The Slaughterhouse Cases, or, corporations are actually people

Hello and welcome to this post on the 1869 Slaughterhouse Cases, legal decisions that changed the nature of business in the United States forever. It’s hard to believe that such a ground-breaking series of legal cases can be so invisible to the general American public today, but it’s sadly true. So we’re going to take a good look and see how we started down the path of legal rights for corporations and corporations being given the rights of individual citizens.

America, and then the U.S., had been viewed as a land where everyone had the right to rise by working hard from the start of European settlement. The immigrant, the poor person, the obscure and uneducated could always better their lot and improve themselves by working. Only in the U.S. was land freely available and relatively cheap, so anyone could farm if they really worked at it. Only in the U.S. were factories abundant, so anyone, even the unskilled laborer or the city poor, could earn a living wage. One of the most persuasive arguments anti-slavery groups made in the antebellum period was that slave labor robbed free men of the chance to work; the Free Soil political party made right-to-labor its main plank. The U.S. could only be great so long as its citizens had the opportunity to contribute their honest toil to the economy and improve both themselves and their nation.

But until 1869, no official body had made the claim that individuals had a legal right to pursue their occupation, no matter the consequences to others. Everyone had the opportunity to work, but no one had the legal protection to work in any way they saw fit. That would all change with a group of butchers in Louisiana.

In the mid-1800s, many butchers worked just north of New Orleans, throwing their offal into the Mississippi River. The end result was that low tide meant the reek of rotting animal carcasses filled the city, and the city’s drinking water was irredeemably polluted with blood and feces. To remedy this situation (at least for New Orleans), the city government requested that the butchers move their shops south of the city. But this wasn’t the simple offer it seemed: the land south of the city that the butchers were to remove to was owned by the state, which demanded a high rent for the new space. The butchers, fearing bankruptcy if they had to pay the high rents, sued the state and the corporation it had set up to administer the land.

Their claim was not just that the rents were unfair and that the state-owned company had no competition and could therefore raise the rents as high as it liked. That would be simple extortion. Instead, they took their argument to a new level by saying that they had a constitutionally protected right to pursue an occupation, and that forcing them to move deprived the butchers of their right to do their work as they saw fit. If they felt that working upriver from the city of New Orleans was good for their business, then any attempt to remove them—for any reason, even the disease their offal brought to the residents of the city—was an unconstitutional attempt to deprive them of the right to work.

The lower courts which heard this case found in favor of the state, but the butchers persisted, and in 1873 they took their case all the way to the Supreme Court. They also came up with an argument worthy of that highest of courts: the lawyers for the butchers actually went so far as to bring in the newly passed Fourteenth Amendment to support their case. This Amendment was meant to extend federal protection to formerly enslaved black Americans by overriding any possible state or local laws that would deny them due process and basically re-enslave them. The Slaughterhouse lawyers applied it to say that the state was depriving the butchers of their right to work and make a living while denying them due process under the law. You can’t just tell people to move because they’re poisoning a city’s water supply, the lawyers said; you have to take into consideration those people’s right to make a living, and if moving their business will harm that living, they can’t be made to move. People have a constitutionally protected right to work.

The Court found in favor of the state once again, but only by a 5-4 margin. It did not reject the butchers’ claims that they had a constitutional right to practice their profession in the way that seemed best to them. It decided, rather, that the Fourteenth Amendment was only about federal protection of citizenship; it was meant to preserve the citizenship of formerly enslaved people against state laws. Slavery was now illegal, and could not be reinstated by state laws. The butchers had not been deprived of their citizenship. The right to work could be managed by each state as it saw fit, and in the case of the butchers, the state had a clear right to uphold the common good by removing a clear threat to the public health—New Orleans had suffered nearly a dozen cholera outbreaks since 1832, which were clearly related to the offal in the drinking water. The state has a right and a duty to protect its citizens, stated the majority opinion, and the butchers must go.

