Implementation of Alabama’s Antebellum External MED

 

Alabama’s First ED Priority: Yeoman Agricultural Lending and the Bank of Alabama

All this palaver about migrations and political culture and their shaping of Alabama’s antebellum policy systems “hits the road” only when we tie it to the formulation and implementation of MED policy and strategy. Here goes! When Bibb became Alabama’s first governor in 1819 he confronted immediate pressures to establish a state-operated bank. The Planters and Merchants Bank, privately-managed, was in fact a state-chartered corporation, and its difficulties as the Panic of 1819 unfolded were irretrievably linked to that structure. Bibb resisted the pressure, but the Planters and Merchants unraveled and was seized on by Pickens as the core for his electoral agenda.

As we discovered in our discussion concerning South Carolina and Georgia canals and railroads, a consequence of a resurgent or active Scots-Irish dominated legislature was its distrust, to outright hostility regarding state-chartered corporations–they were den of elites using public resources for personal benefit. Scots-Irish clear preference was that if something be done, a policy/strategy carried forward, it should be either spun off to the private sector with as minimal public support as necessary, or entrusted to a public (state) EDO. That preference was replicated once again in Alabama. The target in that instance was not internal improvements, but finance and lending, i.e. who would control banks. Why?

In the context of 1820 Alabama, in the initial stages of a cotton boom, the need was not to connect non-existent dots (cities) with non-existent produce (cotton that had yet to be planted), but to provide financing to those who would. As occurred through the multi-state Cotton Belt, cotton plantations did not penetrate highlands and mountainous regions, and the yeoman agriculturalists who settled highlands generally practiced hardscrabble, subsistence small crop farming. This cultural-economic-class–economic base dichotomy evolved into a multi-generational political cleavage that characterized much of subsequent Alabama political–and policy–life.

The first task in every Early Republic state was to set up its financial and lending system (insurance as well). Whether or not one should label this as “economic development” is debatable–but lending and lending is a key strategy of MED ranging from revolving loan funds, to tax-exempt bond issuance, SBA, to infrastructure and mortgage entities. In the 1820 Alabama context it is not unreasonable to consider it as such.

Older coastal urban centers/states had long since dealt with capital accumulation and lending. Accumulated capital and its management was entrusted to state-chartered corporations with some expectation that it would be competently and honestly managed. But even there, the Erie Canal as the principal example, the use of a public EDO for a major project had some attraction. It didn’t hurt that Dewitt Clinton had strong anti-Federalist, Jeffersonian tendencies (his uncle and mentor, George Clinton was Madison’s 1808 VP). Also, said and done, the National Bank was a public EDO. Establishing a sound and accountable financial and lending structure was a first-order task no matter whether one chose an agricultural or industrial path.

The choice was a private EDO (typically a family-owned partnership), a public EDO, or the awkward state-chartered corporation. The Alabama answer to that choice would consume much of its antebellum period–three generations–and it “sucked out the policy oxygen” of Alabama MED, developmental transportation infrastructure, for example. In one form or other the “bank” would be the single most important MED agenda priority until Succession in 1861. A predominant Scots-Irish political culture and a permeable state policy system, arguably was the chief reason why.

In 1823 Pickens took office and in the same year a public, state bank was approved by the legislature. In 1825 the legislature revoked the charter for the Planters and Merchants Bank. The funds to finance the state bank were diverted from a fund to create a state university, because Pickens had vetoed a legislative bill that created a state bank operated by a private board/management. Pickens eventually got his way for a public operated state bank, whose management was directly appointed by the governor and legislator.

[Picken’s state bank] was a perfect reflection of the hostility [of yeoman farmers] toward corporate enterprise and the fear of monopoly that animated the small farmer on the frontier. Such distrust of business hampered economic development … the most unlettered farmers recognized that state governments [potentially] befriended the bankers … and they opposed the lingering Georgia {Faction] influence [by] favoring a state bank and reapportionment of the legislature” [1]

In a series of decisions, however, the Alabama Supreme Court over the next few years, became regarded as an expression of the deposed Royal, Georgia Faction, Party, and a series of successful gubernatorial candidates ran against the non-existent private state-chartered alternative in favor of the Pickens-created state bank. The issue had been “institutionalized” into state-level political agendas. Then President Jackson picked it up on the federal level with his fight against the National Bank. In effect, the bank issue personified the fears of the state’s Scots-Irish political majority, and opportunistic politicians used it for electoral success:

[It was as if] the Royal Party [Georgia Faction] was real–as real as irrational hatred or an unnamed fear. It was the embodiment of all the insecurity of small farmers in the midst of plantations, of the poor in the midst of plenty, of a new state in the midst of old. It was an entity to whom the defiant affirmation could be made that in a democracy, numbers count …. the war against the phantasmal royal party gave the mass of Alabamians something … more valuable. It gave them a crusade [2]

Part of the reason for this anti-bank jihad was the U.S. National Bank which opened a branch in 1831 Mobile. Its more responsible lending terms and conditions, and its proximity to the state bank, put a damper on the volume of loans, and was therefore seen by capital-starved yeomen farmers as yet another “chartered” enemy. The legislature made several attempts to approve legislation, and they and the governor went on record to urge their Congressional Delegation to end the National Bank charter.

