Published by EH.NET (March 2006)
Robert E. Wright, editor, The United States National Debt, 1787-1900. London: Pickering and Chatto, 2005. xlv + 1578 pp. (four volumes) $670 (cloth), ISBN: 1-85196-816-4.
Reviewed for EH.NET by Franklin Noll, Consulting Historian to the Bureau of Engraving and Printing.
The United States national debt is not an easy subject to study as there are probably less than a dozen worthwhile books on the subject, while the primary sources are legion and widely scattered. That is why back in April 2005, at the Economic History Society conference in Leicester, I was excited to come across an advertisement for an upcoming set of documents entitled, The United States National Debt, 1787-1900. At last, I thought, someone was taking the bull by the horns and attempting an in-depth look at this complicated and under-studied topic. I was consequently disappointed. The work does not live up to its broad, encompassing title. Instead of giving a comprehensive look at the history of the national debt, the collection presents a view that is limited in both scope and depth.
The United States National Debt, 1787-1900, edited by Robert Wright, is a four-volume set of texts (all facsimile reprints) bearing on the United States public debt that includes a general introduction, brief introductions to each text, and an index. The selections are arranged chronologically. Volume 1 contains the editor’s introduction and works on “The First National Debt,” covering the period between 1785 and 1801 and the establishment of the national debt. The next volume contains two documents: a review of European and United States economic history (1820) and the first half of a review of international finance by banker Bernard Cohen (1822). Cohen’s work, which is 544 pages long (around 60 pages of which pertain to the United States), continues in Volume 3. This volume also includes three works under the heading of “Antebellum Debt” that reflect contemporary concerns over defaults by some of the states. The last volume is subtitled “The Civil War Debt,” covering the latter half of the nineteenth century and such matters as inflation, the international market for bonds, and the complicated structure of the post-war public debt.
Wright’s view of the United States national debt is not clearly presented in his introduction, but it becomes apparent that Wright approaches the history of the national debt from a market perspective. Accordingly, the texts he has presented tend to focus on the varying state of the market, possible changes in the public debt’s structure, and the milieu of forces that affect bond market performance. Thus, we see works addressing market confidence, confusion over the structure of the public debt, arguments over bond rates at issuance, and the state of overseas markets. No doubt this reflects Wright’s interest in pursuing Richard Sylla’s argument that economic growth in the early national period was finance-led with the spark for growth coming from the creation of the national debt and a government securities market.
Viewed from this perspective, Wright’s collection has real merit. It opens a window onto the complexity of bond markets in the past. This is a service to not only public debt scholars but also to financial historians. Of special note is Wright’s inclusion of texts dealing with the overseas market for Treasury securities. At least five of the twenty-five texts in the collection deal with the foreign market for United States debt instruments or put the public debt in international perspective. Such views of the public debt are rarely seen. This is mostly because, as Wright points out, the overseas market was so small for most of the period covered in the collection (4: 439). However, the collection is entitled The United States National Debt, 1787-1900, not Readings in the United States Bond Market, 1787-1900; and much of what is the national debt is left unexamined.
Now, “national debt” is a fuzzy term. It has been used in the past to refer to everything from the public debt (Hamilton’s usage) to the total debt owed by all individuals, corporations, and governments in the United States. Prudently, Wright supplies his own definition of national debt (one which I agree with): “the acknowledged liabilities (things owed) of a sovereign government” (1: ix). However, Wright does not stick to this definition, but restricts his analysis to only one group of liabilities — those for which the government was wholly liable — the public debt. Wright does not appear aware that by the end of the nineteenth century “the acknowledged liabilities” of the United States included the public debt, railroad debt, and District of Columbia debt as well as liabilities to various Indian tribes, money and securities held in trust, National Bank redemption funds, and any number of odd funding adventures listed in the Treasury’s annual reports. As a result, a great range of important topics is left untouched. For example, can one really talk about nineteenth-century government financing without discussing railroads?
