Diary

Author: Benjamin Rush

Historical Summary

The American Revolution, like other military conflicts, was marked by a rapid rise in the cost of living, a phenomenal decline in the value of Continental paper money, and an orgy of profiteering and black marketeering. To meet this threat the New England states sent delegates to a convention at Providence toward the close of 1776, where a formula was adopted for curbing wages and prices. This action was justified on the ground that something had to be done to keep up the morale of the boys in the armed forces, who resented profiteering back home by capital and labor.

The proceedings of the convention were laid before Congress on January 28, 1777, and evoked a spirited debate. For the inside story we have to go behind the journals of the Congress and read the letters of the delegates to their wives and friends back home. The debates are similar to the polemics following the Second World War between those who favored continuing the OPA and those who maintained that artificial price controls were ineffective so long as bank credit was permitted to expand at an alarming rate. John Witherspoon, Princeton’s President, James Wilson, and other economic realists maintained that it was ineffectual to regulate prices and wages while the issuance of paper money went on unchecked. Others viewed wage and price controls as an invasion of property rights and expressed concern over the tendency of the states to act in combination.

Congress was so sharply divided that it refused to take a stand one way or the other, and passed the buck to the states. Despite the decline in the value of the currency, the states continued to fix wages and prices right down until 1780. Pelatiah Webster, a noted economist of those days, likened the "utmost effect" of these laws to "that of water sprinkled on a blacksmith’s forge, which indeed deadens the flame for a moment, but never fails to increase the heat and force of the internal fire."

Too often do parliamentary journals prove disappointingly routine, confined to recording motions and votes, and lacking in reportorial interest. The Journals of Congress are no exception. However, we are fortunate that the members of Congress were an unusually literate group of sharp-eared reporters who, in their private letters and diaries, have left us rather full accounts of what really went on. While these accounts are not official reports, their authenticity is no whir diminished by the fact that they were written in confidence with no thought of publication.

The debates on price- and wage-fixing which took place in Congress on February 14, 1777, were carefully preserved in the diary of one of the chief participants, Dr. Benjamin Rush, Philadelphia’s leading man of medicine. Aside from his political efforts, Rush, who labored heroically in the terrible yellow fever epidemic of 1793, had ideas in the field of psychiatry which stamp him as a true precursor of the Freudian psycho-analysts. In opposing the resolution he was supported by the President of Princeton (then the College of New Jersey), an able Presbyterian clergyman named John Witherspoon, who in this debate demonstrated his fundamental empirical outlook on life and his forthright common sense. Another Scotsman, James Wilson, lined up on the same side. Perhaps the ablest exponent of the American constitutional position in the struggle with Britain, Wilson had already established himself in Philadelphia as a foe of the democratic forces. At the time of the Constitutional Convention he was to oppose restrictions on the suffrage, however.

The chief advocate of wage and price controls was a distinguished Virginian, Richard Henry Lee, an aristocrat of aristocrats, who leaned over in favor of democracy and advocated imposing checks on slavery. His libertarian ideas were written into the first ten amendments to the Constitution.

Key Quote

"We estimate our virtue by a false barometer when we measure it by the price of goods."

Benjamin Rush

Founding Fathers Fight Inflation

[1776]

February 14, 1777

Upon the question whether the Congress should recommend to the States to adopt the plan for reducing and regulating the price of labor, manufactures, imports, and provisions which had been adopted in the four New England States.

It was said in the negative by Mr. James Smith. That such a recommendation would interfere with the domestic policies of each State which were of too delicate a nature to be touched by the Congress.

Dr. Rush: I am against the whole of the resolution. It is founded in the contrary of justice, policy and necessity as has been declared in the resolution. The wisdom and power of government have been employed in all ages to regulate the price of necessaries to no purpose. It was attempted in England in the reign of Edward II by the English parliament, but without effect. The laws for limiting the price of everything were repealed, and Mr. Hume who mentions this fact records even the very attempt as a monument of human folly.

The Congress with all its authority has failed in a former instance of regulating the price of goods. You have limited Bohea tea to ¾ of a dollar, and yet it is daily sold before your eyes for 30s. The Committee of Philadelphia limited the price of West India goods about a year ago. But what was the consequence? The merchants, it is true, sold their rum, sugar and molasses at the price limited by the committee, but they charged a heavy profit upon the barrel, or the paper which contained the rum or the sugar.

Consider, Sir, the danger of failing in this experiment. The salvation of this continent depends upon the authority of this Congress being held as sacred as the cause of liberty itself. Suppose we should fail of producing the effects we wish for by the resolution before you. Have we any character to spare? Have we committed no mistakes in the management of the public affairs of America? We have, Sir. It becomes us therefore to be careful of the remains of our authority and character.

It is a common thing to cry aloud of the rapacity and extortion in every branch of business, etc., among every class of men. This has led some people to decry the public virtue of this country. We estimate our virtue by a false barometer when we measure it by the price of goods. The extortion we complain of arises only from the excessive quantity of our money. Now, Sir, a failure in this attempt to regulate the price of goods will encrease the clamors against the rapacity of dealers, and thus depreciate our public virtue.