Subsequent governors and state legislators continued relying on the state bank to provide capital/land loans for “frontier yeomen” and fledgling, aspirant, planters. Plantation owners, of course, possessed or had access to sufficient capital from private banks to acquire larger tracts of land, and purchase slaves. This consumed scarce state resources, limited government and low taxes being also key to the Scots-Irish approach, and accordingly “social welfare schemes [including education], even internal improvement projects, were wholly foreign to the government of antebellum Alabama[3].

When the Panic of 1837 hit, the state bank, along with all fairness, nearly other financial institution in the nation, was considerably troubled. The state never defaulted. The state accumulated over $15 million in debt, but the legislature raised taxes, cut spending, and in general used all sorts of financial jerry-rigging to keep the institution intact. Internal improvements became linked with alleged excessive state expenditures, but were criticized not for their financial effects, but for the “corruption” of log-rolling to assist small road improvements and the like. As we shall see, Alabama did not aggressively enter into the funding of internal improvements, nor railroads; its primary debt-issuing institution was the Bank of Alabama, whose primary business was making loans directly or to other banks for yeoman farming.

Alabama Antebellum Age of Railroads

As will be reported in Mini-Series B, Alabama participated minimally in the Age of Railroads, placing among the last of southern states. Access to capital was always the main issue with pre-1850 rail startups, and without Georgia investors, Alabama would not have had any serious rail line previous to 1850. It all changed when the federal government entered the picture in 1851. Guaranteed loans and land grants from Stephen Douglas’s transcontinental railroad legislation provided access to desperately needed funds and land. But where o’ where was the state of Alabama and its cities. They were no where to be found. If anything they the state legislature was hostile.

Alabama’s first successful railroad, the Tuscumbia Railway (in fact it alleges to be the first railroad operating west of the Alleghenies, 1832) appears to have been financed and built by local merchants who operated the landing/pier on the Tennessee River. The initial railroad was barely two miles, used horses, and bypassed Muscle Shoals a series of rapids and rocky shallow fast water that served as a barrier to accessing northern Tennessee River areas. This was part of the Georgia Faction’s heartland, the original plantation nexus for Alabama. With the railroad bypass much of Alabama’s Tennessee River Valley could ship cotton directly to New Orleans on the Tennessee. The railroad eventually extend directly to Decatur, near the Georgia border (45 miles) two years later. The Railway was a state-chartered corporation, but appears to have been privately financed by Georgia Faction well-heeled plantation owners and merchants. (see Mini-Module B of Theme 3)

Alabama’s second railroad  was charted by the state legislature January 1832 to connect Montgomery to the Chattahoochee River near Columbus Georgia. In short order, a second charter was issued to change the terminus to West Point Georgia. The financing was by subscription of Georgia investors ($400,000) which after laying almost 32 miles of track by 1840, petered out. The abbreviated Montgomery Railroad somehow made it through the 1837 Panic, but went bankrupt in 1842–caused by the eventual failure of the Alabama state bank which had taken over its finances by order of the Governor (Bagby) in 1838, as part of the effort to save the state bank.

The railroad had sought state assistance ($1.6 million) but went into bankruptcy before any action was taken. Sold at auction in 1843, it reorganized into the Montgomery and West Point Railroad. Using private subscriptions and the proceeds from loans guaranteed by the Federal Government, and using the labor of 84 purchased slaves (See Theme 2 the Illinois Central) track was laid and the line opened to West Point Georgia in 1851. At that point, the Alabama state legislature, using powers included in the state-charter, placed the profit-making railroad under state fiscal watch and oversight. The owners were required to personally guarantee their financial administration. Despite this negative regulatory environment, the line was expanded, remained profitable–and during the Civil War was raided by the federals eleven times, including one (Wilson’s Raid) which carried over the lines entire rolling stock.

The passage of Stephen Douglas’s Illinois Central federal transcontinental legislation in 1851 triggered several Alabama railroad startups. Loans guaranteed by the federal government not only benefited the Montgomery and West Point line but were successfully used by the Alabama and Florida which linked Montgomery to Pensacola Florida in 1861–suddenly Montgomery was becoming a rail hub. The A&F was owned by Illinois (Peoria) investors and was intended to link up with the Illinois Central. Illinois Central created a direct subsidiary, the Mobile & Ohio Railroad, using federal land grants as well as guaranteed loans opened its 260 mile line connecting Mobile with Columbus KY in 1861.

