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http://web.archive.org/web/20060512072502/www.etext.org/Politics/LaRouche/reconstruction

A crucial battle: the Reconstruction of the U.S. South

by Fredric W. Henderson

Around the world today, there is a crying need for a program
of economic reconstruction. The newly created nations in Europe,
like those of the former Yugoslavia; the continents of Africa,
Asia, and Ibero-America which have been devastated by the genocidal
economic policies of the International Monetary Fund; and the
former Soviet Union, which is now facing uncontrollable chaos,
must not merely survive, but must be able to develop and contribute
to the betterment of their own peoples and of humanity in general.
The issues posed today are the same as those that faced President
Abraham Lincoln and the congressmen and senators who came to
be known as the ``radical Republicans'' at the outset of Lincoln's
second term. Although Lincoln was assassinated in April 1865,
before he could fully elaborate and carry out a program of economic
reconstruction for the South, the radical Republicans were spurred
to continue the fight. They were led by the great nineteenth-century
economist Henry C. Carey, who conceived of the fight to rebuild
America's South as part of a global war against the imperial
policies of Great Britain then being brutally implemented in
India and which had dominated the cotton-based economy of the
U.S. South. Carey's principal ally in the U.S. Congress was
the unflappable, uncompromising congressman from Pennsylvania,
Thaddeus Stevens, who led his allies in the Republican Party
in defining the nature of the work to be completed in the South.
Stevens refused to back down from what he knew to be the principles
which would complete this second American Revolution, by developing
in the South an economic system based on free labor, and expanding
infrastructural and industrial development in that sadly underdeveloped
region of the country.
Today, Carey and Stevens's names are practically unknown; yet
they were the two who best understood that their battle was
not against a bunch of ``unreconstructed'' Southerners, but
against the economic parasitism of Great Britain.

- Reconstruction: a yardstick for the nation - The broader
outlines of the battles waged during this
period have been masterfully described by W. Allen Salisbury
in his book {The Civil War and the American System: America's
Battle with Britain 1860-1876} (New York: Campaigner Publications,
1978). To him, for that work soon to be reprinted, all of mankind
is indebted. However, there are also key aspects of the battles
in Congress that are essential to fully understanding this period.
All historical debate about what occurred following the U.S.
Civil War, has centered on the efforts of the so-called radicals
in the Republican Party to assure through Reconstruction a solid
Republican South to maintain their political control over the
nation. Such issues as black suffrage, disenfranchisement, and
the exclusion of former Confederate officials from holding office
after the Civil War, have become the yardstick by which the
motivations of postwar congressional leaders are measured.
This misses the essential point: How Reconstruction policy for
the South was defined, would be critical to what types of policies
would prevail nationally. There can be no question that such
leaders as Carey, Stevens, Congressman ``Pig Iron'' Kelley of
Pennsylvania, and Senator Benjamin Wade of Ohio saw the Reconstruction
of the South as the economic, political, and social battleground
that it was. But their object was broader, for they also viewed
Reconstruction as the completion of the American Revolution:
It was to be the means to eliminate the influence and control
of British power in America. A South rebuilt along the lines
of the American System of political economy would serve, along
with the West, Midwest, and Mid-Atlantic, as an irresistible
force against the New York and New England centers of British-allied
financial power and economic, social, and political doctrine.
The transformation of the South, which before the war had accepted
British free-trade policies with open arms, into a prosperous
region within the Union, based on American System economic development
measures, would have helped to bankrupt British-allied financial
power in the United States, and with it, Britain.
The opposing faction, committed to British free-trade economic
doctrines and British ``liberal'' political dogma, included
President Andrew Johnson, Treasury Secretary Hugh McCulloch,
Secretary of State William Seward, ``transcendental'' Senator
Charles Sumner of Massachusetts, Congressmen James Garfield
and George Julian, and August Belmont and his pro-British, pro-Confederate
Democratic Party. They were committed to the sabotage of Reconstruction,
which would, in turn, create an unbreakable stranglehold over
the nation through an alliance of the New York and New England
banking interests with an unreconstructed South.
The battle between these two factions, which would determine
the policy direction for the United States to the present day,
raged during the years 1865-68 and culminated in a dramatic
attempt to impeach President Andrew Johnson; this was a failed
effort which can only be described as an attempted constitutional
coup d'e@aatat by the American System wing of the Republican
Party, in a bid to restore those policies of the war years that
had been wiped away with Lincoln's assassination and Johnson's
subsequent traitorous sabotage of both Reconstruction and national
economic policy.
For these reasons, it is important to accurately describe how
this battle was waged, and why it was lost.

