The 19th-Century Bernanke

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An MP3
audio file of this article, read by Floy Lilley, is available
for download
.

There is something
disarming about a technocrat. While it is easy to dismiss elected
officials as blustering panderers, there is something comforting
in the image of the specialist civil servant toiling away with industry
and equanimity. We tend to imagine such an employee of the state
poring over statistics as an ancient Greek priest might examine
entrails, and carefully allocating resources like an Egyptian vizier
allocating slaves. The technocrat seems benign, crucially important,
and above the fray.

This is certainly
the image that has been cultivated by Federal Reserve chairmen.
One remembers Alan Greenspan, with his prominent braincase and thick
glasses, uttering technical jargon just arcane enough to assure
the markets that all was well with the “Greenspan put.” And we are
regularly presented with Ben Bernanke, the bearded sage, comfortingly
citing statistics that show how government remedies are working
their way through the economy (however egregiously wrong
he may be).

This aura surrounding
technocracy has grown especially since the civil service “reform”
of the late 19th century. But technocrats have been striving for
it for much longer.

This striving
can be seen distinctly in the person of Nicholas Biddle (1786–1844),
one of the more interesting characters in United States history.

Starting in
1822, Biddle was the president of the American central bank that
preceded the Fed: the Second Bank of the United States. Biddle was
initially reluctant to take the job. A scion of a high society Philadelphia
family, Biddle had no stomach for the indecorum of politics. He
ultimately accepted the position, however, stating that the Bank
was, “of vital importance to the finances of the government and
an object of great interest to the community.”

His disdain
for competitive democracy (in his words, “the violence of party”)
and his esteem for the Bank merged into a fervent belief that the
Bank should always be above politics. He implemented that belief
as policy while he was Bank president. He proudly declared,

There is
no one principle better understood by every officer in the Bank
than that he must abstain from politics…. We believe that the
prosperity of the Bank and its usefulness to the country depend
on its being entirely free from the control of the officers
of the Government, a control fatal to every bank which it ever
influenced. In order to preserve that independence it must never
connect itself with any administration — and never become
a partizan of any set of politicians.

In the 20th
and 21st centuries, Federal Reserve chairmen carried on this tradition
of jealously guarding the Fed’s independence. Witness Ben Bernanke’s
recent warnings
that the Federal
Reserve Transparency Act
would politicize the Fed.

As we shall
see, in practice, Biddle, like Bernanke, was not against politics
per se; so long as it was conducted in an unpublicized,
“gentlemanly” manner.

The political
climate during the early years of Biddle’s tenure seemed to suit
his temperament and attitude toward governmental institutions perfectly.
In an interview with the Frenchman Alexis de Tocqueville, who was
in Philadelphia conducting research for his book Democracy
in America
, Biddle explained how American politics had
been tamed and a placid consensus had emerged in recent years.

For a long
time we were divided between Federalists and Republicans…. They
fought bitterly until the Federalist party, always short in
numbers, was completely crushed by its adversary….

Since then
there have been people who support the administration and people
who attack it; people who extol a measure and people who abuse
it. But there are no parties properly so called, opposed one
to the other and adopting a contrary political faith. The fact
is that there are not two practicable ways of governing this
people now, and political emotions have scope only over the
details of this administration and not over its principles.

In other words,
under the new consensus there was no need for debate. It was simply
a matter of civil servants like Biddle dutifully implementing wise
policy.

Tocqueville
didn’t completely buy Biddle’s story. As H.W. Brands wrote, “perhaps
because his own experience of aristocracy was deeper than Biddle’s,
Tocqueville detected a continuing struggle between the few and the
many in America.” Tocqueville believed that “aristocratic [and]
democratic passions” were always present, and “though they may slip
out of sight there, they are, as it were, the nerve and soul of
the matter.”

Tocqueville was
right, and the democratic passions he spoke of found their embodiment
in the person of Andrew Jackson, who became president of the United
States in the 7th year of Biddle’s tenure. In many ways, Jackson was
Biddle’s opposite. While Biddle was the quintessential apolitical
civil servant, Jackson was a volatile populist who considered himself
the champion of democracy.

Jackson hated
the prevalent political atmosphere as much as Biddle loved it. Where
Biddle saw consensus and benign paternalism, Jackson saw an entrenched
establishment ridden with corruption. He had first-hand experience
with the cozy, back-scratching ways of the Republican political
monopoly throughout his public career, and especially during his
first, failed attempt at the presidency, in 1824.

Of the three
chief candidates of that election, Jackson was clearly the most
popular. But there was an electoral deadlock, so the race had to
be decided by the House of Representatives. Through a backroom quid
pro quo with rival candidate Henry Clay, John Quincy Adams
ended up winning the House vote and, as a result, the presidency.

After finally
defeating Adams in 1828, Jackson came into office with a large chip
on his shoulder against the Republican establishment. He also had
a distinct disliking for Biddle’s Bank in particular, for he was
an ardent hard-money advocate. His monetary opinions were informed
by contemporary hard-money theorists and his own readings concerning
the South Sea Bubble of 1720. He rightly blamed the Bank for the
Panic
of 1819
and had been a leader in the fight against inconvertible
paper money in Tennessee.

Read
the rest of the article

September
7, 2009

Lilburne
[send him mail] is a
teacher and writer based in San Francisco. He writes about economics,
history, and philosophy at his blog Summa
Anthropica
. .

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