Frédéric Bastiat's writings found a receptive climate in laissez-faire-oriented United States. This was particularly true of the distinguished political and social scientist Francis Lieber (1800–72), a young Prussian scholar who had fled a central Europe inhospitable to German nationalism. In 1835, Lieber succeeded the Jeffersonian Thomas Cooper as professor of political economy and history at the University of South Carolina. Lieber's two-volume Manual of Political Ethics (1838–39) was a comprehensive defence of the absolute rights of private property, as well as its corollary, the right of free exchange of that property. ‘Man yearns’, said Lieber, ‘to see his individuality represented and reflected in the acts of his exertions – in property’. Property, noted Lieber, existed before society and the state, and the state's function is to defend property rights, the unrestricted right of exchange, accumulations, and bequest, from attack. The role of the independent judiciary, an institution created in the United States, was to be guardian over private property, and to do so by applying the common law, ‘a body of rules of action grown up spontaneously and independently of direct legislative or executive action’.
In 1856, Lieber acquired the chair of history and political science (formerly chair of political economy and history), at Columbia University in New York City. In his inaugural address at Columbia, Lieber delivered a paean to free exchange, which is fundamental to civilized life.
Lieber happily taught political economy from the text of Say's Treatise, and argued that economics teaches the idea of ‘the natural, simple and uninterrupted state of things in which man is allowed to apply his means as best he thinks’. So devoted was Lieber to freedom of trade that he believed that the time would soon come when nations would include free trade in their bills of rights. Indeed, Lieber wrote the introduction to the first English translation of Bastiat's Sophisms of Political Economy in 1848. That translation had been made by Lieber's friend, Louisa Cheves McCord (1810–79), daughter of the former head of the Bank of the United States Langdon Cheves, and wife of Colonel David McCord, a protégé of Thomas Cooper and a South Carolina banker, planter, attorney and newspaper publisher. A devoted admirer of Bastiat, Mrs McCord also wrote journal articles denouncing socialism and communism.
But the two outstanding followers of Frédéric Bastiat in the United States were Francis Amasa Walker (1799–1875)49 and his close friend and younger New Englander, the Rev. Arthur Latham Perry (1830–1905). Amasa Walker was the son of a blacksmith, who soon rose to become a successful shoe manufacturer in Boston as well as a railroad promoter. His earliest economic interest was in money and banking, where he became an ardent Jacksonian. Even though a bank director, Walker endorsed the currency principle, and fervently advocated 100 per cent gold money, with bank notes banned from going beyond the specie in the vaults of the banks. In addition, most notes, especially small denominations, were to be gradually eliminated. Bank credit, Walker pointed out, creates inflation and boom-bust cycles, as the banks face an outflow of gold abroad and are forced to contract their credit and bank notes. Walker also realized that gold discoveries need not create crises and panic, since the gold could make possible a more rapid achievement of 100 per cent specie money.
Amasa Walker retired from industrial activity in 1840, at the age of 41, and from then on devoted himself to economics and to political activity. He lectured on economics at Oberlin and Amherst, and from 1853 to 1860 was an examiner in political economy at Harvard. Walker wrote a number of essays for the New York financial organ, Merchants' Magazine, and in 1857 published a book on money and banking, The Nature and Uses of Money. He also served in the Massachusetts legislature and as secretary of the state of Massachusetts.
Walker, by then a lecturer at Amherst College, published, at the end of the Civil War, a scintillating general treatise on economics, The Science of Wealth: A Manual of Political Economy (Boston: Little, Brown, 1866), which incorporated his monetary views into a general treatise on laissez-faire. The book was immensely popular, at home and abroad, going into eight editions in the next eight years.