- Carey and Stevens define the issues - From 1865 to 1868,
Stevens, Carey, and their allies
hammered away at what they saw as the crucial issues the United
States had to face if it was to throw off the yoke of foreign
political and financial control of the nation: protection of
U.S. domestic industries, confiscation of the large Southern
plantations and their redistribution in the form of family-sized
farms, defense of the nation's currency and credit, and, much
like today, dealing with the massive national deficit created
by the Civil War.
Carey's most direct and powerful address on the issue of Reconstruction
came in the form of his August 1867 pamphlet ``Reconstruction:
Industrial, Financial, and Political; Letters to the Hon. Henry
Wilson.'' Carey timed his publication of the pamphlet with Congress's
passage of the first of the Reconstruction Acts. He directed
himself to Wilson because Wilson was a leading ``radical'' Republican
of a distinctly pro-British, pro-free-trade stripe. Wilson was
also a U.S. senator from Massachusetts who, along with Charles
Sumner, had been instrumental in compromising congressional
Reconstruction because of these pro-free-trade views. Wilson
and Sumner believed that cotton, which was Britain's hook into
the U.S. economy, should remain king in the South, and that
the newly freed slaves should remain agricultural field hands.
For them, all that had changed was that 4 million slaves were
now free. Their pro-British bent was preventing any fundamental
change in the feudal economic character of the South from being
implemented.
Carey's pamphlet thus was designed to address Wilson and Sumner's
fundamental error with respect to the issues of Reconstruction.
``British policy,'' warned Carey, ``looks to arrest the circulation
of the world by means of compelling all raw materials produced
to pass through its little workshop. It is a monopoly system,
and therefore it is that poverty, disease, and famine, all of
which unite for the production of slavery, are chronic diseases
in every country wholly subjected to British influence.
``Therefore, too, has it been that British agents have been
always in such close alliance with the slave-holding aristocracy
of the South; and that throughout the late war, British public
opinion has been so nearly universally on the side of the men
who have publicly proclaimed that slavery was to be regarded
as the proper corner-stone of all free institutions.
``British free trade, industrial monopoly, and human slavery
travel together, and the man who undertakes the work of reconstruction
without having first satisfied himself that such is certainly
the fact, will find that he has been building on shifting sands,
{and must fail to produce an edifice that will be permanent}''
(emphasis added).
In the remaining 14 letters, Carey outlined how British policy
had created the slave-based economy of the South, and how, for
30-odd years, the battle over whether such British economic
and political policies would prevail nationally had been at
the center of the fight to shape America's future. He then
made clear that the result of the dominance of such British
measures was the root of secession, and that it had been Britain's
use of its allies and agents, North and South, that had provoked
the conflict of 1861 in an effort to relegate the United States
to a grouping of ``independent'' but impotent satrapies, easily
exploited by British power.
If those policies prevailed after the war, Carey warned, the
victory over Southern secession would be meaningless: America
would be torn apart by the very same forces that had provoked
the conflict in 1860-61.

- Free trade vs. the American System - This view, which was
also held by Stevens, Kelley,
Wade, and their allies, was central to Stevens's proposal for
confiscation and redistribution of the former large plantation
holdings in the South, and the development of Southern economic
resources. Stevens considered confiscation the most important
component of any policy imposed by Congress, as an issue which
separated the free traders in the Republican Party from the
defenders of the American System of political economy who had
successfully been re-established during Lincoln's presidency.
Sumner, Seward, Treasury Secretary McCulloch, Johnson, and the
influential, liberal {New York Tribune} editor Horace Greeley
cringed at the idea of dirigist economic development in the
South. The Reconstruction legislation proposed by Stevens was
not merely opposed to free trade, but was meant to enforce an
economic outlook consistent with, and essential to, the fulfillment
of the principles of political and civil equality, which were
at the center of the battle over political reconstruction--i.e.,
the full return of the Southern states into the Union.
Carey, Stevens, and their allies found themselves opposed on
these economic questions--on the real core of Reconstruction
measures--by this grouping of pro-British free traders and radical
abolitionists. Sumner and his cronies within the Republican
Party purported to fight for political and social reform in
the South, while stripping the nation of economic measures implemented
under wartime pressures--measures that had made the abolition
of slavery and the defeat of the Confederacy possible. They
thus became, along with the still pro-British, pro-Confederate
wing of the Democratic Party controlled by August Belmont and
his friends, the most powerful allies of the very Southern slave
system they had so violently attacked before the war--ironically,
thus ensuring that the root causes for such a system would never
be eliminated from the South.

- Protection of U.S. industries - After the war, advocates
of free trade, both North and
South, Democratic and Republican, wished to use the issue of
the U.S. war debt, in conjunction with efforts at specie resumption,
tariff reduction, and currency contraction, to subvert American
economic policy and power. One of the goals of the free traders
was the elimination of the wartime protective tariff. A second
was the refinancing and repayment of the national debt in specie
(gold), as opposed to U.S. currency (greenbacks). These measures,
if accomplished, would enable the New York and British financial
houses to subvert American economic power. This was a continuation
of America's ongoing fight to control its financial institutions
and to direct its economic development, rather than succumb
to foreign, primarily British, economic domination.
Sen. Benjamin Wade of Ohio made this point clear in a speech
he gave in favor of the Tariff Bill of 1866, urging the Senate
to put off no longer what he considered a critical measure for
fostering the development of industry in the South as well as
the rest of the nation. Wade began with reference to his own
state, noting that in Ohio, ``what few manufactories we have
are in their infancy and free trade would annihilate them at
a blow.'' Wade pointed out that without a tariff during the
Civil War, the war ``would have been a failure and your bonds
would have been no better than confederate bonds today if you
had no tariff. Your paper [money] would have been multiplied
endlessly, and would be worth nothing. It was your tariff that
upheld it. It is your tariff that by encouraging American labor
must keep your specie from going out of the country. There is
no other way to do it.''
Asked Wade, ``Why does Great Britain send her emissaries here
preaching free trade all the time, subsidizing presses to advocate
it, hiring traveling agents to preach it, expending millions
to pervert our minds on the subject? Why, sir, her people were
the most highly protected on the face of the earth, until encouraging
her own labor and building up her own manufactures she had acquired
the monopoly of manufactures throughout the world by the very
process of protection; and when she stood so high, with her
machinery all perfect, her wealth infinite and ready to annihilate
any infant establishment, then, for the same reasons that she
had secured the exclusive manufactures of the world by protection,
she preaches now free trade, that she may keep that monopoly
and prevent other nations from growing up and manufacturing
to vie with her.... Besides ... most of her croaking about
free trade is perfect hypocrisy; for if you look at her tariff
today it is more protective than ours.''
Wade pleaded, ``I hope we shall not be guiled by this song of
free trade from across the ocean. `Take no counsel of your enemies'
is the first lesson of war. She teaches that to us, and it ought
to be a beacon to warn us off the coast. She never teaches anything
for our advantage knowingly; for a more selfish nation never
existed on the face of God's earth, nor a more tyrannical one,
nor one that grinds down the face of the poor with such remorseless
energy as does Great Britain.''
Thaddeus Stevens added his voice to Wade's during these same
debates by pointing out that ``All those free-trade doctrines
that are now located along the Mississippi were some years ago
further located down South. I had hoped that they were expunged
from the free industrial manufacturing North, but I was mistaken.
Whatever else the secessionists took with them, I am very sorry
they did not take all their relics of free-trade doctrine with
them. But it seems they did not; a little of the seed is left.''

