Tocqueville and the Moral Economy of Bankruptcy in Nineteenth-Century America

Abstract

Individual decision-making in a market economy and its effects on society have long been debated. Many are skeptical about whether market decisions can be moral and of the ability of individuals to make good economic decisions. This paper turns to Alexis de Tocqueville’s neglected but emphatic account of bankruptcy in America to illuminate the role of the moral economy in liberal political economy. Although he receives feedback from interviewees that bankruptcy is a problem in America because of the debtor class also referred to by historians of the period, Tocqueville outlines the problem not as one of the inferior judgment of the least advantaged but as a twofold problem of the moral economy. First, Tocqueville shows that norms that elevate materialism and individualism without rules to facilitate economic transactions result in a zero-sum moral economy where individuals can take advantage of one another and both economic prosperity and social cohesion suffer. Second, he highlights unfair rules that disadvantage the poorest in society and prevent them from exercising judgment. The case of bankruptcy demonstrates that for Tocqueville, political participation and liberty remain crucial for economic liberty and prosperity.