Hostname: page-component-84b7d79bbc-l82ql Total loading time: 0 Render date: 2024-07-27T20:53:16.673Z Has data issue: false hasContentIssue false
  • English
  • Français

The Political Distribution of Economic Privilege in Van Buren's New York

Published online by Cambridge University Press:  16 February 2021

Howard Bodenhorn Open the ORCID record for Howard Bodenhorn [Opens in a new window]
Howard Bodenhorn*
Affiliation:
John E. Walker Department of Economics, Clemson University; National Bureau of Economic Research (NBER)
*
E-mail: bodnhrn@clemson.edu
Get access Rights & Permissions [Opens in a new window]

Abstract

Historians have long recognized that one of the principal functions of early nineteenth-century American state governments was the distribution of economic privileges, including preferential grants of corporate privileges. North, Wallis, and Weingast label such regimes natural states and argue that government as privilege dispenser is a characteristic of most societies and, in some few instances, represents a transitional phase between traditional premodern societies and modern open-access democracies. This article documents the operation of the natural state in New York, focusing on how Martin Van Buren's Democratic coalition manipulated the distribution of bank and insurance company charters so as to advance the interests of their Democratic coalition. Consistent with the North, Wallis, and Weingast interpretation, the evidence shows that the transition to open access was neither smooth nor inevitable; Van Buren's Democratic coalition reversed the long-run trend toward greater access until they were unseated during the financial crisis years of the late 1830s.

Type
Research Article
Information
Studies in American Political Development , Volume 35 , Issue 1 , April 2021 , pp. 127 - 145
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1. Hildreth, Ricard, Banks, Banking, and Paper Currencies (Boston: Whipple & Damrell, 1840), 58Google Scholar.

2. Benson, Lee, The Concept of Jacksonian Democracy: New York as a Test Case (Princeton, NJ: Princeton University Press, 1961), 120Google Scholar.

3. Kass, Alvin, Politics in the State of New York, 1800–1830 (Syracuse, NY: Syracuse University Press, 1965), 14–15Google Scholar; Cornog, Evan, The Birth of Empire: De Witt Clinton and the American Experience, 1769–1828 (New York: Oxford University Press, 1998), 37Google Scholar.

4. Cornog, Birth of Empire, 5–6. It seems likely that Van Buren observed how Clinton managed the power of dispensing economic privileges for political purposes, if on a less expansive and systematic fashion. In the 1810s Clinton brushed aside charges that his practice of connecting economic opportunity with political advancement corrupted the political process. See Hanyan, Craig, De Witt Clinton and the Rise of the People's Men (Montreal: McGill-Queens University Press, 1996), 178–79Google Scholar.

5. McCormick, Richard L., “The Party Period and Public Policy: An Exploratory Hypothesis,” Journal of American History 66 (1979): 283CrossRefGoogle Scholar.

6. Elkins, Stanley and McKittrick, Eric, The Age of Federalism (New York: Oxford University Press, 1993), 453Google Scholar.

7. Wallis, John J., “Institutions, Organizations, Impersonality, and Interests: The Dynamics of Institutions,” Journal of Economic Behavior & Organization 79 (2011): 51CrossRefGoogle Scholar.

8. Studies that describe political and economic transitions consistent with the NWW hypothesis include Hilt, Eric, “Corporation Law and the Shift toward Open Access in the Antebellum United States,” in Organizations, Civil Society, and the Roots of Development, ed. Lamoreaux, Naomi R. and Wallis, John J. (Chicago: University of Chicago Press, 2017), 147–77Google Scholar; Koyama, Mark, “The Long Transition from a Natural State to a Liberal Economic Order,” International Review of Law and Economics 47 (2017): 29–39CrossRefGoogle Scholar.

9. Gunn, L. Ray, The Decline of Authority: Public Economic Policy and Political Development in New York, 1800–1860 (Ithaca, NY: Cornell University Press, 1988), 105CrossRefGoogle Scholar.

10. Lu, Lu Qian and Wallis, John J., “Banks, Politics, and Political Parties: From Partisan Banking to Open Access in Early Massachusetts, in Organizations, Civil Society, and the Roots of Development, ed. Lamoreaux, Naomi R. and Wallis, John Joseph (Chicago: University of Chicago Press, 2017), 109–46Google Scholar.

11. Bodenhorn, Howard, “Private Seeking of Private Monopoly in Early American Banking,” in Public Choice Analyses of American Economic History, vol. 3, ed. Hall, Joshua and Witcher, Marcus (Chaim, Switzerland: Springer, 2019), 167–206CrossRefGoogle Scholar.

