The Glorious Cause, page 74
Both King and Monroe represented sectional interests and the division held steady in the debates in Congress over Jay’s instructions. The five southern states, though facing seven in the North (Delaware had no delegation in the Congress at this time), had one advantage: the Articles of Confederation required that treaties must have the approval of nine states. Thus though the northern states might vote to revoke Jay’s original instructions—and did, thereby permitting him to agree to closing the Mississippi—they had no way of securing the ratification of an agreement with Spain. Before King and others came to the realization that the southern states would block a treaty which sacrificed the West to the commercial interests of the East, they had bred deep suspicions in Monroe and others from the southern states. Monroe smelled plots everywhere and soon was convinced that one was afoot which would carry the northern opposition into a separate confederacy.11
The mistrust of the two groups festered long after Jay dropped the negotiations with Gardoqui. Jay had been shocked by the vehemence of the southern delegates. When the question of voting and approval of treaties was raised in Congress, he saw that the game was up. There would be no treaty which recognized Spain’s action in shutting Americans off from the Mississippi. And there was anger and suspicion that would make further cooperation in Congress increasingly difficult.
Congress did enjoy one major success after the conclusion of peace. It arranged for the settlement and government of the West. The arrangements entailed the reconciliation of a number of diverse—and competing—interests. That these interests could be satisfied owed much to Congress’s skill in manipulating what they all had in common—a powerful acquisitive impulse—and to the fact that Congress began its work of disposing of the West before the atmosphere was fouled by Jay-Gardoqui.
The national domain had come into being on March 1, 1784, when Congress accepted Virginia’s cession of the territory northwest of the Ohio claimed by the state under its seventeenth-century charters. Virginia had first ceded its claim to the Northwest in 1781, but this cession did not arouse gratitude throughout the United States because it required that all purchases from the Indians and all royal grants within the territory should be “declared absolutely void and of no Effect.” At least three land companies located in other states had already made such claims, and Virginia aimed to deny satisfaction of their large appetites. These companies—the Illinois-Wabash, Vandalia, and the Indiana—responded by urging Congress to reject the cession.12
There were others who wanted a share of the Old Northwest. Soldiers—later veterans—suggested strongly that lands be set aside for them as a reward for their service. One group from other states urged that a colony be created, with soldiers serving as colonists. For a time, George Washington, who wanted to see his troops reimbursed for their sacrifices, supported this proposal.
Immediately after accepting Virginia’s cession, Congress acted to provide government in the territory. The development of congressional plans involved a complicated story whose leading character was Thomas Jefferson. The essential fact of this story was that Jefferson proposed an ordinance providing that new states, like the old republic in form, would be established out of the West. After a period of territorial government they would enter the Union with a status equal to the original thirteen. Jefferson called the terms of the ordinance “fundamental constitutions between the thirteen original states, and those now newly described,” words which made their way into the statute Congress finally approved.13
Jefferson also served on the committee of Congress which was charged with the responsibility of devising a means of disposing of the new lands. He had hoped that western lands might be given to settlers—not sold to them—and thereby provide new recruits to the class of sturdy freeholders he admired so deeply. Jefferson left for Europe on a diplomatic mission before the committee finished its work, but even had he not, it is unlikely that he could have persuaded Congress to fulfill his noble hope. The national debt stood in the way of giving anything away. In an early report the committee declared that returns from land sales “shall be applied to the sinking such part of the principal of the national debt as Congress shall from time to time direct, and to no other purpose whatsoever.”14
In May 1785 Congress adopted the ordinance which it hoped would regulate the sale of western lands. The Ordinance of 1785 provided that the land was to be divided into townships six miles square. Each township would consist of thirty-six lots, or sections, one mile square. After the territory was surveyed it would be sold at public auction in lots for not less than one dollar an acre in specie or the various certificates issued by the United States. The Ordinance set aside lands for bounties which had been promised to soldiers during the war, and it reserved lot sixteen in each township for public schools. The United States was to receive four sections in each township and one-third of any gold, silver, and copper which were discovered.15
Although surveys began almost at once, the Ordinance did not work as it was intended to. It ran afoul almost immediately of speculators, who urged its suspension. Leading the speculators was a new Ohio Company founded in Boston, and leading the Company was the reverend Manasseh Cutler, formerly a chaplain in the army. Cutler had the foresight to recommend that the president of the Congress, Arthur St. Clair, be made head of the Company. That touch and much skillful lobbying persuaded Congress to allow the Ohio Company to purchase a large tract carved from still unsurveyed lands. Terms of payment were especially encouraging to the Company and included the use of certificates of the United States at their face value, certificates selling in the market for ten cents on the dollar.16
The Ohio Company operated on a large scale. Squatters were less ambitious, but in the aggregate just as destructive of plans of orderly settlement. These men and women brought with them a craving for land and a hatred of the Indians to whom it belonged. Small-scale warfare occurred when the two peoples met, and sometimes soldiers fought both groups.
