Hopes. CHAPTER X THE FIRST YEARS OF PEACE, 1783-1787 FINANCIAL EMBARRASSMENTS THE first years of independence were naturally full of difficulties. An immense debt, state and continental, must be provided for, trade, interrupted by the war, must be reëstablished, the vast Doubts and tracts of western land must be developed, society must be readjusted on a purely American basis, the bitterness felt by the patriotic party for the tories must be allowed to cool, remnants of local jealousies must be dealt with, and the feeling for union, so weak that the Articles of Confederation were but "a rope of sand," must be strengthened and formed into a central government which could command respect at home and abroad. Many persons felt that these embarrassmerts could not be surmounted. They thought chaos would ensue, and after that would come some violent reorganization which would result in two or more states under some kind of European protection. They did not understand the practical quality of the Americans, who, through many years, had boldly solved new and formidable problems, and who, under the lead of men like Washington, Hamilton, Madison, John Adams, and James Wilson, discovered a way to bring the people to accept an efficient form of central government, under which financial, industrial, and social difficulties disappeared. The years 1781-1787 were full of these perplexities: the three years following saw them passing away through the efforts of the people. The Revolutionary Debt. The expenses of the revolution were met by taxation, loans, and issues of paper money. Congress could not lay taxes, but made requisitions on the states, receiving from this uncertain source half a million dollars a year. From foreign loans $7,830,517 was received during the war, and so great was the distress that of this sum $1,663,992 was used to pay the interest on the domestic debt. The foreign loans were derived as follows: from France $5,352,500, from Holland $1,304,000, and from Spain $174,017. During the next six years over $2,000,000 was borrowed abroad, most of it to pay the interest on the foreign debt. Nevertheless, in 1790 we still owed $1,640,071 foreign interest. The domestic continental loans of the war amounted to $28,353,832, and as the interest on these was not paid after March 1, 1782, there was in 1790 an arrearage of this kind of interest amounting to $13,030,168. FINANCIAL DIFFICULTIES 223 The state debts in behalf of the war were very large. Some states were paying their portions as fast as they could, others were doing little or nothing in that way. No suggestion of assumption had yet been made. After the enactment of Hamilton's assumption scheme in 1790 the national government assumed these debts to the amount of $18,271,787. The condition of the debt was a blot on the country's honor and plainly indicated that the tax-laying power of congress ought to be strengthened. The first issues of continental paper money were moderate, and for a year the bills passed at par, but as larger quantities were emitted they depreciated rapidly. In two years their value as Continental compared with specie was three to one, by September 1, Money. 1779, it was thirty-eight to one, and in March, 1780, fifty to one, nearly $200,000,000 being then in circulation. Depreciation continued until the ratio was one hundred to one. In March, 1780, congress called in the currency at forty to one, to be paid in taxes and destroyed. It also provided for a "new tenor" issue at forty to one, bearing interest at 5 per cent. About $120,000,000 was thus paid in and canceled. After 1790 the government redeemed $6,000,000 more at one hundred to one, and the rest was lost to the holders. The continental currency became an object of popular contempt, and in 1781 a facetious fellow of Philadelphia plastered his dog with dollar bills and led him through the streets to the amusement of the onlookers. The states also issued paper money, about $200,000,000 in all. It depreciated alarmingly, and much of it was not redeemed. This large amount of unredeemed money, continental and state, was a forced contribution from the people who held it, and involved a great sacrifice on their part for the cause of independence. Discontent. The wretched state of the finances brought congress to the verge of conflict with the army, which in the last winter of the war remained in camp at Newburg, on the Hudson, watching the British. force in New York while the negotiators in Paris com- in the Army. pleted their task. The pay of the soldiers was badly in arrears, and they began to fear that if they went home without it they would lose it entirely. Some of the officers inflamed their suspicions, and in January, 1783, an address in their behalf was presented to congress. It contained a veiled threat of misfortune if redress was not granted. Congress could do nothing more than promise a month's pay, and the discontent increased. All this did not occur without arousing keen interest elsewhere. Gouverneur Morris, assistant superintendent of finance and an extreme advocate of stronger government, declared that Possible good must come out of the convulsion he thought im- Results. minent. Hamilton, also hoping for a stronger govern ment, but more practical as a public man, hoped that Washington would take control of the movement and through it force the country to strengthen the hands of congress. He wrote cautiously to Washington to that effect; but all his calculations were lost. Washington was not supple-minded, like Hamilton. He was a man of simple loyalty, and he considered the threats of armed interference disloyal and dishonorable. It cannot be said that men like Hamilton and Morris encouraged the dissatisfaction of the army, but the holders of the continental bonds were not so guiltless. This class was strong in PennsylPart of the vania, Massachusetts, Rhode Island, and New HampSpeculators. shire, former trading states where capital was thrown out of employment during the war. Agricultural states, lacking a market for their products, were in no position to invest in bonds, but were more likely to sell what they already had. Thus by 1783 the speculators had bought up the certificates of debt, and the representatives from the commercial states favored a strong financial policy, while the delegates from the agricultural states were not so urgent in the matter. Then the impression got abroad in the army that the capitalists in Philadelphia sympathized with the soldiers and would help them force the delinquent states to their duty. Early in March an agent of the speculators arrived at Newburg and was closeted with General Gates, second in command to Washington. On the tenth an address was secretly circulated, urging the men not to disband until they were paid, and warning them against any man who would counsel otherwise. At the same time a meeting of the higher officers was called for the eleventh. Washing Washington discovered the plot a few hours before the officers were to meet and acted with characteristic