If you read only the table of contents of Jeff Sklansky's fantastic new book, Sovereign of the Market: The Money Question in Early America, you might get the impression that here is a fairly standard and traditional intellectual history of money. Divided into three chronological parts—Colonial, Jacksonian, and Gilded Age and Progressive Era—each section pairs together two biographical chapters of the leading economic theorists of their respective times. Yet this book is far more than just a history of the financial thoughts of six white American men. Building on various historians’ recent recasting of money not as a naturalized market commodity but rather a deeply political object of historical inquiry, Sovereign of the Market manages, all at once, to serve as a sweeping synthesis of American capitalism, a nitty-gritty financial history, a wonderfully eclectic (although at times perhaps a bit too eclectic) cultural history of medicine, architecture, poetry and melodrama, as well as a poignant political and social history of how, as Sklansky notes, “the money question formed the crucible of class conflict in early America” (p. 8).
As the long-lasting influence of Federal Reserve Banker Bray Hammond's 1957 Banks and Politics in America makes plain, when it comes to the history of American banking, generations of grad students (me included) had little choice but to turn to former bankers in order to learn about the labyrinthine workings of Early American finance. This often led to technically complex, but politically crude narratives that downplayed the role of ideology, power, and class in the making of American money. With Sovereign of the Market, we have a worthy replacement for Hammond's consensus-school book. In Sklansky's retelling, readers are given, in clear and precise prose, in-depth explanations of bills of credit, discounting tactics, fractional-reserve banking, small note circulation, “real bills” theory, and bimetallist standards. But by placing these complex financial instruments and ideas in their proper historical context, Sklansky constantly reminds the reader that the making of money, whether by private or public means, is always political and produces not only coins and bills but also winners and losers.
In pitting two antagonistic thinkers against each other in each of the book's three sections, Sklansky shows how “the money question” was one of the most burning issues of Early America. Be it Puritan minister John Wise and proto-Brahmin physician William Douglass in colonial Massachusetts, working class journalist William Leggett and staid central banker Nicholas Biddle in Jacksonian America, or Populist organizer Charles Macune and financial adviser Charles Conant in the Gilded Age, Early Americans argued vehemently over who would have the power—and this book is about nothing if not power—to produce and control the nation's money supply and credit conditions. As the author shows time and again, seemingly theoretical arguments always had real-life ramifications, be it in regard to New York wage laborers decimated by inflation, indebted Texas farmers crushed by high interest rates, or freewheeling Wall Street financiers in desperate need of a centralized regulatory system that could save the unstable exuberances of capitalism from itself.
Sklansky makes two main arguments. First, that the making of money was depoliticized in the long nineteenth century. Second, that the “money question” was not a battle between pro- and antimarket forces but rather between those who viewed money as a means to an end—the trade of equivalent values by petty commodity producers—and those who viewed money as an end in itself—a profitable rate of return on investment. While the former pushed for a democratically run money infrastructure (not unlike public water pipes or roads) that would grease the wheels of an egalitarian market society, the latter aimed to profit from the very production, investment, and circulation of money; thus, turning cash into capital.
As Sklansky tells it, in colonial Massachusetts (and again briefly with Civil War “greenbacks”), American money backed only by legal fiat was created and controlled by elected legislatures—much to the chagrin of capitalist creditors and investors who relied on the scarcity of metal currency to boost interest rates (and their profits) while also protecting their accumulated capital from the ravages of inflation. In the Jacksonian era, it appeared as if these businessmen won the day. American money was effectively privatized, as the power to determine the money supply shifted from local farmers and elected officials to state-chartered commercial banks and a depoliticized gold standard. Yet in the subsequent speculative frenzy, both workingmen like William Leggett and powerful Northeastern financial elites like Nicholas Biddle lamented the fact that banks were lending out far more paper money than gold from their coffers, a development that led to an economic—and epistemic—crisis of representation that decoupled the link between money and value. In a fresh twist to the old “Bank War” narratives, the author demonstrates how both Leggett and Biddle continued to turn to depoliticized solutions—a class-based, antimonopolist, yet ultimately naïve libertarianism for the former and a highly centralized yet nevertheless private regulatory vision by the latter.
For Sklansky, the Gilded Age served as the last real chance in American history to return the power of making money to the people, as Agrarian organizer Charles Macune's elaborate subtreasury plan creatively pushed for an effectively nationalized banking infrastructure of agriculture silos that would cut out middle-men bankers by backing the value of paper bills with their crops instead of capitalists’ gold. Controlled not by private bankers but public legislatures, the subtreasury system would not only create a low-interest, not-for-profit credit system but also an elastic currency that would ebb and flow with the agricultural cycles of the economy. Yet as Sklansky describes in his final chapter on the Progressive Era rise of corporate finance, investment banking, and large trust funds, this was not to be. While the rigid gold standard would be abandoned for a centralized flexible currency as Macune desired, the “independent” technocrat-run Federal Reserve System that was eventually established was insulated from class conflict and largely designed to maintain and stabilize the accumulated value and profitability of corporate investment capital.
To conclude, Sklansky's book helps explain why our own political imagination regarding money is so narrow—limited to technocratic, apolitical debates between economists on whether the next interest hike will be “good” for “the economy” and “the market” or not. Hopefully, this fine book will not only lead to a better understanding of money's complicated past but also a broader vision of its democratic future.
