Reasons for the Failure of the Articles of Confederation'

To understand the seriousness of the situation for this influential portion of the population, it is necessary to examine somewhat closely the precise ways in which the confederate system failed to afford adequate guarantees to property and commerce.

1. The most obvious defect of the government under the Articles was its inability to pay even the interest on the public debt, most of which had been incurred in support of the war. In spite of the most heroic efforts, the arrears on that portion of the debt held by American citizens increased within five years (1784-89) from $3,109,000 to $11,493,858, and at the same time the arrears on the foreign debt multiplied about twenty-five fold. In short, a large group of public creditors were failing to receive the interest due them on government securities. It would have been exercising almost superhuman faculties for them to have quietly acquiesced in the indefinite continuance of such a government and such a policy.

Indeed, the system of raising money provided by the Articles of Confederation was so constructed as to give them no hope that, during its continuance, the long-delayed payments could ever be effected. The confederate Congress had no immediate taxing power: all charges of war and all other expenses were to be defrayed out of a common treasury supplied through levies made by the legislatures of the several states in proportion to the value of the land within each state. Limited to one form of taxation direct taxation by quotas at that and dependent upon the will of the state legislatures for all payments, the confederate Congress really could do nothing but recommend contributions, and was in fact compelled to beg from door to door only to meet continued rebuffs, and to sink deeper and deeper in debt from year to year.

Not only was the Congress thus limited in its resources to quotas imposed on the states; the very principle of apportionment according to the value of lands, buildings, and improve

1 For Madison's concise summary, see Readings, p. 38.

This tax, it will be noted, fell principally on the freeholders; and as they constituted the major portion of the voting population of each state, it is easy to see why the state legislatures were remiss in paying their respective quotas into the common treasury.

ments was itself unjust as measured by the prevailing doctrines of taxation. "The wealth of nations," it was urged in The Federalist, "depends upon an infinite variety of causes. . . . There can be no common measure of national wealth, and, of course, no general or stationary rule by which the ability of a state to pay taxes can be determined. The attempt, therefore, to regulate the contributions of the members of the confederacy by any such rule cannot fail to be productive of glaring inequality and extreme oppression. This inequality would of itself be sufficient in America to work the eventual destruction of the Union, if any mode of enforcing compliance with its requisitions could be devised." 1

This objection that the system of taxation was unjust only added a welcome sanction to the natural dislike of states to pay direct contributions in a lump sum to a distant central government — a dislike which Bismarck discovered long afterward in his experience with the matricular contributions in the German Empire. Consequently the states of the Union vied with each other in delaying the payments of their quotas into the common treasury. As the modern holder of personal property pleads the evasions of others as a justification for not paying taxes on the full valuation of his own property, so each backward state pleaded the delays of other states, and hesitated to pay even when it could, on the ground that it might contribute more than its share. During a period of about four years, from November 11, 1781, to January 1, 1786, Congress laid on the states more than $10,000,000 in requisitions, and received in payment less than one-fourth of the amount demanded. During the fourteen months preceding the formation of the new federal Constitution less than half a million was paid into the confederate treasury - not enough to pay the interest on the foreign debt alone. Had it not been for the loans which the bankers of Holland were willing to make to the struggling republic, the confederacy would surely have been confronted by bankruptcy and total ruin before relief came.

2. The dissatisfaction of the financial interests was more than equalled by the dissatisfaction of traders and manufacturers, both in America and Europe, with the unbusiness-like character

1 The Federalist, No. XXI.

of the confederate Congress. It is true that the Congress could regulate foreign commerce by making treaties with foreign powers and that the states were forbidden to lay any imposts or duties which might interfere with certain of these agreements, but in practice the confederate government was unable to enforce treaty stipulations on the unwilling states that insisted on regulating commerce in their own way. The states bid against one another for trade; they laid duties on goods passing through their limits, thus stirring up strife among themselves; and, what was no less disastrous, they lost the advantages which a reasonable degree of cooperation would have gained.'

The disordered state of American commerce under the Articles of Confederation can best be described in the felicitous language of John Fiske: "The different states, with their different tariff and tonnage acts, began to make commercial war upon one another. No sooner had the other three New England states virtually closed their ports to British shipping than Connecticut threw hers wide open, an act which she followed up by laying duties upon imports from Massachusetts. Pennsylvania discriminated against Delaware, and New Jersey, pillaged at once by both her greater neighbors, was compared to a cask tapped at both ends. The conduct of New York became especially selfish and blameworthy. . . . Of all the thirteen states, none behaved worse except Rhode Island.

"A single instance, which occurred early in 1787, may serve as an illustration. The city of New York had long been supplied with firewood from Connecticut, and with butter and cheese, chickens and garden vegetables, from the thrifty farms of New Jersey. This trade, it was observed, carried thousands of dollars out of the city and into the pockets of detested Yankees and despised Jerseymen. It was ruinous to domestic industry, said the men of New York. . . . Acts were accordingly passed,

"No nation acquainted with the nature of our political system." declared Hamilton in No. XXII of The Federalist, "would be unwise enough to enter into stipulations with the United States, conceding on their part privileges of importance, while they were apprised that engatements on the part of the union might at any moment be violated by its members, and while they found from experience that they might enjoy very advantage they desired in our markets without granting us any in turn, but such as momentary convenience might suggest."

obliging every Yankee sloop which came down through Hell Gate, and every Jersey market boat which was rowed across from Paulus Hook to Cortlandt Street, to pay entrance fees and obtain clearances at the custom-house, just as was done by ships from London or Hamburg; and not a cartload of Connecticut firewood could be delivered at the back door of a country house in Beekman Street until it should have paid a heavy duty. The New Jersey legislature made up its mind to retaliate. The city of New York had lately bought a small patch of ground on Sandy Hook, and had built a lighthouse there. . . . New Jersey gave vent to her indignation by laying a tax of $1800 a year on it. Connecticut was equally prompt. At a great meeting of business men, held at New London, it was unanimously agreed to suspend all commercial intercourse with New York. Every merchant signed an agreement, under penalty of $250 for the first offence, not to send any goods whatever into the hated state for a period of twelve months." 1

3. The monetary system under the Articles of Confederation was even in worse confusion, if possible, than commerce. During the Revolution, Congress had created an enormous amount of paper money which so speedily declined in value that in 1780 one paper dollar was worth less than two cents in specie. It took eleven dollars of this money to buy a pound of brown sugar in Virginia; seventy-five dollars for a yard of linen; and one hundred dollars for a pound of tea. Jefferson records that he paid his physician $3000 for two calls in 1781, and gave $355.50 for three quarts of brandy. After the Revolution, the great majority of states continued to issue paper money without any currency basis. In Rhode Island a most extraordinary conflict occurred over the control of the monetary system. The farmers, being in a majority, secured the passage of a law authorizing the issuance of money to themselves on the basis of mortgages against their farms. The merchants refused to accept this paper, and it promptly declined to about one-sixth of its nominal value. Heavy penalties then were placed upon those who would not accept it, but without avail. Merchants closed their shops rather than yield, and farmers refused to bring produce to town in the hope of starving the merchants out. In nearly every

J. Fiske, The Critical Period of American History, pp. 144-147.

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