Callow hill Street Philada c.7 November 1796
May it please your Excellency
It is the peculiar advantage of a republican Government that the meanest Citizen, may address the highest, upon any Subject which concerns the welfare of the Nation, without having it supposed that, he is interfering in things which do not belong to him. It is equaly true that every Citizen, who thinks for the public Good, ought to use every endeavour within his power, to check folly, to discourage immoral means of aggrandisement, & to point out such plans, as will insure success to Public undertakings without injuring the morals of the Citizens; and that he ought also to address himself to Men in power, upon these Subjects, who, though they may lament the impracticability of some schemes which may be presented to them, may nevertheless receive usefull hints, which, somtime or other, may be of service to the Country.
Since your determination to retire from public business has been anounced to the World, I have been sorry to break in upon your intended retirement, & I have looked round for some other Person, to whom I shou’d suggest my Ideas; but in vain. your Excellency will therefore excuse me, if I still think, that, you are the only person in the U.S., to whom the Subject of this Letter, can with propriety be addressed; especialy, as the prosecution of my Ideas, if they meet with approbation, may be, afterwards, referred to some other Person. I shall, therefore, without further apology, submit the following Ideas to your consideration.
From the time that the United States have become a Nation it is well known that among other things which have retarded her internal improvement may be reckoned a want of Capital.
Good Roads are much wanted throughout the Union. Harbours are defficient in some places. In others, we cannot avail ourselves of the Gifts of Nature, where she wants only a little assistance from Art. Rivers, however usefull they may be, in the transportation of commodities, still their Utility might be multiplied twenty fold; had we a Capital to improve them. and how many Mines remain yet unexplored for want of the same assistance. In the projection of New Towns & Cities a defficiency of Capital for paving, watering, lighting & for public Building is severely felt. What adds to the misfortune is, that the more America encreases in population the greater will be her want of Capital, which is tantamount to saying, that her prosperity, is the cause of her adversity for I think it wou’d be folly to suppose that the luxury of the Times, will permit Money to flow as fast into the Nation as her situation will enable her to encrease in population—and also, I think no man will believe, that the same quantity of Specie, which serves for the uses of three millions of Men, will do the business of four millions, in a Nation connected with all the world by her Commerce. NO. The Luxury of our Citizens on the one hand, and the encrease of our population on the other must keep the United States defficient in Capital, for the purposes of usefull improvement[.] The money or the balance that we receive from foreign Nations, cannot be employed in Works of public Utility and in private luxury at the same time. And although the National industry may probably keep pace with its population, two things more are necessary before the encrease of Specie can preserve its equality with population, namely, that the Specie of other Countries shou’d be attracted towards this, or Secondly, that the foreign Markets for the produce of America shou’d encrease in proportion to the Cultivation of the United States. Beside if America shou’d pursue the policy of insulating herself with respect to commerce, (as some politicians have suggested), who does not see that her population woud encrease faster than the circulating Medium? In short, in whatever point of view we consider these things still it appears that specie is likely to be scarce in the U.S. for Public improvements.
I shall now proceed to consider the mean now in use for raising Capitals for the purposes abovementioned namely, Lotteries—National gaming! What, shall a republic have no other resource for national improvement but national Vice! must we prostitute our Vertue to procure Necessaries? But I not only condemn Lotteries on account of their immoral tendancy, as being a bad means to accomplish a good end; which principle, if it were universaly adopted wou’d put an end to civil Society; but I condemn them also because they are ineffectual, & I have delayed the communication of my Sentiments, till, I believe, the World is convinced, from the experiment, that they will finaly be ineffectual. One thing is certain, that Lotteries never can encrease the Capital of a Nation, but rather as they encourage false hopes and divert the Mind from Industry they tend to diminish that Capital. The success of one or two at first, has fill’d the whole Country with Lotteries that mutualy oppose the success of each other. The time of filling them up is so long, and the expences so great that if there are no chicanery in the business, which the people begin to suspect, the profits must be eaten up.
Convinced therefore as I am—that on the present System Specie is likely to continue scarce and to be much wanted for public improvements. and plainly perceiving that the mean now in use is inadequate as well as Sinfull, and that it will finaly destroy itself, this question naturaly Occurs. Is there no other means of raising Capitals for usefull, & profitable improvements? I answer, Yes. And we have an example of it before our Eyes. The same means that have been taken to encrease Capitals for one Species of usefull improvements may be adopted in other Species. If Banks of discount have enabled the Merchants to extend their Trade, which they have effect[ualy] done; why shou’d not a Bank for Mortgages, instituted on nearly the same principles, enable the builders of houses & Bridges, the constructors of Quays & Canals, and finaly every improvement producing a Revenue, to [pursue] their respective Undertakings.