While useful to be sure in “connecting the dots”, and countering the consequences of Panics,  Democrats saw  public private partnerships as “chartered monopolies and associated wealth” that would enable “corporate wealth [to manipulate] the State”. In response to a 1849 railroad request for state financial participation, legislative Democrats opined

A corporation that is a co-partnership without soul or body, is formed and presents itself before the Legislature … expressing the greatest compassion … kindly proposes to extend a helping hand to develope (sic) their resources … upon the simple condition that said benighted people should first develope two and one half million dollars … for special benefit … [The answer is] No if we have not the internal improvements that older states can boast of, let us be able to glory that Alabama … knows no creditor, and has a population neither seeking nor needing the patronage of State credit” [4].

Absent established centers like Charleston or Savannah, Alabama municipal/county level policy systems were too small and fragile to seriously pursue governmental-led MED. As late as 1850 there were only ten urban centers with a population exceeding 1,000.  One half of its fifty-two counties did not have an urban center which exceeded 500 residents. Mobile with 22,000 was the largest, and Montgomery second with 5,000 [5]. The burden of MED, such as it was perceived, of necessity, fell to the state–laying the foundation for a cornerstone characteristic of Deep South policy systems.

The lack of meaningful urban communities in Alabama, and the stark dominance of rural agricultural economic bases linked to export market by rivers and steamboats meant MED was less associated with urban development and “connecting the dots” than providing the infrastructure for an cotton agricultural economy–an economy that required capital for land/slaves first and foremost.

Whigs, Democrats and the Scots-Irish Yeoman Farmer Political Culture

Whig ascendancy was surprisingly short. It appeared in the very late 1830’s and by 1856 the Republican Party had split from it. Whigs, if only because it identified economic growth in ways that included industrialization, urbanization, commercialization always found deeper roots in the North than in the agricultural South. In the South, in Alabama, Whigs became “Cotton Whigs”. Cotton Whigs, in both North and South were businessmen linked to the global cotton revolution. They alone had a primary interest in tying both northern and southern economic bases together into a national whole. In the Deep South, their natural support came from plantation owners, trade “factors”, ports of entry and export, and the textile mills/shipping-logistics sectors. Whigs held little appeal to the Scots-Irish and yeoman farmers, no matter how much or little they raised cotton or owned slaves.

From the earliest days, the Democrats believed that the substance of freedom was lack of economic dependence on other men. The absence of economic dependence took on moral overtones for them …. The {Alabama Cotton] Whigs were equally dedicated to this … [perspective], but to them the only effective mechanism … was the amassing of … sufficient wealth …. The road to freedom was the road to prosperity and economic development. (p.57)

If Alabama’s relatively open political and policy system offered any lesson, it was that Scots-Irish and yeomen farmer ruled state-wide elections, and hence were atypically powerful in this part of the Deep South cotton empire. The Whigs did form an effective opposition in Alabama from 1840 to the early-mid 1850’s, but more often than not, the Democrats prevailed in policy discussions–particularly when it came to internal improvements and railroad transportation infrastructure. In any case the two parties advocated vastly different positions on institutions, EDOs, and the implementation of the External MED strategy.

The Democrats sought to destroy private banks, to erect user-owned [i.e. public] institutions [in their place] and later to cripple or destroy [private] corporations. The Whigs cast about for ways to increase the money in circulation, and to facilitate commercial intercourse, and they fought legislation which appeared likely to diminish the prosperity of the state…. [p. 57]

The Whigs did better in times of prosperity–particularly in the 1850’s, while the Democrats were strongest in the 1820’s through 1840. The post-1840 to 1850 period was marked by an early willingness of the Democrats to work to bring about economic growth to alleviate the negative lingering effects of the Panic of 1837, and to take advantage of a second wave of Indian Removal that promised whites another bite of the cotton belt expansion apple.

While it is hard to underestimate the low tax-low service limited government that emanated from a culture that valued its isolation and individualism, and an quasi-libertarian autonomy, I believe it was the Scots-Irish definition of freedom or liberty that focused their values against the prime MED strategy of the Early Republic–and the EDO (state corporation charter) that implemented it.

Antebellum southern Scots-Irish, who, we should never forget, were in 1830 rugged pioneers. Daniel Boone died in 1821 and in 1836 Davy Crockett died at the Alamo. These are the days of western “mountain men”–and wagon trains did not yet exist. In a hostile uncivilized Alabama context, liberty assumed a class dimension, an wealthy educated elite versus common man, and it was this value nexus that likely polarized the Scots-Irish against the Whigs and their internal improvements capitalist growth agenda.

