Banknotes, Value, and Credit

Very few of us question the slips of green paper that come and go in our wallets. Yet confidence in those green slips of paper is a recent phenomenon. As we know, prior to the Civil War, the United States did not have a single national currency. Instead, countless banks issued “bank notes” in a bewildering variety of denominations and designs—more than ten thousand different kinds by 1860. Counterfeiters flourished amid this anarchy, putting vast quantities of bogus bills into circulation.

In the prologue of “A Nation of Counterfeiters” Stephen Mihm discusses the “confidence” and value that users put into the banknotes in the 1800’s (even if they were counterfeit) writing “value was something that was something materialized and became tangible when the note was exchanged, when one person put confidence in the note of another. Only then, at that instant, would an intrinsically worthless piece of paper come to mean something more” (Mihm, 10). In this specific part of the prologue, I feel that Mihm’s outlook on “value” mirrors Georg Simmel’s. Simmel believed that value was not the property of the object, but it is the relation it had with people and other objects. I feel that Mihm mirrors this outlook because he wrote that the “worthless” piece of paper came to mean something when the person receiving the bank note gave it the value they believed it held. So, to one person, the bank note could have been worth a quarter of it’s face value, and to another it could be worth the full face value.

Another interesting part of the prologue that caught my attention was when Mihm briefly talked about credit and creditworthiness. During the 1800’s, different forms of payment had been introduced (i.e., personal checks, drafts, book credits, etc.) These types of payments were different because they put the trust of payment on the individual, rather than the bank. As Mihm states, “these instruments worked best at enabling transactions between individuals who already knew each other” (Mihm, 11). Another book/person who really digs into the meaning of credit and it’s meaning is David Graeber, author of “Debt: The First 5,000 Years.” If you lived in the 1800’s and knew the person you had to pay, you would most likely use personal checks. If the person was a stranger, you would most likely use banknotes. This is because back then, credit was TRUST. Money/banknotes was/is simply an IOU that facilitates trust. This is a statement that Mihm may agree with writing “…bank notes, which put the ‘capital’ in capitalism, were nothing more than glorified IOUs” (Mihm, 9).

Now that we’re adults, and most of us have our first credit cards, we have to learn about the risks that come with credit. Personally, I do not have a credit card and (if I could) would like to keep it that way for the rest of my life. Credit has become a very dangerous asset in everyday life. Credit used to be simple but now it requires so much more. Now there are credit scores and if you don’t have a high enough credit score you can’t get an apartment and in some states, a job. Back then credit used to be essential and positive, but now it only seems to hurt people. How would you describe what credit was (1800’s) and is (now) in our society? Knowing that credit used to be helpful, how did it help create communities in the 1800’s? But how does it hurt communities now?

All in all, I found the prologue of “A Nation of Counterfeiters” by Stephen Mihm to be very interesting. I enjoyed learning that back then, people did not trust the money in circulation and now-a-days we trust the “slips of green paper” without question. But should we? Should we question the dollars that we have in our wallets, purses and pockets? I mean when you think about it, what is the real value of the dollar if there is nothing backing it up? How does the Federal Reserve determine the value? I know, too many questions (this is a topic I shan’t get into because I will go on and on and on and also because it deserves it’s very own blog post) but it would be very interesting to hear all of your guys’ thoughts on everything.

Baptist’s “How Slavery Haunts Today’s America”

In his response to the Economist’s review of his book, The Half Has Never Been Told: Slavery and the Making of American Capitalism, Edward E. Baptist does not concede to his critics. Baptist takes the opportunity to write a scathing reply for CNN.com, which he titles “How Slavery Haunts Today’s America”. Baptist’s basic argument in The Half Has Never Been Told is that without the free labor of African Americans, the United States (and even much of Western Europe) would not have seen such a rapid rise of industrialization. Baptist asserts that beginning with the invention of the cotton gin in 1794, enslavers created a “huge cotton and slavery complex” (CNN.com, p.1). The cotton gin allowed enslavers to plant cotton in new environments (mostly places in the deep south such as, Mississippi, Louisiana, and Georgia) because the cotton gin could better process the plant. The speed of the cotton gin meant that slaves could pick and process more cotton than had previously been possible. This new speed generated more and more profit for the enslavers as well as Europeans (especially the British). As Baptist points out, cotton quickly became the most important and profitable commodity in the world market. Therefore, Baptist writes, “…the work of slaves…was driving the industrial revolution” (CNN.com, p.1). The institution of race-based slavery in the United States abused millions while at the same time making others incredibly rich. Baptist states that, “Slavery systematically exploited, brutalized, and impoverished some people. The forced movement of people to the cotton frontier made others wealthy, and not just enslavers. Northerners and Europeans created a worldwide textile industry based on slave-made cotton” (CNN.com, p.2). Slavery allowed white people in the United States, as well as Western Europe, to profit off the labor of dehumanized people. The story that wholesome American pioneers, inventors, and innovators made this nation is a fantasy.

