THE BIRTH OF A GREAT NATION

Wilfred McClay beautifully describes the scene in his 1994 book, The Masterless, and as McClay notes, the Grand Review marked an important moment in American nationalism. Four years earlier, the Union army had been an aesthetic and military shambles. Some states dressed their soldiers in purple Oriental blouses, some in emerald, some in red fezzes. But by 1865, the Union solders had been molded into a single, powerful, all-blue force.

Yet for all the machine-like rigor of the Review, this was still an American force, and therefore highly individualistic. Idiosyncratic characters like Wait Whitman and Bret Harte reported on the march for their countrymen. The Civil War didn’t crush American individualism, but it did alter the magnetic poles of American life. Before the war, the two great forces were the individual and the locality. After the war, the two great poles were more likely to be the individual and the nation.

Economics doesn’t exactly match the pomp and drama of military affairs, but the story of economic policy during the Civil War is essentially the same. Before the war, it was the states that issued currency and conducted nascent economic policy. The national government did little more than deliver mail, impose tariffs, and conduct foreign policy. But after the war, the United States had a national economy for the first time. The federal government issued currency, built railroads, funded training colleges, and promoted economic growth. While Abraham Lincoln was busy overseeing the war, congressional Republicans embarked on a great era of legislative activism, dramatically strengthening the national government.

Today, those Republicans — like William Pitt Fessenden and Justin Smith Morrill — are little known. Liberal historians sometimes seem prejudiced against them because they were not proto-New Dealers. Conservatives tend not to look to them for guidance because they opened a Pandora’s box that led to the great expansion of federal power that culminated in the Great Society and the era of big government. But in fact, the early congressional Republicans were vigorous conservatives, whose basic assumptions about the uses and limits of government still form the core of the Republican tradition. And today’s Republicans could do worse than to emulate their positive approach.

The story of their policy is told fairly, if not scintillatingly, in Heather Cox Richardson’s The Greatest Nation of the Earth: Republican Economic Policies During the Civil War. There were, she shows, three pillars to Republican economic thought during the Civil War: labor, small enterprise, and harmony of interests. Republicans believed that man was made to work. As one Republican editor reminded his readers, God had decreed “in the sweat of thy face shalt thou eat bread.” Most of the Republican members of Congress were self-made men. Many had scratched their way up after the early deaths of fathers or mothers. Fessenden, the chairman of the Senate Finance Committee and later Lincoln’s treasury secretary, was born a bastard and rose through stiff and dogged perseverance.

Thus, they had reason to believe that in a land of open competition any person could rise to prosperity through hard labor. They loathed the large landowners in Europe who kept the workers there propertyless and perpetually poor. They opposed the southern aristocracy and the caste-like structure of southern life. And they were suspicious of concentrated wealth in any form. They believed instead that America could be a fluid and classless society. The Communist Manifesto was over a dozen years old when the Civil War began, but American Republicans rejected the inevitability of class conflict. “We are certain,” the staunchly Republican Philadelphia Inquirer editorialized during the war, “that . . . there is no enmity of interest between capital and labor, but an actual unity of interests.”

Democrats then, like Democrats now, were more likely to see society as a series of conflicts between classes and groups. But Republicans believed that if all Americans worked hard and competed openly, then all would prosper together.

It was an optimistic creed, and Republicans were extraordinarily optimistic about America’s future. The party foresaw a time in which “a score of mighty and prosperous States, the pride of the Republic and the admiration of the world, will leap forth from the great valleys, prairies and forests of the West like youthful giants rejoicing in their strength.”

Republicans were suspicious of government. They thought it was more corruption-prone than private business, and they were afraid that a large public sector would destroy competitive labor markets. But as the war went on, they found more ways to use government that would not violate their principles (or at least not much).

The first great expansion of federal power was overseen by Lincoln’s first treasury secretary, Salmon Chase. The Union was desperate for money to pay the troops. Chase issued federal war bonds. At first he sold them to banks and financiers, putting Alexander Hamilton’s face on the initial issues. But Treasury officials got into terrible rows with bankers over bidding procedures and fair prices, so Chase marketed the bonds to the masses.

The popular offering was a huge success, and the bonds put northerners into contact with the federal government in new ways. The bonds began circulating as currency. Bond drives stirred up national feeling. Republican faith in the small businessmen who bought the debt was enhanced. Americans felt more independent from Europe as they discovered they could raise capital among themselves rather than running to London or Paris. America is “today the most powerful nation on the face of the globe,” one Republican congressman told a crowd in 1864. “This war has been the means of developing resources and capabilities such as you never before dreamed that you possessed.”

