The Critical Period of American History

by John Fiske

Financial distress precipitates the political crisis.

There is no telling how long the wretched state of things which followed the Revolution might have continued, had not the crisis been precipitated by the wild attempts of the several states to remedy the distress of the people by legislation. That financial distress was widespread and deep-seated was not to be denied. At the beginning of the war the amount of accumulated capital in the country had been very small. The great majority of the people did little more than get from the annual yield of their farms or plantations enough to meet the current expenses of the year. Outside of agriculture the chief resources were the carrying trade, the exchange of commodities with England and the West Indies, and the cod and whale fisheries; and in these occupations many people had grown rich. The war had destroyed all these sources of revenue. Imports and exports had alike been stopped, so that there was a distressing scarcity of some of the commonest household articles. The enemy's navy had kept us from the fisheries. Before the war, the dock-yards of Nantucket were ringing with the busy sound of adze and hammer, rope-walks covered the island, and two hundred keels sailed yearly in quest of spermaceti. At the return of peace, the docks were silent and grass grew in the streets. The carrying trade and the fisheries began soon to revive, but it was some years before the old prosperity was restored. The war had also wrought serious damage to agriculture, and in some parts of the country the direct destruction of property by the enemy's troops had been very great. To all these causes of poverty there was added the hopeless confusion due to an inconvertible paper currency. The worst feature of this financial device is that it not only impoverishes people, but bemuddles their brains by creating a false and fleeting show of prosperity. By violently disturbing apparent values, it always brings on an era of wild speculation and extravagance in living, followed by sudden collapse and protracted suffering. In such crises the poorest people, those who earn their bread by the sweat of their brows and have no margin of accumulated capital, always suffer the most. Above all men, it is the labouring man who needs sound money and steady values. We have seen all these points amply illustrated since the War of Secession. After the War of Independence, when the margin of accumulated capital was so much smaller, the misery was much greater. While the paper money lasted there was marked extravagance in living, and complaints were loud against the speculators, especially those who operated in bread-stuffs. Washington said he would like to hang them all on a gallows higher than that of Haman; but they were, after all, but the inevitable products of this abnormal state of things, and the more guilty criminals were the demagogues who went about preaching the doctrine that the poor man needs cheap money. After the collapse of this continental currency in 1780, it seemed as if there were no money in the country, and at the peace the renewal of trade with England seemed at first to make matters worse. The brisk importation of sorely needed manufactured goods, which then began, would naturally have been paid for in the south by indigo, rice, and tobacco, in the middle states by exports of wheat and furs, and in New England by the profits of the fisheries, the shipping, and the West India trade. But in the southern and middle states the necessary revival of agriculture could not be effected in a moment, and British legislation against American shipping and the West India trade fell with crippling force upon New England. Consequently, we had little else but specie with which to pay for imports, and the country was soon drained of what little specie there was. In the absence of a circulating medium there was a reversion to the practice of barter, and the revival of business was thus further impeded. Whiskey in North Carolina, tobacco in Virginia, did duty as measures of value; and Isaiah Thomas, editor of the Worcester "Spy," announced that he would receive subscriptions for his paper in salt pork.

State of the coinage.