The national debt and the destruction of the national currency

The elimination of the greenbacks, or what was termed currency
contraction, was central to the plan of the New York banks,
and their British allies, to ensure destruction of American
economic independence. The greenbacks were a national paper
currency created by the Lincoln administration and its allies
in Congress during the war to allow the financing of the war
effort and general economic expansion. This was only possible
because, by creating a national currency, the government directly
controlled the nation's credit, and as a result was not dependent
on either American or foreign banks for its ability to finance
itself. Lincoln and his congressional allies, most notably
Thaddeus Stevens, had thus severed the U.S. economy from the
British-controlled financial markets, destroying their ability
to manipulate American economic policy. Eliminating the greenbacks,
resumption of payments on United States bonds in specie, elimination
of the wartime protective tariff, and the refinancing and repayment
of the national debt, represented the major mechanisms for British
subversion of American economic power.
Advocates of contraction argued that the greenbacks did not
represent a sound currency since, they claimed, it was inflationary.
They proposed that a combination of their withdrawal from circulation
and a return to payments in specie (or gold) of both interest
and principal on government bonds was the only way to ensure
the financial community's ``confidence'' in U.S. credit and,
therefore, economic stability. But the ``confidence'' they sought
was from the very institutions which they represented: the New
York and international banks, the very banks that had waged
political and financial war against every one of Lincoln's wartime
economic measures. They also argued that an immediate reduction
of the vastly increased national debt, created to wage the war,
was of equal importance.
In a speech given in the debates on contraction in 1866, Philadelphia
Congressman William D. Kelley developed the American System
approach to dealing with such questions. In doing so, he also
made clear the interrelationship of Southern Reconstruction
and the larger national economic questions. Rather than the
short-sighted view of some of his colleagues, Kelley argued,
``In entering upon this new era, we should do it not only in
reference to our present financial condition, {but with reference
to our expanding trade and resources, and the possibilities
of the development of our resources, and the increase of our
population.} Return to specie payments is most desirable. The
extinguishment of our national debt is no less desirable. Nobody
wishes the speedy return of the one and the extinguishment of
the other more than I do. But caution is speed when danger is
in the way. And let us pause before we act upon a bill so pregnant
with possible consequences as this.''
Kelley then pointed out the fallacy of the view ``that there
is only one way in which to approach a return to specie payments,
and that is by contracting the currency'': This, he said, was
the sure road to economic ruin. He pointed out that such a view
``is a mistake, but it brings me to consider the vastly greater
and more dangerous powers contained in the authority to be given
the Secretary of the Treasury to redeem the greenback and fractional
currency, our only non-interest-bearing loans.... There is another
way [which] leads to wealth and power.''
Kelley then elaborated this route to real financial solvency,
arguing for economic development and not austerity, in the form
of contraction, and against a single-minded commitment to the
repayment of the national debt. He noted, ``We mine more gold
and silver than any other nation on earth. And under the good
influences of the Committee on Mines and Mining of this House,
of the construction of the Pacific railroad, and the return
of peace, we will mine gold and silver enough in one year to
pay our debt. But what is the use of mining it? It all goes
to foreign lands.'' Kelley further explained the effects of
such myopic thinking, in regards to economic activity. ``We
raise grain; but it rots in our fields, or we consume it for
fuel. We raise cotton; but we send it to Europe to be manufactured;
and we send the manufactures as much grain as they need to feed
their workmen, and then we send them our gold with which to
pay them for making our iron and spinning and weaving our cotton
and wool. Let us modify that.
``The people of the Northwest are the great importers of grain
into this country. While their wheat is rotting in their fields,
and their corn blazing in their stoves and heaters, they are
importing grain. Yes sir; grain condensed into railroad iron,
condensed into cloth, condensed into every article they wear
and use, and which they import, but might manufacture. I say
that the question of specie payment connects itself with the
question I am now touching upon--the fostering of the skill
and industry of the country.''
He argued that the expenditures of the war years had been made
to guarantee the future of the nation: ``Mr. Speaker, we fought
this war for posterity, and I am willing posterity, as the price
of the blessing we transmit, shall pay the pecuniary debt we
have contracted.... I am willing it shall pay the debt with
which we have mortgaged the magnificent estate we are to leave
them.
``I am not willing to tax the widows and orphans of our soldiers
to hasten the payment of our debt. One half of our country is
devastated by war, its system of labor demoralized, and it has
its widows and orphans; and I am not willing to tax them and
their wasted estates in order that we may hasten to pay this
debt.''
Noting the measures that should be taken instead, he indicated
the result: a vastly {greater} capability to deal with such
financial questions, which is the result of real economic expansion.
``Let us so legislate that there shall be no expansion of the
currency. Let us so legislate that there shall be no increase
in the debt. And let us so legislate as to relieve our labor
of taxation to the amount of the difference between our income
and our expenditures.... Let us relieve all those branches of
industry which are now impaired or destroyed by our internal
taxation. Promote the development of our resources and stimulate
our industry by repealing taxes in the amount of one hundred
and fifty or two hundred million dollars per annum. Let us promote
the recuperation of the South and give employment to the discharged
soldiers of the North, and in five years the principle laid
down by the gentleman from Massachusetts, that the extensive
development of the resources of the country and the increase
of population creates uses for money will be demonstrated, and
we will have a population which will carry the amount of currency
which now indicates undue expansion....
``Then, sir, what will be the case? Why, ten years hence the
employment of American labor, steadily and at liberal wages,
will, by inviting emigration, have doubled our population, and
will not only have quadrupled, but twice quadrupled our material
resources. You cannot calculate the ratio of the increase of
our taxable wealth. For, sir, what was known until within a
few years ago as the great desert which was forever to divide
the Atlantic and Pacific States is found to be one vast mass
of gold and silver and precious stones. So that into the desert
so many men are swarming in busy hives and are drawing from
the earth treasures in comparison with which the storied wealth
of `Ormus and of Ind' are not to be named. At the end of ten
years our population may be doubled and our taxable property
will have doubly quadrupled, and your share of our debt, Mr.
Speaker, will be lessened just in proportion as we shall have
increased the number of consuming and taxable citizens, and
that of your estate will be diminished by the vast aggregate
of wealth developed by enterprise or accumulated by industry.''
Kelley ended by noting that something more than the ability
to create a balanced ledger sheet was needed if the nation were
to prosper: ``I hope the power to contract the currency by redeeming
our non-interest bearing debt, the legal tenders, will not be
granted. I do not lack confidence in the qualities of the Secretary
of the Treasury as a banker. I believe him to be one of the
ablest in the country; but I believe that bankers' wisdom is
a delusion in these days. What we want is, the sagacity, grasp,
and courage of statesmanship, and his propositions, as disclosed
in this bill, do not, I think, display these qualities.''