There is no doubt but, Banks for whatever purposes they are instituted are attended with Evils as well as every other human institution. But the People of the U.S. have had more examples before them, from which to draw their experience than any other Nation, they will see the Rock upon which others have split and avoid similar [evils] by wiser provisions. On the Ordinary plan of constituting Banks of Discount, the few individuals Who commence the Undertaking make rapid fortunes: But it is the Public who shou’d receive the benefits. Individuals shoud be only well paid by receiving a liberal interest for the Capital Advanced. That I woud restrict to about 7 1/2 P. Cent. Any further profits that might [accrue] shou’d be applied to usefull public improvements.
Whenever any particular Species of adventure produces better interest than any other it is sure to paralize all the rest, for a time. In England the profits of all the New Canals are restricted, (if I recolect right) to 5 Pr Cent.
Whatever Names or forms Governments may assume whether it be a Republic or a Monarchy or any thing else, still where Money is, there Power will find its Center. persuaded as I am of this truth I have been much surprised that Governments while they reserve to themselves, the prerogative of coining & fixing the Standard of Specie, shou’d permit private Companies to transform Paper into current Money.
As Governments are at present constituted (I speak without exception) every Legislative Act that in its operation has any influence on the Value of Specie is of the utmost importance. Without a due attention to this particular is it not evident that by a single Act, Power may be diverted from its proper sphere, and placed in other hands than that of Governmt. Thousands may be raised from indigence to affluance and ten thousands may be reduced to misery by the fluctuation of the Value of Specie. It may do more it may prevent a Nation from flourishing when every other cause is favourable to its prosperity, and may give one Nation an ascendency over another; as great an evil as can befall a Country.
As Banks of discount are now formed I know of no Law by which they are restricted in the emission of paper, this has made them become, in some Countries, Political Engines, or rather one of the Elements of Government, interwoven by time into the Constitution. And so it will be in every Country, where they are not under proper restrictions. In Short, a Bank imposes upon the Public, if it issues a greater Value of promissary Notes, than it has on hand of Merchts Bills for discount, that quantity it has a right to issue, and it does the Country a great service when it takes up Bills of difficult negotiation from the circulating Mass, and replaces them with Bills of easy currency.
But when Bank Notes are issued beyond that rule of justice, the private Company of Bankers begin then to do an act, which in its consequences may overturn the designs of the Legislator, and thwart the best plan’d measures of Government: for by encreasing the circulating medium, Specie is render’d of less Value and the produce of a Country advanced in price, perhaps at the very time when Government was contemplating its reduction, with a view of competeing with foreigners at a distant Market, or of introducing usefull Manufactories into the Country.
By this means indeed Capitals are formed, but falling into private hands are expended in Luxury: But it is the want of means to raise Capitals for public improvement that I lament.
Under these considerations—namely—That a want of Capital is a serious Obstruction to usefull Public Works— That the means of creating them is inadequate to the purpose—That Specie is likely to be scarce, though its value be diminishing. I say that considering these things, I imagine that I have devised a Plan, whereby the Country may be improved—The necessity for Lotteries obviated—The circulating medium encreased in proportion only to population & improvement—and the private Adventurers sufficiently recompensed—a Plan which may be extended to every Species of improvement that will when compleated produce a Revenue.
But for the present the City of Washington is the Object upon which I have fixd my Attention, as being of all the improvements now going forward in the U. States, of the most importance and greatest magnitude, and which (if it be seriously intended to pursue it) will require more vigourous and powerfull measures to accomplish, than any that is yet before the public.
I calculate, that with a Capital of less than a Million Dollars—Seven & a half PerCentum may be afforded to the Subscribers—Houses may be built to accomadate a thousand families for several Successive Years—and (after the first year) twenty [thousand Dollars] may be spared annualy out of the profit to defray public expences such as Street paving—lighting—and Watering.
If in general my Ideas which have been only Sketched, & the plan which is only hinted at, shoud meet with so much approbation from your Excellency as to excite a degree of curiosity to know it more at large, I shall communicate with pleasure either by Letter to Mount Vernon, or Personaly at Philada. I am Sir your most obt Humble Servt
DLC: Papers of George Washington.