James Madison, the principal architect of the U.S. Constitution and a statesman who warned about the dangers of democracy, oversaw the establishment of the Second Bank of the United States before retiring from public life in 1817, the same year the bank began operations and many years before the Bank War emerged as a major political conflict. Madison had originally opposed the creation of a central bank in 1790, together with Thomas Jefferson, when the Federalist Alexander Hamilton proposed establishing the Bank of the United States. Several of the Founding Fathers believed that such an institution lacked a constitutional basis. However, support for a central bank increased after the War of 1812, leading Madison to reconsider his earlier position.
Humiliated by their opposition to the war, the Federalist Party—founded by Hamilton—collapsed. Nearly every prominent politician joined the Republican Party, founded by Jefferson. Many hoped that the disappearance of the Federalist Party would also mark the end of partisan politics. Yet even within the new one-party system, ideological disagreements and regional loyalties soon resurfaced. One of the most divisive issues was the campaign to revive the national bank. Many Republicans continued to regard such a bank as Hamilton’s legacy and viewed it as a threat to state sovereignty, while many also considered the Federalists to have been traitors.
The period between 1815 and 1824 became known as the Era of Good Feelings. During this time, the nation effectively operated under a one-party system. Political conflict was minimal, and a spirit of national unity appeared to prevail. Nevertheless, divisions gradually emerged. As organized mercantilism declined and lost influence, the Federalists either withdrew from public life during the 1820s or aligned themselves with one of the emerging Republican factions. These factions eventually formalized the division of the Republican Party into the Democratic Party and the National Republican Party, which later evolved into the Whig Party.
The Republican Party was founded by Thomas Jefferson and James Madison in the early 1790s. Later, around 1828, supporters of Andrew Jackson established the Democratic Party. The original Republican Party advocated political equality and territorial expansion, states’ rights over a strong federal government, and reductions in both the national debt and government spending. The National Republican Party, organized as the anti-Jackson movement, was founded in 1824, while the designation ”National Republican” came into common use around 1830. The Republican Party split over the selection of a successor to President James Monroe. The faction led by Martin Van Buren, which sought to preserve many of the original Jeffersonian principles, evolved into the Democratic Party. It favored limited government and state sovereignty while opposing national banks.
According to this interpretation, both the Democrats and the Federalists ultimately departed from the vision of George Washington, Thomas Jefferson, James Madison, Andrew Jackson, and others who sought to preserve the republic. They came to believe that they, too, could determine the nation’s direction without giving sufficient weight to the views of those who had studied history and understood the institutional safeguards they considered necessary. As a result, former Federalists gradually found their way into the emerging Democratic movement, much as they had previously influenced the Republican Party. Jefferson, in this view, failed to establish the balance he envisioned between the federal government and the people. This gave rise to competing factions whose conflicts and rivalries, particularly after 1824, gradually enabled the concentration of wealth and federal power, ultimately allowing the federal government to suppress the people while supporting the banking elite.
Here is the English translation:
Washington wrote about the real capacity of political parties to destroy the fragile unity that holds a nation together. He was deeply concerned that political parties had previously grown powerful and would do so again, seeking to gain greater influence than other groups at the expense of the common good. Washington understood that other governments viewed political parties as inherently destructive because of their tendency to pursue and retain power, as well as their frequent desire to take revenge on their political opponents.
Washington expressed genuine concern over ”the alternate domination” of one party over another, whereby one party temporarily gains control of the government and may use that power to retaliate against the other.
He believed that this tendency toward abuses directed at the party out of power ”…is itself a frightful despotism. But this leads at length to a more formal and permanent despotism.”
The careful reader of his Farewell Address may be struck by how remarkably prophetic his words appear:
”The disorders and misfortunes that result gradually incline the minds of the people to seek security and repose in the absolute power of an individual; and sooner or later, the leader of some dominant faction, more capable or more fortunate than his rivals, turns this disposition to the purpose of his own advancement, upon the ruins of public liberty. It always serves to distract the public councils and weaken the public administration. It stirs up society with unfounded jealousies and false alarms, incites one group against another, and at times foments riots and insurrection. It opens the door to foreign influence and corruption, which gain easy access to the government itself through party interests. Thus, the policy and the will of one nation become subordinated to the policy and the will of another.”