The fact that anyone doubts the huge role of slavery in the development of our modern capitalist economy is unbelievable. The United States became a world superpower in part because of the South’s production of cotton. Such production would not have happened if it were not for the forced and unpaid labor of millions of African Americans. Unsurprisingly, the United States is still dealing with the consequences of slavery. Institutional, as well as individual, racism is very obviously still the norm in this country. Despite electing a black president, the United States is not in a post-racial society. Baptist makes this point by writing,

…today the discrepancy between the descendants of the enslaved and white Americans is huge…The justifications enslavers and their allies offered for what they were doing – claims that African-Americans were subhuman, that they were lazy, or that they were violent and needed to be ‘controlled’ to prevent black men from rampant anti-white violence – are still being tossed around in our society. These kinds of racism are sometimes used to justify exclusions that make it harder for black families to close…[the] wealth gap (CNN.com, p.2).

The United States continues to grapple with the consequences of slavery everyday. African Americans are marginalized and often denied the ability to achieve the ‘American dream.’ Baptist closes his reply to the Economist’s critiques by writing something that is hard to deal with but undeniably true: “…slavery’s legacy is still destroying lives” (CNN.com, p.2).

Slavery & Complicity in Baptist’s “Collateralized and Securitized Human Beings”

     In the chapter, “Toxic Debt, Liar Loans, Collateralized and Securitized Human Beings, and the Panic of 1837,” Edward E. Baptist discusses the many intricacies of the U.S. financial system in the decades leading up to, and directly after, the Panic of 1837. Baptist pays special attention to southwestern states and territories and the increasingly important role they played in the U.S. economy, as during this time the region emerged as a powerful site of the production of raw material, owing to the labor of enslaved people who had been forcibly moved to the region.

     As Baptist points out, the tremendous industrial development which occurred during this time is often credited to the development of new technologies, like the spinning jenny and the mechanical loom, and to the proliferation of the division of labor. However, this perspective marginalizes the role played by the labor of millions of enslaved people across the world, and especially in the southern United States. “By the 1830s, 80 percent of cotton used by the British textile industry came from the southern United States,” (Baptist, 75). Were it not for the raw material provided by enslaved labor, the rapid industrialization which occurred throughout the nineteenth century would never have transpired as it did. In this economic environment, “enslaved human beings embodied the ultimate hedge. Cotton merchants, bankers, slave traders—everybody whose money the planter borrowed…all expected that enslaved people would eventually either (1) make enough cotton to enable the planter to get clear, or (2) be sold in order to generate the liquidity to pay off the debt,” (Baptist, 79). The charter of the Consolidated Association of the Planters of Louisiana in 1827, furthered the conversion of enslaved human beings into financial instruments.

     CAPL functioned much like any other bank at the time, using human lives as collateral when lending to planters; however, it also created more leverage at lower costs for these enslavers, and hedged more effectively against loses by individual investors through its securitization of slaves. CAPL provided liquid capital to its borrowers with an agreement with the state of Louisiana to back $2.5 million in bonds; these bonds would then be sold in international markets. British investment in securities which aided the further development of slavery in the southwest United States continued amid a political atmosphere which would result in the abolition of slavery across the British Empire in 1833. As Baptist notes, 

“one might think that British and other European investors, making choices during a decade that saw the emancipation of all slaves in the empire by act of Parliament, would object to purchasing securities that clearly funded the expansion of an immoral and allegedly inefficient institution. But that would be wrong. The objections raised to the southwestern bond issues in the British financial press actually focused on other issues. They wondered if the securitization of slaves really eliminated risk. Were the banks based on a sound footing? Would they repay their debts? And was it safe to invest in a slave economy?” (Baptist, 83)

     Perhaps this willingness to over look moral issues is understandable considering the complicity of entire economies in the development and continuation of slavery. After all, it doesn’t seem reasonable to expect British investors to turn down bonds that would support planters in the southwestern United States when British textile mills bought the cotton harvested by the enslaved laborers whose lives were owned by those same planters. Still, I wonder, why would British investors and the financial press disregard the moral issues surrounding the question of whether or not to invest bonds which would further the expansion of slavery, regardless of where that expansion took place? Is the conversion of a human life into a financial instrument perhaps more pernicious than slavery itself, or are these two one and the same?

Why They Did What They Did

 

In the article Underground on the High Seas and by Craig B. Hollander talks about the illegal slave trade across the Atlantic. It talks about the people who started it and were the most successful in the business. Two of the most successful illegal slave traders were George Stark and Thomas Sheppard.

