Founding Plutocrat: The Life and Times of Robert Morris
Today, we’re often told that the American Revolution was a “conservative” one and in some respects, this is true. By and large, the Founding Fathers were men of property, slaveholders and of conservative political inclination, though this does not mean that they were perfectly analogous to 21st century conservatives. One notable exception was Thomas Paine, who was born in England to humble circumstances and died a virtual pauper. Paine, the most politically advanced and radically democratic thinker among American revolutionary leadership, was for a long time written out of the panoply of the founders for his egalitarianism, support for the French Revolution, criticism of Christianity and the Bible. With the encouragement and assistance of Benjamin Franklin, Paine settled in Pennsylvania when he emigrated to British North America. This was fortuitous because in many ways the state became ground zero for the radicalism of the American Revolution and also a microcosm for how that radicalism would later be short circuited by wealthy, anti-democratic elites after the war against Great Britain had been won.
In 1776, a radicalized people in Pennsylvania led the push for what became the most democratic state constitution in the newly declared United States of America and probably the world at that time. As historian, Terry Bouton points out in Taming Democracy: “The People,” the Founders and the Troubled Ending of the American Revolution, a Pennsylvania-centered study of the period, modern Americans have been trained to think of the model for democratic government as a divided legislature and a powerful executive armed with the veto. Pennsylvania’s revolutionaries thought otherwise. They saw such a government as checking democracy rather than promoting it. Divided government was a British idea, where the king and upper chamber of Parliament — the House of Lords, filled with titled aristocrats who served for life — constrained the more democratic, elected branch, the House of Commons (though it should be noted that the right to vote was extremely limited in Britain at this time).
Most Pennsylvanians felt that they had suffered under this system, so the solution they developed was a unicameral (or one house) legislature and an executive with no veto power. Highly radical for the time, the new constitution also allowed nearly all adult men to vote, including free African-American males (a right they held in Pennsylvania until 1837). As Bouton relates, many of the framers of the 1776 constitution wanted to go even further and include a clause allowing the state to insure equality by confiscating wealth from extremely rich people. That clause had declared that, “future legislatures of this State should have the power of lessening property when it becomes excessive in individuals” because concentrations of wealth were “a danger to the happiness of mankind.” The measure was voted down, however. Though the majority of the state constitutional convention may have embraced “leveling principles,” as one delegate put it, most of them were still landed gentlemen who objected to property confiscation. Instead, they believed that government could equalize wealth by less coercive means — although the constitution would remain silent on what those means should be.
One Pennsylvanian was horrified by this unleashing of democracy and the “leveling spirit” and became determined to overturn it. Most Americans have probably never heard of Robert Morris but he was one of the iconic figures of the Revolution. Today, his image adorns the inside of the dome of the Capitol building: he is depicted as the heir of Mercury, god of commerce, in the Brumidi fresco, The Apotheosis of Washington. As Bouton points out, the giant image of Morris on the Capitol ceiling ably captures his larger than life persona. Heavy and six feet tall, he was a man whose physical attributes reflected his ambition.
In the words of Bouton:
“As a merchant, he was a king among princes, so aggressive in his dealing that he took risks others would not dare — such as when he single-handedly tried to corner the nation’s tobacco market. When Morris built his dream mansion, it was so palatial in scope that it was never completed and came to be called ‘Morris’s Folly.” When he invested in land, Morris leveraged his fortune to buy at least 6 million acres, a gamble that would leave him in debtors’ prison when the speculative bubble burst in the 1790s.”
In 1775, the Continental Congress appointed Morris chairman of its secret Committee of Trade, which controlled war-related spending. He used the position to direct nearly a million dollars’ worth of business through his own mercantile firm and other businesses in which he had an interest. He used government ships to transport his private cargo free of charge to markets in the West Indies and Europe. If the ships sank or were captured, the public subsidized Morris for his private losses. In all of these ways — and critics alleged the he also embezzled another $80,000 — Morris used the government to turn himself into probably the wealthiest man in America and the most powerful, aside, perhaps, from George Washington. According to Bouton, “the degree of authority he possessed over the economy was probably never matched in the subsequent history of the United States.”
As powerful as he was, Morris knew that much of his authority would ebb after the war; to establish lasting power, he would need to recruit other men of means to his cause. His primary recruiting tool was the wealth possessed by government. As Bouton relates, the basic premise of Morris’s plan was that the Unites States could only stand alongside the nations of Europe when government dedicated itself to putting even greater wealth into the hands of the already affluent. Morris wanted the government to channel money to the wealthy, either through direct payments or by privatizing the most lucrative parts of the state. We might note, as Bouton does, how much this resembles today’s “neoliberalism” or supply-side/trickle-down economics. Indeed, Morris himself came close to describing his new creed in similar terms. He said that the interests of the wealthy went “hand in hand” with the public good and that national greatness would come by “distributing property into those hands which could render it most productive” — a group he identified as “moneyed men” or the “mercantile part of society.”
The chief obstacle to Morris’s plan was democracy. Ordinary Pennsylvanians were committed to the “spirit of ‘76” and its principles of political and economic equality and would oppose his plan for redistributing wealth to those who were already rich. Morris had no illusions that he could gain converts among the common folk. He had never embraced the ideals of Pennsylvania’s Revolution; he had initially opposed the Declaration of Independence and was among the most vocal opponents of the 1776 state constitution. He scorned the common people as “vulgar souls whose narrow optics can see but the little circle of selfish concerns.”
