This special addendum edition of the Reading Wheel Review features a transcript of an interview between CRCD Executive Director Dr. Jordan Ballor and Dr. Erik Matson. In their conversation, Drs. Ballor and Matson discuss themes related to their new set of books, A History of Christian Political Economy, and Sources in Christian Political Economy. They discuss Christians’ thinking in political economy at the time of the American founding. The transcript has been edited to reduce its length and increase its clarity. Where Dr. Ballor or Dr. Matson paraphrase the thoughts and/or words of other figures, the text is italicized.
Ballor: At the Reading Wheel Review we’ve been examining writings related to America 250, the Declaration, and the Founding era all year long. So I thought it would be worth discussing how our book projects examine the American political economy of that era, including what we included, what we omitted, and other concerns that animate the larger project. Then listeners can get that sensibility about the posture we bring toward these questions.
So I was looking through, for example, in Sources in Christian Political Economy—the volume where we have primary sources from across seven different periods of Christian history over the last 2000 years—the American Founding would fall in what we call the Classical Period, which we start in 1725 and end in 1848. I’m looking through the names that we included, with the caveat that this is a very partial, suggestive kind of an attempt to provide an anthology: Joseph Butler, Ferdinando Galiani, John Wesley, Alexander Geddes and George Hay, Anders Chydenius, Thomas Robert Malthus, and Richard Whately. There is nary an American among them. So let’s talk a little bit about the American context during this period.
Matson: First, let me just say that we did think about including some Americans from the classical period in that volume. We could easily have filled up the Classical section with excerpts from American writers because many of the early American political economists were theologians or clerics, beginning with the first and greatest early American political economist, Pelatiah Webster. We thought about including him. He was a Congregationalist minister before he became a merchant and a kind of political commentator and essayist. We debated including something from John Witherspoon, a minister and a professor of moral philosophy. Why did we decide not to include any Americans?
Ballor: We had constraints. I think we kind of leaned towards some lesser-known figures like Chydenius. Even if nobody has heard of Pelatiah Webster, once they get the name, they could Google that person and find their works probably pretty easily on the Internet Archive or Google Books or some other easily available format. Some of these other works are a little more obscure, and you’re less likely to run across, for instance, the name of Chydenius or Hay and Geddes. So that was probably part of our calculation. There were constraints across all of these volumes.
Matson: I think also maybe some of the American names are even more obscure than the names that we do include in our volume. I suppose Webster is not as obscure, although most people don’t know who he is, but we could have included George Logan, a Quaker and physiocratic American writer in the 1780s. But from our perspective, or from the perspective of people in the twenty-first century, they are just sort of footnotes, or footnotes to the footnotes that we included in our volume.
Ballor: We call this the Classical period, in connection with Adam Smith’s thought. What did Americans think of Adam Smith? How did Smithian-inflected economics get translated across the Atlantic and so on?
Matson: Smith obviously was read and Smith was viewed as an authority of sorts, into the nineteenth century. Smith was referenced and he became like a stand-in, a representative of a kind of view of political economy. So he was more referenced and discussed than really read and studied, even though I do think people read and studied him. Hamilton, for example, read and made extensive use of Smith. If you read the “Report on Manufactures,” he lifts lines almost directly from The Wealth of Nations. In the first part of the “Report on Manufactures,” Hamilton discusses whether agriculture is more productive than manufacturing. So Hamilton takes on the physiocratic idea that land is the ultimate source of all wealth. And he says: No, this is not actually correct. Manufacturing is actually productive. Whether it’s more productive than agriculture is an open question, but we can certainly establish that it is active. And he draws on Smith’s arguments for that. He also draws on Smith’s arguments when he discusses the division of labor. Smith mentions in the first chapter of The Wealth of Nations three reasons why the division of labor increases labor productivity; Hamilton essentially quotes them verbatim. So the whole of the “Report on Manufactures” is run through with Smithian arguments. Hamilton studied Smith and viewed Smith as an authority, but Hamilton didn’t follow him all the way in his policy prescriptions.
Ballor: Let’s pause there for a second and get the timing down. How much of Smith was known when? The Declaration was in 1776. The Wealth of Nations had been published earlier that year, but these guys were busy. It seems implausible that the arguments in The Wealth of Nations made much of an effect on the Declaration, though The Theory of Moral Sentiments was out earlier. So are we looking at a Smithian influence, especially in terms of economics, in the 1780s at the earliest and beyond? It’s kind of providential in a way, you could say, that both of these works came out in the same year, but there’s no real kind of connection between them other than chronological proximity. Right?
