Trading at the New York Stock Exchange, 1889.
“The Constitution was essentially an economic document based upon the concept that the fundamental private rights of property are anterior to the government and morally beyond the reach of the popular majorities.” -Charles A. Beard, 1913
“Beard described his ideal world as ‘a workers’ republic’. . . He possessed a radical analysis; he proposed public alternatives to private property; what he lacked was a radical politics to implement his ideas. This was a task he left to others.” -Ellen Nore, 1983
In early 1817, a handful of stockbrokers in New York City, meeting on Wall Street, drafted the Constitution of the New York Stock and Exchange Board, adding amendments throughout the year. In US history, 1817 is also considered the beginning of the “Era of Good Feelings,” marked by growing nationalism and economic expansion under president Monroe and, to a lesser extent, his successor John Quincy Adams, who helped draft the Monroe Doctrine. The era of Jacksonian populism, often portrayed as a backlash to Monroe/Adams republicanism, immediately followed. Common to both eras were regularized economic “panics” in 1819, 1825, and 1837, the defining feature of a longer era of contentious economic expansion.
Initially, brokers in New York signed a contract in 1792 called the Buttonwood Agreement to manage war-related securities investments. After the War of 1812, brokers wanted a more complex contract. In 1817, two Buttonwood signers, Nathan Prime and John Benson, were elected president and secretary of the freshly consolidated Board, and helped establish a “tradition whereby brokers on the exchange had a more privileged position than outsiders who simply dealt with or for the public” (Geisst 15).
This specialized privilege is evident in the text of the 1817 Constitution, which includes an amendment deeming that “no member of this Board, nor any partner of a member, shall hereafter give the prices of any Stock, Exchange, or Specie to any Printer for Publication.” Brokers, then, incorporated a means of controlling the flow of information into their constitution.
Walter Werner and Steven Smith detail the extent to which brokers secluded their operations, writing that not only “did keeping membership exclusive maintain the price-fixing cartel, it also sustained the practice of charging outsiders higher commission rates” (Werner & Smith 29). Stockbrokers initially restricted financial information as another commodity. Information, both factual or rumored, was central to nineteenth century America, such that by 1832, newspapers “generated only 15 percent of the revenue of the post office but 95 percent of the weight transmitted by horse and stagecoach” (Lepler 14). But controlling information to make it easier to exploit outsiders was part of a larger trend in risky land investments related to western expansion.
Even the newly established national bank began participating in rampant land speculation, resulting in the Panic of 1819. George Dangerfield suggests in his 1952 text about the era that the 1819 panic marked a downward spiral, writing that when “the prosperity began to collapse, nationalism as a unifying principle faded with it; and sectionalism, or the maneuvers of different sets of social and economic arrangements, took its place” (175). The republic into which Prime and Benson brought their Stock Exchange was economically centralized and nationally unified. Power was concentrated among landowners (southern slave owners, western frontier colonists, and northern investors) whose elected representatives did nothing to regulate the banking system that corresponded to the landowners’ aggressive, often militaristic expansion. Dangerfield describes this as a land bubble that burst in 1819.
Reaction to the land bubble’s bursting resulted in hostility toward the national bank. Jackson rode this hostility into the White House in 1828, and after reelection “ordered all federal deposits withdrawn from the bank as a sign of his lack of support” (Geisst 19), as part of his supposedly populist agenda. The national bank closed, causing smaller banks to close, which in turn prompted widespread payment suspensions, sparking the Panic of 1837.
The use of the word panic was a popular indictment of political leadership. Jessica Lepler notes that in the Jacksonian era, Americans used the word panic because “it implied individual innocence. By turning to the term panic in May 1837, rather than revulsion, crash, or the times, American authors blamed their troubles on collective forces beyond the control of all but political elites” (4). Monroe and Adams let wealth stratify, but under Jackson, the next panic was worse.
What is clear is that the national bank and private investments were so inseparable that by the time Jackson leveled the former out of populist extremism, the latter was unable to sustain itself for much longer. The federal government was often criticized in the early nineteenth century for its “relations with wealthy merchants and bankers” and for allowing “the commercial class [to operate] without much government interference” (Geisst 21). This is often misconstrued as a conflict between government and private enterprise, but this interpretation misses an important point.
Here, Charles Beard’s 1913 An Economic Interpretation of the Constitution of the United States provides a useful framework for understanding that the US Constitution was written for the same reason stockbrokers wrote their own constitution on Wall Street. Hardt and Negri nod to Beard’s framework when they argue that constitutional republics were designed to protect private property first and foremost. They note that “Behind every formal constitution. . . lies a ‘material’ one” which, as Beard points out, foregrounds the economic interests of its drafters, including land, slavery, and securities (Hardt & Negri 10). The republic was created to protect its creators’ property rather than the general population. When it could not protect investors from their own rampant speculation, those investors blamed the republic rather than their own practices.
Jacksonian populism was not the antithesis to Monroe/Adams republicanism, but the transformation of it. Giovanni Arrighi notes in The Long Twentieth Century that by the 1790s, “civilians were mobilized to sustain indirectly, and often unknowingly, the war-making and state-making efforts of rulers” (50), leading to inter-state systems taking on the previous tasks of monarchs through “the democratization of nationalism” (52). Individual states took on the task of governance for the ideological reasons Beard examines, which led to nationalist cooperation to accumulate capital. State-making became a civilian matter, and those civilians reacted negatively to the Panics of 1819 and 1825 by directing their state-making capacity toward localized interests, what Dangerfield calls “sectionalism.” This is how the Era of Good Feelings became, rather than precipitated, Jacksonian populism.
Wall Street survived Jacksonian populism because it acted, from its inception, as a state in itself, no more responsible for national financial panics than any other individual state. The Commonwealth of Wall Street took on the same duties of state-building as New York or Virginia.
Ellen Nore states that Beard’s analysis is only a framework for understanding national problems, but she also hints that Beard’s analysis implicitly invites radical solutions. Beard indicts the Constitution as a financial agreement between brokers, such that panic is inherent in its logic. One way to escape such panic, at least, is to imagine life beyond the rigid logic dictated by the past.
Arrighi, Giovanni. The Long Twentieth Century. Verso, 1994.
Beard, Charles A. An Economic Interpretation of the Constitution of the U.S. Macmillan, 1925.
Dangerfield, George. The Era of Good Feelings. Harcourt, Brace & World, 1952.
Geisst, Charles R. Wall Street: A History. Oxford University Press, 2012.
Hardt, Michael, Antonio Negri. Commonwealth. Harvard University Press, 2011.
Lepler, Jessica M. The Many Panics of 1837. Cambridge University Press, 2013.
Nore, Ellen. Charles A. Beard: An Intellectual Biography. Southern Illinois University Press, 1983.
Werner, Walter, Stephen Smith. Wall Street. Columbia University Press, 1991.