But the minority opinion latched on to the idea that businesses themselves had a right to exist. Justice Stephen Field wrote in the dissenting opinion,

“It is contended in justification for the act in question that it was adopted in the interest of the city, to promote its cleanliness and protect its health, and was the legitimate exercise of what is termed the police power of the State. That power undoubtedly extends to all regulations affecting the health, good order, morals, peace, and safety of society, and is exercised on a great variety of subjects, and in almost numberless ways. All sorts of restrictions and burdens are imposed under it, and when these are not in conflict with any constitutional prohibitions, or fundamental principles, they cannot be successfully assailed in a judicial tribunal.  With this power of the State and its legitimate exercise I shall not differ from the majority of the court. But under the pretence of prescribing a police regulation the State cannot be permitted to encroach upon any of the just rights of the citizen, which the Constitution intended to secure against abridgment.

…It is contended in justification for the act in question that it was adopted in the interest of the city, to promote its cleanliness and protect its health, and was the legitimate exercise of what is termed the police power of the State. That power undoubtedly extends to all regulations affecting the health, good order, morals, peace, and safety of society, and is exercised on a great variety of subjects, and in almost numberless ways. All sorts of restrictions and burdens are imposed under it, and when these are not in conflict with any constitutional prohibitions, or fundamental principles, they cannot be successfully assailed in a judicial tribunal. ” [my italics]

The subtle change going on here is evident, first in the phrase “the just rights of the citizen”. While Field most likely meant it to refer to the men who worked at their jobs, later corporate lawyers and big business owners would morph “citizen” to mean the business itself—the corporation. If a person has the right to work, then doesn’t a business have the right to exist, so it can provide that work? And if a business has a right to exist, it has the right to operate in any way it sees fit. Successful business was determined by profits, and if a profitable company pursued certain business tactics like monopoly or price-fixing or child labor, who could tell that company it had to stop? It was providing work for thousands of people, creating jobs, and fueling the economy. What outside body could decide that those profitable tactics were wrong? How could anything that made money, jobs, and materials be wrong? The law as people knew it simply did not apply to business. Business was a new class of citizen.

Secondly, the right of a government to impose restrictions in the name of the common good and public health and safety is unimpeached only when it is “not in conflict with any constitutional prohibitions”. But if corporations have a constitutionally protected right to exist and conduct business as they see fit, then no government can impose any restrictions on them.

Field went even further, invoking the spectre of  “involuntary servitude” and using language [in italics] that seemed to refer to the forced removal of the butchers and the restriction that they work only in one allotted location:

“[It is] clear that [the words “involuntary servitude”] include something more than slavery in the strict sense of the term; they include also serfage, vassalage, villenage, peonage, and all other forms of compulsory service for the mere benefit or pleasure of others. Nor is this the full import of the terms. The abolition of slavery and involuntary servitude was intended to make every one born in this country a freeman, and as such to give to him the right to pursue the ordinary avocations of life without other restraint than such as affects all others, and to enjoy equally with them the fruits of his labor. …A person allowed to pursue only one trade or calling, and only in one locality of the country, would not be, in the strict sense of the term, in a condition of slavery, but probably none would deny that he would be in a condition of servitude. He certainly would not possess the liberties nor enjoy the privileges of a freeman. The compulsion which would force him to labor even for his own benefit only in one direction, or in one place, would be almost as oppressive and nearly as great an invasion of his liberty as the compulsion which would force him to labor for the benefit or pleasure of another, and would equally constitute an element of servitude.” [my italics]

(It is bitterly ironic that slavery would come up in this case, as one of the lawyers for the butchers was John A. Campbell, who had resigned from the Supreme Court to serve the Confederacy at the start of the Civil War and spent his post-war career thwarting black Americans’ attempts to enjoy the protections of the Fourteenth Amendment.)

The door was now open to other lawyers representing much bigger clients than the Louisiana butchers to claim that any restrictions on big business was tantamount to slavery. Price-fixing, monopolies, hostile takeovers, graft, child labor, inferior-grade materials (including foodstuffs), corrupt trusts, and other practices would all be protected or ignored by the law on the grounds that these were the necessary components of successful corporations. The U.S. government was particularly susceptible to this argument in 1873. Determined to grow the economy after the Civil War, and devastated by the financial panic of 1873 itself, the government was more willing to let profitable corporations do whatever it took to build the economy.