Washington argued that political parties needed to be restrained in a free country with a government deriving its authority from the consent of the governed and established through popular elections. He warned of the danger that political parties could distract the government from its fundamental duty to the people and even contribute to the destruction of liberty. Unfortunately, it is now far too late to curb the lust for power within today’s political parties; it has become deeply entrenched.
John Taylor (1753–1824), a descendant of one of colonial Virginia’s most respected families, served as an officer in the Continental Army and the Virginia militia during the American Revolution. He was a successful lawyer and planter, advocated scientific agriculture, and became the first president of the Virginia Agricultural Society. He served in the Virginia House of Delegates during the 1780s and 1790s and later as a U.S. senator for much of the early nineteenth century.
”Enormous political power always accumulates enormous wealth, and enormous wealth always accumulates enormous political power. Both constitute tyranny, because the acquisition of either comes at the cost of the liberty and property of nations.”
— John Taylor, A General Discussion of Tyranny and the Choice Americans Face
John Taylor was a strong defender of individual rights and remained deeply wary of the expanding power of the federal government during the early decades of the United States. In clear yet passionate language, he explained the dangers of government interference in free trade.
The evils of bribery and corporate welfare are, according to Taylor, the very forms of tyranny he exposed in his book Tyranny Unmasked. He wrote the work to oppose what he regarded as an unjust tariff in the early 1820s, and in its third section he goes on to warn of the kinds of abuses that government can inflict upon its citizens.
He also warned against allowing the Supreme Court to legislate from the bench and against the dangers of a two-party system. Taylor cautioned Americans against following the English model in many respects—for example, by concentrating power in influential magistrates—and argued that the states must defend their cherished liberties against federal encroachment. He further warned voters not to be deceived by flattery into surrendering their rights to ambitious, career-minded politicians.
Tyranny Unmasked is a brilliant analysis of political economy and economic policy in the early 1820s. Taylor highlights the injustice and folly of protective tariffs and their consequences. He skillfully demonstrates how ”protecting” an industry from competition effectively raises the price of its products while fostering an alliance between government and business that undermines liberty. He shows how economic interests use tariffs to gain unfair advantages over competitors and how they achieve influence over the people’s representatives through their political power.
Taylor advocated the Jeffersonian ideal of free trade, low taxes, and the abolition of protective tariffs. Tyranny Unmasked is a masterpiece in its defense of liberty and limited government.
Jefferson believed that the founders of the republic had made a mistake by failing to anchor the federal constitutional order in local communities and assemblies. As a result, expectations of meaningful local political participation weakened, and civic virtue declined as politics increasingly became the domain of only a small number of people. Jefferson believed this deficiency could have been remedied by directly integrating the smallest units of self-government—districts and wards—into the federal system.
He proposed a multi-tiered structure in which deliberative assemblies at the district level would serve as the primary public forums and the fundamental units of self-government. Between the local district meeting and the national legislature, a series of progressively broader representative bodies would be established, with each level electing the members of the body immediately above it.
Jefferson believed that the role of the national government should be as limited as possible, focusing primarily on national defense, while most governmental authority should remain with the states. As a consequence, taxation and public spending should be kept to a minimum. Industry should not be favored at the expense of agriculture. Banks, paper money, and especially public debt were, in his view, all inherent dangers to American liberty.
Later, after diplomatic protests and a trade embargo failed to halt British attacks on American shipping, Madison led the United States into the War of 1812. The war convinced him of the need for a stronger federal government, and he subsequently oversaw the establishment of the Second Bank of the United States, contrary to the advice of Jefferson, whom he had succeeded as president.
Jeffersonians feared that closer economic and political ties with Great Britain under the Jay Treaty would strengthen Hamilton’s Federalist Party, promote aristocratic interests, and undermine republicanism. The debate over the Jay Treaty helped shape the First Party System, with the Federalists generally favoring Britain and the Jeffersonian Republicans sympathizing with France.
Efforts to resolve Anglo-American disputes failed in 1806 when Jefferson rejected the Monroe–Pinkney Treaty, and tensions continued to escalate until the War of 1812. According to this interpretation, Madison ignored Jefferson’s advice and instead strengthened the federal government by creating a central bank, which he left in the hands of influential Federalists who did not share his republican principles or constitutional outlook. This, it argues, contributed to the corruption Jefferson had feared and ultimately led to the Bank War under the Old Republican Andrew Jackson.