Walker's money and banking views were the centrepiece of his book. He took the rare position of advocating a system of free banking within a firm matrix of legally required 100 per cent reserve.50 Walker wrote:
Much has been said... of the desirableness of free banking. Of the propriety and rightfulness of allowing any person who chooses to carry on banking, as freely as farming or any other branch of business, there can be no doubt. But it is not, and can never be, expedient or right to authorize by law the universal manufacture of currency...[When] only notes equivalent to certificates of so much coin are issued, banking may be as free as brokerage. The only thing to be secured would be that no issues should be made except upon specie in hand.51
In his general economics, Walker emphasized catallactic analysis, and employed the concepts of wealth and value squarely in the Bastiat tradition. In fact, Walker heaped a great deal of praise on Bastiat's theory of value, and proceeded to include several pages of quotes and examples from Bastiat's Harmonies. In addition, Walker continued in the French tradition of stressing the entrepreneur as a force in production very different from that of the pure capitalist.52
But unquestionably the outstanding disciple of Bastiat in the United States was Arthur Latham Perry. Perry, a graduate of Williams College in 1852, almost immediately accepted the position in which he would spend the bulk of his life teaching history, political economy, and German at his alma mater. Perry had ben introduced to Bastiat's works by his friend Amasa Walker, and he reported that ‘I had scarcely read a dozen pages in that remarkable book [Bastiat's Harmonies of Political Economy] when the Field of the Science, in all its outlines and landmarks, lay before my mind just as it does today ,.. from that time Political Economy has been to me a new science; and that I experience then and thereafter a sense of having found something...’53
In the Spring of 1864, Perry wrote a series of articles on ‘Papers on Political Economy’ for the Springfield Republican, which set forth Perry's Bastiat-derived viewpoint on political economy. The proper focus of economic theory, he declared, was value, and value is determined by the mutual services exchanged in any transaction. The crucial axiom and focus of economic analysis, added Perry, is that men exert effort in order to satisfy desires, and trade is a mutual exchange of services to bring about those satisfactions. Both parties gain from every exchange, else they would not engage in the transaction. Workers, Perry pointed out, could only gain if more capital is employed in hiring them, which would increase wage rates per worker.
Encouraged by Walker, Perry expanded his articles into a textbook, published the following year. Elements of Political Economy, later called Political Economy, became by far the most successful economic textbook in the country, going through no less than 22 editions in 30 years. In his text, Perry not only paid tribute to Bastiat, but also hailed Macleod, and adopted the Macleod vision of the history of economic thought – saluting Condillac, Whately, Bastiat and Macleod as leaders of the correct services, catallactic, or what Perry called the ‘All Sales’ school.54 Engaging in a detailed and sophisticated analysis of exchange and its preconditions in values and the division of labour, Perry went beyond Bastiat to purge economics totally of the vague and materialistic Smithian concept of ‘wealth’ and to focus instead completely on exchange.55
Although he did not use the term ‘entrepreneur’, Perry's concentration on value and exchange as a human activity led him to treat the businessman as an active forecasting entrepreneur rather than a robotic participant in a static general equilibrium. Thus: ‘your man of business must be a man of brains. The field of production is no dead level of sluggish uniformity like the billowy and heavy sea’; instead, the occupation ‘requires foresight, wise courage, and a power of adaptation to varying circumstances’.56
True to his focus on the great mutual benefits of exchange, Arthur Perry lauded free exchange and denounced all restrictions and limitations upon that process. Thus Perry points out that
... anybody can know that what is rendered in an exchange is thought less of on the whole than what is received. The slightest introspection tells any man that. As this must always be true of each of the parties to any exchange,... each is glad to part with something for the sake of receiving something else... A very little introspection will inform any person, that were this higher estimate wanting in the mind of either of the two parties, the trade would not take place at all... Hence no law or encouragement is needed to induce any persons to trade; trade is natural, as any person can see who stops to ask himself why he has made a given trade; and on the other hand, any law or artificial obstacle that hinders two persons from trading who would otherwise trade, not only interferes with a sacred right, but destroys an inevitable gain that would otherwise accrue to two persons alike.57
Perry particularly attacked such virulent interferences in free exchange as minimum wages, labour unions, usury laws, and paper money. While Perry, even more than Walker, failed to realize fully that bank deposits were as much part of the money supply as notes, he went even beyond Walker's 100 per cent reserve proposal for paper money, to calling for the eradication of paper money completely, even if backed 100 per cent by specie. He believed, however, that bank credit and issue of deposits should be totally free within that matrix.
