with an eye toward translating money into political leverage.
Although business, banking, and corporate histories are often indexed by the formal names of firms and institutions, the process of actually creating a political economy is personal and contingent.39 This is not a study that rests comfortably in the gallery of a legislature to rehash debates over a banking bill, nor does it dwell in casebooks or libraries. Thanks to almost two decades of brilliant interdisciplinary studies into political culture and a push to move “beyond the Founders,” we know that politics is not confined to recorded debates at the federal level. If we want to know what happened and how things really worked, we need to recover what happened out of sight in conference rooms and out of doors in the streets of the states and localities that composed the federal union.40 At each layer of the regime, officials were regularly besieged with proposals and petitions from people promising access to financial capital. But awarding privileges to these applicants was not a blind process favoring just anyone with money; legislators did not turn to strangers to build the republic. Instead, successful petitioners were more likely to be coalitions and partnerships that deliberately blended financial capital, political capital, and human capital in the form of technological, engineering, or other forms of specialized expertise. At the friction point where private initiative met public authority, well-crafted coalitions were represented by lobbyists, current and former legislators, officials, and opinion leaders who, in turn, seduced other lawmakers with personal assurances that a coalition had the know-how and capital to plan, execute, and complete a project, delivering a public good in return for a publicly given privilege and an opportunity for private profit. Therefore, the very process of creating a financial and transportation infrastructure in the early republic had structural incentives that favored a particular species of business coalition—one assembled with political savvy—because the winnowing process used by legislators to cull through stacks of petitions demanded no less.
As Robert Livingston observed in 1784, officials charged with policy making in the new republic—city aldermen, state legislators, judges, governors and their small circles of advisers—all were more responsive to organized interests than airy notions of the public good or specific demands backed by a disorganized—if unified—“popular” will. For lawmakers and government officials “the public good” was not a self-evident vision; even at rare moments of apparent consensus, opposing economic interests could use their institutional advantages to thwart policies intended to serve that public, civic good. Therefore the legal privileges conferred on particular groups long ago and under a now-deposed regime had given them an institutional permanence that was undeniably difficult to overcome. Being so well established in the political marketplace allowed these groups to amplify their wishes—however narrow and selfish—giving them an outsized voice in policy making. Moreover, the state’s inaction reinforced this institutional asymmetry by discouraging the formation of countervailing rival institutions and coalitions.
In the emerging American political system, therefore, the pre-Revolutionary habit of attending to organized, mobilized, and institutionalized interests had remained in place. Government responded to pressure from established interests; it was irrelevant whether those interests were discredited so long as they faced no meaningful opposition. In pondering the failures of the early 1780s, Robert Livingston had come to appreciate the important role that the institutionalization of political interests played in creating engaged and competent public and mixed-economy enterprises. For Livingston, the novelty of this situation was that it was an institutional problem he could not change by leaning on his aristocratic name or his immense inherited land holdings. The sellers of spoiled bread flour and “Tea-Water men” had enfeebled the city government’s capacity to address matters of public health and commercial regulation, not because those ideas lacked merit or because the city lacked the legal authority to assert its police powers in those areas but because no countervailing interests existed to agitate for those measures. The chancellor and others, therefore, could pine all they wanted for more energetic public authorities and more civically oriented projects, but these plans would always be at risk of being defeated so long as advocates were unorganized and unstructured. Being interested was not the same as being an interest, let alone an institution. A hungrier and thirstier population might be unhappy, but unless they were mobilized and organized, they were unlikely to see the government change its course. Electing a slate of more favorable candidates to the state legislature or the city’s board of aldermen would not provide a cure because the underlying problem was a lopsided institutional ecosystem.
With this realization Livingston had discovered a loophole in the radicalism of the American Revolution: a small number of people could multiply their impact by organizing themselves into associations and institutions with permanence and influence. For this reason, Robert Livingston, who hailed from one of the nation’s most wealthy and aristocratic families, had been at the apex of Revolutionary politics, and claimed to have “concluded my political career,” decided in early 1784 to write, circulate, and submit a petition asking the state legislature to create a corporation. Livingston saw commerce, and banking in particular, as a useful tool for revolutionary settlement—the process of bringing the Revolution to a close now that the war was over. He believed commerce could mend the frayed relationship between the city and state’s revolutionary Patriots—Whigs both mild and “hot-headed”—and those former Tory Loyalists who decided to remain in America and cast their lot with the new republic. If Livingston could channel influence and money toward the common goal of repairing and rebuilding the city’s physical plant, he could help New York City reemerge from the conflict as a commercial center with a vigorous mixed economy and population of Tories and Patriots who were each stakeholders in the city’s success. Meanwhile, he could personally profit from his investments while gaining leverage over and influence within the city and state’s political economy by installing himself and select like-minded associates at the head of what would become the state’s most influential financial institution. In the months following a Revolution against imperial abuses, unaccountable power, and monarchical tyranny, New York’s chancellor had decided how he would maximize his influence in the new nation’s political system: he would become a banker.
In creating a market, therefore, the state had defined what was at stake in political competition. By simply responding to interests, the state encouraged the formation of interests that would marshal financial, human, and technical capital on behalf of proposed projects. In addition, lawmakers prodded aspiring citizen-shareholders to organize plans; identify, recruit, and mobilize supporters: consolidate investor capital: and circulate petitions later unfurled in lobbies and cloakrooms in Manhattan, Albany, and Washington. Once legislators had decided to engage outside interests in the act of state formation, the boundary between politics and capital became as thin as the paper petitions for those charters and grants.
Embracing the complexities and context of these narratives is crucial; the instinct to search for clean hands and pure intentions is little different from the temptation to impose ahistorical “public” and “private” categories on mixed-economy institutions. The early republic’s applied political economy was consciously manipulated by its participants in a way that militates against such neatness. Once the first shovel of canal dirt or turnpike mud was turned over by a worker paid in paper banknotes that had been carried upriver aboard a privately owned state-licensed steamboat and unloaded on a private pier at a public port, any bright categorical lines we imagine had long been trampled underfoot. Similarly, divisions between partisanship and supposedly apolitical business relationships crumbled once people began identifying themselves as Federalists, Republicans, or Whigs, for personal financial reasons, and switched affiliations if such a move would deliver advantages in business, credit, legal privileges, or political appointments. Even during the Critical Period and “Revolution of 1800,” when ideological commitments reached high-water marks, political leaders were busy constructing legislative and electoral majorities with promises of public patronage, private favoritism, and competitive advantages in commerce and business. Taken together, these statutes, petitions, and journals; the debates they ignited; and the institutions they spawned are the clearest articulation of what Americans expected from their government and envisioned for their political economy in this era.
The
