Remarks presented by Lawrence Goodwyn, William Greider & others on the occasion of the 100th anniversary of the Populist Sub-Treasury Plan for financial reform – December 9, 1989, in St. Louis, Missouri.
It was a resigned, plaintive-sounding analogy but it spoke volumes about the roaring ’80s. “I don’t think it is healthy to have this dramatic concentration of financial power,” investment banker Felix Rohatyn told the New York Times in 1988. “But it’s just like the nuclear age, you can never uninvent the atomic bomb any more than you can uninvent these astronomical capital markets.”
Maybe so. But Mr. Rohatyn’s financial world, for all its explosive effects on American society in the past decade, has proven to be eerily fragile as well as inordinately powerful. In fact, that world is no more permanent than those created by the crop lien system in the 1880s or stock watering in the 1920s.
To reckon with a system that appears to have spun so majestically out of control, it helps to consider America’s historical record of financial disorders — and of ordinary citizens organizing themselves to “uninvent” the problem. There’s no more telling example than the Gilded Age and the biracial agrarian firestorm it provoked called Populism.
The Populist movement built itself on a model of economic cooperation intended to combat the two sources of financial pressure that plagued farm communities 100 years ago — vise-like credit conditions and a pinched, inflexible currency. By the end of the 1880s, hundreds of thousands of Americans had been drawn to Populism’s organizational seedbed, the Farmers Alliance, through its cooperatives and vibrant system of grassroots education.
In December 1889, Alliance representatives met in St. Louis along with leaders of the Knights of Labor in an attempt to coalesce the great urban and rural organizations of America’s “producing classes.” That gathering knit the ties that would underpin Populism’s insurgent moment on the stage of national politics in 1890 and 1892. But what made the St. Louis convention memorable was the report of its Monetary Committee, an audacious program for financial reform authored by Texas Alliance leader Charles W. Macune.
Macune’s Sub-Treasury plan, based on years of cooperative experience, was both visionary and intensely practical . It proposed that the federal government establish a warehouse to store crops after harvest in every county that raised at least $500,000 of farm produce each year. These “sub-treasuries” would become the instrument of money creation — a way for farmers to borrow against their crops and land at low interest or to sell those crops at market value and be paid in a new national currency. Money supply would rise or fall flexibly, in tandem with the nation’s productive capacities. The cost of credit would shrink as farmers borrowed through their own national government rather than a restrictive private banking system. And agricultural prices would rise from their crushingly depressed levels.
Macune’s plan to harness the monetary authority of the nation on behalf of its citizens formed the centerpiece of Populism’s battle for economic opportunity. Conventional minds derided it mercilessly — “the wildest idea conceived by sober man” sniffed the New York Times. But broader thinkers like Richard Ely, founder of the American Economics Association, and John Maynard Keynes applauded its viability. Indeed Macune’s ideas anticipated Keynes’ commonsense premise that monetary policy must support production of real goods. Though they were watered down, even twisted, in execution, Macune’s notions also informed the establishment of the Federal Reserve System in 1913 and the New Deal’s farm programs two decades later. MORE…