Before and during the time that capitalists were fully assuming the prerogatives of running the production process in field and factory, finance was building up its own resources from the outside. Meanwhile, the mechanisms of public and private debt made the lives of farmers, craftsmen, shopkeepers, and others increasingly insupportable.
This parasitic economic metabolism helped account for the riotous nature of Gilded Age politics. Much of the high drama of late nineteenth-century political life circled around "greenbacks," "free silver," and "the gold standard." These issues may strike us as arcane today, but they were incendiary then, threatening what some called a "second Civil War." In one way or another, they were centrally about debt, especially a system of indebtedness that was driving the independent farmer to extinction.
All the highways of global capitalism found their way into the trackless vastness of rural America. Farmers there were not in dire straits because of their backwoods isolation. On the contrary, it was because they turned out to be living at Ground Zero, where the explosive energies of financial and commercial modernity detonated. A toxic combination of railroads, grain-elevator operators, farm-machinery manufacturers, commodity-exchange speculators, local merchants, and above all the banking establishment had the farmer at their mercy. His helplessness was only aggravated when the nineteenth-century version of globalization left his crops in desperate competition with those from the steppes of Canada and Russia, as well as the outbacks of Australia and South America.
To survive this mercantile onslaught, farmers hooked themselves up to long lines of credit that stretched back to the financial centers of the East. These lifelines allowed them to buy the seed, fertilizer, and machines needed to farm, pay the storage and freight charges that went with selling their crops, and keep house and home together while the plants ripened and the hogs fattened. When market day finally arrived, the farmer found out just what all his backbreaking work was really worth. If the news was bad, then those credit lines were shut off and he found himself dispossessed.
The family farm and the network of small town life that went with it were being washed into the rivers of capital heading for metropolitan America. On the "sod house" frontier, poverty was a "badge of honor which decorated all." In his Devil's Dictionary, the acid-tongued humorist Ambrose Bierce defined the dilemma this way: "Debt. n. An ingenious substitute for the chain and whip of the slave-driver."
Across the Great Plains and the cotton South, discontented farmers spread the blame for their predicament far and wide. Anger, however, tended to pool around the strangulating system of currency and credit run out of the banking centers of the northeast. Beginning in the 1870s with the emergence of the Greenback Party and Greenback-Labor Party and culminating in the 1890s with the People's or Populist Party, independent farmers, tenant farmers, sharecroppers, small businessmen, and skilled workers directed ever more intense hostility at "the money power."
That "power" might appear locally in the homeliest of disguises. At coal mines and other industrial sites, among "coolies" working to build the railroads or imported immigrant gang laborers and convicts leased to private concerns, workers were typically compelled to buy what they needed in company scrip at company stores at prices that left them perpetually in debt. Proletarians were so precariously positioned that going into debt -- whether to pawnshops or employers, landlords or loan sharks -- was unavoidable. Often they were paid in kind: wood chips, thread, hemp, scraps of canvas, cordage: nothing, that is, that was of any use in paying off accumulated debts. In effect, they were, as they called themselves, "debt slaves."
In the South, hard-pressed growers found themselves embroiled in a crop-lien system, dependent on the local "furnishing agent" to supply everything needed, from seed to clothing to machinery, to get through the growing season. In such situations, no money changed hands, just a note scribbled in the merchant's ledger, with payment due at "settling up" time. This granted the lender a lien, or title, to the crop, a lien that never went away.
In this fashion, the South became "a great pawn shop," with farmers perpetually in debt at interest rates exceeding 100% per year. In Alabama, Georgia, and Mississippi, 90% of farmers lived on credit. The first lien you signed was essentially a life sentence. Either that or you became a tenant farmer, or you simply left your land, something so commonplace that everyone knew what the letters "G.T.T." on an abandoned farmhouse meant: "Gone to Texas." (One hundred thousand people a year were doing that in the 1870s.)
The merchant's exaction was so steep that African-Americans and immigrants in particular were regularly reduced to peonage -- forced, that is, to work to pay off their debt, an illegal but not uncommon practice. And that neighborhood furnishing agent was often tied to the banks up north for his own lines of credit. In this way, the sucking sound of money leaving for the great metropolises reverberated from region to region.
Facing dispossession, farmers formed alliances to set up cooperatives to extend credit to one another and market crops themselves. As one Populist editorialist remarked, this was the way "mortgage-burdened farmers can assert their freedom from the tyranny of organized capital." But when they found that these groupings couldn't survive the competitive pressure of the banking establishment, politics beckoned.
From one presidential election to the next and in state contests throughout the South and West, irate grain and cotton growers demanded that the government expand the paper currency supply, those "greenbacks," also known as "the people's money," or that it monetize silver, again to enlarge the money supply, or that it set up public institutions to finance farmers during the growing season. With a passion hard for us to imagine, they railed against the "gold standard" which, in Democratic Party presidential candidate William Jennings Bryan's famous cry, should no longer be allowed to "crucify mankind on a cross of gold."
Should that cross of gold stay fixed in place, one Alabama physician prophesied, it would "reduce the American yeomanry to menials and paupers, to be driven by monopolies like cattle and swine." As Election Day approached, populist editors and speakers warned of an approaching war with "the money power," and they meant it. "The fight will come and let it come!"
The idea was to force the government to deliberately inflate the currency and so raise farm prices. And the reason for doing that? To get out from under the sea of debt in which they were submerged. It was a cry from the heart and it echoed and re-echoed across the heartland, coming nearer to upsetting the established order than any American political upheaval before or since.
The passion of those populist farmers and laborers was matched by that of their enemies, men at the top of the economy and government for whom debt had long been a road to riches rather than destitution. They dismissed their foes as "cranks" and "calamity howlers." And in the election of 1896, they won. Bryan went down to defeat, gold continued its pitiless process of crucifixion, and a whole human ecology was set on a path to extinction.
The Return of Debt Servitude