- Confiscation was the central issue - Reflecting the global
nature of the fight involved in
reconstructing the United States, Henry Carey, in a pamphlet
strategically published after Ulysses S. Grant's election to
the presidency, his 1868 ``Letters to President-elect U.S.
Grant,'' put before Grant, the Congress, and the nation the
example of the extraordinary transformation that had occurred
in Germany in less than 30 years because of the adoption of
Friedrich List's system of protection for Germany, known as
the Zollverein.
Carey pointed out the importance of List's American System measures
to another economic revolution which had occurred in Germany,
that of the Prussian land reforms: ``[Baron H.F. vom] Stein
gave the Prussian people that freedom which has everywhere been
seen to result from division of the land but to make it permanent....
To prevent the retrograde movement which must inevitably have
resulted from persistence in a policy which separated producers
from consumers, and which looked to constant exportation of
the soil in the form of rude products, it was needed that another
great man, List, should make his appearance on the stage. At
the cost of both property and life he did the work, and if we
now seek his monument, we shall find it in the remarkable empire
that has so recently appeared upon the European stage, described
in my former letter.''
That wasn't all. Knowing full well of the strategic alliance
which had existed between Russia and the United States during
the Civil War, Carey pointed out that ``Russia, by dividing
her land among those who previously had owned or cultivated
it, has made one great step towards the establishment of freedom
for her whole people. Thus far, however, the Emperor seems to
have failed to see that there can be no real freedom for men
who are compelled to waste their labor and to exhaust their
soil by sending its products in their rudest forms to foreign
markets. The day must, however, come when his eyes will be open
to that great fact.''
But, said Carey, unlike Prussia and Russia, the United
States, ``failing altogether to profit by the great examples
that had thus been set for us, we have proclaimed emancipation
while leaving all the land in the possession of its opponents;
and have given the right of suffrage to [the freedmen], men
who, as the recent election has proved to be the case, must
exercise it in a way to please their late masters, or forfeit
power to obtain bread for their wives and children.''
Thus the 4 million newly freed slaves were only ``nominally
free,'' and, wrote Carey, their condition without land ``must
be far worse than it had ever been before.''
Carey urged Grant, ``Let it now be understood that men and women
who give themselves to the work of Southern development both
can and will be sustained by all the powers of government, and
the negro will become really free, while the nation will become
as really independent.'' If this were not done, he warned, ``the
negro will be re-enslaved; the Union will be split up into fragments,
as so recently has been the case with the great empire [Germany]
which now stands in the lead of Europe; and the men who have
so nobly carried us through the late rebellion will have to
regret that their labors have resulted in leaving the country
in a condition far worse than that which had existed when Fort
Sumter had been first assailed.''
Stevens and Carey saw eye to eye on this issue. The congressman
attempted, unsuccessfully, to include provisions for such a
redistribution of Southern land into Congress's Reconstruction
measures, in the form of the initial proposed Acts of Congress
for Southern reorganization. Having succeeded in the initial
redistribution of Southern lands through the wartime Confiscation
Acts, and Freedmen's Bureau, signed into law by Lincoln, but
wrecked by Andrew Johnson's mass pardoning of former rebels,
he wished to see the issue addressed head on. He also fought,
again unsuccessfully, to ensure that such a provision be included
in the body of the Fourteenth Amendment to the Constitution.
Any talk of confiscation was enough to make the likes of Horace
Greeley hysterical. Greeley editorialized in the {New York Tribune,}
in opposition to this ``radical'' proposal: ``We protest against
any warfare against Southern property ... because the wealthier
class of Southerners, being more enlightened than the ignorant
and vulgar, are less inimical to the blacks.''
As Stevens was quick to point out, however, it was this very
``wealthier class of Southerners'' which had, to a large degree,
led the South into rebellion and which which constituted the
most virulent opponents of political and economic equality for
the freedmen.
Besides such editorial response, however, a more significant
effort was being engineered by Massachusetts cotton broker and
``radical'' ideologue Edward Atkinson, who was also a free-trade
propagandist. Atkinson informed Johnson's treasury secretary,
Hugh McCulloch, in August 1867: ``I am endeavoring with some
others who are known as extreme radicals to give such direction
to the reorganization of the South as shall prevent the creation
of an exclusive black men's party and also to kill the scheme
of confiscation. I also hope we may be able to secure the election
of a Southern delegation who shall not be under Thad Stevens's
lead on tariff and currency questions, but of this I am not
hopeful. The new men of the South will be likely to be the very
men who will follow Stevens even to prohibition of imports;
they will be misled by the desire to establish manufactures
and to diversify employment.''
Stevens's proposal thus served as the starting point for the
heated debates which would follow over the transformation of
the South. He was the first to elaborate a congressional policy
for Reconstruction as an alternative to that of President Johnson.
What Stevens had in mind is clear from his introduction to his
proposed Acts explaining the need for seizing the property of
this grouping of Southern rebels:
``Reformation must be effected,'' said Stevens. ``The foundation
of their institutions, political, municipal, and social, must
be broken up and relaid or all our blood and treasure have been
spent in vain.... Heretofore Southern society has had more the
features of aristocracy than democracy. The Southern States
have been despotisms. It is impossible that any practical equality
of rights can exist where a few thousand men monopolize the
whole landed property.... How can republican institutions, free
schools, free churches, free social intercourse exist in a mingled
community of nabobs and serfs, of owners of twenty-thousand-acre
manors, with lordly palaces, and the occupants of narrow huts
inhabited by low white trash? If the South is ever to be made
a safe republic let her land be cultivated by the toil of its
owners, or the free labor of intelligent citizens. This must
be done, even though it drive the nobility into exile. If they
go, all the better. It is easier and more beneficial to exile
seventy thousand proud, bloated and defiant rebels than to expatriate
four million laborers, native to the soil and loyal to the Government.''
Stevens thus proposed to crush Southern oligarchical power by
confiscating their immense land holdings, providing land and
economic independence for the newly freed blacks and poor whites
of the South. Confiscation simultaneously would have established
the basis for enduring republican institutions based on development-oriented
economic policies. Stevens viewed the issue as so central, that
when he presented it to the Congress on March 19, 1867, he said,
``Whatever may be the fate of the rest of the bill I must earnestly
pray that this may not be defeated. On its success, in my judgment,
