The Case for Free Trade in Silver
Henry George
[Reprinted from The Standard, Vol.6, 21
December, 1889.
A response by Henry George to a letter to the paper from William C.
Davis]
Henry George - Dear Sir: I am a "singletaxer"
and have been doing what I could to advance the cause here.
To-day in Colorado, and in other silver producing communities,
there is great interest manifested in the "silver question,"
and of course the "hobbies" are free coinage and the
coinage of at least four millions of dollars per month - neither
of which, in my opinion, will permanently benefit the silver
producing sections. The question I would like to see taken up
and discussed is, What effect would free trade with foreign
countries have on the silver market in the United States? This
question should be introduced in all single tax and free trade
clubs, and the discussion should be forced into congress, and
into the newspapers and periodicals, so that the public can be
set to thinking on this vital question on a higher plane than
that of sectionalism.
This question, properly agitated, I think will do a great deal
toward making the silver producing sections democratic, and that
means, eventually, "free trade." Knowing the great
interest you have in the advancement of the masses, and that
absolute free trade will have a tendency to better the condition
of the producing masses, I have taken the liberty of addressing
you personally on this subject so important to my state. I am a
regular subscriber to THE STANDARD (although not directly from
the office), and after reading I circulate it at much as I can.
There are quite a number here who see more or less of the "cat."
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I do not think there can be room for much discussion as to the effect
free trade would have on the silver market in the United States. It
would have the same effect that it would have on the cotton market or
the wheat market -- enabling our people to get more in return for the
commodities they produce. And of all sections of the Union those in
which the notion that protection can be of any general benefit would
seem to be most clearly absurd, are the gold and silver producing
states. For whatever else may be raised in price by protection, gold
and silver cannot. Their value is fixed in the markets of the world,
and their portability is such that no government has ever yet been
able to prevent their flow either by export or by import duties.
Protection does not and cannot raise the value of gold and silver, but
it can and does raise the value of other things which men dig gold
and silver to pay for, and which, and not the metals themselves, are
the real things they endeavor to obtain by their work.
If Mr. Davis could estimate the direct and indirect effect of the
tariff in enhancing the price of those things for which the Colorado
product of gold and silver is used to pay, he could get some idea of
how protection operates to discourage Colorado mining. But while this
is a good thing to do, it seems to me that the best way to fight
protection in the silver producing states is in the way I believe it
best to fight it everywhere, not on matters of detail and local
interest, but on broad principles and general interests. I do not
believe that any minimizing of the gospel of free trade in the hope of
getting the support of local interests is ever as effective as
denouncing the whole system as the robbery and fraud that it is, and
advocating the equal rights principle of absolute free trade. For that
men are really governed in such matters by their theories rather than
by their interests is strikingly illustrated by the strength of the
protective idea in Colorado and in California and other Pacific
states. Whether protection does or does not benefit the east, clearly
these states only lose by it. Yet this fact does not affect the
eastern men who emigrate to the Pacific. Having accepted or imbibed
some vague idea that protection is beneficial to a nation, they retain
it, and vote for protection against the clear interests of themselves
and their section, until they wake to the falsity of the whole
protective theory.
Joseph P. Carbery, writing from Cincinnati, alludes to the opinion
that "gold and silver are in themselves money, independent of any
power or agency of the state," and to the opposite one that "the
stamp or seal of the supreme power upon any substance converts it into
money within its jurisdiction," and then adds:
"The money of the United States is just what the
government, within the limits of its constitutional power, declares
shall be money. This constitutional limit is, that whatever is
coined, the coin must have at all times the value of money - of the
identical money described in the grant 'of power to coin money.'
That distinct idea of value possessed the minds of every member of
the convention that framed the instrument - and called money that
which was so called by everyone, and had been by their ancestry from
the earliest landing in America. It was the 'value' of the Spanish
silver dollar in universal use (circulation) just in the condition
of wear it was in.
