WI: No National Banking Acts?

MAlexMatt

Banned
I read an interesting paper recently (State Banks and the National Banking Acts: A Tale of Creative Destruction, written by Prof. Matthew Jaremski of Vanderbilt University) whose essential thrust was that a shift in capital regulations between the pre-Civil War state banking laws and the post-Civil War national banking laws led to the centralization of banking activity into urban centers along what would become the 'manufacturing belt' of the American Northeast. Essentially, smaller, more rural areas could not bring together the necessary bank capital to convert existing state banks into national banks, so when Congress passed a prohibitive tax on state bank notes in order to incentivize the shift from state bank charters to national ones, many state banks in these areas simply closed up shop on note issue and either converted to pure banks of deposit or just ceased doing business period.

His suggestion is that this led to a decline of important banking activities in these areas and, eventually, to the capital and liquidity scarcity problems that drove the populist movement later on in the 19th century. Since big city banks could not create branches in rural areas in most states, bank capital concentrated into cities, leaving rural and smaller towns starved of the stuff.

Ignoring, for the moment, the butterflies from the Federal government having to find some other way of financing itself during the Civil War, what implications might this have for late 19th century American history? How might an American Upper Mid-West and Northeast more dominated by a succession of medium sized cities, instead of the OTL trend of a contrast between the massive industrial metropolises and their network of feeder cities and the much smaller ruler towns and villages, alter American history? What kind of politics evolve in a North America with less in the way of late 19th century Populism? If bank currency is more widely available, for instance, I can only imagine the Free Silver movement has a lot less impetus behind it.

There is a very striking diagram from the paper, showing areas where banks closed during the Civil War and where they reappeared. I would like to share it but it seems my old lean-on for free file hosting, imageshack, has turned rogue on me and I don't really know of alternatives that you don't need an account for. Anyone have any suggestions?

Another interesting dynamic the diagram shows, unrelated to the question in this topic, is how utterly the Civil War devastated the South's financial system. The South, especially the Upper South, goes from having a banking network that, if not quite as dense as that of important parts of the North, is still obviously present and capable. After the Civil War, there are maybe a dozen counties with banks left. Chilling.
bankclosures.jpg
 
I would consider that while there may be some 'medium sized' mid-western cities, those that serve as hubs for the railway lines will still become great metropolitan areas. There were other reasons that these places became major cities.
 

MAlexMatt

Banned
I would consider that while there may be some 'medium sized' mid-western cities, those that serve as hubs for the railway lines will still become great metropolitan areas. There were other reasons that these places became major cities.

While true, it's worth considering that, say, Chicago is ten times larger than the next closest urban area in Illinois. While transportation hubs (both ports and railway centers) have a natural advantage over other cities, I don't think it entirely justifies the sheer demographic dominance of such cities in the US.

EDIT: And also, many of the second-ranking cities in US states are satellites of major hubs. I would expect there to be a more distributed network of hub cities ITTL in other words, rather than just a random distribution of medium sized cities. Think about Indiana for instance: Indianapolis predominates, while cities that, by rights, ought to have been hubs because of their locations on the Ohio or Lake Michigan or other major axes of transportation are far smaller.

I mean, think about how cities become rail hubs: Geography plays a role, but the capacity to finance is also very important.
 
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MAlexMatt

Banned
So, I went away for a while and I come back to find this still an interesting question.

How does post-bellum America evolve without the significant currency shortages of that period IOTL? Forgetting the demographic and urban geographic changes speculated on in the OP, how would the politics of the US evolve without the significant force of populism?
 
I think you're assuming that populism still doesn't occur ITTL. Even with more, wide-spread, centers of capital the prices of agricultural goods that the farmers who mostly made up the early People's Party will still occur, unless you're willing to contend that as modernization is first implemented and crop yields grow deflation won't occur to agricultural goods.

Then you also have to consider that quite a bit of the Populists were quasi-socialists; after all the original name of the group was the Farmers and Laborers’ Union of America - and other industrialized, western nations had populist-socialist parties arise even when they had different, more wide-spread, systems of capital & investment than the US.

As well you have need to look at the political environment the Populist party was born into. Both the Democrats and the Republicans were essentially controlled by the rich elites - that's not going to change with your scenario, though it will mitigate the issue somewhat by increasing the number of people, and changing the distribution thereof, of those considered within the elites. But there were still be a very viable political niche for a party representing 'the little people.'

Finally also there's the economic situation. The Panic of 1893, or something quite similar, is just as likely to occur within your scenario as it was IOTL - changing where the capital is located doesn't change the fact that too much of it is going to be invested into the Railroad Bubble. In fact I would say having the capital centers more widely distributed would make the situation even worse, as each region would invest even more heavily in their own area, as opposed to OTL where there was at least a mediocre attempt at centralization by the banking powers. This would cause an even worse panic, and might push the Silverites into joining the Populists on an official level.

So really, as opposed to your, or rather this Jaremski's, assumptions, I would say that instead of weakening the populist movement without the National Banks the populists would have been even stronger than IOTL.
 
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