Conceived in Liberty (266 page)

Unquestionably the most important political event of the latter years of the war was the final ratification of the Articles of Confederation. Like many other fateful political and economic changes made at the end of the war, this measure, put through as a wartime necessity, became effective only in time of peace. For American radicals, this represented a disastrous cultural lag between the social conditions that had arisen and the institutions that were established for very different times and purposes.

Maryland, under the firm political control of a tightly knit oligarchy of land speculators, blocked the required unanimity for accepting the Articles of Confederation, which had passed Congress in late 1777, by refusing to ratify unless Virginia’s vast claims to the western lands were nationalized and placed under a Continental Congress that the speculators could hope to control. During 1778 and 1779 the Virginia Assembly directly repudiated the huge land claims of the Indiana, Illinois, and Wabash Companies, whose membership included the rulers of Maryland, overriding the Virginia conservatives, headed by Benjamin Harrison, Edmund Pendleton, and Carter Braxton, who had close commercial connections with the land speculators, especially the Philadelphia merchants Robert Morris, the Whartons, and the Gratz brothers.

The liberal forces in Virginia, led by Thomas Jefferson and George Mason, nevertheless faced a difficult struggle; they were, for example, blocked in their efforts to open up a land office for the western lands to throw them open for settlement and to end the speculator threat once and for all. The conservatives opposed this plan not only because of their connections with the land speculators, but also because widespread settlement
of the West would draw off population from the East, lowering the value of eastern property. The liberals, however, were aided by pressure from the western settlers led by Col. Arthur Campbell.

The defeat of the speculators seemed assured during 1778 and 1779, and a land-office bill was finally passed in June 1779. Mason’s bill, however, gave firm preemption rights only to existing settlers, and failed to provide them for future settlers, who would naturally form the main body of the population of the West. An all-powerful Virginia commission was therefore able to sell the virgin lands at 40 pounds for 100 acres (in depreciated currency) to anyone who cared to buy. Jefferson’s provision of granting only 50 acres to each settler was thus rejected, and no limitation was placed on the amount that could be purchased by any nonsettlers. The result was that within a few years the precious western lands fell into the hands of individual absentee land speculators, who paid in a still further depreciated currency. Robert Morris, for example, later came to own 1.5 million acres of western lands.

Their claims ended in Virginia by Mason’s 1779 bill, the powerful land companies turned once again to Congress, and argued once more that Congress had plenary sovereignty over western lands, sovereignty which had “devolved” from Great Britain. Congress, they claimed, should keep Virginia from putting its land law into effect. Thus, Congress was asked to assert power over western lands which even the Articles would deny to it! But logic yielded to the aggrandizement of power, and, in early October 1779, Congress voted 6–5 to advance the land companies’ proposals to a committee packed with their supporters. In mid-October, the committee reported a recommendation for Virginia and other states to suspend all sales and grants of their western lands until the end of the war. Congress voted for the resolution, with only Virginia and North Carolina opposed.

Virginia did not passively accede to this aggrandizement of central power, and led by George Mason, it quickly issued a strong remonstrance against the congressional invasion of its sovereignty on behalf of land speculators. New York, however, was scarcely as sturdy, and under the pressure of Congress, in mid-February 1780 it agreed to cede its dubious claims to the lands of the Iroquois, to make them the property of the Continental Congress. Congress agreed to this cession in September, urging other landed states to cede voluntarily their own claims for the sake of confederation, and even Virginia’s delegates approved. Connecticut also ceded its claims to western lands in Congress in October 1780, reserving to itself a tract of three million acres in northern Ohio (the Western Reserve). Thus began the central government’s fateful ownership and sovereignty over virgin lands. In this way, sovereignty, at least
over all territories not yet states, was placed solely in the hands of Congress—a vast accretion of central power that for the most part went unchallenged.