decision. He published at once a general order decrying meetings secretly called and ton's Action. openly appointing a meeting for the fifteenth. Gates was checkmated, abandoned his own meeting, but hoped to control the one just called, where as senior officer he would preside. No one thought the commander-in-chief would attend, but the deliberations had hardly begun on the fifteenth when he entered and took the floor to speak. Ordinarily of a quiet manner he was now agitated and greatly in earnest. He denounced the arguments of the secret address, assured his hearers that the best exertions in their behalf would be made, and left the room with the confidence of all but the chief plotters, many of his hearers being in tears. Resolutions were then offered full of patriotic utterances and expressing abhorrence of the recent secret circular. Gates, in the chair, put the question and had the humiliation to announce it was carried unanimously. Thenceforth the army was loyal. June 2 it was disbanded, and the soldiers went quietly home, their accounts unsettled, and, as Washington said, "without a farthing of money in their pockets." One incident only marred the dispersal. A body of raw recruits were at Lancaster, Pennsylvania, their pay also in arrears. When FAILURE OF AMENDMENTS 225 Congress in Flight. they heard the Newburg army was going home without pay they became mutinous, and eighty of them marched to Philadelphia, vowing they would have their rights. They were joined by some veterans, and marched through the streets, drinking, threatening, but attempting no actual violence. Congress applied to the Pennsylvania executive, a Council of State, for protection, but they replied that they dare not call out the militia lest they join the mutineers. Then congress adjourned, and after three days fled to Princeton. Philadelphia declared the flight unnecessary and thought it was instigated by delegates who wished to deprive the city of the honor of being the capital of the confederation. Two attempts to give Con gress the The financial distress of the day suggested a grant of taxing power to the central government. In 1781 the states were called upon to amend the articles of confederation to allow congress to collect an import duty of five per cent. All consented but Rhode Island, whose refusal defeated the proposition. Her very smallness made her jealous of the loss of authority, and her large dependence on commerce made her un- Taxing willing to surrender a part of what was her surest source of Power. revenue. Virginia, who assented at first, withdrew her approval on reflection. The prospect of mutiny in the army led congress to take up the question again in 1783. This time imposts were to be laid for twenty-five years on specified articles, the proceeds to go to paying interest on the debt; and the plan was to be adopted if all the states consented. Now was seen how much more the states clung to their power with the disappearance of danger from England. Virginia and North Carolina accepted without hesitation, but other states held back. Impost and no-impost became slogans for two classes, merchants, owners of the public bonds, and those liberals who foresaw the advantages of union constituting one class, and the great body of farmers, shopkeepers, and illiberal persons who believed concentration would lead to despotism constituting the other. Interest and theory were combined on each side. After three years' debate, Massachusetts, New Hampshire, Connecticut, New Jersey, South Carolina, and Pennsylvania had granted the impost, and Delaware was willing if all the other states granted it. New York, Rhode Island, Maryland, and Georgia held out, or granted it on such conditions that the benefit was slight. The failure of this second attempt to give the central government authority to collect taxes made a deep impression on the people, before whom a proposition for a revision of the articles of confederation was already submitted. INDUSTRY AND TRADE AFTER THE WAR Although the war greatly reduced exports of grain, tobacco, fish, lumber, and rum, and cut off the importation of a hundred useful Q articles, it did not produce absolute distress. Food and the simpler articles of manufacture could be had in abundance; and while men fought for liberty they would forego finery. They were Conditions. generally used to hardships and could bear them lightly when they would. When independence was won it would De time enough to think of making money. Industrial Trade with But peace brought unexpected difficulties. The British ports were closed to us now as to other foreigners, unless we paid high duties. Continental ports were open, but England was the great manufacturing country of the world: it was her implements, cloths, and other merchandise we were accustomed to use, and how could we buy them unless we sent her our products? Have them we would, £3,700,000 worth in 1784, and as we sent to England only £750,000 worth in that year there was a mighty draining of specie to settle the balance. At the same time England laid a high duty on whale oil, a blow at our whalers, and the trade with the British West Indies, so lucrative before the war, was now forbidden by the navigation laws, in order to protect the British merchants and shipowners. Some men of the day resented the idea that we must trade with England. Was not France our friend and her ports open? But every merchant knew it was not possible to build up trade with France. We were bred on British commerce, and our taste would not change quickly. So while trade with the continent and in the Orient gradually reëstablished itself, it did not fill the want. England's It was, of course, England's interest to keep our trade, but it was hard to make her realize it. She seemed to think we could not choose but trade with her. Then retaliation was thought of. But no one dreamed that thirteen states could act effectively against England. It was a task for the central authority, and in 1784 congress asked the states to grant for fifteen years the right to pass a navigation law. As England had shown no willingness to make a commercial treaty, the power was also asked to exclude from our ports certain goods, the property of citizens of a nation not in treaty with us. The New England states were earnest for the measure, the Middle States supported it without enthusiasm, but the South suspected that it would lead to an advantage for the trading class at the expense of the farmers. So many restrictions were placed by the states on the exercise of the power that their votes granting it were futile. Adams sent to London. A Then diplomacy was tried. John Adams, in Paris, was appointed minister to England, with instructions to make a commercial treaty and secure the execution of the treaty of 1783. He arrived in London in May, 1785, and was received with marks of good will by the king; but the negotiation proceeded slowly. England understood her advantage. She commanded the situation and knew it. Why should she give up her ancient |