Yesterday’s discussion got me thinking about debt, in particular the political uses of debt. Here, I think that the experience of the American Revolution and the failure of the Confederacy may have something to tell us about Mormon history.
Consider, for example, the success of the American Revolution. In the dark days of the American cause was kept alive in large part by a trickle of guns and money that came from Holland via the Dutch controlled island of St. Eustatius. American envoys in Amsterdam had succeeded in selling bonds issued by the Continental Congress to Dutch investors. The money generated from these bonds was then used to purchase weapons, which were shipped out in Dutch bottoms to the Caribbean, where they were transferred to American ships that then ran the British blockade into the colonies. The sale of the bonds — that is the indebtedness of the nascent American government — was extremely important for two reasons. First and most immediately it helped the Continental army to arm and equip itself. Second and perhaps more importantly it created a powerful constituency within Dutch society in favor of independence. Hard-headed Dutch investors who didn’t give a fig for the American cause on ideological grounds nevertheless began putting pressure on the Dutch government to help the revolting colonials. The only way that their highly speculative American bonds would pay was if the Americans succeeded. In contrast, a British victory would guarantee a total loss.
During the Civil War the Confederacy unsuccessfully pursued the same policy. They issued bonds to finance their war. The bonds were mainly sold to British and French speculators. The hope was that not only would the debt create immediate revenue for their cause, but it would also create a political constituency in Europe that would pressure the French and especially the British government to support the Confederacy. It almost worked, but not quite. The costs of English involvement in the Civil War were too high both in military terms and in domestic political terms. The English middle and lower classes were not eager to go to war on behalf of southern slave-owners in order to protect the investments of City bond holders. Also, by the mid-nineteenth century the English securities markets were deep enough that a proportionally smaller share of the capital in place was parked in speculative Confederate bonds, as compared with the Dutch markets the century before.
There is, I think, a similar story that can be told of Mormon debt. During the final two decades of the nineteenth century, the Church began taking on increasing amounts of debt by issuing bonds to speculators in New York and California. As I understand it, this was done mainly to prop up Church owned industries that were taking a hit from a combination of general economic down turns, the transformation of the western economy (many businesses founded during the pre-railroad days of expensive transport no longer worked in the post-railroad days of cheap freight), and a drop in tithing income caused by the economic disruption of the anti-polygamy Raid of the 1880s. Today Mormons learn about this debt mainly through the church-produced movie “The Windows of Heaven” about Lorenzo Snow’s re-emphasis on the law of tithing. The debt, however, had — I think — an ironically salutary effect on the political position of the Church. In the late 1880s and 1890s, Mormons had comparatively few political friends. The issuance of Church bonds, however, did give Mormon emissaries entre into the financial centers of the East, and, perhaps more importantly, gave powerful men in those centers a strong incentive to protect the Church from destruction. After all, the end of Mormonism meant that they would not get paid. It was in part through these political channels that the First Presidency was able to broker the deal for Utah statehood in the 1890s. It also meant that the Wall Street wing of the Republican party in effect tempered the ideologically driven anti-Mormon wing of the Republican party This, in turn, helped to pour oil on the troubled Mormon political waters of the 1890s. In short, the existence of Mormon debt probably played an important role in negotiating the integration of Mormons into the American political mainstream.