So corporations began to take on the rights of citizens, and very protected citizens at that, while workers, small businessmen, consumers, and others were relegated to second- or third-class citizens. It would take decades of Progressive reforms, beginning in the late 1800s and lasting into the mid-20th century, to undo the damage and make corporations accountable to the law.

We are seeing a pendulum swing now, though, in the early 21st century, as corporations have gained the status of private citizens so far as political campaign contributions go, and the federal government is loathe to tax corporations appropriately. Who knows what the next Slaughterhouse Case will be?

The Cross of Gold, the 1896 presidential election, Scopes, and beyond

Part the last of our series on William Jennings Bryan’s famous 1896 “Cross of Gold” speech brings us to the 1896 election, for which Bryan was the Democratic candidate. He ran against Goldbug William McKinley who, like most Republicans, blamed the Democrats and their bi-metallism platform for the economic Panic of 93. The McKinley campaign issued fake dollar bills that read “IN GOD WE TRUST…FOR THE OTHER 53 CENTS” to illustrate the Republicans’ belief that a dollar backed by silver instead of gold would only be worth 47 cents. McKinley looked for support not only from the big businessmen, financiers, and bankers Bryan decried in his Cross of Gold speech, but also from rich farmers, skilled workers, and small businessmen who had more to gain from reducing the flow of currency and curbing inflation.

McKinley was successful in winning this portion of the electorate, which included the wealthy farming states of the Great Lakes region and gold-mining California. McKinley’s alliance with stable, wealthy sections of the populace seemed more promising for the nation’s economic future than Bryan’s rag-tag army of small farmers, coal miners, and social reformers. The 176 electoral votes won in the poor southern and midwestern states that went to Bryan in the election could not match the 271 electoral votes of the wealthy northern and eastern states, and California that went to McKinley.

President McKinley was blessed by incredible good luck: shortly after his election, word of the gold finds in the Klondike reached the continental U.S. California’s gold had pretty much dried up, and McKinley had been faced with the problem of getting enough gold to replace the silver he was going to remove from the currency. That problem was solved by the Klondike, and McKinley was credited at the time with restoring the boom economy.

Bryan ran against McKinley once again in 1900, still pushing for bi-metallism and the little guy, and accusing McKinley of imperialism because of the Spanish-American War of 1898. McKinley won easily, as gold and the war were both very popular with the average American. 1908 saw Bryan run once again, and once again advocating silver while attacking the Republicans for trust-busting that helped big business and hurt small business. His slogan was “Shall the People Rule?” Their response was to elect William Howard Taft in a landslide.

After 1908, Bryan gave up his attempts on the presidency and became a much sought-after public speaker. He was asked to deliver his Cross of Gold speech hundreds of times, and he did so, never tiring of its populist message, and taking heart from its continued popularity. He was made Secretary of State in 1913 by President Wilson but resigned after Wilson declared war on Germany in 1915. Bryan continued to promote reform politics, supporting both Prohibition and women’s suffrage.

But his most famous second act was acting as the prosecution counsel in the famous 1925 Scopes Trial (the Scopes “Monkey Trial”) in which Tennessee teacher John Scopes was put on trial for teaching evolution. Bryan’s reputation made him a seemingly knockout choice, but he was humiliated and outwitted by defense counsel Clarence Darrow, and while the jury returned the guilty verdict everyone had expected they would, the Supreme Court overturned the ruling on a technicality. If you have ever seen a cartoon or show that has a southern lawyer facing a big-time lawyer, and the southern lawyer says “Now, I’m just a country lawyer, but…” then tells a folksy anecdote, then goes in for the kill on the uppity, smug lawyer, that is a reference to Darrow’s skewering of Bryan. It’s unfair in that the big-time lawyer is usually represented as a rich, big-city, corporate lawyer, which is a 180 from who Bryan was, but that is the image that has gone down to posterity. Bryan’s reputation was shattered by the daily newspaper accounts of his humiliations in court at the hands of Darrow; fortunately for him, Bryan did not live long with the embarrassment. He died from complications from diabetes five days after the trial ended.

Thus the curtain closes on Bryan and the Cross of Gold. He recorded the still-popular speech in 1921, and you can hear it here. It’s worth our while to understand this speech and its importance, and to see that while Bryan never won the presidential office he sought, his ideas and reforms were in large part successful, and part of our lives today.