This focus on the public debt is only one way that the collection falls short of a full review of the national debt. Wright’s market perspective also works against any systematic look at the structure of the national debt, its larger role in the United States economy, and its political nature. Do not get me wrong; all these topics do get touched upon in the four volumes Wright has assembled. Given the inherent complexity of the national or even the public debt, it would be hard to create such a large collection and not bring up these items. My criticism is that these topics are not dealt with in a way that provides sufficient understanding and a more complete picture of either the national or public debt to the reader.
In terms of the national debt’s structure, somewhere the basics need to be discussed. The differences between the public debt and other forms of debt issued by the United States government need to be defined as well as the differences between a bond, a note, and the other securities used by the Treasury. Further, many fundamental questions have to be answered either through introductory material or selected texts to help make sense of the national debt and the market for bonds. These would include: Why are some securities denominated in foreign currency? Is United States currency debt? What is the circulation privilege? How were Treasury securities actually sold?
Briefly touched upon in Wright’s texts is the public debt’s interconnectedness with the rest of the economy. In various ways and to varying extents currency, banking, tariffs, taxes, and popular investing in bonds were influenced by the size and structure of the debt. The most conspicuous absence in the collection is a reference to the public debt’s relationship with the money supply after the Civil War. Though it is occasionally alluded to in the documents, the relationship between budget surpluses, the retirement of the public debt, resumption, and the money supply is never fully explained. Especially surprising is the lack of any real discussion of how National Bank circulation depended upon the existence of certain government bonds, a situation that put an upward pressure on bond prices. The only mention in the 1,600 pages of the collection is a one and a half-page section in a pro-government pamphlet put out by Jay Cooke in 1865 (4: 117-18).
There is also a relative neglect of political matters in the collection. The national debt has always been an ideological battleground or a club with which to bludgeon the opposition. Wright recognizes this to a point but some odd gaps exist in the collection. For example, while Wright presents texts that comment on the Federalist/Anti-Federalist debate over the role of the national debt in the future of the nation, I found it odd that there is no entry from Jefferson or Hamilton. There is also no entry on the elimination of the public debt under Jackson or the swirl of ideological forces manipulated and invoked during the episode. Further, almost no mention is made of the impact on the public debt of the silver controversy, especially since it spawned an awkward form of debt currency, the Treasury Notes of 1890.
However, Wright does touch upon the politics of debt management, an under-studied aspect of the national debt, when he presents the testimony of Secretary of the Treasury John Sherman before a House committee over the terms of the Funded Loan of 1881 (4: 353-74). Before the Second Liberty Loan Act of 1917 the responsibility for debt management lay with the Congress and not the Treasury. Thus the terms of all Treasury securities (interest, maturity, etc.) were matters of political argument. I wish that Wright had explained the Congressional role in security issuance and explored the topic further.
Lastly, something also needs to be said about the quality of Pickering and Chatto’s four volumes. The use of facsimile reprints comes with certain advantages and problems. Readers get a real feel for the text but have at times to deal with out-dated spellings and meanings (the latter often elucidated by Wright), which can be problematic for students. The publisher also has to face the problem of expanding or reducing the original text to fit the printed page. While a larger font is a relief to us of advancing age, the fonts of some texts are extremely small, making reading at times uncomfortable. This headache was aggravated at times when, at least in my copy, the reproduction was faint and blurry.
In sum, the editorial view of The United States National Debt, 1787-1900 is too narrow and too shallow to be of use to a wide audience. It is too narrow in scope for many scholars of the national debt or public finance; while it is too shallow in explanation and context to make sense to students or novices to the subject. Of course any collection of documents that one can have on a topic of interest and not have to track down oneself is of value. But, at $670 a copy this is a costly luxury (though Pickering and Chatto have announced that scholars can get the work for half price if they can convince their library to buy a copy). I am afraid I will still have to wait for that comprehensive study on the history of the national debt.
Franklin Noll, Consulting Historian to the Bureau of Engraving and Printing, specializes in the history of Treasury securities, the national debt, the Treasury, and the Bureau of Engraving and Printing. Some of his work on the public debt is available at the EH.Net Encyclopedia and EH.Net Databases pages.