They wanted to hire people to help them that were trustworthy around the community, so they will be less suspicious. Two men that they hired were Joseph Findley Smith and Adolphe Lacoste. Lacoste is a french native, but there is very little information about his family and when they came to the United States. Lacoste is also a very trusted character that took this job to supply for his mother, two sisters, and wife. He knew that one trip makes a large amount of money and he thought that one trip would not get them into trouble.

Similar to gambling, once they started they couldn’t stop. When they did get caught the first time, they were pardoned and guilted the president and convinced President James Monroe that what they did was alright. When Smith wanted to get out of the business, Stark and Sheppard guilted him a raise as bribe and gave him lousy examples that what he is doing is alright.

Being infatuated with the idea of making a lot of money overwhelmed Lacoste and Smith. They were confused because both people were raised with good morals, however they knew what they were doing was ethically wrong and illegal. They were also confused because what Stark and Smith were telling them seemed convincing, but was a lie. Stark and Smith were obsessed with the slave trade that they would endanger other people’s lives to make more money than they would anywhere else.

In my opinion, I think what Smith, Lacoste, Stark, and Sheppard did was wrong, but it does not make them bad people. Stark and Sheppard were definitely more selfish than Smith and Lacoste, but the more trips they made, all of them took out the “ethical” aspect and unconsciously decided to become ignorant to the idea. Especially Smith and Lacoste were very conflicted. They knew that what they were doing was wrong, but they had other people to think about.

In the article, How Slavery haunts today’s America by Edward E. Baptist, he describes the story of a slave, William, who is being moved to the south to work on a cotton plantation. Baptist describes in his book the exploitation of the slaveowner to the slaves and how horribly treated the slaves were. When people found out about this and describes the slaves as victims, people on social media were not sympathetic to the slaves but were trying to defend the slaveowners actions.

What Baptist did, which was very bold, was make people aware of what happened, so they would not be able to be ignorant anymore. When he did this, it was like the readers were angry at learning about the reality. When I read this article, I was shocked and disgusted that people to this day are still as racist as they were back then.

I was raised in New Jersey, so maybe I am biased to the idea of slavery and have only learned about it one way, but it should make sense to everyone that torturing and considering people as property is inhumane.

“Underground on the High Seas”

In the seventh chapter of Capitalism by Gaslight, Craig B. Hollander writes about commerce, character and complicity in the illegal slave trade. More exclusively, Hollander writes about two ship captains- Adolphe Lacoste and Joseph F. Smith and their aid in the illegal transatlantic slave trade. As we all know, the transatlantic slave trade was the biggest deportation in history and a determining factor in the world economy of the 18^th century. Millions of Africans were torn from their homes, deported to to the American continent and sold as slaves. Although the Slave Trade Act of 1807 was designed to eliminate all American participation in the trade, there were still ample ships engaged.

Participants of the slave trade were thought of to be “unfeeling” and “monsters capable of this foulest of murders.” But in the cases of Adolphe Lacoste and Joseph F. Smith, they were quite “ordinary.” Lacoste and Smith lived normal childhoods. Lacoste emigrated to the United States from “one of the French West-Indian islands” to then reside in South Carolina and Smith was born and raised in Baltimore. Although both of these men had backgrounds involving vessels, they had no experience or previous invitations to work the slave trade.

Lacoste was asked to captain the ship Science by Eugene Malibran, and Smith was asked to captain the ship Plattsburgh by Thomas Sheppard and George Stark. All three of these financiers sought out captains that they knew they could trust and manipulate. When you really think about it, both of these men were truly sensible and they often demonstrated signs of doubt in what they were doing. Lacoste and Stark were both in financial debt, and had numerous family members that they had to care for. Although these men knew the slave trade was illegal, their decision to participate was swayed by the fact that they would be getting paid a great deal of cash. I understand that the government tried their best to pursue the “artful men” behind the voyages, but do you think that the Lacoste and Smith should have gotten all of the blame?

Now that I’m reflecting, I found it ironic and hypocritical that at the time, most Americans did feel that the transatlantic slave trade was a “grave crime against humanity” but yet domestic slave trade was still perfectly legal. Yes, there is a huge difference, but in a macro sense, African Americans were still ripped away from their homes and commoditized. But that’s besides the point, just my general opinion. Another thing that I found interesting is the fact that Lacoste and Smith didn’t have to serve their full sentence. I do agree with Coco when she brings up the fact that society can sometimes pressure one to engage in illegal tasks to provide for their family, and the comparison between Locke/Smith and people participating in the drug trade. In today’s society if someone got arrested for smuggling drugs or even attempting to make drugs, they’re in jail for life. They wont be able to write an apology letter to Obama, or have their companions vouch for their actions and then all of a sudden be free. Since you know Smith and Lacoste’s backgrounds and reasoning… is the crime they committed justified? How do you feel about the outcome? Should I not even compare today’s crimes with crimes from the 19^th century since the system has changed tremendously? To end my tirade, the quote that Hollander uses on 148 really expresses my thoughts on Lacoste and Smith being pardoned- “‘It will be recollected’ , the Arkansas Gazette predicted, ‘that the first person found guilty under the act for preventing the slave trade, was pardoned.’ ‘How then’ the newspaper wondered, ‘can others be executed with justice?'”