Consider, Sir, the consequence of measuring our virtue by this false standard. You will add weight to the arguments used at St. James’s to explode patriotism altogether, and by denying its existence in this country destroy it forever. Persuade a woman that there is no such thing as chastity, and, if there is, that she does not possess it, and she may be easily seduced if she was as chaste as Diana. Sir, the price of goods may be compared to a number of light substances in a bason of water. The hand may keep them down for a while, but nothing can detain them on the bottom of the bason but an abstraction of the water. The continent labours under a universal malady. From the crown of her head to the sole of her feet she is full of disorders. She requires the most powerful tonic medicines. The resolution before you is nothing but an opiate. It may compose the continent for a night, but she will soon awaken again to a fresh sense of her pain and misery.

Colonel Richard Lee, in the affirmative. Mr. President, The learned Doctor has mistook the disorder of the continent. She labours under a spasm, and spasms, he knows, require palliative medicines. I look upon the resolution before you only as a temporary remedy. But it is absolutely necessary. It is true the regulations formerly recommended by Congress were not faithfully carried into execution, but this was owing to the want of regular governments. New and regular governments have been instituted in every part of America, and these will enable all classes of people to carry the resolution into execution.

Mr. Samuel Chase, in the affirmative. Mr. President, this is a necessary resolution. It is true it failed formerly in Philadelphia because it abounded with Tories. But it succeeded in Maryland. It must be done. The mines of Peru would not support a want at the present high price of the necessaries of life. Your soldiers cannot live on their pay. It must be raised unless we limit the price of the clothing and other articles necessary for them.

Mr. Seargant, Negative. The price of goods cannot be regulated while the quantity of our money and the articles of life are allowed to fluctuate

Colonel James Wilson, Negative. There are certain things, Sir, which absolute power cannot do. The whole power of the Roman emperors could not add a single letter to the alphabet. Augustus could not compel old bachelors to marry. He found out his error, and wisely repealed his edict lest he should bring his authority into contempt. Let us recommend the resolution to the consideration of the States only without giving our opinion on it, that they may discuss it with unbiassed minds.

Dr. Witherspoon, Negative. Sir, it is a wise maxim to avoid those things which our enemies wish us to practise. Now I find that our enemies have published the act of the assembly of Connecticut for regulating the price of necessaries in the New York paper in order to shew our distress from that quarter. Remember laws art not almighty. It is beyond the power of despotic princes to regulate the price of goods. I fear if We fail in this measure we shall weaken the authority of Congress. We shall do mischief by teaching the continent to rest upon it. If we limit one article, we must limit every thing, and this is impossible.

Mr. John Adams, Negative. Perhaps I may here speak against the sense of my constituents, but I cannot help it. I much doubt the justice, policy and necessity of the resolution. The high price of many articles arises from their scarcity. If we regulate the price of imports we shall immediately put a stop to them forever.

Dr. Rush. Sir, it has been said that the high price of goods in Philadelphia arose from the monopolies and extortion of the Tories. Here I must say the Tories are blamed without cause. A similar spirit of speculation prevails among the Whigs in Philadelphia. They are disposed to realise thief money in lands or goods. But this is not owing to any timidity or disaffection among them. They fear the further depreciation of your money by future emissions. Stop your emissions of money and you will stop speculation. I am not apt to reply to words, much less to play upon them. The gentleman from Virginia has miscalled the malady of the continent. It is not a spasm, but a dropsy. I beg leave to prescribe two remedies for it. (1) Raising the interest of the money we borrow to six per cent. This, like a cold bath, will give an immediate spring to our affairs; and (2) taxation. This, like tapping, will diminish the quantity of our money, and give a proper value to what remains.

The resolution was amended. The plan of the four New England States was referred only to the other States, to act as they thought proper.

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Chicago: Benjamin Rush, Diary, ed. Benjamin Rush in History in the First Person: Eyewitnesses of Great Events: They Saw It Happen, ed. Louis Leo Snyder and Richard B. Morris (Harrisburg, Pa.: Stackpole Co., 1951), Original Sources, accessed April 24, 2024, http://originalsources.com/Document.aspx?DocID=7AYI543RJHXB6J6.

MLA: Rush, Benjamin. Diary, edited by Benjamin Rush, in History in the First Person: Eyewitnesses of Great Events: They Saw It Happen, edited by Louis Leo Snyder and Richard B. Morris, Harrisburg, Pa., Stackpole Co., 1951, Original Sources. 24 Apr. 2024. http://originalsources.com/Document.aspx?DocID=7AYI543RJHXB6J6.

Harvard: Rush, B, Diary, ed. . cited in 1951, History in the First Person: Eyewitnesses of Great Events: They Saw It Happen, ed. , Stackpole Co., Harrisburg, Pa.. Original Sources, retrieved 24 April 2024, from http://originalsources.com/Document.aspx?DocID=7AYI543RJHXB6J6.