The cutting edge of Scots-Irish yeomen farmer political culture perception of External MED in antebellum Alabama was it threatened not only their desired way of life, but that it represented an intrusion of powerful and evil external forces on their individual autonomy, freedom and political liberty itself. “Alabama farmers seem always to have been fearful for their freedom. The fewer contacts they had with the world, the better they liked it. They sought individual autonomy[7]. Something like an agricultural proletariat  class consciousness had permeated into the Scots-Irish mind frame–a resistance to the latest in a long history of intrusions by external and unseen enemies. This line of thinking is advanced by J. Mills Thornton in his Politics and Power in a Slave Society:

Class hatred and corporate wealth was a continuing theme in Alabama history. Such hatred could coexist both with an earlier Jackson[ism] and a later disillusionment [with it caused by its effects on the horrible Panic of 1837]. In the former view capitalists were the enemies of the common people; in the latter they were his manipulators. In either case they were evil.

It was their [yeomen farmers] attitudes toward corporations and specifically towards state aid to corporations that the parties were most sharply divided. In the 1820’s there had been little opposition to internal improvements undertaken at state expense [including the Bank of Alabama]… But by the 1840’s Jacksonians no longer looked favorably even on communal projects … [even if] such aid would help end the depression …[or] increase state wealth [8]. 

Internal Improvements, State-Chartered Corporations and the Alabama Scots-Irish

The targets of their wrath were internal improvements, startup railroad companies, and private banks, the common denominator being that each was likely a state-chartered corporation. That clumsy form of private public partnerships were seen as little more than legal ruses that led the wealthy elites to become parasites on the hard-working agricultural working class. That line of thinking also opened up Alabama political rhetoric so that thirty years previous to Marx the most outrageous, fanciful personifications of class opposition to Early Republic capitalism and anything remotely related to its elites and the social changes they wrought, became entrenched in Alabama elections and policy-making. As we may still see today, the heritage of this line of thinking may well be a foundation for the proverbial low tax-low service southern business climate.

In the 1820’s enough of the planter class federalism remained to challenge the Scots-Irish. The state in that decade intermittently provided some state assistance to a few internal improvements (roads and canals). That internal improvements could be successfully relegated to a secondary priority is demonstrated by the emergence in Alabama of a purely privately financed and operated developmental transportation infrastructure: the steamboat. In the same year Pickens took office (1823) Alabama’s first steamboat to operate on a regular schedule, the Harriet, sailed into the state capital (Cahaba) harbor–and then onto Montgomery. Alabama cotton belt cotton could reliably be powered downstream, and up, to Mobile.

A resurgent Jacksonian populism of the early 1830’s, however hardened Scots-Irish anti-capitalist inclinations. The Panic of 1837 unleashed a mixed bag of disillusionment with state banking, but intensified the class schism [11 William E. Martin, Internal Improvements in Alabama, Forgotten Books, February 2018, originally published 1902]. “Class hatred and fear of corporate wealth [evolved into] a continuing theme in Alabama history …. capitalists were the enemy of the common man” and the unchecked unaccountable State potentially enlisted to serve its ends [6]. So the State Board of Internal Improvements, created in 1824, was terminated in 1832.

State aid to capitalists and state funds to corporations was intensely resisted, and when in the late 1830’s the Whig Party–with its aggressive internal improvement agenda–attempted to compete with the dominant Democrat Party they encountered resistance from this attitude, and the the fear of federal intrusion of the primacy of states (i.e. states rights) in this policy area. The Age of Railroads commenced precisely at this critical juncture when the Whigs split off and contested Democrats. Government assistance to private railroad became a major division between the two parties.

Internal improvements and railroad development were policy-metaphors for capitalist wealth and subversion of the common man’s core interests and values.  If so, one can see that whatever the benefits of economic growth came at the price of individual liberty and class subjection. Whigs and Democrats–the two political parties were talking different languages. That this linkage of class and individual liberty could, when conditions warrant, be repeated in populations wildly different than the 1840’s Alabama Scots-Irish may provide some insight into so-called “populism”.

 

Footnotes

[1] William Rogers, et al, Alabama: the History of a Deep South State, pp. 74-5.

[2] J. Mills Thornton, Politics and Power in a Slave Society, p. 19.

[3] J. Mills Thornton, Politics and Power in a Slave Society, p. 19.

[4] J. Mills Thornton, Politics and Power in a Slave Society, p.52)

[5] Lewy Dorman, Party Politics in Alabama from 1850 through 1860 (University of Alabama Press, 1995), p.15.

[6] J. Mills Thornton, Politics and Power in a Slave Societypp. 50-1.

[7] J. Mills Thornton, Politics and Power in a Slave Society, p. 54.

[8 J. Mills Thornton, Politics and Power in a Slave Society, pp. 50-1.