It is worth while, in this connection, to observe what this specie was, the scarcity of which created so much embarrassment. Until 1785 no national coinage was established, and none was issued until 1793. English, French, Spanish, and German coins, of various and uncertain value, passed from hand to hand. Beside the ninepences and fourpence-ha'-pennies, there were bits and half-bits, pistareens, picayunes, and fips. Of gold pieces there were the johannes, or joe, the doubloon, the moidore, and pistole, with English and French guineas, carolins, ducats, and chequins. Of coppers there were English pence and halfpence and French sous; and pennies were issued at local mints in Vermont, Massachusetts, Connecticut, New Jersey, and Pennsylvania. The English shilling had everywhere degenerated in value, but differently in different localities; and among silver pieces the Spanish dollar, from Louisiana and Cuba, had begun to supersede it as a measure of value. In New England the shilling had sunk from nearly one fourth to one sixth of a dollar; in New York to one eighth; in North Carolina to one tenth. It was partly for this reason that in devising a national coinage the more uniform dollar was adopted as the unit. At the same time the decimal system of division was adopted instead of the cumbrous English system, and the result was our present admirably simple currency, which we owe to Gouverneur Morris, aided as to some points by Thomas Jefferson. During the period of the Confederation, the chaotic state of the currency was a serious obstacle to trade, and it afforded endless opportunities for fraud and extortion. Clipping and counterfeiting were carried to such lengths that every moderately cautious person, in taking payment in hard cash, felt it necessary to keep a small pair of scales beside him and carefully weigh each coin, after narrowly scrutinizing its stamp and deciphering its legend.

Cost of the war; Robert Morris and his immense services.

In view of all these complicated impediments to business on the morrow of a long and costly war, it was not strange that the whole country was in some measure pauperized. The cost of the war, estimated in cash, had been about $170,000,000—a huge sum if we consider the circumstances of the country at that time. To meet this crushing indebtedness Mr. Hildreth reckons the total amount raised by the states, whether by means of repudiated paper or of taxes, down to 1784, as not more than $30,000,000. No wonder if the issue of such a struggle seemed quite hopeless. In many parts of the country, by the year 1786, the payment of taxes had come to be regarded as an amiable eccentricity. At one moment, early in 1782, there was not a single dollar in the treasury. That the government had in any way been able to finish the war, after the downfall of its paper money, was due to the gigantic efforts of one great man,—Robert Morris, of Pennsylvania. This statesman was born in England, but he had come to Philadelphia in his boyhood, and had amassed an enormous fortune, which he devoted without stint to the service of his adopted country. Though opposed to the Declaration of Independence as rash and premature, he had, nevertheless, signed his name to that document, and scarcely any one had contributed more to the success of the war. It was he who supplied the money which enabled Washington to complete the great campaign of Trenton and Princeton. In 1781 he was made superintendent of finance, and by dint of every imaginable device of hard-pressed ingenuity he contrived to support the brilliant work which began at the Cowpens and ended at Yorktown. He established the Bank of North America as an instrument by which government loans might be negotiated. Sometimes his methods were such as doctors call heroic, as when he made sudden drafts upon our ministers in Europe after the manner already described. In every dire emergency he was Washington's chief reliance, and in his devotion to the common weal he drew upon his private resources until he became poor; and in later years—for shame be it said—an ungrateful nation allowed one of its noblest and most disinterested champions to languish in a debtor's prison. It was of ill omen for the fortunes of the weak and disorderly Confederation that in 1784, after three years of herculean struggle with impossibilities, this stout heart and sagacious head could no longer weather the storm. The task of creating wealth out of nothing had become too arduous and too thankless to be endured. Robert Morris resigned his place, and it was taken by a congressional committee of finance, under whose management the disorders only hurried to a crisis.

The craze for paper-money, 1786.

By 1786, under the universal depression and want of confidence, all trade had well-nigh stopped, and political quackery, with its cheap and dirty remedies, had full control of the field. In the very face of miseries so plainly traceable to the deadly paper currency, it may seem strange that people should now have begun to clamour for a renewal of the experiment which had worked so much evil. Yet so it was. As starving men are said to dream of dainty banquets, so now a craze for fictitious wealth in the shape of paper money ran like an epidemic through the country. There was a Barmecide feast of economic vagaries; only now it was the several states that sought to apply the remedy, each in its own way. And when we have threaded the maze of this rash legislation, we shall the better understand that clause in our federal constitution which forbids the making of laws impairing the obligation of contracts. The events of 1786 impressed upon men's minds more forcibly than ever the wretched and disorderly condition of the country, and went far toward calling into existence the needful popular sentiment in favour of an overruling central government.

Agitation in southern and middle states.