depends not only the happiness and respectability of the colored
race, but their very existence. Homesteads to them are far more
valuable than the immediate right of suffrage, though both are
their due.''
Stevens also proposed to take the proceeds from the sale of
those confiscated lands, to provide for the payment of the costs
of the war that these aristocrats had provoked and supported.
This included the creation of the funds to provide pensions
for veterans and their families, to pay the damages done to
loyalists whose property had been seized or destroyed as a result
of the war, and to pay the war debt.
However, Stevens's ``confiscation'' measure implied far more
than simply necessary redistribution of Southern agricultural
land, and a just repayment of the costs that resulted from such
Southern agents of disunion, in their efforts to destroy America
in the interests of the British financial oligarchy.
Not only did this small group of the Southern population control
almost all land, and through the slave-based plantation system,
monopolize and direct all other Southern economic resources,
but because of the usurious character of the financing of Southern
agriculture, they owed massive amounts in credit extended by
the factors, brokers, and merchants of the international cotton
trade. Such British-allied New York finance houses as Brown
Brothers, and such British financiers as the Baring and Rothschild
interests, whether directly or indirectly, controlled well over
90% of Southern cotton production, and thus the majority of
Southern debt was in the hands of these New York, London, and
Liverpool houses.
For well over 10 years prior to the war, from the Compromise
of 1850, the circles of New York finance and business, almost
to a man, tirelessly worked in behalf of Southern interests.
Tied economically to London and the slave-based cotton economy
of the American South, they functioned as the center of Northern
support for British free trade and its maintenance in the form
of support for the growing influence of King Cotton.
A letter from one such New York ``merchant'' to the prominent
abolitionist, Samuel May, gives a sense of the political and
economic dependence of such New Yorkers on the South during
the developing ``sectional crisis'' of the years just before
the war. The merchant admitted, ``We are not such fools as not
to know that slavery is a great evil, a great wrong. But a great
portion of the property of the Southerners is invested under
its sanction; and the business of the North, as well as of the
South, has become adjusted to it. There are millions upon millions
of dollars due from Southerners to the merchants and mechanics
alone, the payment of which would be jeopardized by any rupture
between the North and the South. We cannot afford, sir, to let
you and your associates endeavor to overthrow slavery. It is
not a matter of principles with us. It is a matter of business
necessity.... We mean, sir, to put you abolitionists down, by
fair means if we can, by foul means if we must.''
Stephen Colwell, a collaborator of Henry Carey and a preeminent
economist, calculated, in 1859, that over $200 million a year
in trade with New York came from, and therefore was dependent
on, the Southern cotton economy.
For such reasons, New York bankers and businessmen were among
the leading advocates of free trade and of slavery; they also
went into a virtual panic with Lincoln's election and the South's
break with the Union. New Yorkers' fears of repudiation by Southern
planters in 1860-61 were so intense that a large number of them
began to organize for New York City itself to leave the Union,
furthering the British effort to ``Balkanize'' the United States,
and set itself up as a free city. They hoped that in so doing,
and becoming, as August Belmont would argue, ``the Venice of
the West,'' they would ensure that neither Southern debts nor
their special relationship to the South and to British finance
would be lost. One pro-secession New York financier argued in
December of 1860, ``I would have New York a free city--not a
free city with respect to the liberty of the negro, but a free
city in commerce and trade.... There is ... no other way in
which New York City can preserve her position, retain the value
of real estate, prevent the breaking up of all the material
interests with which the city is identified and saving her merchants
from ruin.''
Thus, Stevens's proposed confiscation and sale of such Southern
land was a bombshell thrown in the midst of the international
financial community. Stevens calculated that land to be worth
$3.5 billion, and he intended, not only to force those who had
caused the war to pay off three-quarters of the national debt,
but to cripple the real financial power behind such an oligarchical
system.
As Stevens argued: ``Those who will be affected by this bill
will not exceed seventy thousand out of a population of six
million whites, for this is a people of aristocrats and subjects;
of a proud nobility and a cringing, poor peasantry. Those seventy
thousand persons own about three hundred and ninety million
acres of land out of the five hundred millions in the confederate
States. This, together with the town property, cannot be worth
less than $10,000,000,000. This estimate includes no man's property
who was worth less than $10,000; nor does it include any personal
property, which may perhaps swell it to $12,000,000,000.''
The implications of such a proposal were staggering to those
free traders who hoped to carry the day in their efforts at
the destruction of ``American System'' economic measures. They
were potentially even more devastating to the two centers of
financial and political control behind the free-trade onslaught
against America. For with the confiscation of the property of
the approximately 70,000 cotton barons who controlled the wealth
of the South, the more than $300 million debt owed to the New
York banking consortium and its British allies would be wiped
away. (This was the same consortium which had waged political
and financial war against every one of Lincoln's wartime economic
measures and which, with the New England textile merchants,
represented the center of free-trade agitation in the United
States.) Even more significantly, Stevens's proposal would also
have wiped away some $1 billion in indebtedness to London and
Liverpool factors, shaking the British financial system to its
foundations.
Given the implications of what Stevens and Carey had in mind,
it should come as no surprise that Great Britain and its allies
launched what was virtually a second war to ensure that they
would not prevail. Begun with the assassination of Abraham Lincoln,
that war would be waged over the same issues that had been central
to that which was fought from 1861-65. However, this war would
be designed to ensure that any remnants of a commitment to the
American System were eliminated from American policymaking.
The composition of the 39th and 40th Congresses, which sat during
1865-67 and 1867-69, respectively, played as large a role as
Britain's agent-in-place, Secretary of the Treasury McCulloch,
in determining the outcome of the critical battles over congressional
Reconstruction. Lincoln, Carey, and Stevens's ability to shape
a national mandate for the policies adopted during the war,
and thus to control a majority in the Congress, had been critical
to the defeat of the Confederacy. With the advent of peace in
1865, even despite Lincoln's assassination, a national consensus
still existed; but it would very quickly be destroyed by a massive
operation to guarantee that what had been lost on the battlefield,
would be victorious even with military defeat.