Matson: I think, if anything, the connection runs the other way—from the American independence movement to The Wealth of Nations. Smith was working on The Wealth of Nations in the late 1760s and early 1770s in Kirkcaldy, Scotland, and then he finished it in London because he wanted more information about what was happening in the American colonies. So The Wealth of Nations becomes a very American book. I’m sure that The Wealth of Nations was in the colonies by the time the Declaration was published. I have no doubt that there was pretty regular communication between the colonies and Britain, so I’m sure that the arguments were read. We talked in our previous episode about Joseph Schumpeter’s claim that there’s really nothing new in The Wealth of Nations in some sense. And I think that that’s right and wrong. It’s right in the sense that you can find a lot of the arguments that Smith advances in other sources in the eighteenth century, which were, of course, available and widely read in colonies. So for example, Hume’s political discourses and Francis Hutcheson’s system of moral philosophy—John Witherspoon adapted a lot of these sources in his own lectures on philosophy at Princeton—the Presbyterian College of New Jersey, as it was called at the time—which ended up being a kind of intellectual hub for revolutionary activity. So the ideas that influenced The Wealth of Nations obviously influenced thinking about political economy and politics more broadly in America. After 1776, I think it’s clear that—as we see with Hamilton—by the 1790s, statesmen and philosophers were reading The Wealth of Nations and absorbing its arguments. In the nineteenth century, Smith became a kind of household name.
Ballor: It’s not going to be news to anyone that economic matters played a large role in the motivations behind the revolution or the move for independence, which eventually culminated in a war. I was looking through the list of grievances in the second half of the Declaration again today, and these things leapt out at me: the tyrant King George has “erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.” Among other things, he’s “cutting off our Trade with all parts of the world,” “imposing Taxes on us without our Consent,” “depriving us in many cases, of the benefits of Trial by Jury”—so the American common law and the rights of English citizens have been withdrawn—“He has plundered our seas, ravaged our Coasts, burnt our towns, and destroyed the lives of our people.” That covers a lot. So the economic concerns play a large role here. What can we say about the normative visions that are in play for certain Founders? What would the ideal kind of American society look like for some of these figures? How did they think about the relationship between, say, morality, politics, and economics?
Matson: That’s a big question, and there are different kinds of visions. But if you go back to the idea of “harmonizing sentiments,” which is Jefferson’s phrase he coined toward the end of his career in response to accusations that come forward in the nineteenth century that Jefferson was plagiarizing and that the Declaration didn’t actually put forth anything new. Jefferson responds: I was actually not attempting to put forward anything novel. I was just attempting to express a set of harmonizing sentiments—that is, a kind of moral and political vision that was broadly held among Americans at the time.
So if you think about those harmonizing sentiments, something fundamental—at least as far as political economy is concerned—is the idea that wealth is not, in the first instance, a product of direct political mediation. There is a kind of natural order, a providential order, actually, and cooperation with providential order leads to prosperity. Working against the providential order leads to corruption and decay. And so what are the aspects of that providential order? Individualism in some respects; the laws of community justice—i.e. person, property, promises due, volunteerism; and the rule of law, not the rule of arbitrary human authority. So principles that govern the governors, essentially. That’s the core. And of course, slavery is extremely significant because that, of course, runs against that sort of moral vision. The greatest contradiction is Jefferson himself—a slaveholder who also articulated some of these beautiful sentiments about the law, and inalienable rights, and so forth.
Ballor: In addition to obviously declaring liberty, the Declaration is a political document. Matthew Spalding makes the case that it functions as a kind of explicitly codified pre-legislation in a way, in that it grounds later documents like the Constitution and so on. It’s the first act of a legislative body, the Continental Congress. So it is obviously political in that sense, and as we’ve already seen, there are many economic dimensions to it. You could also say that religious liberty is at least implicit in something like the pursuit of happiness and other kinds of concerns that animate the Founders. There’s this great quote also from John Witherspoon in his May 1776 sermon “The Dominion of Providence Over the Passions of Men”: “There is not a single instance in history in which civil liberty was lost, and religious liberty preserved entire. If therefore we yield up our temporal property, we at the same time deliver the conscience into bondage.” So that’s just one example of the intimate relationship that many of these Founders saw between what we could call economic, political, and religious liberty. Can you say a little bit more about what you learned about Witherspoon and his view?