"The silver dollar then was, and now is, the unit of value by
which all labor and its product must be measured. The constitution
gives power to coin money and declare the value thereof - not to
print a promise on paper and call it so. Your hostility to the
silver coinage, and the inferential advocacy of paper money, is an
unpleasant surprise to me, as it must be to all hard money
democrats. Men will differ on expediencies, but on fundamental
principles there should be a clear acceptance by members of a party."
I do not know what party Mr. Carbery has in his mind. I certainly do
not belong to any party which requires of me adherence to any fixed
opinions on the money question. Nor do I know of any such party as
being in existence. There are "hard money democrats" and "hard
money republicans," "soft money democrats," and "soft
money republicans." Nor do I see why what he terms my "hostility
to the silver dollar and inferential advocacy of paper money"
should be a surprise to him or to anybody else. Though I have not had
much to say on this matter in THE STANDARD, since I believe the money
question a subordinate one, yet I have set forth my views in "Protection
or Free Trade?" in the chapter entitled "Delusions arising
from the use of money."
Nor have I any hostility to the silver dollar. What I object to is
that the people of the United States should be taxed to buy silver and
coin dollars for which they have no use, and that the nation, the far
greater part of whose component individuals needs more capital, should
keep great hoards of coined bullion lying in treasury vaults, where it
is utterly useless to anybody. I have great hostility to that offshoot
of the protective system which would have the government make a market
for the produce of the silver miners, and regard it, as I regard the
whole protective system, as an infringement of the doctrine of equal
rights. Why should the United States buy up silver for which it has no
use, any more than it should buy up iron, or copper, or spelter, or
wheat, or potatoes, or copies of THE STANDARD? Why should the
government become a special providence for silver miners any more than
for farmers, printers, barbers, doctors or bootblacks? If any metal is
to be bought up for the sake of creating a demand for it, it ought to
be aluminum, since that might stimulate the progress of invention in
cheapening the production of the metal of the future and thus hasten
the day when aerial navigation will convert warships into old iron and
enable smugglers to laugh at custom house officers.
Nor can I imagine where Mr. Carbery has got his notion that the
constitution of the United States fixes the Spanish silver dollar as
the standard of the money that congress shall cause to be coined. The
constitutional power to issue money comes from the following clauses
of the constitution:
"Sec. 8.-The congress shall have power:
"To borrow money on the credit of the United States.
"To coin money, regulate the value thereof, and of foreign
coin, and fix the standard of weights and measures."
There is nothing here about the Spanish silver dollar, nor, if there
were, do I believe that the people of 1787 were divinely inspired or
authorized to legislate for the people of 1889.
As to the nature of money, neither of the parties to which Mr.
Carbery refers is right. Gold and silver are not of themselves money,
nor yet can money be made by legislative fiat. What makes anything
money is the common consent to receive it. Where this exists without
it, no intrinsic value is needed, Where this does not exist,
governments may stamp and issue and fiat in vain. The history of our
own governments, as the history of all governments, proves this. One
especially curious and comical instance is the way in which the
caustic pen of Dean Swift, in the celebrated Drapier letters, drove
the Wood copper coinage out of Ireland in the early part of the
eighteenth century, though it was backed by all the fiat power of the
British government, which vainly offered heavy rewards for the
discovery of the author of the Drapier letters, though everybody knew
that there was only one man in Ireland who could have written them.
But gold and silver, and in a less degree, copper, do possess certain
natural qualities of permanence, portability and divisibility which
peculiarly fit them for use as money so long as intrinsic value is a
necessary quality, and which still give to the first of these metals
something of the character of an international money as a standard of
value and in the settlement of balances. But where there is a credit
and confidence behind it sufficiently stable and wide, paper becomes
the most convenient and least expensive material out of which money
can be made.
The real thing which gives paper money its validity is not the
government stamp, but the common consent and general credit which
attend it. The check or due bill of a business man or capitalist of
solvent repute will pass current to a certain extent and within
certain limits. The check or due bill of a very rich and very well
known man, such as Mr. Astor or Mr. Vanderbilt, will pass current to a
larger extent and within larger limits, but the checks or due bills of
the government, which has larger resources and is far more widely
known than any individual, and which, as a tax collector is moreover
practically a general creditor of all within its jurisdiction, will
ordinarily pass current to a greater extent and over a wider area.