12. Bodenhorn, Howard, “Bank Chartering and Political Corruption in Antebellum New York: Free Banking as Reform,” in Corruption and Reform: Lessons from America's Economic History, ed. Glaeser, Edward L. and Goldin, Claudia (Chicago: University of Chicago Press, 2006), 231–57CrossRefGoogle Scholar.

13. See Thomas v. Dakin, 22 Wendell 2; People v. Assessors of Watertown, 1 Hill 616; and see discussion in Bodenhorn, Howard and Haupert, Michael, “Was There a Note Issue Conundrum in the Free Banking Era?” Journal of Money, Credit, and Banking 27 (1995): 702–12CrossRefGoogle Scholar.

14. Murphy, Brian Phillip, Building the Empire State: Political Economy in the Early Republic (Philadelphia: University of Pennsylvania Press, 2015), 23–24CrossRefGoogle Scholar.

15. Hildreth, Banks, Banking, and Paper Currencies, 122.

16. Cole, Donald B., Martin Van Buren and the American Political System (Princeton, NJ: Princeton University Press, 1984), 78CrossRefGoogle Scholar; Benson, Concept of Jacksonian Democracy, 329–32.

17. Benson, Concept, 332.

18. Dubin, Michael, Party Affiliations in the State Legislatures: A Year-By-Year Summary, 1796–2006 (Jefferson, NC: McFarland, 2007)Google Scholar.

19. See, among others, Redlich, Fritiz, Molding of American Banking: Men and Ideas (New York: Hafner, 1947)Google Scholar; Hammond, Bray, Banks and Politics in America from the Revolution to the Civil War (Princeton, NJ: Princeton University Press, 1957)Google Scholar; Bodenhorn, “Bank Chartering and Political Corruption”; Lu and Wallis, “Banks, Politics, and Political Parties.”

20. Benson, Concept of Jacksonian Democracy, 4.

21. Gunn, Decline of Authority, 15; Cole, Martin Van Buren, 45.

22. Gunn, Decline of Authority, 81. McCormick, “Party Period,” advances a similar argument, which also informs arguments advanced in North, Douglass C., Wallis, John Joseph, and Weingast, Barry R., Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History (New York: Cambridge University Press, 2009)CrossRefGoogle Scholar; Seavoy, Ronald E., The Origins of the American Business Corporation, 1784–1855 (Westport, CT: Greenwood Press, 1982)Google Scholar; Countryman, Edward, “The Empire State and the Albany Regency,” in The Empire State: A History of New York, ed. Klein, Milton M. (Ithaca, NY: Cornell University Press, 2001), 295–306Google Scholar; Bodenhorn, “Bank Chartering and Political Corruption,” 231–57.

23. Seavoy, Origins of the American Business Corporation.

24. Dommett, Henry W., A History of the Bank of New York, 1784–1884 (New York: G. P. Putnam's Sons, 1884), 11Google Scholar.

25. Alexander, DeAlva S., A Political History of the State of New York. Vol. I: 1774–1832 (New York: Henry Holt, 1906), 186Google Scholar. Schwartz, Anna J., “The Beginning of Competitive Banking in Philadelphia, 1782–1809,” Journal of Political Economy 55, no. 5 (1947): 417–31CrossRefGoogle Scholar; A. Glenn Crothers, “Banks and Economic Development in Post-Revolutionary Northern Virginia,” Business History Review 73: 1–39; Bodenhorn, “Private Seeking of Private Monopoly” document similar experiences in Pennsylvania and Virginia.

26. Murphy, Building the Empire State, 86, argues that there is little direct evidence to support the claim that banks were so openly partisan, in part because few financiers would let profitable investments pass for purely partisan reasons. But even banks in competitive environments engage in credit rationing to control portfolio risk, and the excess demand for loans in a capital-scarce market worked in concert with credit rationing to allow bankers to discriminate in several dimensions, including party affiliation. The classic presentation of a credit-rationing model can be found in Joseph E. Stiglitz and Andrew Weiss, “Credit Rationing in Markets with Imperfect Information,” American Economic Review 71, no. 3: 393–410.

27. Historians typically refer to the party as Democratic-Republicans, but I adopt the shorter term “Republican” to refer to the party until Van Buren became the leader of the Democrats circa 1825.

28. Prince, Carl E., “The Passing of Aristocracy: Jefferson's Removal of the Federalists, 1801–1805,” Journal of American History 57 (1970): 565CrossRefGoogle Scholar.