Matson: Witherspoon was one of the great figures in American public life. He was the only cleric to sign the Declaration of Independence. The range of his activities was truly remarkable. He participated in hundreds of committees in the Continental Congress. He was president of the Presbyterian College of New Jersey. Madison stayed an extra semester to study Hebrew with Witherspoon. So he really was a remarkable figure.
He also, I think, was one of the great political economists of the Founding era. One of the first substantive works in political economy—there were many pamphlets and tracks that were published—was published by Witherspoon, and the full title is “Essay on Money, as a Medium of Commerce; with Remarks, on the Advantages and Disadvantages of Paper Currency.” We don’t do titles like they did titles back then; I wish that we could go back to that. Essentially, he gave all of these speeches at the Continental Congress during the war and then after the war about currency, about legal tender laws, about price controls, and his colleagues persuaded him to publish them as a book, essentially. The main thrust of that work is an attack against legal tender laws—that is, the state designating a currency and requiring that individuals make payment, at least payment of debts, in that currency.Witherspoon believes that’s an abrogation of the natural order. He believes that it’s trying to give value to something that doesn’t inherently have value, and it’s also a violation of liberty.
He also writes against paper money. One of the major problems during and after the war was inflation. The Continental Congress issued continental dollars, which were essentially coupon bonds. They were issuing and paying debt, but the problem is that they way over-issued the debt and had no credible mechanism for collecting taxes. So people perceived the debt to be relatively worthless. This was a huge problem fiscally to the war when the Congress was trying to settle it. Witherspoon was writing against this. So Witherspoon and Pelatiah Webster were on the same page on this front, arguing that you have to have credible mechanisms for raising tax revenue. If you ever issue paper currency, then you’re going to generate significant amounts of inflation. And price controls, which governments naturally turn to when there’s inflation, are incredibly ineffective. They do the opposite that they intend to.
So both Pelatiah Webster and Witherspoon write about price controls. Witherspoon writes about price controls brilliantly in this anonymous open letter to George Washington that he writes in 1778, though it was never published for reasons that aren’t clear. But it did come out in his collected works posthumously. So what was happening in 1778? Washington was camped with the Continental Army at Valley Forge, and they had serious rationing issues. So Washington proposed essentially that the Continental Army would hold a market and invite farmers and merchants to come and sell their goods, but with the prices fixed and announced beforehand. Witherspoon looked at this and essentially said: It’s great that you’re holding a market instead of just roaming around the countryside, taking goods from people, and forcing worthless continental dollars on them. But you can’t call them prices because if you control the prices, it’s not a market. And price controls just don’t work. And so he gives this brilliant exposition of what prices are, where they come from, why the concept of a just price is maybe valid in theory but impossible to determine in practice—that is, you can’t give a number. If somebody asks you, what’s the just price in this market? Witherspoon says that you can never really give a number. What’s a reasonable price? He says that a reasonable price is a price that buyers and sellers determine to be reasonable. There are so many different factors that enter into prices. People come from different places, people have different costs, people know their local circumstances. He really gives voice to something that Hayek, of course, elaborates on in the twentieth century in his work on the epistemic function of the price system. It’s there in Witherspoon; it’s there in Pelatiah Webster as well. What’s interesting is that these two Americans are, from an eighteenth century perspective, very sophisticated price theorists.
One more thing that I’ll say about Witherspoon: He actually ends up adopting the views of many of his former Scottish antagonists on political economic matters. When Witherspoon was in Scotland, he was embroiled in all kinds of controversies in the Church of Scotland. He opposed the moderating forces that were, in his view, drifting from orthodoxy, that weren’t sufficiently evangelical, that were just preaching morals and not preaching the Gospel. Some of these antagonists included followers of Francis Hutcheson and, of course, the arch villain of the enlightenment, David Hume. But then when Witherspoon came to America, he picks up a lot of these perspectives, and his views on political economy and politics generally share a great deal in common with Hume and Hutcheson. He even approvingly references Hume’s essay “The Jealousy of Trade” in an address that he delivers in 1776. So Witherspoon understood political economy to be a kind of ecumenical creed—a valid system that helps us understand the way the world is and how we ought to organize our affairs. It’s something that can bring people of different logical and philosophical perspectives together, in the sense that we have a common language to discuss aspects, at least of the commercial world.
Ballor: Another angle may be that idea of harmonizing sentiments, right? One way of understanding the American experiment in ordered liberty is as an experiment in finding a modus vivendi—a way of living in something approximating harmony, even as we come with radically divergent and even conflicting perspectives and worldviews and theological opinions and so on. So disagreement on theology or metaphysics does not necessarily require conflict in the political and economic arena. What a wonderful picture of that in Witherspoon’s own life, character, and intellectual journey from Scotland to America.