John Randolph, a leading figure among the Old Republicans, praised Jackson in enthusiastic terms. Speaking repeatedly in the Senate, Randolph declared that Jackson was the only man capable of reclaiming and restoring the fallen American republic. Jackson greatly admired Randolph and, in early 1830, appointed him U.S. ambassador to Russia.
Central banks became a major political issue in the early nineteenth century when the nationalist wing of the Republican Party, led by the former Federalist Henry Clay, supported a central bank, while the Old Republicans opposed such policies. Instead, they advocated a strict interpretation of the United States Constitution and a weak federal government.
Nicholas Biddle, a Federalist and president of the Second Bank of the United States, who lacked extensive political experience, spoke highly of Federalist legislators, describing them as men of excellent education, strong legal knowledge, and sound judgment. At the same time, he argued that almost all Republicans lacked both the manners and the ability required for public office (Let a Common Interest Bind Us Together by Albrecht Koschnik).
Andrew Jackson, who served as the seventh President of the United States from 1829 to 1837, launched a campaign against what he regarded as an aristocratic elite that controlled the national bank. By that time, the Founding Fathers’ ideals—favoring individual liberty and opposing institutions that concentrated power—had, in this interpretation, begun to fade. The country was experiencing considerable political confusion, while democratic and federalist currents that, according to this view, departed from the Founders’ warnings about democracy had grown increasingly influential.
The bank sold securities, including shares, in London, and British ownership of bank stock was one of the reasons Jackson vetoed the bank’s recharter. Jackson believed that the bank should be abolished because it concentrated the nation’s wealth in a single institution, exposed the government to foreign influence, primarily benefited the wealthy, exercised excessive influence over Congress, and favored the Northeastern states—where commercial interests were strongest—at the expense of the Southern and Western states.
When Andrew Jackson died in 1845, he had still not formally aligned himself with the Democratic Party and continued to regard himself as a natural and cultivated Republican. Jackson’s victory over the Bank made him the only president to preside over the complete elimination of the national debt, a goal he was firmly committed to achieving. This was made possible by a Congress that insisted on reducing the debt while Jackson maintained a balanced budget and preserved the fiscal status quo.
John C. Calhoun, a committed Jeffersonian Republican and the seventh Vice President of the United States (1825–1832), declared as early as 1836 that powerful financial interests and the influence of the banks had created a power within the government that had become greater than the people themselves and was in the process of taking control of the government. In the postwar period, he chaired the committees responsible for introducing legislation establishing the Second Bank of the United States, and his extensive dealings with the Federalists gave him considerable insight into the nation’s political elite.
Calhoun was profoundly shaped by the Founding Fathers in his belief in the potential of republican government. He began his political career as a Jeffersonian Republican. After 1828, he generally sided with the Democratic Party, although he also flirted with the Whig Party and considered running for president in 1824 and again in 1844. Having started as a leading nationalist and advocate of reform, Calhoun shifted course after 1828 and became the foremost spokesman for states’ rights and slavery.
Calhoun was devoted to the principles of liberty and vigilance against corruption. He expanded the concept of republicanism to include the need to protect minority rights against majority rule through his theory of the ”concurrent majority.” As his distrust of democracy grew, he sought to minimize the role of the Second Party System in South Carolina. During the decade following his death, leaders of the secessionist movement regarded Calhoun as a hero. In 1957, a Senate committee chaired by Senator John F. Kennedy ranked Calhoun among the five greatest U.S. senators of all time.
Later, the American Civil War caused the economy of the Northern states to flourish, bringing increased prosperity to cities such as New York, which, according to one account, ”came into its own as the nation’s financial center,” linking ”the capital of the Old World with the ambitions of the New World.” J. P. Morgan established vast foundations, while John D. Rockefeller’s Standard Oil relocated to New York.