Virginia’s turnabout was largely caused by the 1780 invasion of the South, prompting a panicky and irrational urge to ratify the Confederation and thus gain more effective northern support for the war effort—support which never materialized. The liberal administration of Virginia, headed by Jefferson as governor and by George Mason, was more interested in justice for the settlers than in power for Virginia. Hence, they overlooked future questions of central power and ceded the lands north of the Ohio to Congress. There were, however, certain conditions attached to their agreement, the most important being that the Indian land claims to the region (i.e., the claims of the land companies) be voided, and that Virginia be guaranteed the Kentucky lands. Congress refused to void the company land claims, and the land companies put up a furious barrage of propaganda, including subsidized pamphlets by Samuel Wharton, Benjamin Franklin, and Tom Paine, all of Philadelphia. Paine’s hiring out to the Indiana Company to present its case in a pamphlet,
Public Good,
continued the practice of selling his pen and his principles for hire that he had begun the year before in his dealings with La Luzerne. (After the Deane-Lee affair, the impecunious Paine quietly allowed himself to join the paid ranks of the very French government that he had recently so strenuously opposed.) It goes without saying that the developing pattern of this sellout to the privileged interests dealt a grievous blow to the radical cause in America, for which Paine had been the most eloquent and popular champion.

In October 1780, Congress again agreed to all of Virginia’s conditions except the crucial voiding of speculative land claims. The following January, the Virginia Assembly made the Mason offer official by voting to cede the lands north of the Ohio—the “Old Northwest”—provided that the Mason conditions were met.

In the meantime, Maryland’s intransigence was also being undermined by the threat of British invasion or raids from the Chesapeake. Appealing for naval protection, Maryland was urged by La Luzerne, who was anxious for the war effort, to ratify the Confederation. Bludgeoned by this virtual blackmail, Maryland finally ratified the Confederation on February 2, 1781, after the Maryland Senate was convinced that their claims would still be pressed in Congress. Meanwhile, Virginia clung to control of the lands despite repeated attempts in Congress to dislodge it. Congress finally celebrated the enactment of the Articles of Confederation on March 1, 1781.

The struggle over the western lands raged for three more years within
the Confederation. Finally, driven by greed for revenue to be derived from the virgin public domain, Congress tacitly agreed to ignore land-company claims, with only New Jersey and Maryland objecting. Virginia’s northwest lands were finally ceded to the suzerainty and total ownership of the Congress on March 1, 1784.

Crucial to an understanding of the political history of the Revolutionary War era is a comprehension of the way that the war effort was financed. By the end of 1775, Congress had already increased the nation’s money supply by 50 percent in less than a year, and state paper issues had already begun in New England. The Congressional Continental bills followed what was to become a sequence all too familiar in the western world: runaway inflation. As paper money issues flooded the market, the dilution of the value of each dollar caused prices in terms of paper money to increase; since this included the prices of gold, silver, and foreign currencies, the value of the paper money declined in comparison to them. As usual, rather than acknowledge the inevitability of this sequence, the partisans of inflationary policies urged further accelerated paper issues to overcome the higher prices and searched for scapegoats to blame for the price rise and depreciation. The favorite scapegoats were merchants and speculators who persisted in doing the only thing they ever do on the market: they followed the push and pull of supply and demand. In another familiar attempt to deal with the problems of inflationary intervention, they outlawed the depreciation of paper, or the rise of prices. Such attempts to hold back the inevitable results of inflation are invariably about as successful as King Canute’s command to the tides; but the vital difference is that these controls create a great deal of havoc in their wake. Maximum price controls simply create grave shortages and “black markets” of the commodity. The inevitable response of this escalation of controls is ever more vigorous penalties against the merchants and speculators; and, aside from the oppression suffered by merchants, the
only result is to make the shortage even more severe. And so inflation tends to pursue its course until the paper money becomes worthless and controls eventually wither away.

Continental paper was issued by Congress at an accelerating rate: in 1775, $6 million; 1776, $19 million; 1777, $13 million; 1778, $64 million; 1779, $135 million. This was a total issue of over $235 million in five years superimposed upon a pre-existing money supply of $12 million.

