Defects of the Confederation (1789)

BY REVEREND JEDIDIAH MORSE

NO sooner was peace restored by the definitive treaty, and the British troops withdrawn from the country, than the United States began to experience the defects of their general government. While an enemy was in the country, fear, which had first impelled the colonists to associate in mutual defence, continued to operate as a band of political union. It gave to the resolutions and recommendations of congress the force of laws, and generally commanded a ready acquiescence on the part of the state legislatures. Articles of confederation and perpetual union had been framed in congress, and submitted to the consideration of the states, in the year 1778. . . .

These articles however were framed during the rage of war, when a principle of common safety supplied the place of a coercive power in government; by men who could have had no experience in the art of governing an extensive country, and under circumstances the most critical and embarrassing. To have offered to the people, at that time, a system of government armed with the powers necessary to regulate and controul the contending interests of thirteen States, and the possessions of millions of people, might have raised a jealousy between the states or in the minds of the people at large, that would have weakened the operations of war, and perhaps have rendered a union impracticable. Hence the numerous defects of the confederation.

On the conclusion of peace, these defects began to be felt. Each state assumed the right of disputing the propriety of the resolutions of congress, and the interest of an individual state was placed in opposition to the common interest of the union. In addition to this source of division, a jealousy of the powers of congress began to be excited in the minds of people. . . .

. . . Jealousy of power had been universally spread among the people of the United States. The destruction of the old forms of governments, and the licentiousness of war had, in a great measure, broken their habits of obedience; their passions had been inflamed by the cry of despotism; and like centinels, who have been suddenly surprized by the approach of an enemy, the rustling of a leaf was sufficient to give them an alarm. This spirit of jealousy . . . operated with other causes to relax the energy of our federal operations.

During the war, vast sums of paper currency had been emitted by Congress, and large quantities of specie had been introduced, towards the close of the war, by the French army, and the Spanish trade. This plenty of money enabled the states to comply with the first requisitions of Congress; so that during two or three years, the federal treasury was, in some measure, supplied. But when the danger of war had ceased, and the vast importations of foreign goods had lessened the quantity of circulating specie, the states began to be very remiss in furnishing their proportion of monies. The annihilation of the credit of the paper bills had totally stopped their circulation, and the specie was leaving the country in cargoes, for remittances to Great Britain; still the luxurious habits of the people, contracted during the war, called for new supplies of goods, and private gratification seconded the narrow policy of state-interest in defeating the operations of the general government.

Thus the revenues of Congress were annually diminishing; some of the states wholly neglecting to make provision for paying the interest of the national debt; others making but a partial provision, until the scanty supplies received from a few of the rich states, would hardly satisfy the demands of the civil list.

This weakness of the federal government, in conjunction with the flood of certificates or public securities, which Congress could neither fund nor pay, occasioned them to depreciate to a very inconsiderable value. . . .

Pennsylvania indeed made provision for paying the interest of her debts, both state and federal; assuming her supposed proportion of the continental debt, and giving the creditors her own state notes in exchange for those of the United States. The resources of that state are immense, but she has not been able to make punctual payments, even in a depreciated paper currency.

Massachusetts, in her zeal to comply fully with the requisitions of Congress, and satisfy the demands of her own creditors, laid a heavy tax upon the people. This was the immediate cause of the rebellion in that state, in 1786. But a heavy debt lying on the state, added to burdens of the same nature, upon almost every incorporation within it; a decline, or rather an extinction of public credit; a relaxation and corruption of manners, and a free use of foreign luxuries; a decay of trade and manufactures, with a prevailing scarcity of money; and, above all, individuals involved in debt to each other—these were the real, though more remote causes of the insurrection. . . .

But the loss of public credit, popular disturbances, and insurrections were not the only evils which were generated by the peculiar circumstances of the times. The emissions of bills of credit and tender laws, were added to the black catalogue of political disorders. . . .

