LOOKING back at United States history, our nation has faced economic crises with relative frequency; roughly every 20 years we experience an economic downturn, or what would have been termed in the 19th century a “panic.” Those who paid attention in high school history classes, or who have taken a select set of classes at the University will remember them: The Panics of 1819, 1837, 1857; the gold debates and populist movements of the 1880s and 1890s; the crashes of 1907 and 1929; the periods of stagflation of the late 1970s and early 1980s, and finally, the crisis-awaiting-a-name in which we now find ourselves. These crises suggest a cyclical nature of the American capitalist economy, that astounding overall growth requires periods of readjustment. Many of these crises were either caused by or demanded executive action from the sitting president and ended being defined by that President’s character. In light of our own approaching election, we ought to examine what that might mean for us.
Several crises demonstrate ably the potential impact of executive power on economic events, the best of which is the Panic of 1837. In 1837, The United States entered a recession that, if not caused by the actions of Martin Van Buren and his predecessor, Andrew Jackson, was at least heightened by them. Jackson de-capitalized the Second Bank of the United States in a move dictated by personal opposition to banks and concentrations of money and power. He wrote in his veto statement against the concentration of funds in the hands of the wealthy, lamenting, “It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes,” and that most of the money belonged to foreigners and “a few hundred of our own citizens, chiefly of the richest class.” Jackson spread the money to numerous small banks, which triggered inflationary lending without hard currency to back it up. When the economy crashed in 1837, after Jackson had left office, Martin Van Buren’s administration washed its hands of the government’s direct involvement in the economy, and the United States lacked a central bank until the formation of the Federal Reserve System in 1913 (also the result of a market crash, that of 1907).
The example provided by Andrew Jackson ought to function as a warning, as the rhetoric of blaming the wealthy for social and economic ills currently runs rampant over the presidential race. Senators Obama and McCain both have spoken against the exorbitant pay offered to CEOs even when their companies fail. In one television add, Obama called it “wrong” and “an outrage.” John McCain has said that many CEOs have “forgotten or disregarded the basic rules of sound finance” and “proven unworthy” of the trust the American people and their employees placed in them. Clearly this is an issue that both campaigns feel resonates with the American people.
And yet the lessons of executive involvement in our economy would advise us to take heed of the character of the man we seek to put in a position with so much influence over our economy. For example, Andrew Jackson had a deep seated dislike of banks and those who ran them. He also was prone to personal feuds and held grudges for life. These two issues came to a head in confronting the Second Bank of the United States, as Jackson found himself in position to exercise control over an institution and a man he hated.
We ought to take a similar look at the words and actions of our own candidates. John McCain has generally insisted that despite the current crisis and the problem of CEOs receiving excessive pay, the fundamentals of our economy are strong. Barack Obama, on the other hand, seems to take issue with the nature of our society and economy. Recently, comments made on NPR have surfaced in which Obama stated that he considered the failure of the Civil Rights movement to redistribute wealth one of its “tragedies” and in which he suggested that redistributing wealth was an issue of “political and economic justice.” These are the words of a man with a fundamental opposition to the end results of the United States economy, and a man who, if he wins, will enter office with essential freedom to enact the legislation he desires.
Jackson’s issue was with the institution of banking and the concentration of wealth in the hands of the few. He did believe, however, that “Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth can not be produced by human institutions.” This principle is something Barack Obama seems opposed to, and the example of Andrew Jackson ought to teach us the dangers of placing a man with an established predisposition against economic success into a position in which he can attack it.
Robby Colby’s column appears Thursdays in The Cavalier Daily. He can be reached at r.colby@cavalierdaily.com
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