One of the things that you raise as an issue with respect to these government-issued coupons that were basically functioning something like currency was the challenge of raising revenue. I’d love to turn back to Hamilton just for a minute and talk about the big issue of tariffs and the role that tariffs played in federal economic policy. But before we do that, I do want to read something of a longer quote, and maybe we can just leave it there. But I love this quote, partly because some of my work on Smith is focused on the phraseology of “the wealth of nations” and the genealogy of that phrase.. That phrase appears in 1787 in the Federalist Papers, specifically in Hamilton’s Federalist No. 21, when he writes:
The wealth of nations depends upon an infinite variety of causes. Situation, soil, climate, the nature of the productions, the nature of the government, the genius of the citizens, the degree of information they possess, the state of commerce, of arts, of industry, these circumstances and many more, too complex, minute, or adventitious to admit of a particular specification, occasion differences hardly conceivable in the relative opulence and riches of different countries.
So that’s his assertion. We can agree or disagree whether that’s true or not, but that’s his claim. Here’s the conclusion he makes of it:
The consequence clearly is that there can be no common measure of national wealth, and, of course, no general or stationary rule by which the ability of a state to pay taxes can be determined. The attempt, therefore, to regulate the contributions of the members of a confederacy by any such rule, cannot fail to be productive of glaring inequality and extreme oppression.
So the context here is he’s making this general observation about countries and then saying: Well, when you apply it to something like the post-Revolutionary confederation of former colonies, how are we going to raise revenues? How are we going to justly apply taxes across this new nation if we can’t have a common or stationary rule? So the broader context is how are we raising money for this federal government? As we know, Hamilton wanted a robust national government. But of course, you need money to do that. So let’s talk about tariffs as a way of raising money for the federal government in the eighteenth century. We don’t have to talk about it as contrasted with the twenty-first, but maybe that’ll come up naturally.
Matson: Trade policy was a big deal in America. Political economy issues were absolutely central to American politics from the beginning. The first division of party was arguably over political economy issues—whether there should be a national bank, whether such a bank was constitutional. That was a big reason for the split between Madison and Jefferson on the one hand, and Hamilton on the other. Should we be subsidizing manufacturers? Should we be protecting manufacturers? Should the national government be assuming the debt of the state? Will this be a consolidation of national power? Should we be discriminating between the original holders of government debt and the present holders of government debt?
These were the main issues that were discussed and dealt with in the 1780s and 1790s. The main issue is: How do we service debt? How do we create a republic that has efficient public credit so that it’s viewed as a credible force on the world stage and so that also it can protect itself, sustain itself, and run its government? This debate led into the crowning and ultimately the ratification of the Constitution. But even afterwards, in the 1790s and through the nineteenth century, the issues of trade policy, public finance, and banking came back over and over again. There are some who say that the Civil War was about economic policy at the end of the day, which I don’t think is correct exactly. But there is a real sense in which trade policy contributed significantly to the conflicts that ended up ultimately coming forth as the Civil War.
Let’s back up for a minute to say a few things about the tariff in American economic history. If people are interested in a deeper dive on these things, the authoritative book, as far as I’m concerned, is Douglas Irwin’s Clashing Over Commerce, which was published in 2017. One of the useful things about the book is the kind of paradigm that he proposes. He notes that throughout American history, tariffs have had three general functions, not at the same time: (1) Tariffs are import taxes to collect revenue. (2) Tariffs have been used to restrict imports—that is, to protect certain domestic industries. (3) Tariffs have also been used as tools for reciprocity—that is, to encourage other countries to lower their tariffs, so political leverage, essentially.
Reciprocity doesn’t begin in American history until the 1934 passage of the Reciprocal Trade Agreement Act. That ushered in the era of free trade, which lasts more or less until 2018. But in the early days of the republic, tariffs were used overwhelmingly for revenue purposes. There was no income tax in the United States until 1913. After the Civil War, tariffs were used more to restrict imports, more for protective purposes. But still, even toward the end of the nineteenth century, most federal revenues came from tariffs. So it’s a different universe, right? It’s difficult for people now to say, “Well, we should go back to how things were then.” Number one, the magnitude of federal expenses is so much greater, and number two, there just weren’t the same kinds of taxes in place that we have now.