The state governments were supposed to collect taxes to retire the Continental notes, thus imposing a second burden upon the public after the “tax” of inflation had done its work. But opposition by Americans to taxation was too great, and most states levied no taxes at all until 1780. Instead, the states also turned to the printing press for their finances. Apart from Georgia and Delaware, they offered no security for the notes except a vague pledge of future tax revenues, which was no security at all, and so their notes depreciated, each at a different rate. The states tried to maintain their notes at par coercively with severe legal-tender laws. The states also tried to finance themselves by issuing interest-paying treasury notes. The total of state issues during the Revolution was nearly $210 million. Virginia led in this inflation by issuing $128 million, followed by the Carolinas, each with an issue of about $33 million. Adding federal certificates and loan office certificates, this made a total of about a fiftyfold expansion of America’s money supply in a few short years.

Depreciation of the paper money proceeded inexorably along with the frenzied increase in its quantity. Thus in December 1776, the Continentals were worth $1—$1.25 in specie on the market; in October 1777, the value had fallen to 3 to 1; in December 1778, to 6.8 to 1; and in December 1779, to the negligible 42 to 1. By April 1781, the Continentals were virtually worthless, exchanging on the market at 168 paper “dollars” to one dollar in coin.

This process of inflation and the subsequent attempts of government to thwart its consequences led both to the hardships and shortages of supplies suffered by the Continental Army, particularly at Valley Forge, and to the severe mutinies in the latter part of the war. In the first place, the soldiers were paid in Continentals, and were bewildered to find the value of their pay rapidly dwindling. Farmers understandably refused to accept paper money, preferring hard cash that would not depreciate before they could use it themselves. When the Continental Army moved to confiscate and seize supplies from them, they were embittered and often fled the area. The Continental Army often found that food and other vital supplies became woefully scarce, since the brutal power of the army to plunder could not extend to farmers remote from the military camp.

The several states—especially in New England and in the middle states
—also tried to help matters by imposing maximum price controls. State and local governments presumed to know what market prices of the various commodities should be, and laid down price regulations for them. Wage rates, transportation rates, and prices of domestic and imported goods were fixed by local authorities. Refusing to accept paper, accepting them for less than par, charging higher prices than allowed, were made criminal acts, and high penalties were set: they included fines, public exposure, confiscation of goods, tarring and feathering, and banishment from the locality. Merchants were prohibited from speculating, and thereby from bringing the needed scarce goods to the public. Enforcement was imposed by zealots in local and nearby committees, in a despotic version of the revolutionary tradition of government by local committees.

Price controls made matters far worse for everyone, especially the hapless Continental Army, since farmers were thereby doubly penalized: they were forced to sell supplies to the army at prices far below the market and they had to accept increasingly worthless Continentals in payment. Hence, they understandably sold their wares elsewhere; in many cases, they went “on strike” against the whole crazy-quilt system by retiring from the market altogether and raising only enough food to feed themselves and their own families. Others reverted to simple barter. Master artisans, forced by price control to sell at a loss, threatened to shut up shop. And, as always happens under price control, hidden price increases were achieved by lowering the quality of goods, again to the detriment of the consumers.

Efforts to enforce price controls during the Revolution were frenzied and futile attempts to thwart the laws of economics. Shortages of goods in localities or states where enforcement was harsh led to sporadic attempts to fix and coordinate uniform price codes throughout the United States. The first comprehensive statewide code was imposed by Connecticut in October 1776. In December, delegates from the four New England states met at Providence and fixed a detailed schedule of wages and prices, and each state government then enacted it into law. At the request of Congress, the middle and upper southern states then met at York, Pennsylvania, to draft a similar code, but it was voted down by three of the six states. In early August 1777, a convention of New England states and New York called by Massachusetts at Springfield resigned themselves to scrapping the whole apparatus of control. Congress, however, again called for a series of regional conventions to impose uniform price control in late 1777. As in the previous year, the deep South did not respond, but delegates from all the New England and middle states met at New Haven in January 1778, and recommended a new code. Only Connecticut, New York, New Jersey, and Pennsylvania passed it into law. When rebuked for not joining the effort, Massachusetts, no longer enthusiastic about price
controls, wryly announced that the Continental Army had informed it that the code would make it impossible for the army to buy supplies for its troops. This led Congress, in June 1778, to advise repeal of all controls; the four states that had passed the code soon followed the congressional advice.