Paine the Economic Royalist

The foibles of most public men are unearthed while they walk among us. “The evil that men do lives after them; the good is oft interred with their bones.” But revisionism makes history its palimpsest. Heroic pamphleteer Thomas Paine is but the latest of the Founding generation laid low by this twenty-first-century zeitgeist.

His sin?  Paine was a bimetallist who believed in commodity currency -- gold or silver. Honored in his time, today’s establishment would have the New Rochelle revolutionary tarred-and-feathered for his heterodoxy.

Paine’s motivation for writing Dissertations in the mid-1780s was a Pennsylvanian banking bill and the rivalry it spawned: one bank with notes guaranteed by specie versus another with no guarantee other than legal tender laws, which he reasoned belied the currency’s worthlessness and “calculated to support fraud and oppression.”

“Nature has provided the proper materials for money, gold and silver, and any attempt of ours to rival her is ridiculous,” Paine wrote; they were “the emissions of nature: paper is the emission of art.”

This artificial “increase in the supply of money and credit” was the very definition of inflation, explained economic journalist Henry Hazlitt, much as “diluting the money supply with paper is the moral equivalent of diluting the milk supply with water.” Paine’s indictment of inflationary evils is no less eloquent:

Money, when considered as the fruit of many years industry, as the reward of labor, sweat and toil, as the widow’s dowry and children’s portion, and as the means of procuring the necessaries and alleviating the afflictions of life, and making old age a scene of rest, has something in it sacred that is not to be sported with, or trusted to the airy bubble of paper currency.

His anti-fiat fulmination comes into focus again courtesy of monetary historian Lawrence White, whose latest despatch on Paine and monetary policy is timely in this presidential election year, when the Republican candidate presents the opportunity to end the régime of Fed-induced quantitative easing.

Bien-pensant opprobrium has been heaped upon Donald Trump by putative friend and partisan foe alike. It’s doubtful that party apparatchiks know Paine’s counseled punishment for money printing was impeachment and death; it’s beyond doubt that they don’t care. Paine is passé. His defence of “hard money” betrays royalist -- economic royalist -- sympathies.

The controversial epithet arose in Depression-era rhetoric between free-market economics and government intervention. Amnesia was chronic, for New Dealers forgot -- had they ever learned? -- a similar slump in the early 1920s quickly recovered through government neglect, a tribute to market vitality admirably chronicled in James Grant’s The Forgotten Depression: 1921, the Crash that Cured Itself.

New Deal government intervention ensured that the Great Depression years would always be remembered.

Austrian economist Ludwig von Mises took up the cause of economic orthodoxy. “Those whom one would have in the past called liberals the American socialists and interventionists today call reactionaries, conservatives, or economic royalists,” he limned. “In this change of the meaning of liberalism, the victory of interventionist ideas and the abandonment of a market economy are clearly evidenced.”

Classical liberals were the men of private property, the stable dollar, and laisser-faire economics. The American economic juggernaut was their creation.

Yet when the financial bubble of easy money burst at the end of the Twenties, the blame was placed squarely at their feet. Politicians, chafing from being sidelined during the economic boom, cried out that only government could cure the ills of market-failure bust.

Incoming President Franklin Roosevelt became their hero, inaugurating his administration with intervention in industry and production, confiscation of gold in preparation for a fiat dollar, and legal harassment of any business, large or small, that contravened New Deal regulations.

But the spurious growth engineered through deficit spending declined inexorably by the end of his first term, and FDR shifted from emphasizing the benefits of his New Deal legislation to castigating those whose intransigence he blamed for its disappointing record.

Roosevelt manned a frontal assault on the economic royalists in his 1936 renomination speech. “New kingdoms were built upon concentration of control over material things,” Roosevelt thundered,  disparaging capitalist production on one hand, damning labor mobility on the other: “The royalists of the economic order have conceded that political freedom was the business of the Government, but they have maintained that economic slavery was nobody’s business.”

The American principles Roosevelt disingenuously claimed as his own -- “for democracy, not tyranny; for freedom, not subjection; and against a dictatorship by mob rule and the over-privileged alike” -- were the values of the economic royalists. They were the values of the Revolutionary Founders and Framers of the Constitution.  They were the values of Thomas Paine.

They were not the values of the New Dealers. Nor are they the values of the contemporary Washington establishment that runs roughshod over the Constitution in its program of overreach, redistribution, and loose money -- those who truly seek, in Roosevelt’s words, “to overthrow the institutions of America.”

His independence pamphlet on Common Sense made Paine famous. “The world may know, that so far as we approve of monarchy, that in America the law is king.”  He returned to this theme a decade later in Dissertations: “There are such things as right and wrong in the world, and so far as these are parties against each other, the signature of Common Sense is properly employed.”

Again is the hand of destiny poised, pen in hand, over the American palimpsest. If provident, common sense will reign along with sound currency. Paine’s ghost, in turn, would gladly refrain from taking up the fight were “King Gold” restored to its rightful throne.

Stephen MacLean maintains the weblog The Organic Tory.