Just briefly about Hamilton—Hamilton did not actually support extremely high protective tariffs because Hamilton knew that the tariffs had to provide revenue. If you have really, really high protective tariffs, then you don’t import any goods and there’s no revenue. Hamilton’s idea is a combination of modest tariffs and subsidies for domestic manufacturers. So that’s the vision that he puts forward in the “Report on Manufactures.” People should go and read it; they would be surprised at some of the things that they find. People now want to claim Hamilton for one side—at least conservatives seem to want to. Vice President J.D. Vance comes out and says: We’re in the tradition of Hamilton. And then economist and author David Bahnsen has a podcast and he says: No, we, the old right, the Reaganites, we are in the tradition of Hamilton. But if you read the “Report on Manufactures,” you get the sense Hamilton thinks about Americans kind of like J.R.R. Tolkien thought about hobbits: that is, Americans want to keep to themselves. They want their land; they just want to escape; they won’t really pursue opportunities; they have a kind of aversion to machines. The government has to subsidize manufacturing, Hamilton argues, because even if it’s hospitable, people won’t take the profit opportunity because they’re kind of hobbit-like and they just want to keep to themselves.
Ballor: Let’s talk a little bit about what laissez-faire means and what clerical laissez-faire might mean. I’ve got a quote here from Francis Wayland, the Baptist minister and economist, that highlights some of the continuity and discontinuity with John Wesley. So this is Wayland: “… it is necessary, provided always he do not violate the rights of his neighbor, 1st, That he be allowed to gain all he can.” So there’s the Wesleyan connection. “2d. That having gained all he that can, he be allowed to use it as he will.” And that’s it. That’s the statement.
So Wesley would say: Yes—and to use it as he will, he ought to earn all he can, gain all he can, but also give all he can. Now, Wayland doesn’t make those more minute determinations with respect to how you ought to use your money, but certainly those would be within the scope of legitimate use. So with that as a jumping off point, let’s talk a little bit about the clerical laissez-faire.
Matson: In one sense, they’re ministers who write about economics. So on the one hand, they’re just people. On the other hand, they’re representatives of an approach to economics that is grounded in ethics, jurisprudence, and by extension, theology. That’s an older approach to political economy that goes back to the seventeenth century. In some respects, it goes all the way back to the Scholastics. So in one respect, it’s not really new. They work under the assumption that the world is ordered by God. The world is providentially ordered. There are rules. There are governing principles in ethics, and these principles have implications for how societies function and for the kinds of things that make for a prosperous society. So pursuing the right indirectly promotes the good. There’s this consonance between the right and the good, between doing what is ethically proper and contributing to social prosperity.
Ballor: If you act in accord with the moral order, promote the good of your neighbor, you’re going to tend toward the spiritual, but also material affluence and enrichment of yourself and others.
Matson: Exactly. John McVickar, a clerical laissez-faire figure, actually describes commerce as something holy, which is very interesting language. You can find that language earlier in the eighteenth century as well. Daniel Defoe says similar kinds of things.
Ballor: There’s a Puritan sense to that—claiming that mundane labor in our vocation in the world has that sacredness to it, including the actual work itself, not just the position you occupy.
Matson: Right. But of the clerical laissez-faire, Wayland is the best example. They believed that classical economic analysis—as it came forward in the eighteenth century from Smith and then in France through Jean-Baptiste Say—illuminates the potential for harmony between individuals, between classes, between nations. The tools of political economic analysis help us understand that we don’t live in a zero-sum world. The material world is not zero-sum. The spiritual world is not zero-sum. And political economy helps us to appreciate that. So they talk about political economy as kind of an extension of ethics, an extension of discourses of natural law. That’s more or less their approach; there are differences on different margins, but that kind of core idea is reasonably common in the nineteenth century in America.
Ballor: That’s a great place to conclude. If you want to follow the story beyond the early Republic—into the conflagrations across Europe, including Marx’s and Engels’s role in that in 1848; the Civil War and post-war developments, especially into the nineteenth century, the formation of the American Economic Association, and so on—I recommend our book A History of Christian Political Economy in print now, along with its companion reader Sources in Christian Political Economy.
I’ll give the last word to Wayland, who articulates this kind of mutual benefits view, which we set up as part of our overall analytic way of thinking about economic views and economic doctrine across the centuries, from a zero-sum or limited good to a mutual benefits view: “We see, in the above remarks, another illustration of the truth, that the benefit of one is the benefit of all, and the injury of one is the injury of all. He who is honestly promoting his own welfare is also promoting the welfare of the whole society of which he is a member.”