I understand that my opinion on what happened to Lacoste and Smith is two-sided. I sympathize with them and understand why they did it, but then I also don’t agree with the pardon. I apologize for being wishy-washy, but I just can’t find myself sticking to one side.

Guilty Actors or Guilty Societies? Moral Confusion and the Criminals it Creates

In chapter seven, “Underground on the High Seas” in Capitalism by Gaslight, Craig B.Hollander analyzes the reasons and consequences of Captain Lacoste’s and Captain Smith’s illegal participation in the slave trade. As Hollander points out, “Most Americans did, indeed, feel that the transatlantic slave trade was a grave crime against humanity” during the same historical period that slavery was still legal in the United States. This new law created a new type of “human trafficker”, once legal slavers now gone underground,“brazen enough to break the law, ruthless enough to commit heinous acts, and effective enough to warrant military surveillance”. Lacoste and Smith, captains of the Science and Plattsburgh respectively, became active participants in this illegal activity since the transatlantic slave trade was banned in the 1807 Slave Trade act. Yet despite the illegality of the slave trade, slavery itself would hardly have been unfamiliar to these two men. Smith was from Baltimore where the public was known as “the most willing to break the slave trade laws”. Lacoste was from Charleston, which had been the largest slave port in the US. Needless to say, both of these men were from slave states when their journeys began in 1820. 

The most obvious question is what led these two men to become criminals? Hollander points out that the political philospopher Laurence Thomas once stated “it must be acknowledged that evil can be perpetrated by individuals who were once ordinary people, that is, morally decent people.” This statement argues the case that perhaps both men were not horrible “monsters”, but instead, as we find out later in the reading, came from common families in desperate straits and were simply seeking a means out of their impending poverty. Lacoste was described as a “very good character, young & possessing to the highest degree filial and sisterly love”. As for Smith, a former passenger of his described him as “in almost every respect a good example of an American man”. How are we to reconcile these men and their crimes? Two upstanding fine young men, caught in the act of committing horrendous acts. Lacoste, and Smith were arrested in 1820 yet both were pardoned by the president and released by 1822. Being young and sympathetic figures ended up saving them from being locked in prison. 

It is astonishing to see how social pressure and the desire to provide for one’s family can make a apparently good person commit all sorts of horrendous acts, no matter how horrible those acts may be. Smith was offered ten times his normal salary to captain this ship, enough money to provide a fast and expedient escape from his financial woes. The moral confusion of their age may not excuse them, but it certainly must at least partially explain their actions. Young men or women engaging in illegal trade or crime often enter this market because they lack the education or money to do something else as rewarding. Some individuals participating in the drug trade in places like Mexico can be compared to Lacoste and Smith. What do they risk by driving buses filled with drugs through borders? Apparently not enough to at least give it a try and have the chance of making good money for their families. Are their actions illegal, and will they lead to pain and suffering? Indisputably. But are people like these really criminals or can their actions merely be excused by their situation, and the endless American appetite for drugs? One could almost say that they reluctantly participate, that they don’t kill, they don’t hurt, they just do what they must to survive. Is that a crime?

Slavery’s Legacy

All historians can agree that the United States’s economy developed into a capitalist powerhouse over the course of the nineteenth century. It grew from a small agrarian economy in 1800 to one of the largest industrial capitalist ones in the world by 1900. But how exactly did this transformation occur? For much of the twentieth century, historians viewed slavery as an obstacle that stood in the path of “true” capitalist development, which was powered by “free” wage labor. This interpretation depicted slavery as inefficient, anomalous, and regionally isolated to the South. How does recent historical scholarship challenge this interpretation, according to historian Seth Rockman in his essay, “The Unfree Origins of American Capitalism”? And if slavery was so integral to the economic success of the United States–as Rockman argues–should anything be done to compensate the descendants of slaves for their ancestors unremunerated work? In answering the last question, it might be helpful to skim journalist Ta-Nahesi Coates’s 2014 essay, “The Case for Reparations,” as well as political scientist Cedric Johnson’s left critique of the reparations idea here.