperate people who believed they were saving themselves by sacrificing me.

This “die so that I may live” attitude is the fundamental betrayal of Christianity and perhaps underscores the strange notion that there is nobility in martyrdom.

I don’t see popes going to war, nor kings, nor presidents and members of Congress.  Thus the hypocrisy of the death by proxy stance that Christianity has become.

I have an idea.  Let’s create hell on earth so people will want to die.  That should solve the overpopulation problem.

Wednesday, April 7, 2010—We’re now into “The Other Civil War” chapter, page 237, about the strikes in the North in the 1830’s and beyond—long before the war on the South began.

Zinn annoys me because he focuses on the injustices and riots themselves, blaming the “capitalists,” the “rich,” and the “landowners,” without giving a good account of their methods.  The Robber Barons did a better job of showing how the railroad interests used government to further their ends.  In fact, Zinn’s history seems to worsen class divide by pandering to the disenfranchised and showing no effective retaliation other than violence, labor unions, and strikes.  He lets the government off the hook by virtually ignoring it, except in the most superficial way.

Thursday, April 17, 2010—I read about 12 pages of People’s History..  All about labor strikes during the mid-to-late 1800s.  A bad depression in 1893 due to boatloads of immigrants brought to lower the price of labor while native-born laborers couldn’t afford to feed their families.   Over and over the federal government and state militia came in to break up strikes, and the Supreme Court and lower courts cemented the rights of corporations over individuals in the Sherman Anti-Trust Act, the Interstate Commerce Commission, and other tactics that proved who the federal government really works for.

Zinn doesn’t say much about the Supreme Court, but it appears to be the great black hole in this whole US federal government farce.  Zinn only touches on the notion that it is composed of presidential appointees who are confirmed by Congress, thereby a mockery of the idea that the US is a republic.  But language distortion goes back a long way.  Even the 1800s sources Zinn quotes were discussing the conflict of labor vs. capital, referring to the overlord imperialists as “capitalists” unwilling to acknowledge human capital’s value.

Laborers never learned how to organize, except to fight, and this is why they failed.  Had they taken over the mills and factories and run them themselves, evicting the bosses, we may have written a different history.

Saturday, April 17, 2010—More violence.  Now the US in the late 1890s expands its imperialist empire, because all those machines that displaced all those workers are producing more goods than anyone needs or can afford.  So the US is forcing its way into other countries, like Japan and Cuba.  It’s justifying war, as in Cuba, supposedly to support revolutionaries against oppressive government, but also to protect American corporate interests that invested there.

Monday, April 19, 2010—Now, we’re into the Spanish-American War, in which the US used the Cuban revolution in 1898 or so to substitute the US Platt amendment for the Spanish rule.  It then used economic expansion to justify a bloody takeover of the Philippines, really bloody, in which American troops went on killing sprees wiping out entire towns, no one over ten years old spared.  And bragging about it, calling the Filipinos “niggers.”

McKinley was president at the time.  Of course he didn’t want war but felt it necessary to protect the Philippine timber and other resources from other countries and the Filipinos from themselves.

Wednesday, April 21, 2010—I read more People’s History, now up to page 363.  Late 1800s and early 1900s.  Strikes and more strikes, labor disputes, government stepping in at every turn to protect the corporations, the factories, murdering strikers, arresting leaders, making examples of them.  World War I was probably a diversionary tactic, to find an external enemy, because the internal mood was so belligerent.  No wonder people are afraid of the government.

But Zinn skips right over the Federal Reserve Act and income tax.  He subtly distorts the record by blaming Taft for the income tax and Wilson for the Federal Reserve Act, and only mentions these in a sentence or two in passing.

How strange, think I, that he would so easily bypass the vehicle by which the very workers he panders to were so completely disenfranchised.

People tell me Zinn is a “liberal.”  He seems to celebrate socialism, derived from Populism, but never defines any of it.  It’s clear “capitalism” was used in the vernacular in the 1800s to describe the industrialist imperialists, so demonization of the term began long ago.  The notion that human capital, like “qi” or life force in Oriental medicine, has been eliminated from the equation tells me this is why we are all are so debilitated now.

I can only do so much, I decided.  Many people have had a piece of the picture.  Zinn even quotes Helen Keller a time or two.  One of the heroines from my youth, she was social consciousness itself, a socialist at a time when socialism was needed, because it was synonymous with compassion.