Perry was especially vehement in attacking protectionism, writing numerous articles and delivering hundreds of speeches on behalf of free trade and against protection. The protective tariff, Perry pointed out, was unsound economically; it violated property rights, and it violated the letter and spirit of the Ten Commandments. A protective tariff stole from the western farmer to establish privileges for a few manufacturers. Perry courageously withstood the pressure of powerful Williams alumni, headed by ironmonger George H. Ely, against his free trade teachings. After the assassination of his former student, lifelong friend, and fellow-member of the Cobden Club of Great Britain, President James A. Garfield, Perry took the highly unpopular step in New England of leaving the Republican Party as the ‘party of privilege’ and corruption, and joining the Democratic Party. Much admired by free trade statesmen, Perry was asked by President Cleveland to be his secretary of the Treasury.
Another laissez-faire stalwart, at least for the prime years of his life, was Perry's friend and colleague who taught rhetoric at Williams, the Rev. John Bascom (1827–1911). During the 1850s and 1860s, Walker, Perry and Bascom made a formidable team in New England. Perry persuaded Bascom to write a book on economics, and Bascom's Political Economy (1859) extolled the forces of production and competition in seeking profit and in thereby benefiting the commonwealth. Government's only role is to protect the rights of private property, so that production can do its work. Bascom also pointed out that ‘monopoly’ can only be meaningfully defined as an exclusive grant of privilege by the government; otherwise all property could be called ‘monopoly’. Bascom also joined Walker in advocating 100 per cent specie reserves to bank notes.
Later, John Bascom became president of the University of Wisconsin, and succeeded Perry in the chair of history and political economy at Williams when the latter retired in the 1890s. Bascom must have become a severe trial to his old friend, however, because by the 1880s, Bascom had begun to abandon the cause and write books in the new statist discipline of ‘sociology’. Bascom now shifted drastically to call for the government privileging of labour unions, and for the abolition of the ‘excess’ of individualism. Bascom had now come to believe that the only danger from socialism and collectivism was ‘unreasonable resistance to [this] organic force which is pushing into our lives’. ‘Growth’ [i.e. collectivism], Bascom smugly concluded, ‘must have its way’.58 Clearly, John Bascom had rapidly made his peace with the new intellectual current that swept Europe and the United States in the 1880s and 1890s.
One of the most unusual – and most advanced – of the American admirers of Frédéric Bastiat was the Boston merchant Charles Holt Carroll (1799–1890). A staunch adherent of free trade and laissez-faire, Carroll, in articles in mercantile and financial magazines from 1855 until 1879, concentrated on questions of money and banking. In essence, Charles Carroll was the last Jacksonian, continuing to argue the ultra-hard money cause long past the tremendous setback it received during the Civil War, when greenbackism and the national banking act necessarily led sound money men to concentrate on sheer return to the gold standard. Moreover, Carroll was not content to advocate 100 per cent banking; he perceptively and consistently urged 100 per cent banking for demand deposits as well as notes. Carroll, indeed, was particularly clear in demonstrating that bank demand deposits mainly arise from the extension of loans by the banks. He also pointed out the fallacy of the Smithian ‘real bills’ justification for fractional-reserve banking. Furthermore, Carroll realized that central banking, epitomized by the Bank of England, allows far more room for the expansion of fractional reserve and ‘fictitious’ money than would a system of free banking. But in addition, Carroll went beyond most hard-money advocates by calling for the elimination of such potentially dangerous currency names as ‘the dollar’ (which give the illusion that these units are goods-in-themselves), and their replacement as the currency unit by regular, ordinary-language definitions of weight in gold, e.g. in numbers of troy ounces. For international currencies, that is, for currencies not redeemable in a common metal, Carroll worked out the essence of the purchasing-power-parity theory for the underlying determination of exchange rates on the world market.