In this rough way the Old Northwest began to fill up. The Ordinance of 1784, which had provided self-government in the territorial stage, was one of the casualties. Dismayed by the barbarism in the West and convinced by the speculators that land titles were endangered by the incessant upheavals, Congress repealed the ordinance, replacing it with a new one in 1787, the so-called Northwest Ordinance. This ordinance lifted control from the hands of settlers and placed it with Congress. Officials slated to be elected locally were now to be appointed. Full self-government would not be obtained until a territory became a state.17
III
The high distinction Congress attained in formulating the land policies went unrecognized at the time. Rather, by 1786 a feeling of crisis pervaded Congress and much of the nation. At the center of this feeling lay a disenchantment with public finance and commercial policy which in turn bred doubts about the adequacy of republican institutions of government. Most doubts, of course, hung around Congress itself, though strong nationalists also entertained fears of the adequacy of local institutions—in particular, state legislatures and the public policies created by them. In this mood, some Americans came to fear that the American Revolution and its natural child, the republic, might soon be destroyed.
The concern about public finance extended to the economy, and for much of the period before 1789, complaints echoed in the newspapers, Congress, and in private about the decline of trade. As is so often the case, popular perceptions did not recognize the realities. And what were the economic realities? They cannot be charted precisely—given the scarcity of quantifiable data—but they indicate that, despite the damages of war and the exclusion of American ships from the British West Indies, recovery was rapid, though uneven. The middle Atlantic states may have enjoyed the quickest resurgence of business. These states—Pennsylvania, Delaware, New Jersey, and New York—had long produced agricultural products for the market, especially the West Indies. They now began processing their farm commodities for local markets, for example, cereals into beer, porter, and whiskey to slake republican thirsts. They also began to manufacture goods for themselves and the South.18
To the north, New England made slower going of recovery. The cod, whale oil, and the ships which Yankees had carried or sailed for English markets, especially in the West Indies, were also adversely affected by the war. And, of course, gaining entrance into British West Indies ports could not be done. By 1786 the cod fishers had brought their sales to about 80 percent of prewar quantities. They did so by pushing their ships into the French West Indies and into Spanish and Portuguese harbors.19
In the southern states recovery proceeded with difficulty. The rice country lost the old British bounty when America declared independence. Indigo production fell after the war—and Carolina planters generally struggled. Tobacco in the Chesapeake now could be shipped directly to the European continent—and was. Less Virginia tobacco was shipped to Europe in the 1780s than in the years just before the war, but full recovery was not far off. And the effort to grow wheat, corn, and flaxseed that began a generation or more before the Revolution continued.20
On the whole, overseas trade regained life with remarkable ease. To be sure, the exclusion from the British West Indies inhibited commerce, but elsewhere American ships found themselves welcome. Though the British excluded the Americans from the West Indies, they dealt with them on the same basis in home ports as they did those from the colonies. American shippers paid the same duties and received the same drawbacks as colonials, for example.
In this climate, prices obtained for American commodities remained high in the 1780s with tobacco and wheat doing especially well. Those American states exporting these products profited, of course, but New England and South Carolina which had to import grain found paying for it at world levels to be difficult.
Prices fell in most of the country, responding to the unfavorable balance of trade and to European levels. Public debt remained high as both Congress and the states struggled to deal with it. The debt and the flow of specie outside the country to meet the trade deficit helped to depress trade and to slow recovery.21
To an objective observer, economic recovery in the 1780s might have seemed promising, even impressive. At the time, however, the economic condition of the nation looked bleak, with prices depressed, public and private indebtedness heavy, and trade regulation chaotic. Americans understandably judged their prospects by short-term conditions, the circumstances that could be felt at the moment. Long-term comparisons were not available to them—and had they been, probably would not have lessened the uneasiness they felt.
Whether all Americans felt unease about the economy in the 1780s cannot be known. Nor is there any way to determine just how widespread the mood was that something had gone wrong with the Revolution. That there was anxiety about public policy is clear, and the expression of this mood did not confine itself to Congress or state legislatures. Newspapers throughout the United States published letters and essays virtually every week about grim conditions and the dangers they brought to virtue and republicanism. Ministers took up these themes on the Sabbath, and public-spirited citizen-writers produced pamphlets and poems on the American condition. And private correspondence suggests that the condition of the republic preoccupied many men who did not resort to the public prints to declare their opinions about it.22
This anxiety, which was perhaps fairly widespread, focused on Congress. Indeed dissatisfaction with Congress and its works—or lack of works—shaped a movement for constitutional reform in the 1780s.