The Cross of Gold speech: a close reading

Part 3 of our series on William Jennings Bryan’s famous 1896 “Cross of Gold” speech focuses on the text of the speech itself. We’ve looked at the battle over bi-metallism fought by Silverites and Goldbugs that the speech addresses in part 2, and now we’ll see how Bryan lays out his argument for silver.

The text is from History Matters; the following are excerpts, not the entire text (it’s too long for us to consider here). All italics are my own unless noted. So let’s begin:

“I would be presumptuous, indeed, to present myself against the distinguished gentlemen to whom you have listened if this were but a measuring of ability; but this is not a contest among persons. The humblest citizen in all the land when clad in the armor of a righteous cause is stronger than all the whole hosts of error that they can bring. I come to speak to you in defense of a cause as holy as the cause of liberty—the cause of humanity. When this debate is concluded, a motion will be made to lay upon the table the resolution offered in commendation of the administration and also the resolution in condemnation of the administration. I shall object to bringing this question down to a level of persons. The individual is but an atom; he is born, he acts, he dies; but principles are eternal; and this has been a contest of principle.”

—Remember that Bryan was speaking at the Democratic National Convention, so the distinguished gentlemen his audience have already listened to are the candidates vying to become the party’s presidential nominee, and their supporters. Bryan, while a Democrat, was in spirit a Populist; he was a supporter of the “common man”, the farmer and laborer, as opposed to the big businessman, banker, and machine politician. He immediately begins by positioning himself as a somewhat common man who has every right to speak to such a high-powered convention because he is “clad in the armor of a righteous cause”. He may be but “an atom”, but he speaks in the name of an eternal principle “as holy as the cause of liberty” itself, and, indeed the cause of humanity itself. Anyone who studies rhetoric will see a master practitioner in Bryan. He is in just one paragraph humble yet charged with integrity, a defender of humanity. Anyone who could listen to him and not choose the “resolution in condemnation of the [current president’s] administration”, the resolution against the gold standard, is basically an inhuman criminal.

“Never before in the history of this country has there been witnessed such a contest as that through which we have passed. Never before in the history of American politics has a great issue been fought out as this issue has been by the voters themselves.”

—Never? There’s never been such a great issue as this? Not federalism, states’ rights, or slavery? Technically Bryan is covering himself by saying that this issue will be fully decided by votes, not war or acts of Congress. But all the same it’s a dramatic overstatement.

“On the 4th of March, 1895, a few Democrats, most of them members of Congress, issued an address to the Democrats of the nation asserting that the money question was the paramount issue of the hour; asserting also the right of a majority of the Democratic Party to control the position of the party on this paramount issue; concluding with the request that all believers in free coinage of silver in the Democratic Party should organize and take charge of and control the policy of the Democratic Party. …Our silver Democrats went forth from victory unto victory, until they are assembled now, not to discuss, not to debate, but to enter up the judgment rendered by the plain people of this country. …Old leaders have been cast aside when they refused to give expression to the sentiments of those whom they would lead, and new leaders have sprung up to give direction to this cause of freedom. Thus has the contest been waged, and we have assembled here under as binding and solemn instructions as were ever fastened upon the representatives of a people.”

—This is the important point: the bi-metallist platform of the Democratic party is the result of grass-roots activism; the “common men” of the party, the voters, have sent the clear message that they want the party to support silver coinage. Party leaders who wouldn’t go along with the people were voted out, and new leaders, like Bryan, voted in. Thus, Bryan, and his listeners, are under “binding and solemn instructions” to support silver. This is how Bryan represents the cause of humanity, and liberty: he is truly a representative of the majority of the people of his party, who lives only to do their will.