- Why Reconstruction failed -
In the two years following the war, the battles over postwar
measures became a struggle over which faction of the Republican
Party would prevail. By 1867, although not all of the measures
that Stevens and his allies had proposed had been implemented,
it was clear that national policy was moving steadily toward
the outlook they represented. The Stevens Republicans were beginning
to prevail, and the disastrous effects of McCulloch's contraction
policy and moves toward resumption of specie payments created
significant economic dislocation throughout the nation. In the
South as well, the political leaders and institutions in the
former states of the Confederacy were certain to follow the
lead of Stevens and Carey, and support the measures that they
had been fighting for. Thus, the readmission of Southern states
to the Union and the return of their senators and congressmen
to deliberations in Washington, D.C., could very well doom the
free traders in America.
These four sessions of Congress would be controlled by Republicans,
but within that Republican majority, there were essentially
three groupings. Historians have tried to describe the alliances
within these bodies in every imaginable way, but by blacking
out the crucial role played by Carey, as well as the ideas of
American System economics, they have never really been capable
of understanding the strategic significance of the battle then
under way.
One faction was committed to the restoration of the American
System economic policies which had won the war and transformed
the nation. Led by Thaddeus Stevens and William Kelley in the
House and Benjamin Wade in the Senate, they have been labeled
``extreme'' radicals by historians. In fact, their ``extremism''
was the result of their commitment to the doctrines upon which
the United States had been founded, the same principles of political
economy advocated by Benjamin Franklin, George Washington, and
Alexander Hamilton. Like the founding fathers, they saw the
fulfillment of the political principles of the Declaration of
Independence and Constitution as the basis for the Reconstruction
of the South and a realignment of national political power.
Their opponents were proponents of British economic, social,
and political doctrines, Americans who had surrendered their
loyalty to the principles of American republicanism. This alliance
included some rather strange bedfellows, like the radical abolitionists
Sumner and Julian, as well as more moderate Republicans like
Rep. Roscoe Conkling, a leader in the New York political machine
of William Seward and James Garfield, all of whom were joined
on the Democratic side by August Belmont's Democrats.
The ``swing'' group in this battle were the ``middle ground''
Republicans of both radical and moderate outlook, who generally
either knew nothing or very little about economic questions,
or whose views could be shaped by what they thought was politically
expedient. In general, they had supported Lincoln's policies
during the war because they believed them to be necessary to
ensure that the war effort could be sustained. They were also
likely to support similar measures after the war, if they could
be made to understand that they were necessary for the survival
of the nation. This group included Sen. John Sherman and Reps.
Robert Schenk, Samuel Shallaberger, and John A. Bingham. Ulysses
S. Grant was in this category, and his weakness on economic
questions would prove disastrous.
To understand why Reconstruction failed, it is essential to
understand the way in which the ``middle ground'' Republicans
were counterorganized and misled. This is what accounts for
the dramatic swing in congressional support on such issues as
currency contraction, specie resumption, and the refinancing
of the national debt. Certainly, those Republicans who made
an abrupt about-face on such questions, many of whom were uncompromising
on Reconstruction issues like black suffrage and assertion of
federal power to protect the political and civil rights of the
freedmen, were men of some conviction and, unlike their free-trade
radical colleagues, had no fundamental ideological commitment
to such economic measures.
Opponents of congressional Reconstruction often mocked Stevens
and his colleagues for ``waving the bloody shirt,'' that is,
for attempting to put before the Congress evidence of the burnings
of newly opened public schools for the freedmen and whites in
the South, of harassment and threats against black and white
Republicans, of the beatings and lynchings occurring in the
South as a means to intimidate the nascent Republican Party
in the states of the former Confederacy. The ``bloody shirt''
would come to be a term of derision, both for congressional
opponents and historians, meaning an exaggerated, emotional
plea used for partisan purposes. Ironically, within the Congress
itself, such ``radicals'' as Sumner and Julian on the Republican
side were engaged in their own form of political lynching of
those congressmen who tended to side with Stevens, Kelley, and
Wade on economic issues.
In other words, the means for manipulating the ``swing'' Republicans,
to guarantee the triumph of British free trade, was achieved
through a process of ``bloody shirt'' waving against them, many
of whom were solid ``radicals'' on political questions dealing
with the South, which produced a campaign of intimidation and
a bludgeoning into line on free-trade economic measures. In
doing this, the allies of British free trade made adept use
of the hated Copperheads (pro-Confederate Northern Democrats
of the war years), President Johnson, and the unrepentant rebels
of the old slave aristocracy of the South.
Amazingly, Democrats who had been thoroughly discredited by
their Confederate sympathies during the war, and who opposed
the Republican majority on Reconstruction measures, saw the
issue of economic discontent as the vehicle for their political
resurrection. As a result, such pro-Southern fanatics as Clement
Valladingham and George H. Pendleton became the spokesmen for
radical soft-money, anti-resumption economic doctrines. Both
men, who during the war had strenuously opposed the protective
tariff and the Legal Tender Acts which had created the greenbacks,
now organized Democratic politicians from the western states
around a plan for maintaining the greenbacks and paying off
the national debt in legal tender, not specie.
Such a posture was a parody of the American System measures
of Republicans like Wade, Stevens, and Kelley, since the national
party was still completely controlled by the Belmont-led free-trade
faction. This development laid the basis for forcing the Republican
Party into a ``sound'' money posture and served as the foil
for radical free-trade Republicans in their attacks on those
Republicans who supported American System measures. It would
thus be used in an effort to isolate the Carey faction in the
party, and for the free-trade faction had the added advantage
of preparing the way for the defeat of Carey's allies, starting
with Benjamin Wade in the Ohio legislative elections of 1867.
Beginning in 1867, those Republicans who allied with Stevens,
Kelley, and Wade on such issues as support for the greenbacks
and opposition to contraction, were subjected to the attacks
of the free-trade Republicans for joining hands with such Copperhead
heretics as Valladingham. While leaders of the American System
faction of the Republican Party continued to make clear that
the issue was economic policy, not who supported it, moderate
Republicans preoccupied with political expediency began to became
disoriented.
Sumner's tactic was to paint a grim picture of Northern Copperheads
and Southern traitors in an alliance to undermine the rights
and freedom of blacks in the South. But it was precisely because
the measures proposed by Stevens were not implemented--and because
of the criminal actions of President Johnson--that former rebels
were able to launch an effort to undermine the congressional
Reconstruction program. Just as Sumner and other radical abolitionists
had argued that slavery had been the one and only reason for
secession and the war, they now argued for ``radical'' orthodoxy
on a program of ensuring black political rights in the South
and free-trade economic measures. Republicans who had no understanding
of political economy nor of the implicit connection between
Reconstruction and national economic measures, found themselves
attacked as allies of the Democratic and Southern traitors,
for joining with Stevens.
With foot dragging and compromise on the Reconstruction issues,
and a back-and-forth battle on economic issues, the instability
of the situation was increased with the British/Freemasonic-inspired
insurrection against Reconstruction by the Ku Klux Klan, which
threw the South into political turmoil. Finally, the controversy
over the impeachment of President Andrew Johnson erupted.