Thursday, April 22, 2010—Peoples History shows how ruthless the GoverCorp attitude is.  People are right to be afraid.  Those who opposed the barbarians were glamorized, like Upton Sinclair, yet used to enable social reforms that played into GoverCorp’s hands.

On page 368 Zinn discusses World War I, the Espionage Act, which was used to jail and castigate people who opposed the war.  The Socialists didn’t, as a group, but notable Socialists like Jack London, Upton Sinclair, and Clarence Darrow, were soon converted.

Zinn’s history bats the ball back and forth like a tennis match but offers few insights into the causes.  The attitudes that have come down through time allow people to justify cruelty, violence, and bloodshed.

 

 

 

Zinn on First Americans

bkszinn2003

A PEOPLE’S HISTORY OF THE UNITED STATES:  
1492-Present
by Howard Zinn
Published 1980; fifth printing, 2003

Introduction:  One of the best American history books I have read, this stellar work upsets any romantic notions one might have about our nation’s beginnings.  I read the book seven years ago, and it remains one of my all-time favorites.

Friday, March 12, 2010—I sprang for A People’s History of the United States, by Howard Zinn, who just died a couple of weeks ago.  I have read 40 pages of this 690 page book and find it most inspiring, surprisingly enough.  It begins with an account of Columbus’ brutality in slaughtering the Arawak Indians in the Bahamas (which Zinn never calls the “West Indies”) and the blood lust that accompanied the gold lust and slave lust that characterized not only this but subsequent genocide in North and South America.

Apparently there were 10 million Indians (Native Americans) living in North America when the Europeans arrived, with their strange notions of property rights, their guns and superior attitudes.  Many of these natives were organized in loose confederacies by language.  The Iroquois spread through much of New York , with various centers or pockets of clans distinguished by their regions or specialties.  The Mohawks (People of the Flint), Oneidas (People of the Stone), and the like.  They were generally pacifist, meaning they existed in peaceful harmony with each other and other tribes.  Disputes were generally between individuals.  Land and housing were held and worked in common.  There was no sexual one-upmanship.  The senior women controlled the decisions about whether to wage war, elected the tribal leaders, and removed them if they got out of line.  They made the moccasins and tended the crops, so they controlled the supplies for warring missions.

The English in Jamestown and New England behaved as badly as Columbus, but here the issue was land rather than gold.  They plopped themselves in the middle of established Indian turf and used guns and deception to bully and con the area Indians into submission.  In the beginning, the natives were willing to share, because this was their way, but when the Brits began to reveal their barbaric, exploitive, attitudes, the Indians grew wary.  Brits raided Indian villages, stole women and children for sex, slavery, and sport, murdered at random, and burned crops for no good reason, even though they were starving.  They couldn’t get along with each other, either, enough to cooperate, and they were all too lazy to work.  Those settlers who defected to the Indians for safe harbor and food were severely punished if caught.

So this is our heritage.  Zinn says the combined assaults of war, disease, and famine decimated the North American Indians to about one million in a few short years (maybe 50).

A quote from Chief Powatan to John Smith in 1607:  “Why will you take by force what you may have quietly by love?”

I like Zinn’s approach.  He does not romanticize or pander to the cultures that were obliterated.  He is the ultimate egalitarian, so far, recognizing the clash of values in the clash of cultures, and writing the history from the perspective of the vanquished.

The book, and especially the first chapter, spoke to my soul, because the descriptions of Arawaks and mainland natives sounds much like my ideal commune, a place where everyone has a role to play for the communal good, and no role is considered better or worse than others.  I sense the Indian spirit is rising again, by default, if nothing else.  We are backing into it, because we are too weak and debilitated to fight, and there is little left to steal.

This is the great dilemma of modern man.  We have progressed ourselves into a quandary, slaves to our own progress, with a wheel that is spinning out of control.  Progress downhill fast has hit the swampy bottom, I hope, and is having to deal with the muck, sewage, toxins, landfill, and dysfunctional technology it has created.

The “health care crisis” is a political statement, and a wise one.  “Sorry, I’m too sick to go to war, to work, to pay taxes or contribute to the economy.  Where’s my check?  You promised.”
They are learning instinctively if not intellectually, that the way to downsize government is to bankrupt it.