“The gentleman who just preceded me [Governor Russell] spoke of the old state of Massachusetts. Let me assure him that not one person in all this convention entertains the least hostility to the people of the state of Massachusetts. But we stand here representing people who are the equals before the law of the largest cities in the state of Massachusetts. When you come before us and tell us that we shall disturb your business interests, we reply that you have disturbed our business interests by your action. We say to you that you have made too limited in its application the definition of a businessman. The man who is employed for wages is as much a businessman as his employer. The attorney in a country town is as much a businessman as the corporation counsel in a great metropolis. The merchant at the crossroads store is as much a businessman as the merchant of New York. The farmer who goes forth in the morning and toils all day, begins in the spring and toils all summer, and by the application of brain and muscle to the natural resources of this country creates wealth, is as much a businessman as the man who goes upon the Board of Trade and bets upon the price of grain. The miners who go 1,000 feet into the earth or climb 2,000 feet upon the cliffs and bring forth from their hiding places the precious metals to be poured in the channels of trade are as much businessmen as the few financial magnates who in a backroom corner the money of the world.”

—Bryan claims that farmers, small businessmen, miners, and common laborers are just as important to the U.S. economy as big businessmen, bankers, lawyers, and Wall Street traders because the former does the exact same thing as the latter: they generate wealth. They put money into the economy. They grow the economy. But he goes further: the small businessman and farmer are actually better than the bankers and big bosses because the little guy actually does real work—he “by the application of brain and muscle to the natural resources of this country creates wealth”. Big guys grow fat off the sweat of the little guy’s brow. Bankers don’t do anything but collect interest, bosses make money off their workers. Miners risk life and limb, while traders sit in nice rooms betting on what the market will do. Does the trader really deserve as much respect and consideration as the miner? Bryan thinks not.

“Ah, my friends, who have made the desert to blossom as the rose—those pioneers away out there, rearing their children near to nature’s heart, where they can mingle their voices with the voices of the birds—out there where they have erected schoolhouses for the education of their children and churches where they praise their Creator, and the cemeteries where sleep the ashes of their dead—are as deserving of the consideration of this party as any people in this country. It is for these that we speak. We do not come as aggressors. Our war is not a war of conquest. We are fighting in the defense of our homes, our families, and posterity. We have petitioned, and our petitions have been scorned. We have entreated, and our entreaties have been disregarded. We have begged, and they have mocked when our calamity came. We beg no longer; we entreat no more; we petition no more. We defy them!”

—Here Bryan builds on his theme of the virtue of the laborer and takes it into truly melodramatic realms. The little guys are all pioneers and mystical seers, “rearing their children near to nature’s heart, where they can mingle their voices with the voices of the birds”, and can be found “out there where they have erected schoolhouses for the education of their children and churches where they praise their Creator, and the cemeteries where sleep the ashes of their dead”. Apparently only country people love nature, provide an education for their children, love God, and bury their dead. Since the little guys of the Democratic party voted for silver, Bryan and all the leaders of the party are speaking for these people, but it goes beyond that; suddenly, Bryan and his audience are those people. “They” turns to “we” as Bryan goes on: “We are fighting in the defense of our homes, our families, and posterity… We beg no longer; we entreat no more; we petition no more. We defy them!” For someone who started out assuring a Massachusetts Democrat that no one in the room had any hostility toward the east coast, Bryan has quickly turned the east coast into a hideous “them” who the Democrats are not just fighting but defying.

“Mr. Jefferson, who was once regarded as good Democratic authority, seems to have a different opinion from the gentleman who has addressed us on the part of the minority. Those who are opposed to this proposition tell us that the issue of paper money is a function of the bank and that the government ought to go out of the banking business. I stand with Jefferson rather than with them, and tell them, as he did, that the issue of money is a function of the government and that the banks should go out of the governing business.”

—If putting democratically elected government representatives rather than rich, corrupt bankers,  in control of U.S. economic policy was good enough for Thomas Jefferson, it’s good enough for Bryan.

“The gentleman from New York says that he will propose an amendment providing that this change in our law shall not affect contracts which, according to the present laws, are made payable in gold. But if he means to say that we cannot change our monetary system without protecting those who have loaned money before the change was made, I want to ask him where, in law or in morals, he can find authority for not protecting the debtors when the act of 1873 was passed when he now insists that we must protect the creditor.”

