When this republic was founded, there was a widespread distrust of finance and banking and a hatred of speculation, especially among farmers. These attitudes reflected their Christianity. Historically Christianity had opposed charging interest and other features of capitalism.
Many felt it was a biblical commandment to work. (Genesis 3:19) The biblical notion of justness had a sense of proportionality as "an eye for an eye and a tooth for a tooth." The idea that a person could be become fabulously wealthy without visible signs of work was unacceptable to them. This was not politics of envy; it was a sense of justice.
The farmers and others with this view coalesced around Jefferson and Madison and their Republican Party. They held no hatred of the rich; they judged people by how their money was obtained. They opposed Wall Street (which was only a sliver of what it is today) where betting was all pervasive: Jefferson described New York City as " a cloacina of all the depravities of human nature."
Jefferson felt that farmers were particularly virtuous because they obtained their money through honest labor. When the Constitution's adoption set off a wave of speculation, they felt it was a threat to "republican principles" and republican government. Madison thought it was outrageous that men should profit so much from speculation: "There must be something wrong, radically and morally and politically wrong, in a system which transfers the reward from those who have paid the most valuable of all considerations, to those who scarcely paid any consideration at all." It should be noted their Republican Party was hostile to speculators and finance; today's Republican party (founded in 1854) generally acts as a servant of speculators and finance.
The great classical economists of the era, Adam Smith and David Ricardo, dealt with concepts which have been articulated to give deeper understanding of the farmer's position. They held there were two aspects to every commodity; a use values and an exchange value. The use value of a commodity, say a coat, depends on qualities of warmth and appearance and attractiveness. The exchange value of the coat depends on the quantitative amount it would sell for.
They envisioned an economy where one farmer would produce a commodity such as bacon that had particular qualities and exchange it for a different commodity, say wool, which a had different qualities and a different use value. Essentially exchanges were made to get items with different qualities.
They viewed finance as manipulating and creating exchange values to gain control of use value. But they saw this was done without creating use values. The farmers, close the earth, viewed with disapproval someone quickly attempting to change one quantity of money into a larger quantity say $5,000 into $10,000. This kind of exchange is fundamentally different than the aforementioned bacon for wool.
As agricultural productivity dramatically grew, the conflict between use values and exchange values was apparent. The bushel price of wheat in 1871 was $1.24; in 1894 it was 49 cents. As farmer produced more use values (more wheat) they received less exchange values (money). Their physical and financial productivity were inversely related. Their group, the Grange, had a strong incentive to reduce production and a their slogan was: "Raise less corn and more Hell." Their desire for government help was not the "politics of envy"; it was the politics of survival and escape from abject destitution.
The logic of profitability dictates that businesses maximize exchange values not use values. Generally, exchange values are increased when use values are destroyed or curtailed. During the Great Depression, when millions were starving, to help the profitability (the exchange values) of agriculture, 6 million pigs (millions of use values) were deliberately destroyed. In 2002 the auto industry could have produced 20 million more cars, but the creation of those millions of use values would have meant less exchange value for the industry so the production did not occur.
One cannot assume that if businesses get more money it will be used to create bigger supplies with lower prices.
In the early 1980s, the then chairman of the University of Utah Economics Department, E. K. Hunt, emphatically stressed: in our world the driving force is a relentless quest to create and accumlate exchange values. The evidence of his deep insight abounds:
* Our best-compensated people once were oil men and industrialists-people who created use values. Now the big money has shifted more to finance- people who create exchange values. The average annual compensation of the top 25 hedge fund managers was over a billion dollars. Is it any wonder that up to a third of our best students in our best schools were planning careers that would not create use values?
* We have recently had years where over 40 percent of all U.S. profits were derived from exchange value creation.
* In 2011 the value of derivatives (financial instruments tied to other financial instruments-viewed by many as bets on bets) grew 18 percent in six months to reach $708 trillion-more than 11 times the total value of all the goods and services produced in the world annually.
Today, many of the strongest critics of speculation and Wall Street are called anti- capitalist, socialists, and enemies of free enterprise. Yet there is every reason to suppose that the author of the Declaration of Independence (Jefferson) and the father of the Constitution (Madison) would deplore a system which directs inordinate effort to creating, promising, and litigating about giant claims on future exchange values.
They would consider a capitalism heavily based on speculation as fundamentally immoral.
Jones lives in West Haven.
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