The decline of Congress, a development which saw it gradually lose authority and public confidence, actually began well before the end of the war. As soon as the war started Congress found itself searching for ways to raise an army and keep it in being. Within a year the problem took on a form familiar to virtually all governments engaged in war—how money was to be raised. Congress of course resorted to currency finance, a technique much practiced in the long period before the Revolution. Before the Revolution, governments had printed money as they needed it and used it to meet their expenses. They had not proceeded without plan, however, or heedless of the obvious consequences of unrestrained printing presses. Rather they had retained their people’s support by assigning taxes for the redemption of the currency at the time it was issued. This relationship of paper money and taxes specified for its redemption gave everyone confidence in the money, and it was ordinarily made legal tender not only for the payment of taxes but also for private debts. If the people of a colony lost confidence that their government would, or could, collect the taxes, the currency depreciated.23
The people of America lost confidence in Congress’s ability to collect taxes fairly early in the Revolution. Congress issued six million dollars in paper money in 1775, a total which rose to $25 million by the end of the next year. Altogether, Congress put out around $200 million during the Revolution. Since it lacked the power to tax, it had to depend upon the states to retire the money. The states did collect the currency as payment for taxes, but they did not take it out of circulation. They needed it too badly for that, and consequently as fast as they collected it they spent it themselves. To make matters worse, they issued their own currency.24
Not surprisingly, depreciation began fairly early in 1776—in part because so much money had been emitted. Intangibles—most importantly the public’s faith that the war could be won—also affected the value of money. When, in November, Howe seemed about ready to push Washington out of Pennsylvania as well as New Jersey, the public found it difficult to believe that any American government would be able to redeem the debt. Nor did Congress encourage belief in itself when in 1778 it declared some $41 million it had emitted counterfeit—and offered holders the opportunity to exchange notes of this issue by purchasing loan certificates. This stratagem was really a means of compelling people to lend money to their government. People who held the “counterfeit” notes evaded this requirement, however, at considerable cost to their regard for Congress.25
Congress struck the worst blow against itself in late 1779 when it attempted to act responsibly. In September of that year it decided that when the total currency in circulation reached $200 million, it would stop all further emissions. At the time of this decision about $160 million had been issued; with the need for money almost desperate, the cutoff of emissions was only a few weeks in the future.26
The exhaustion of Congress evoked the demands on the states that followed—for specific supplies late in 1779 and larger requisitions of commodities early in the next year. Soon after, Congress added to state burdens the pay of Continental soldiers, with each state expected to pay its troops in regular service. The problem of the money supply remained, and Congress turned to a brutal resort to solve it. In March 1780 it virtually repudiated all its currency in circulation by revaluing it at one-fortieth of its face value. It tied repudiation to an emission of new currency and placed on the states the actual work of collecting the old and issuing the new. Public finance—and considerable power—had thus shifted to the states.27
As harsh as some of these measures appeared, they had a chance of working, and they might have forestalled much of further inflation and the decline in public morale. They did not work as they were intended to work, however. Not all these measures were compatible with one another, and in fact the way Congress and the states obtained the supplies to feed and otherwise sustain the army ruined the plan to retire the $200 million in old currency. From 1779 on both the state officials and Continental commissaries impressed food and clothing for the army. When they took supplies they gave certificates promising payment. Since the certificates bore no interest their holders looked for ways of ridding themselves of them in the states where they were received in payment of taxes. Meanwhile the old currency remained in circulation and was only slowly withdrawn. By June 1781 a little more than $30 million had been collected by the states.28
Congress lost power to the states in still another fashion: through servicing its debts. When Rhode Island’s rejection of the impost in 1781 destroyed hope that national obligations might be met through a uniform duty on imports, Congress resolved to try again. It did two years later with a more complicated proposal that it collect the impost and certain other duties as well. Several states approved at once but the necessary unanimity eluded Congress once more. While it waited, Congress urged the states to come forward with requisitions. Some did, though rarely with all that was requested and never with the amount in specie that Congress rashly thought it might collect.
Requisitions failed, and between October 1782 and September 1785 Congress made no new requests but waited—usually vainly—for the states to honor old ones. After 1785 it stopped paying interest on its debt to France, and in 1787 it proved unable to make all the payments on the principal. American creditors could not be paid by Congress either; nor could they be put off. They clamored for the interest owed them, and sometimes for the principal. They did not content themselves with appeals to Congress but pleaded their case to the state legislatures. As early as 1782 the states had responded with payments of interest and principal. Pennsylvania set the pattern in that year by issuing certificates of interest which were receivable for taxes. Others soon followed. And all took action to reduce their own debts. Virginia, for example, applied over $3 million collected between 1782 and 1785 toward its debt.29
If any possibility existed that Congress might reclaim control of public finance, it lay with the impost. By 1786 nine states had approved; several with severe conditions. Unwilling to sit on its hands while the states played with the impost and assumed real power in America, Congress tried a fresh expedient. In 1784 it had authorized the issue of indents, as certificates of interest were called, which states might use to pay congressional requisitions. It sent loan officers into the states with instructions to provide local officials with indents. These officials were to pay interest on the debt with the indents, observing a careful schedule of payments of interest. The first expenditure was to meet past interest due through 1782. Under this plan Congress authorized the states to accept the indents for taxes and to return them with a certain percentage of specie in response to requests for requisitions.30