—A New Yorker (of course–east coast!) says he’ll go along with bi-metallism, which reduces the value of the dollar, only if contracts that were signed before the bi-metallism law is passed are mandated to be paid in gold. So if I lend someone $10 in gold, I want them to repay that loan with ten valuable, gold-backed dollars, not ten silver-backed dollars that are only worth about $6 in the international markets. This would basically protect banks, the enemy of the farmer and small businessman who have to borrow a lot of money under the gold standard. But Bryan says, You’re very concerned about protecting lenders—why didn’t you care about protecting borrowers during the Crash of 1873, when many were forced into bankruptcies as banks called in loans? The New Yorker, of course, is biased against the little man.

“Now, my friends, let me come to the great paramount issue. If they ask us here why it is we say more on the money question than we say upon the tariff question, I reply that if protection has slain its thousands the gold standard has slain its tens of thousands. If they ask us why we did not embody all these things in our platform which we believe, we reply to them that when we have restored the money of the Constitution, all other necessary reforms will be possible, and that until that is done there is no reform that can be accomplished.”

—Why is the party focusing its entire platform on one issue, bi-metallism? Doesn’t the country have other problems that need to be addressed? Bryan replies that bi-metallism is the source of nearly all the problems in the country: debt, small business failure, monopoly, etc. If silver is restored, “all other necessary reforms will be possible.”

“Why is it that within three months such a change has come over the sentiments of the country? Three months ago, when it was confidently asserted that those who believed in the gold standard would frame our platforms and nominate our candidates, even the advocates of the gold standard did not think that we could elect a President… Mr. McKinley was nominated at St. Louis upon a platform that declared for the maintenance of the gold standard until it should be changed into bimetallism by an international agreement. Mr. McKinley was the most popular man among the Republicans ; and everybody three months ago in the Republican Party prophesied his election… Why this change? Ah, my friends, is not the change evident to anyone who will look at the matter? It is because no private character, however pure, no personal popularity, however great, can protect from the avenging wrath of an indignant people the man who will either declare that he is in favor of fastening the gold standard upon this people, or who is willing to surrender the right of self-government and place legislative control in the hands of foreign potentates and powers…”

—Goldbugs had this 1896 election locked up with their pro-gold Republican candidate McKinley, and were sure bets to steamroll the Democrats into accepting the gold standard as well, but the sheer and pure power of the People, the little guys, won out. McKinley’s “personal popularity, however great”, cannot protect him from “the avenging wrath of an indignant people”. McKinley’s decision to act bilaterally with the United States’ international trading partners and adopt a currency policy that everyone agreed on, was in effect a move to “surrender the right of self-government and place legislative control in the hands of foreign potentates and powers…” Thus the rise of the Democrats, against all odds, in the election.

“If they tell us that the gold standard is the standard of civilization… we can tell them this, that they will search the pages of history in vain to find a single instance in which the common people of any land ever declared themselves in favor of a gold standard. [This] is a struggle between the idle holders of idle capital and the struggling masses who produce the wealth and pay the taxes of the country; and my friends, it is simply a question that we shall decide upon which side shall the Democratic Party fight. Upon the side of the idle holders of idle capital, or upon the side of the struggling masses? [The] sympathies of the Democratic Party, as described by the platform, are on the side of the struggling masses, who have ever been the foundation of the Democratic Party. There are two ideas of government. There are those who believe that if you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it.”

—The only people who want the gold standard are the parasitic, idle, undemocratic rich. There is no trickle-down economics, where legislation that makes the rich richer also benefits the poor (“their prosperity will leak through on those below”). What does exist is poor men working their way up the ladder through their smarts and hard work and democratic principles, which benefits the whole nation.

“You come to us and tell us that the great cities are in favor of the gold standard. I tell you that the great cities rest upon these broad and fertile prairies. Burn down your cities and leave our farms, and your cities will spring up again as if by magic. But destroy our farms and the grass will grow in the streets of every city in the country.”

—Immediately after this, Bryan will insist once again that he accuses the east coast of no wrong; it is clear, however, that this is a west v. east battle for him, great cities against small farms, “broad and fertile prairies” against cities. Farms are the backbone of the economy and the virtue of the nation, and it is farms that are irreplaceably important, not cities and banks and smokestacks.

“If they dare to come out in the open field and defend the gold standard as a good thing, we shall fight them to the uttermost, having behind us the producing masses of the nation and the world. Having behind us the commercial interests and the laboring interests and all the toiling masses, we shall answer their demands for a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.”