- The unsuccessful bid to impeach Johnson - Since Johnson
was probably the most lame duck of
Presidents America has ever produced; since Congress had well
over the two-thirds majority needed to override any Johnson
veto; and since Johnson had less than a year remaining in office,
why the drive to remove him--especially at a time when the very
profound questions of the relationship of congressional and
presidential power and prerogative were at issue, and the constitutional
provision for impeachment had never before been utilized against
a chief executive?
Johnson as President exerted a powerful influence over the Reconstruction
of the Southern states. He advised Southern opponents of congressional
Reconstruction to disobey, impede, and resist the law of the
land, as embodied in the Acts of Congress related to Reconstruction.
Such advice was not only criminal, but tended to fuel the process
started by his own pro-Confederate policy in 1865-66, feeding
the fires of insurrection in the South initiated by the Ku Klux
Klan. His role as commander-in-chief and his control of patronage
still allowed him to determine who would be the federal officials
in not only the South, but in the rest of the nation as well.
Johnson exercised that power to remove {en masse} appointees
allied with his congressional opponents; by 1867, he had also
removed every military commander in the South and replaced them
with officers hostile to Congress and the Reconstruction Acts.
Equally important, the influence and prestige of the presidency
was an essential ingredient in securing national consensus for
such critical measures as Reconstruction and a national economic
policy. A leader guiding the nation in the implementation of
such measures, rather than subverting and impeding them, would
have ensured the success of this ``second American Revolution''
for generations to come.
With Johnson clinging to both McCulloch and those free-trade
policies that would dismantle the nation's economy, and continuing
in his criminal obstruction of Congress on Reconstruction, those
allied with Henry Carey decided it was time to be rid of Johnson
once and for all. Despite the support for impeachment for other
reasons by the likes of Sumner, Julian, and Wilson, there was
a very legitimate sense of outrage throughout the nation at
Johnson's actions to undermine congressional efforts to deal
with the South. It was this sentiment, along with that generated
by McCulloch's economic measures, that those like Stevens, Kelley,
John Ashley of Ohio, and Wade wished to direct into removing
Johnson and replacing him with Wade and a cabinet committed
to American System policies.
The very first calls for impeachment came from the business
and manufacturing layers allied with Carey and with which such
congressmen as Stevens and Kelley, and senators such as Wade,
agreed. E.B. Ward and his Iron and Steel Association, along
with George Wilkes, editor of the influential magazine {Wilkes'
Spirit of the Age,} in early 1867, after Johnson's veto of the
Civil Rights and Freedmen's Bureau bills, and his call for rejection
of the Fourteenth Amendment, first raised the call for Johnson's
impeachment.
Johnson was also under considerable pressure to remove McCulloch
as treasury secretary, and he had even considered trying to
soften the effect of removing Edwin Stanton as secretary of
war, by simultaneously removing McCulloch.
John Covode, a Carey ally from Pennsylvania, introduced the
initial resolution for impeachment. Immediately afterwards,
Johnson's annual message, with its strong endorsement of McCulloch's
contraction and resumption measures, brought strong pressure
on Republican conservatives and free-trade radicals against
impeachment. As a result, Covode's measure was voted down.
T.W. Egan, a friend of both Atkinson and President Johnson,
wrote to Johnson, ``All the great Northern capitalists are afraid
of the consequences of impeachment. To use the words of one
of them--`the President might be crushed, but the finances of
the country would go to ruin.'''
The key turning point occurred with Wade's election as president
pro tem of the Senate, placing him in the position to succeed
Johnson if the President were impeached and removed from office.
The influential free trader Edward Atkinson knew that should
Johnson be impeached, Britain's agent-in-place, McCulloch, would
be ousted. He also knew that Wade was a staunch proponent of
American System economic measures and fully aware of the role
of British influence and power in efforts to destroy America.
Atkinson argued to numerous of his free-trade friends in Washington
that the only ``irreparable injury'' that a chief executive
could inflict ``was to tamper with the currency. Upon this question,
Johnson has been right and Mr. Wade is suspected of being wrong.
Should such be the truth I would regard the removal of Mr. Johnson
a great misfortune in its ultimate effects.'' He wrote to Senator
Sumner that Wade's elevation to the presidency, because of his
soft-money, high-tariff views, would mean that ``the Republican
Party would cease to exist.''
Another free trader, editor Horace White, wrote to Rep. E.B.
Washburne, Grant's closest political confidant, ``I don't know
how it may look to you, but the gathering of evil birds around
Wade (I refer to the tariff robbers) leads me to think that
a worse calamity might befall the Republican Party than the
acquittal of Johnson.''
Most violently of all, James Garfield, aware that Wade, if he
became President, intended to appoint E.B. Ward, a leading opponent
of contraction and other free-trade measures, as secretary of
the treasury, attacked Wade: ``They say that [Johnson's] Conviction
means a transfer to the Presidency of Mr. Wade, a man of violent
passions, extreme opinions, and narrow views; ... [with] a grossly
profane coarse nature who is surrounded by the worst and most
violent elements in the Republican Party.''
It is in the context of this overall battle that the impeachment