Morris’s chief target for his counter-revolution was the elimination of government issued paper money. To a large degree this mimicked what the Britain had done at the end of the French and Indian War (1754–1763) when they had passed the Currency Act of 1764, which had forced Americans to repay debts to British merchants and bankers in extremely scarce “hard money,” actual gold and silver coins. This had precipitated a depression as bad or worse as that of the 1930s and had been a major, though often underexplored, factor in leading to the American Revolution.
Morris believed he could avoid a similar debacle by replacing government paper money with a new kind of currency issued by private banks. He saw privatization as the cure for the danger of inflation. He believed that if the government’s power to print money was lodged with private companies, the moneyed men running them could be trusted to never print too much money. In many ways, Morris intended finance under private banks to be less democratic than it had been under the British. While Britain had allowed elected officials in Pennsylvania to maintain some influence over monetary decisions, Morris’s plan purged government from the process entirely. In his ideal system, no public forum would exist for the American people to influence decisions about something central to their well-being.
The primary agent of salvation would be the bank Morris created in Philadelphia in 1781 — the first private bank chartered in United States. Prior to this banking and money creation had been an exclusively public function in the thirteen colonies and most Americans were strongly opposed to the very idea of a privately-owned bank. As Bouton points out, Morris’s ambitions were reflected in the name he chose for the institution: the Bank of North America. The only role for government, as far as Morris saw it, was to charter private banks and shield stockholders from liability if the bank ran into financial trouble. Although Morris imagined that there would eventually be many private banks in the United States, he was averse to competition with his bank. Thus, he wanted to kill off Pennsylvania’s public land bank, which made fixed rate, long-term, low interest loans to farmers, artisans and businessmen, using their land or other assets as collateral.
Morris insisted on limiting rivals, in part, because a lack of competition fostered one of his larger goals: funneling even more wealth to the moneyed men. He wanted his bank to reap steep profits as the Pennsylvania region’s primary moneylender. As Morris told potential investors, “Few will find the other parts of their fortunes to yield them so certain an income as the stock they have in the bank.” His predictions turned out to be uncannily accurate. In 1783, the bank paid a whopping 14.5% dividend and 13.5% in 1784.
Morris also believed that privatization would reward wealthy creditors with its tight control of money. The bankers would tie the amount of currency in circulation to the amount of gold and silver in their vaults. As money became scarce its value would increase, making it more expensive for debtors to repay with currency and ensuring that creditors made a magnificent return on what they had loaned. This would in turn make it easier for the moneyed men to repay their own loans, chiefly from European merchants and financiers, when they converted their Bank of North America currency into British pounds, Spanish dollars or French livres. This was assuming, of course, that the common folk could continue to scrape together the money to pay them.
It was here that the Morris plan came apart. His privatization plan assumed that ordinary Americans had the money to repay their debts. But as Bouton points out, this was a strange assumption to make when the plan also called for the removal of money from circulation, taking away their primary source of credit (the land banks) and otherwise stacking the deck in favor of creditors. The results were predicable. Morris’s policies replicated the cash scarcity that Britain had caused yet another severe economic depression that lasted for almost a decade.
Morris’s bank currency proved to be a poor substitute for government-issued paper money. Since the new bank only printed money in close correlation to the amount of gold and silver in its vaults, it needed to have an enormous and, ultimately, impossible supply of hard money to keep the economy humming. Morris tried to compensate for his underfunded bank by issuing paper money of his own creation, called “Morris notes” but they proved to be entirely inadequate. Only a small number of these notes circulated among merchants and government contractors in denominations far too large for the average American to acquire.
The Bank of North America was re-chartered in 1787, under more restrictive controls that hindered its intended role as a central bank. In 1790, Pennsylvania’s 1776 constitution was also replaced by one modelled on the new U.S. Constitution with its “checks and balances” and “separation of powers. By then, the action had moved on to the new federal government and the proposal for a Bank of the United States. George Washington counted Morris as a close friend and confidant. He had even lived as a guest in Morris’s house for several months during the Constitutional Convention. In 1790 when the national government moved from New York to its temporary home in Philadelphia (while Washington, D.C. was being built), now-President Washington once again lived in the Morris mansion. Washington wanted Morris to be the first Treasury secretary but Morris turned him down preferring a Senate seat instead. Alexander Hamilton, who took the position instead, was Morris’s protégé and the former’s financial ideas, often called “Hamiltonian,” were, in the words of Bouton, “in many ways a repackaged version of Morris’s philosophy. In short, [Morris’s] ideals became the ones around which most of the nation’s founding fathers rallied during the postwar decade.”
Morris himself ended up in eerily similar circumstances to his political polar opposite, Tom Paine. After trying to elude his own creditors following the collapse of his land speculation scheme, Morris was arrested and spent several years in debtor’s prison, his health declining. The U.S. Congress passed its first bankruptcy legislation, in part, to get Morris out of prison. After his release, he spent the last years of his life in quiet retirement, assisted by his wife. Morris died on May 8, 1806 in Philadelphia. He is buried in the family vault of his brother-in-law, Bishop William White at Christ Church. A plaque installed later reads: ROBERT MORRIS signer of the Constitution of the United States of America. Deputy from Pennsylvania to Federal Constitutional Convention May 25, 1787 — September 17, 1787.”