The advantages the colonies had derived from bills of credit, under the British government, suggested to Congress, in 1775, the idea of issuing bills for the purpose of carrying on the war. And this was perhaps their only expedient. Money could not be raised by taxation—it could not be borrowed. The first emissions had no other effect upon the medium of commerce, than to drive the specie from circulation. But when the paper substituted for specie, had, by repeated emissions, augmented the sum in circulation, much beyond the usual sum of specie, the bills began to lose their value. The depreciation continued in proportion to the sums emitted, until seventy, and even one hundred and fifty nominal paper dollars, were hardly an equivalent of one Spanish milled dollar. Still from the year 1775 to 1781, this depreciating paper currency was almost the only medium of trade. It supplied the place of specie, and enabled Congress to support a numerous army; until the sum in circulation amounted to two hundred millions of dollars. But about the year 1780, specie began to be plentiful, being introduced by the French army, a private trade with the Spanish islands, and an illicit intercourse with the British garrison at New York. This circumstance accelerated the depreciation of the paper bills, until their value had sunk almost to nothing. In 1781, the merchants and brokers in the southern states, apprehensive of the approaching fate of the currency, pushed immense quantities of it suddenly into New England—made vast purchases of goods in Boston—and instantly the bills vanished from circulation. . . .

Industry likewise had suffered by the flood of money which had deluged the states. The prices of produce had risen in proportion to the quantity of money in circulation, and the demand for the commodities of the country. This made the acquisition of money easy, and indolence and luxury with their train of desolating consequences, spread themselves among all descriptions of people.

But as soon as hostilities between Great-Britain and America were suspended, the scene was changed. The bills emitted by congress had long before ceased to circulate; and the specie of the country was soon drained off to pay for foreign goods, the importations of which exceeded all calculation. Within two years from the close of the war, a scarcity of money was the general cry. The merchants found it impossible to collect their debts, and make punctual remittances to their creditors in Great-Britain; and the consumers were driven to the necessity of retrenching their superfluities in living and of returning to their antient habits of industry and œconomy.

This change was however progressive and slow. In many of the states which suffered by the numerous debts they had contracted, and by the distresses of war, the people called aloud for emissions of paper bills to supply the deficiency of a medium. The depreciation of the continental bills, was a recent example of the ill effects of such an expedient, and the impossibility of supporting the credit of paper, was urged by the opposers of the measure as a substantial argument against adopting it. But nothing would silence the popular clamor; and many men of the first talents and eminence, united their voices with that of the populace. Paper money had formerly maintained its credit, and been of singular utility; and past experience, notwithstanding a change of circumstances, was an argument in its favor that bore down all opposition.

Pennsylvania, although one of the richest states in the union, was the first to emit bills of credit, as a substitute for specie. . . .

Notwithstanding a part of the money was loaned on good landed security, and the faith of that wealthy state pledged for the redemption of the whole at its nominal value . . . yet it has sunk to two-thirds of this value, in the few commercial transactions where it is received.

North Carolina, South Carolina. and Georgia had recourse to the same wretched expedient to supply themselves with money . . . But the bills they emitted shared a worse fate than those of Pennsylvania; they expelled almost all the circulating cash from the states; they lost a great part of their nominal value, they impoverished the merchants, and embarrassed the planters.

The state of Virginia had too much wisdom to emit bills; but tolerated a practice among the inhabitants of cutting dollars and smaller pieces of silver, in order to prevent it from leaving the state. This pernicious practice prevailed also in Georgia.

Maryland escaped the calamity of a paper currency. . . .

New-Jersey is situated between two of the largest commercial towns in America, and consequently drained of specie. This state also emitted a large sum in bills of credit, which served to pay the interest of the public debt; but the currency depreciated, as in other states.

Rhode-Island exhibits a melancholy proof of that licentiousness and anarchy which always follows a relaxation of the moral principles. In a rage for supplying the state with money and filling every man’s pocket without obliging him to earn it by his diligence, the legislature passed an act for making one hundred thousand pounds in bills; a sum much more than sufficient for a medium of trade in that state, even without any specie. The merchants in Newport and Providence opposed the act with firmness; their opposition added fresh vigor to the resolution of the assembly, and induced them to enforce the scheme by a legal tender of a most extraordinary nature. They passed an act, ordaining that if any creditor should refuse to take their bills, for any debt whatever, the debtor might lodge the sum due, with a justice of the peace, who should give notice of it in the public papers; and if the creditor did not appear and receive the money within six months from the first notice, his debt should be forfeited. This act astonished all honest men; and even the promoters of paper money-making in other states, and on other principles, reprobated this act of Rhode-Island, as wicked and oppressive. But the state was governed by faction. During the cry for paper money, a number of boisterous ignorant men, were elected into the legislature, from the smaller towns in the state. Finding themselves united with a majority in opinion, they formed and executed any plan their inclination suggested; they opposed every measure that was agreeable to the mercantile interest; they not only made bad laws to suit their own wicked purposes, but appointed their own corrupt creatures to fill the judicial and executive departments. Their money depreciated sufficiently to answer all their vile purposes in the discharge of debts—business almost totally ceased, all confidence was lost, the state was thrown into confusion at home and was execrated abroad.