29. Gallatin, Albert, The Writings of Albert Gallatin, vol. I, ed. Adams, Henry (New York: Antiquarian Press, 1960), 129Google Scholar.

30. North et al., Violence and Social Orders, 154–58.

31. Hammond, Jabez Delano, The History of Political Parties in the State of New York from the Ratification of the Federal Constitution to December 1840 (Cooperstown, NY: H. & E. Phinney, 1844), 219Google Scholar.

32. Alexander, Political History, 190–91; Benton, Nathaniel S., A History of Herkimer County, Including the Upper Mohawk Valley (Albany, NY: J. Munsell, 1856), 386–87Google Scholar.

33. Tullock, Gordon, “Rent Seeking,” in The Selected Works of Gordon Tullock. Volume 5: The Rent-Seeking Society, ed. Rowley, Charles K. (Indianapolis: The Liberty Fund, 2005), 11–100Google Scholar; North et al., Violence and Social Orders.

34. The markers signify the majority party in the state assembly: F = Federalist, R = Democrat-Republican prior to the rise of Martin Van Buren's Regency circa 1825, D = Democrats, and W = Whigs.

35. Hammond, Banks and Politics, 162; Hubert, Philip G. Jr., The Merchants’ National Bank of the City of New York (New York: privately printed, 1903), 89Google Scholar.

36. Hammond, History of Political Parties, 300.

37. Ibid., 337.

38. Ibid., 163; Benton, History of Herkimer County, 359.

39. Gunn, Decline of Authority, 70.

40. Hough, Franklin B., New York Civil List (Albany, NY: Weed, Parsons, 1860), 33–34Google Scholar.

41. Hanyan, De Witt Clinton, 6.

42. Cole, Martin Van Buren, 78.

43. Ibid., 78.

44. New York (State) Senate, Senate Journal (1824), 501.

45. Ibid., 502.

46. Kass, Politics in the State of New York.

47. Benton, History of Herkimer County, 360.

48. Niven, John, Martin Van Buren: The Romantic Age of American Politics (New York: Oxford University Press, 1983), 220Google Scholar. See also Root, L. Carroll, “New York Bank Currency: Safety Fund vs. Bond Security,” Sound Currency 2 (1895): 285–308Google Scholar.

49. Cornog, Birth of Empire, 5, for instance, notes that De Witt Clinton used his political power and standing in the Manhattan Company to that the bank's resources could be used to support his political and philanthropic activities.

50. For a modern assessment of New York's Safety Fund System, see Bodenhorn, Howard, State Banking in Early America (New York: Oxford University Press, 2003), 155–82Google Scholar, and references therein.

51. Lincoln, Charles Z., ed., Messages from the Governors (Albany, NY: J. B. Lyon Company, State Printers, 1909), 238–45Google Scholar.

52. Ibid., 242.

53. Ibid.

54. Hanyan, De Witt Clinton, 272–73. See also New York State, Senate Journal, 48th Sess., 1825, 613–15; Miller, Nathan, The Enterprise of a Free People: Aspects of Economic Development in New York State during the Canal Period, 1792–1838 (Ithaca, NY: Cornell University Press, 1962), 138–39Google Scholar.

55. Just three charters were granted before 1800 and 56 between 1838 and 1860. For the data see Robert E. Wright, “U.S. Corporate Development 1790–1860,” MEAD: The Magazine of Early American Datasets (2015), https://repository.upenn.edu/mead/7/. For a discussion of the economics of early American marine insurance, see Kingston, Christopher, “Marine Insurance in Britain and America, 1720–1844: A Comparative Institutional Analysis,” Journal of Economic History 67 (2007): 379–409CrossRefGoogle Scholar.

56. Benson, Concept of Jacksonian Democracy, 70.

57. Lu, Qian, From Partisan Banking to Open Access (London: Palgrave, 2017)CrossRefGoogle Scholar; Lu and Wallis, “Banks, Politics, and Political Parties, 109–46.

58. Hilt, “Corporation Law,” offers a similar interpretation.

59. See Bodenhorn, “Bank Chartering and Political Corruption,” for a discussion of the political events leading to the adoption of free banking; North et al., Violence and Social Orders, 228–40 for a discussion of the post-1840 New York transition in a larger context.

60. Laws of the State of New York (Albany, NY: Printer to the State, 1792), 351–55.

61. Hutchins, S. C., Civil List and Forms of Government of the Colony of the State of New York (Albany, NY: Weed, Parsons, Printers to the State, 1870)Google Scholar.