proceedings against President Johnson must be considered; otherwise,
the Johnson impeachment seems unintelligible.
With it now clear that impeachment would lead to the loss of
the Executive by the advocates of free trade, yet with the push
for Johnson's ouster at fever pitch, it was apparent that the
only way out for this free-trade faction was to sabotage the
effort. It was at this point that an emboldened President moved
to fire Secretary of War Stanton, an ally of the radicals on
Reconstruction measures. The issue of impeachment exploded again;
however, this time it was not Stevens who moved to draft the
articles, but Representative Julian and George Boutwell, a crony
of Sumner and Wilson from Massachusetts.
But the character of the impeachment proceedings as shaped by
Boutwell, with their fixation on Johnson's violation of the
Tenure of Office Act (constitutionally dubious at best) ensured
that the proceedings were turned into a political circus.
Thaddeus Stevens had adamantly opposed the use of the Tenure
of Office Act as grounds for impeachment, and had drafted his
own articles for impeachment, which he unsuccessfully fought
to put through as the basis for Johnson's indictment. Throughout
the whole of the impeachment proceedings, Stevens and his allies
continued to focus on the simple reality of Johnson's real crimes
in obstructing Congress as the reasons for impeachment. Stevens
reiterated again and again that the core of Johnson's malfeasance
was his commitment to policies contrary to the legislatively
mandated policy of Congress and thus the law of the land, and
the dangerously destructive character of this fact for the nation's
future and well-being.
In this way, Stevens fought to have the proceedings premised
on a higher legal, constitutional, and political ground. When
he realized that he would not prevail, he reluctantly added
the two final articles of what became the House's bill of impeachment,
hoping they would become the basis for a trial on what he considered
the real ``high crimes and misdemeanors'' for which Johnson
should be impeached. Even with these included, he was far from
convinced that such would really occur, and warned that the
impeachment process would fail, leaving in its wake a political
disaster for himself and his allies.
On the eve of Johnson's trial before the Senate, Stevens wrote
to Rep. Benjamin Butler: ``As the Committee are likely to present
no articles having any real vigor in them, I submit to you if
it is not worth our while to attempt to add at least two other
articles. With all this struggle of years in Washington, and
the fearful sacrifice of life and treasure, [if we fail] I see
little hope for the Republic.''
After Johnson's acquittal, Stevens reintroduced his proposed
indictment, in an attempt to salvage the situation. But by
this point, the process was irreversible, with the deals in
the Senate having been made, and those members of the House
who had supported impeachment being so demoralized that another
effort seemed futile. Before the new resolution could be considered,
the House adjourned, killing once and for all any effort to
try Johnson on grounds for which he truly deserved conviction.
As a result, what was created was a pathetic exercise in what
appeared to be political vindictiveness, rather than constitutional
principle.
Johnson was thoroughly discredited, yet he remained President.
Most importantly, McCulloch remained secretary of the treasury,
with his position actually strengthened. Wade was prevented
from succeeding to the presidency, and the deals which most
certainly had been made before the trial began, were consummated.
They would not be unimportant for future developments in Congress.
In return for Johnson's agreement to cease his objectionable
and illegal behavior in regard to the Reconstruction Acts and
other measures dealing with the South passed by Congress, for
example, the key votes against impeachment were garnered in
the Senate. However, Senator Grimes, a key free trader in the
Senate, who engineered the compromise, would also elicit an
agreement from such key senators as Ross, Pomeroy Fowler, and
Fessenden, that their votes would be cast in the future for
anti-tariff, pro-free-trade economic measures. The deal with
Johnson included an agreement that, in return for his acquittal,
he would retain McCulloch.
The issues of real political importance, those raised by Carey
and his allies, became obscured in this battle which trivialized
the fundamental disputes between Congress and the President,
and between the two factions of the Republican congressional
majority. The only ones to benefit from the affair were the
advocates of the British political, economic, and social doctrine,
who would soon overwhelm the nation. The ``bloody shirt'' would
become redder, and would soon be waved with as much vengeance
against those who dared to advocate American System measures,
as against the enemies of American republicanism in the defeated
South.
This would become clearer when, in his last Presidential Message,
Johnson, totally reversing himself, would call for economic
measures more extreme than even the ``Pendleton Plan'' of the
western Democracy. Johnson by this point was as dead politically
as one could possibly be, having been unceremoniously spurned
for the nomination for President in his own right by even the
Democratic Party.
In conjunction with the erosion of the congressional leadership
of the pro-Carey faction, with the defeat of Wade, the death
of Stevens in 1868, and the destruction of a real Southern Republican
Party, these pressures were to prove too great for the ``middle
ground'' of the party to withstand. They thus opted for compromise,
both on Southern Reconstruction and on national economic issues.
The result was disastrous for the nation.

>From Executive Intelligence Review, V19, #48.

--
John Covici
covici@ccs.covici.com

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