John D. Rockefeller was the son of William Rockefeller Sr., who worked as a traveling salesman of patent medicines, commonly referred to as ”snake oil,” and was later indicted for a rape allegedly committed at gunpoint. Joseph E. Persico, who had served in the U.S. Navy, worked at NATO headquarters in Naples, Italy, and later became an author, American military historian, and chief speechwriter for Vice President Nelson Rockefeller, stated in a History Channel documentary that Rockefeller had built a network extending into virtually every center of power in the United States and abroad. According to Persico, this network—rather than the family’s wealth alone—was the true source of the Rockefeller family’s influence.
Rockefeller had a strong interest in eugenics. As Peter Quinn writes in the article Race Cleansing in America: A Nationwide Gene-Purity Movement Promoted Methods ”That Were Eventually Adopted by the Third Reich. And Everyone from John D. Rockefeller to W.E.B. Du Bois Supported It” (American Heritage, February–March 2003), John D. Rockefeller Jr., who had served as head of the Rockefeller Foundation since 1897, took a keen interest in eugenics—particularly population control. Rockefeller later joined the American Eugenics Society and became a trustee of the Bureau of Social Hygiene. He corresponded with Charles Davenport, director of the Carnegie-funded Eugenics Record Office, regarding his personal belief that women classified as ”feeble-minded” should be kept imprisoned beyond the expiration of their sentences so that they ”would … be prevented from perpetuating their kind … until after their childbearing years had passed.”
Rockefeller occupied an unusual position of wealth and prestige, enabling him to use his interest in eugenics to exert considerable influence over research in the field. As head of the Rockefeller Foundation, he had substantial authority over the allocation of its funding. According to this account, the Rockefeller family’s ”wealth and social standing gave them immense political influence, which, together with their financial resources, they invested in the eugenics movement around the world.” The Rockefeller Foundation pursued an explicitly international mission through its grants. By extending its programs beyond national borders, it spread the Rockefeller name and the prestige associated with it. It also expanded American influence and promoted American ideas in distant countries.
Researcher Carol Sachse argues that incorporating eugenics into the category of science distorted the Rockefeller Foundation’s mission. She wrote: ”The Foundation’s goal shifted from ’promoting the well-being of humanity’ to ’the rationalization of human behavior.'”
By the mid-1930s, Nazi eugenicists could present themselves as the architects of what they regarded as the world’s most effective eugenics system, achieved, according to this account, with crucial support from the United States. ”Germany’s early work in eugenics would not have been possible without the extensive support of the Rockefeller Foundation. And without this initial research, they would not have been as well prepared for Hitler’s creation of a state-controlled eugenics program.”
The Kaiser Wilhelm Institute would go on to play a leading role in advancing German eugenics research. With the assistance of Rockefeller funding, these institutions enabled Germany to follow the American example of integrating eugenics into society. Rockefeller’s financial support reflected Germany’s admiration for American eugenics policies and the American ambition to spread its model throughout the world. In this way, the research conducted at the Kaiser Wilhelm Institute allowed Germany both to emulate American scientific work and to compete with it for international prestige.
By the 1880s, under Rockefeller’s business empire, the Standard Oil cartel controlled approximately 85 percent of all oil shipped in the United States. Rockefeller maintained close relationships with banks that enabled him to buy out his remaining competitors with cash, sometimes through secret agreements, while rebates and discriminatory pricing remained among his most effective competitive tools. Earlier, Rockefeller had successfully collaborated with the railroads to raise shipping costs for his competitors, with the result that most independent refineries collapsed after 1872 (White-Collar and Corporate Crime: A Documentary and Reference Guide by Gilbert Geis, Professor Emeritus of Criminology, Law, and Society at the University of California). The New York World described Standard Oil as ”the most cruel, insolent, ruthless, and grasping monopoly that ever existed in a civilized society.”
In the late 1850s, many farmers joined the new Republican Party, which promised free land and restrictions on the expansion of slavery into the western territories. Following the Union’s victory in the Civil War, however, the new party, according to this interpretation, revealed itself as an instrument of Northeastern business interests by imposing monetary restrictions and granting government support to large corporations (The Failure of Agrarian Capitalism by Niek Koning). By the late nineteenth century, the Republican Party had become closely associated with the banking and industrial elite.
It was in the Northeast—where Wall Street was located and where J. P. Morgan and Rockefeller had established their principal bases of power—that, according to this account, they, together with many individuals of Federalist persuasion who were not regarded as true Republicans, maintained close ties with the British elite.