62. Weise, Arthur J., The History of the City of Albany, New York: From the Discovery of the Great River in 1524, by Verrazano, to the Present Time (Albany, NY: E. H. Bender, 1884), 431Google Scholar.

63. Four early bank charters could not be located in the list of banks in Weber, Warren E., “Early State Banks in the United States: How Many Were There and When Did They Exist?” Journal of Economic History 66, no. 6 (June 2006): 433–55CrossRefGoogle Scholar.

64. The city and county histories are not a random sample. A city, county, or bank history is used if is available on Google Books. I started searching for director lists in larger, more populous counties and continued to search alphabetically by county thereafter until the sample included more than 2,500 person-bank observations.

65. Howard Bodenhorn, “Opening Access: Banks and Politics in New York from the Revolution to the Civil War” (National Bureau of Economic Research working paper no. 23560, June 2017).

66. Lu and Wallis, “Banks, Politics, and Political Parties.”

67. Hutchins, Civil List.

68. Excluding appointive positions from the political elite (for the purposes of this study) is unlikely to underestimate the connection between politics and corporate finance because most men ever appointed to a prominent political position served as an elected representative at some point in their careers.

69. Bodenhorn, Howard and White, Eugene, “The Evolution of Bank Boards of Directors in New York, 1840–1950,” in Enterprising America: Businesses, Banks, and Credit Markets in Historical Perspective, ed. Collins, William J. and Margo, Robert A. (Chicago: University of Chicago Press, 2015), 107–45Google Scholar.

70. See Hutchins, Civil List, for lists of men holding various elective offices and the years (sessions) in which they served.

71. Kass, Politics in the State of New York, 25.

72. New York State Senate, Report of the Majority of the Select Committee on the Oneida Bank, Document No. 58, Documents of the Senate of the State of New York, at Their Forty-Sixth Session (Albany, NY: E. Croswell, Printer to the State, 1837), 74.

73. Ibid., 3.

74. Ibid., 30.

75. New Century Club, Outline History of Utica and Vicinity, Prepared by a Committee of the New Century Club (Utica: I. C. Childs & Son, 1900); History of Oneida County, New York, with Illustrations and Biographical Sketches of Some of Its Prominent Men and Pioneers (Philadelphia, PA: Everts & Fariss, 1878); Canfield, W. W. and Clark, J. E., Things Worth Knowing about Oneida County (Utica, NY: Thomas J. Griffiths, 1909)Google Scholar.

76. Sample selection bias will be an issue if the purpose of matching biographies with shareholders was to generate a representative random sample of the Utica region's mid-nineteenth-century population. Representativeness is not the point, however. Both samples are probably selected on similar criteria: success in business, participation in local organizations, philanthropic activities, and political connectedness.

77. Journal of the Assembly of the State of New York (Albany, NY: E. Croswell, 1836), 974–75.

78. History of Oneida County.

79. New York State Bank Commissioners. Annual Report of the Bank Commissioners. Document No. 71. Documents of the Assembly of the State of New York 61, no. 2 (Albany, NY: E. Croswell, Printer to the State, 1838), 46.

80. Ibid., 56–64.

81. Spencer, Ivor Debenham, The Victor and the Spoils: A Life of William L. Marcy (Providence, RI: Brown University Press, 1959)Google Scholar; Van Deusen, Glyndon Garlock, Thurlow Weed: Wizard of the Lobby (Boston: Little, Brown, 1947), 221Google Scholar.

82. Benton, History of Herkimer County, 360.

83. The Bucktail leadership wish to limit corruption and yet exploit the patronage potential of chartering may explain the declining use of elected officials as commissioners and their reluctance to name commissioners in chartering acts. Excluding politicians eliminated blatant self-serving among leaders, which would have offered fodder for opposition newspapers. Not naming commissioners in acts distanced the party from the self-serving that would almost inevitably occur.

84. Benson, Concept of Jacksonian Democracy, 120.

85. Watson, Richard L., “Thurlow Weed, Political Boss,” New York History 22 (1941): 411–25Google Scholar; Van Deusen, Glyndon D., “Thurlow Weed: A Character Study,” American Historical Society 49 (1944): 427–40CrossRefGoogle Scholar; Van Deusen, Thurlow Weed.

86. Van Deusen, Thurlow Weed, 76.

87. Watson, “Thurlow Weed, Political Boss,” 411–25.

88. Van Deusen, “Thurlow Weed,” 431; Van Deusen, Thurlow Weed, 33.