The second dramatic federal policy was the creation of a national currency. One historian has estimated that there were 7,000 different kinds of bank notes in circulation before the Civil War, not including counterfeits. States issued currencies, but they were sold at discount beyond their own borders; as Richardson explains, a $ 10 bill from Maine might go for $ 8 in Boston or $ 5 in New York. In the West, there was an acute shortage of reliable currencies.

Looking to enhance nationalist sentiment, and hoping to raise money, Chase proposed a national currency. Desperate for funds, the House Ways and Means Committee opted for a paper- currency plan — the bills would not be redeemable for gold and could therefore be printed more readily. And so began a debate that lasts to this day. Democrats opposed the law, fearing any expansion of federal power, and in the hurly-burly of debate, financial pressures proved decisive. Lincoln signed a paper-currency bill into law on February 25, 1862, and greenbacks began to flood through the country. They were immediately popular, and the Union did not become victim to the same inflation that afflicted the paper currency of the Confederacy.

The Republicans were developing a taste for federal power, and in 1864 they went overboard. The country was becoming alarmed by the rapid fluctuation in gold prices. Americans were disgusted by the unseemly behavior of the traders in the Gold Room in New York, which they felt was being manipulated by southern infiltrators. In the spring, Chase proposed a bill that shut down the Gold Room and outlawed trade in gold futures. Lincoln signed the bill on June 17. The price of gold immediately skyrocketed. Gold futures trading went underground, and five days after Lincoln had signed the original bill into law, the Senate voted to repeal it. Lincoln signed the repeal two weeks later.

The Republicans had learned a lesson about the dangers of interfering with the markets. But they did not give up on federal power. Republicans also revised federal tariff policy during the war, built the railroads, created a federal income tax, and instituted the land grant colleges. The tariffs are the touchiest issue for present-day Republicans who admire the party’s founders. The entire party was protectionist, believing that restricted trade served economic nationalism. Republicans argued that if the nation depended on European products it would never be “Americanized.”

Then as now, Republicans raised taxes with great trepidation. Nonetheless, in need of revenue, the Republicans created the Internal Revenue Bureau and imposed a 3 percent value-added-tax on manufacturing. Their debate on the income tax seems quaint. In 1864, some Republicans proposed a progressive tax, 5 percent on income over $ 600, 7.5 percent on income over $ 10,000, and 10 percent on income over $ 25,000. Others were appalled, arguing that it was “vicious” and “unjust” to tax rich people at higher rates. Justin Smith Morrill argued against such “inequality,” maintaining that “the man of moderate means is just as good as the man with more means, but our theory of government does not admit that he is better.” In the end a tax that was not quite fiat prevailed, and Steve Forbes had his first Republican antecedent. Except in one respect: All these taxes expired by 1872.

Republicans went on to use government to promote economic growth. The Homestead Act, the Land Grant College Act, and the creation of the Department of Agriculture were all designed to boost farm production, which Republicans regarded as the foundation of national and moral wealth. Republicans, who had harbored nativist sentiments before the war, became friendly to immigration during it, hoping to attract more and better labor. Lincoln asked Congress to set up a bureau to recruit immigrants, arguing that new Americans were “a source of national wealth and strength.” And most memorably, the Republicans pushed through transcontinental railroad legislation to open up western development.

The railroad legislation was problematic for the early Republicans because they distrusted public enterprises. They went through a series of tortured efforts to set up the transcontinental operation as a private concern, with the rigorous controls and management of a for-profit business. They never quite perfected a private/public management structure (who ever has?), but they persevered, believing that America could not become “the greatest nation of the earth,” as one Republican put it, without this sort of sweeping enterprise.

As Republicans energetically used the federal government to champion their conservative vision of the American destiny, Democrats defended states’ rights and argued that the Republican programs were unconstitutional. But the Democrats were never able to mount an effective opposition. Heather Cox Richardson (an assistant professor of history at MIT, not the prominent conservative activist Heather Richardson Higgins) maintains that the story of the Civil War Republicans is a tragic one, because the society they ushered in contrasted violently with the one they envisioned. They hoped to create a classless society of open competition, small enterprise, and social mobility. Instead, she writes, the ensuing Gilded Age featured consolidation, large enterprises, and class conflict. Perhaps, but it is hard to evaluate her thesis because the economic life of the Gilded Age lies outside the scope of her narrative.

The Republicans’ economic policy may have produced an America that was more cruel than the one they dreamed of, but it did lead to an America that was every bit as great as its champions envisioned. Their central animating ambition was to make America the most dynamic nation on earth, and they certainly accomplished their aim. By creating a federal government that was energetic but not bloated, they did propel America into the first rank of nations. They did manage to tie a vision of national greatness to a set of mostly sensible economic policies. And for that, the forgotten Republicans like Chase, Fessenden, and Morrill do deserve high admiration and respect.

David Brooks is a senior editor of THE WEEKLY STANDARD.