If there were no element of credit in our currency - that is to say,
if we had no money but metallic money, and if our coins contained in
all cases a value in metal equal to their face and current value, then
there will be no objection to free coinage, for the government , in
order to save private individuals trouble and annoyance, which would
be very great if they were compelled to undertake it, would, in
coining what any one chose to bring of the coinable metals, be merely
acting as the general weigher and assessor. But so long as there is an
element of credit, in the currency the government should be the only
issuer of money until (what the advance in civilization may some time
give us) an international credit money, guaranteed by all civilized
governments and current over the whole civilized world, makes its
appearance. The general government should be the only issuer of money,
both for the general convenience and the protection (in the true sense
of the term) of those who are most liable to have inferior money
passed upon them, and because the issuing of credit money for general
circulation is a valuable privilege, which ought to be shared by the
whole people and not suffered to enrich a few.
We have at the present time in the United States nine kinds of money
in circulation. Copper coins, nickel coins, silver coins, gold coins,
silver notes, gold notes, national bank notes and direct treasury
notes, or greenbacks. Of these nine kinds of money, only one kind, the
gold coins, have an intrinsic value equal to their current value. But
this one kind of money, which alone has intrinsic value equal to its
current value, is not at all preferred by the people on that account.
On the contrary, over the far greater part of the United States (I do
not know how it is now in California, as I have not been there for
some years), silver notes, national bank notes, or even greenbacks,
are preferred to gold as having an equal current value and being more
portable; and all these nine kinds of money, differing greatly in
intrinsic value and representative character, circulate
interchangeably at par with one another. The induction is irresistible
that it is not the intrinsic value of the money, or anything that is
pledged for the redemption of the money, or is held by the United
States as its representative, but the credit of the government itself
which secures the common consent by virtue of which our money
circulates. Therefore it is a sheer waste that we should be buying and
hoarding up in treasury vaults immense quantities of gold and silver
that might as well be in the mines from which they are taken for any
useful purpose they are serving. One uniform currency, consisting of
paper and subsidiary coins, the direct issue of the government, and
such gold coin as anybody wanted the United States to assay and stamp,
would save an enormous sum annually to the people of the United
States.
As for the amount of money; that makes no difference, except as to
fluctuations in the standard and measure of value. Whether we reckon
in dollars and cents, or in cents and hundreths of a cent, makes no
difference whatever so long as the relation with other values is he
same. But the depreciation or appreciation of a currency is injurious
because it changes the real force of contracts, and because of the
uncertainty introduced into all business and all pecuniary relations,
and the difficulties and wastes involved in passing to a new standard
of value.
As for the growth and development of a country requiring more money,
the fact is that the effect of the advance of civilization, by
increasing the use of checks, savings bank deposits and other forms of
private credit, and increasing the swiftness and ease of
communication, tends to the less use of money. What the silver men
want are two things, or rather there are two classes of silver men,
each wanting a separate thing, who are uniting their forces:
- Those who want the government to buy silver for which it has no
need, in the hope that they will get a higher price for their
metal.
- Those who want to depreciate the currency by bringing it to a
silver basis.
I am opposed to both these projects. But if we must depreciate our
currency let us at least do it in the cheapest and most manly fashion,
by issuing directly currency enough to do it, without buying hundreds
of tons of silver for which we have utterly no use.
For the satisfaction of a number of correspondents of THE STANDARD
besides those mentioned, I have stated my views on the silver
question, as far at least as is now necessary. But I should like to
say that in doing so I do not invite more communications on the
subject. For a man may be a hard money man or a soft money man, and
yet, what is more important still, a single taxer; and I think it
would be a mistake to devote the THE STANDARD to the discussion of the
money question to the exclusion of the more important matters to which
it has given the first place.
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