—There is power in our union: the battle for silver will be won by the little man, the “producing masses of the nation”, and not the inactive parasites sitting on their golden thrones in New York or Boston. The poor man will not be crucified with a crown of thorns, will not be sacrificed to the gold standard; and since the little guy is humanity, “you shall not crucify mankind upon a cross of gold.”

One can only imagine the torrential applause this speech was concluded with. Bryan was elected the Democratic Party’s presidential candidate, and newspapers across the country reverberated with the story and the speech, which was reprinted ad infinitum. Next time, we’ll see how it all played out.

Next time: the 1896 election

Silverites, Goldbugs and the Cross of Gold

Part 2 of our series on William Jennings Bryan’s famous 1896 Cross of Gold Speech provides background on the issue at the heart of that momentous address to the Democratic National Convention.

When gold was discovered in California in 1848, there was a Gold Rush that opened the west and changed the nation. When silver was discovered in the west in the 1860s, however, there was no Silver Rush. For decades the federal government had valued silver at 16:1 against gold—that is, it took 16 ounces of silver to equal 1 ounce of gold in value. It was much more lucrative to find gold than silver.

But the U.S. was not on the gold standard. Anyone could turn in gold or silver in any form—jewelry, bars, coins, etc.—to a U.S. Mint and receive dollars for their metal. Gold and silver could both be turned in for dollars, and this is called bi-metallism. Our currency was backed by silver and gold.

This system was threatened, however, by the Gold Rush. Gold flooded the market, making silver relatively scarce. While the Mint still offered the 16:1 ratio, silver could be sold privately for more—12:1, 10:1, etc. People stopped taking their silver to the Mint and began hoarding it or selling to it private or foreign buyers.

Such was the situation when silver was discovered in Nevada in the 1860s. While there was no Silver Rush, silver did begin to flood the market, and those private buyers and great 12:1 deals for silver dried up. Now you had to take 20:1 or 25:1 deals. But the U.S. Mint was still offering 16:1, and people who found themselves with too much silver on their hands flocked back to the Mint to turn it in for dollars. As a result, more silver dollars were minted.

All of this silver being turned in for dollars was good news for westerners, rural farmers, and the poor because it put more dollars into circulation. You can’t spend your silver jewelry, but you’ll spend the dollars you get for it. More money in circulation means there’s less of a need for people to borrow money, and that drives down interest rates. Farmers who needed to buy the new farm equipment that the Industrial Revolution was making necessary could buy it without going into debt with a loan. Poor people could buy more goods. These were the Silverites, who welcomed the liquidity of bi-metallism during a silver boom.

But not everyone was happy. The heart of business in the U.S. was in the east, on Wall Street and in the big industrial cities, and eastern banks had made fortunes loaning money to westerners, especially farmers, and charging high interest rates. With the boom in silver, that was diminished, and big business cried foul to the government through its lobbyists. These were the Goldbugs, who wanted to make dollars scarce by stopping the conversion of silver to dollars.

The situation came to a head in 1873. All that basically worthless silver pouring into the federal government for a decade had caused an economic crisis. The dollar was being backed more and more by silver, and less and less by gold. And since silver had lost so much value, the dollar might lose its value abroad. If a European won’t buy your silver, they’re not going to accept your silver-backed dollars. So Congress passed the Coinage Act of 1873, which stated that the dollar would no longer be backed by silver, eliminated the silver dollar, and severely limited how much silver Mints were allowed to accept from the public. Bi-metallism was over.

Silverites called it the  “Crime of ’73,” and claimed that justice was thwarted by rich businessmen. Goldbugs celebrated this embrace of the gold standard and claimed it was “sound money” policy.

Now you see what Bryan is driving at. He was from Nebraska, a western farming state whose people were hurting from the clampdown on silver. In his speech he is saying that he will not let the U.S. crucify the common man on a cross of gold—he will not let the government stay on the gold standard at the expense of the poor, the farmer, the western rancher or small businessman. If elected president, he will bring back bi-metallism, the dollar will be backed by gold and silver, and there will be more dollars in circulation, reducing debt.

Next time: close-reading the speech