Massachusetts Bay had the good fortune, amidst her political calamities, to prevent an emission of bills of credit. New Hampshire made no paper; but in the distresses which followed her loss of business after the war, the legislature made horses, lumber and most articles of produce a legal tender in the fulfilment of contracts. . . . It must not however be emitted, that while the most flourishing commercial states introduced a paper medium, to the great injury of honest men, a bill for an emission of paper in Connecticut, where there is very little specie, could never command more than one eighth of the votes of the legislature. . . .

The legislature of New York, a state that had the least necessity and apology for making paper money, as her commercial advantages always furnish her with specie sufficient for a medium, issued a large sum in bills of credit, which support their value better than the currency of any other state. Still the paper has raised the value of specie, which is always in demand for exportation, and this difference of exchange between paper and specie, exposes commerce to most of the incon-veinencies [inconveniences] resulting from a depreciated medium.

Such is the history of paper money thus far; a miserable substitute for real coin, in a country where the reins of government are too weak to compel the fulfilment of public engagements; and where all confidence in public faith is totally destroyed.

While the states were thus endeavoring to repair the loss of specie, by empty promises, and to support their business by shadows, rather than by reality, the British ministry formed some commercial regulations that deprived them of the profits of their trade to the West Indies and to Great Britain. Heavy duties were laid upon such articles as were remitted to the London merchants for their goods, and such were the duties upon American bottoms, that the states were almost wholly deprived of the carrying trade. A prohibition . . . was laid upon the produce of the United States, shipped to the English West India Islands in American built vessels, and in those manned by American seamen. These restrictions fell heavy upon the eastern states, which depended much upon ship-building for the support of their trade; and they materially injured the business of the other states.

Without a union that was able to form and execute a general system of commercial regulations, some of the states attempted to impose restraints upon the British trade that should indemnify the merchant for the losses he had suffered, or induce the British ministry to enter into a commercial treaty and relax the rigor of their navigation laws. These measures however produced nothing but mischief. The states did not act in concert, and the restraints laid on the trade of one state operated to throw the business into the hands of its neighbour. Massachusetts, in her zeal to counteract the effect of the English navigation laws, laid enormous duties upon British goods imported into that state; but the other states did not adopt a similar measure; and the loss of business soon obliged that state to repeal or suspend the law. Thus when Pennsylvania laid heavy duties on British goods, Delaware and New Jersey made a number of free ports to encourage the landing of goods within the limits of those states; and the duties in Pennsylvania served no purpose, but to create smuggling.

Thus divided, the states began to feel their weakness. Most of the legislatures had neglected to comply with the requisitions of Congress for furnishing the federal treasury; the resolves of Congress were disregarded; the proposition for a general impost to be laid and collected by Congress was negatived first by Rhode Island, and afterwards by New-York. The British troops continued, under pretence of a breach of treaty on the part of America, to hold possession of the forts on the frontiers of the states, and thus commanded the fur trade. Many of the states individually were infested with popular commotions or iniquitous tender laws, while they were oppressed with public debts; the certificates or public notes had lost most of their value, and circulated merely as the objects of speculation; Congress lost their respectability, and the United States, their credit and importance.

. . . The old confederation was essentially defective. It was destitute of almost every principle necessary to give effect to legislation,

It was defective in the article of legislating over states, instead of individuals. . . . The confederation was also destitute of a sanction to its laws. When resolutions were passed in Congress, there was no power to compel obedience by fine, by suspension of privileges or other means. It was also di[e]stitute of a guarantee for the state governments. Had one state been invaded by its neighbour, the union was not constitutionally bound to assist in repelling the invasion, and supporting the constitution of the invaded state. The confederation was further deficient in the principle of apportioning the quotas of money to be furnished by each state; in a want of power to form commercial laws, and to raise troops for the defence and security of the union; in the equal suffrage of the states, which placed Rhode Island on a footing in Congress with Virginia; and to crown all the defects, we may add the want of a judiciary power, to define the laws of the union, and to reconcile the contradictory decisions of a number of independent judicatories.

Jedidiah Morse, (Elizabethtown, 1789), 113–123 passim.