Morgan invested heavily in politicians whom he believed would govern in ways favorable to large corporations and financial institutions, while also opposing populist movements. Owing to wartime loyalties, the new Republican Federalists were able for a time to retain the support of Northern farmers. That support eventually eroded with the rise of the Granger movement, the anti-monopoly parties, and the tariff reform movement, after which many Northern farmers returned to the Democratic Party.
Although Jackson won the Bank War against the Second Bank of the United States, central banking policies were later reintroduced through what this account characterizes as unconstitutional means. More than seventy-five years would pass before another successful attempt was made to establish a central bank in the United States, culminating in the creation of the Federal Reserve System in 1913.
This, in turn, helped the ruling families in the United States gain greater control over the government and fostered an alliance between the state and opinion-makers—a partnership among government officials, business leaders, intellectuals, and experts who worked together to shape the state according to their own preferences and interests, as the economist, historian, and political theorist Murray Rothbard, among others, has argued in his research.
The period during which the Founding Fathers’ vision for America came to be regarded as outdated, and the Progressive movement emerged, occurred largely between 1890 and 1920. This was a time when economic misconceptions among academics, financial maneuvering on behalf of the Morgan and Rockefeller interests, political favoritism, and struggles for power converged over the course of three decades.
As economist, historian, and political theorist Murray Rothbard writes:
”After 1873, J. P. Morgan became by far the leading investment banking firm in the United States. If Jay Cooke was a ’Republican’ banker, Morgan, carefully maintaining ties with both parties, exercised his greatest influence among the Democrats. The other major financial interest with influence in the Democratic Party was the prominent European investment banking house of the Rothschilds, whose agent, August Belmont, served for many years as treasurer of the National Democratic Party. Morgan’s enormous influence over the Democratic administrations of Grover Cleveland (1885–89, 1893–97) becomes evident simply by examining their leading personnel. Grover Cleveland himself spent virtually his entire public life within Morgan’s sphere of influence. Cleveland’s cabinet was filled with Morgan men, with only occasional exceptions from other banking circles. The War and Navy Departments under Cleveland were likewise dominated by bankers.
The great turning point in American foreign policy came in the early 1890s, during the second Cleveland administration. At that time, the United States decisively and permanently shifted from a foreign policy of peace and non-intervention to an aggressive program of economic and political expansion abroad. At the center of this new policy were America’s leading bankers, eager to use the nation’s growing economic strength to subsidize and secure export markets and investment opportunities that they themselves would finance, as well as to guarantee loans to developing nations. The principal target of this aggressive expansion during the 1890s was Latin America, and the chief rival they sought to displace was Great Britain, which had long dominated foreign investment throughout the region.
In a remarkable series of articles published in 1894, Bankers Magazine laid out the agenda for the remainder of the decade. Its conclusion was that ’if we could wrest the South American markets from Germany and England and permanently retain them, this would indeed be a conquest worth almost any sacrifice.’ Morgan’s longtime associate Richard Olney, serving as Secretary of State from 1895 to 1897, embraced this outlook and placed the United States on the path toward empire. After leaving the State Department, he publicly summarized the policy he had pursued. The old policy of isolation proclaimed in George Washington’s Farewell Address is over, he declared. The time had come, Olney insisted, when ’it is necessary for us to accept a leading position … among the great powers of the earth.’ And ’the pressing need of our commercial interests,’ he added, ’is for more markets and larger markets’ for American products, especially in Latin America.”
This banking conspiracy involving J. P. Morgan and other Wall Street figures would later, according to this account, attempt to overthrow U.S. President Franklin D. Roosevelt (FDR) in a military coup in order to establish a fascist dictatorship. The episode is presented as evidence of the deeply conspiratorial nature of this power elite, which, by undemocratic means, had positioned itself as a leading force within the American government. According to this interpretation, their objectives were later described by their academic supporter and insider Carroll Quigley, a member of the Council on Foreign Relations (CFR), who wrote about what they allegedly sought to achieve in secret, beyond public knowledge: global political and economic dominance. The passage further argues that this has since been substantiated by the work of scholars such as Laurence H. Shoup, a prominent expert on the Council on Foreign Relations.
The rise of the invisible government and the evolution of the empire – Part 1
