Conceived in Liberty (268 page)

In late 1780, Congress tried to issue $1 million in “specie certificates” which were supposed to be sold only for specie to raise some hard money for the government; but the new notes were simply issued, as were other notes, to pay for the federal deficits.

As the Continental currency collapsed, the Continental Army turned to simple impressment—seizures of goods—to supply itself, and thus scarcely endeared itself to the populace being confiscated. To “pay” for the impressments, the army quartermaster and commissary departments issued paper tickets, or “certificates,” which then flooded the country. State governments also turned increasingly to impressment of goods, and “paid” for the seizure with their own welter of certificates. The Yorktown campaign was financed almost solely by federal and state impressment certificates. Even apart from state issues, federal certificates issued during the war amounted to about $200 million in themselves. The certificates, which didn’t even pay interest, rapidly depreciated to almost nothing.

Naturally, when the states tried to impose taxes in order to retire old Continental paper according to the scheme of March 1780, Americans balked. For if they had to pay taxes, surely they were entitled to pay in the virtually worthless state or federal certificates rather than in the less worthless Continentals? And as the people of the various states insisted on paying their taxes in certificates, the state governments found it impossible to retire the old Continentals. By June 1781, when all the Continentals were supposed to have been retired, only $30 million had been taxed and delivered by the states, and only $600,000 of new bills had been issued —and even these had already depreciated to 5 to 1 in specie. The scheme to prop up and retire Continental paper had proved an abject failure. Pennsylvania and New Jersey decided to fix the value of Continentals at their true market value, which soon collapsed completely. After April
1781, the Continentals began to pass out of circulation, and before long they could hardly be found. If they were used, they passed at less than 500 to 1 in specie dollars. It is no wonder that the popular motto arose: “Not worth a Continental.” Despite the strenuous efforts of Congress and the states, they took their natural economic course and passed out of existence. Their rapid disappearance also relieved the public of a permanent legacy of crippling public debt.

When Congress agreed to accept certificates in payment of the requisitions, some of the worthless paper was drained off; the legal tender laws were also repealed. Congress never bothered to pay its promised interest on the small amount of new bills, and this helped depreciate them further. After August 1780, Congress issued new certificates payable in new bills and bearing interest until redeemed, and the old certificates were made redeemable in their negligible existing specie values.

Thus, Congress and the states jettisoned their worthless mass of currencies without burdening the present and future economy with a further debt. They were not bemused by the notion that these currencies had to be redeemed at par, or indeed had to be redeemed at all. As Ferguson explains:

Currency and certificates were the “common debt” of the Revolution, most of which at war’s end had been sunk at its depreciated value. Public opinion did not view government contracts as sacred and tended to grade claims against the government according to their real validity. Paper money had the least status; the mode of its redemption was fixed by long usage.... In any case, the holder had no exemption from the general misfortune, and he was expected to abide by the ordinary process by which money was redeemed.
*

Unfortunately, Congress did not display the same wisdom with the loan certificates. For these securities, or rather for the security holders, it showed far greater tenderness. In 1780, Congress decided to reduce the loan certificates to their specie value according to the depreciation of Continentals that had actually prevailed at the time of purchase. The actual scaling down, however, was much too limited; the loan certificates issued after March 1780, for example, were liquidated at a rate of 40 to 1 in specie when depreciation at the time approached 100 to 1. Furthermore, Congress continued to pay valuable bills of exchange for the interest on the pre–1778 loan certificates. Most important, it undertook to redeem the interest and principal on the loan certificates itself, in contrast to the paper currency which it had been glad to push off onto the states. The loan certificates were to become the substantial core and the beginnings of the
permanent, peacetime federal public debt. Significantly, the bulk of this debt was held in the northern states; 90 percent of the original subscriptions were held in states north of Maryland, of which people in Massachusetts, Connecticut and Pennsylvania held two-thirds. Pennsylvania alone originally held one-third of the debt, and its share was expanded by later sales and transfers.

As for the states, they too insisted on retiring their worthless paper through tax receipts, but at least they agreed to redeem the paper at depreciated values, some at the greatly depreciated market value of the currency. In Virginia and Georgia, they were as low as 1,000 to 1 in specie. By the end of 1783, all the wartime state paper had been withdrawn from circulation.

*
See Eric Foner,
Tom Paine and Revolutionary America
(New York: Oxford University Press, 1976), pp. 178–79.

**
The dismal saga of price controls during the Revolution may be found in Richard B. Morris,
Government and Labor in Early America
(New York: Columbia University Press, 1946), pp. 92–135. The author, by the way, is in sympathy with the price control program.

*
Morris,
Government and Labor in Early America,
p. 125.

*
Foner,
Tom Paine and Revolutionary America,
pp. 149–82.

*
E. James Ferguson,
The Power of the Purse: A History of American Public Finance, 1776–1790
(Chapel Hill, N.C.: University of North Carolina Press, 1961), p. 68.

Ironically, just as the great havoc wreaked by the flood of paper money was fading away, with the money collapsing and passing out of circulation, the conservatives, especially those of New York and Pennsylvania, were preparing to use the paper emergency to put through a veritable counterrevolution in the American economy and society. These men had long yearned for the reestablishment in America of the British system without Great Britain: a strong, centralized government dictating to the people of the various states, centralizing and controlling the vital money power through a central system of taxation. Now that the financial oligarchy had unto itself so much of the federal public debt, it was newly inspired to found a strong central government so that its greatly depreciated securities might be redeemed in full, and so that they could establish a new form of paper inflation which
they
could control. Instead of Continental paper, which, after its emission, travelled haphazardly into the economy, they would found a commercial bank in America. This would be a private bank to function as a public monopoly central bank and insure that public operations could be skillfully employed for the oligarchs’ private profit. This counter-revolution was also carried through to save the war effort— at a time when the war was almost over.

The way was paved for the triumph of conservatism in the latter years of the war by changes in two pivotal states, Massachusetts and Pennsylvania. In Massachusetts, the people in a referendum had overwhelmingly rejected the conservative constitution of 1778. Bowing to the inevitable, the conservatives realized that they would have to accede to the longstanding radical demand for a constitutional convention for the state separate
from the existing legislature, the General Court. The towns, for example, had urged a separate convention by a majority greater than two-to-one. In June 1779, therefore, the General Court called such a convention for early September, with voting for delegates by universal manhood suffrage. In another concession to radical demands, the various articles of any proposed constitution would have to be ratified by two-thirds vote at a popular referendum.

The constitution of 1780 was drafted, at the convention, by three people: the extremely wealthy conservative James Bowdoin and the two Adams cousins, with John Adams as the major author. Like its aborted predecessor, the constitution was a highly conservative document, a reflection of the willingness of Sam Adams to tag along with John, despite the former’s radical instincts. A high property-value qualification for voting (60 pounds) was imposed for all state elections. This was substantially higher than that called for by either the old colonial charter or the rejected constitution of 1778. Furthermore, the sole qualification for officeholders was now to be in real estate, so that money or other personal property would not suffice to be eligible for holding office. A strong independent executive and upper house were imposed; and the governor could veto a legislative act which could be overridden only by a two-thirds vote.

A bill of rights was appended to the new constitution, but it was rather weak. Part of this “declaration of rights” authorized the legislature to
require
the towns to tax the public for church support, thus giving a constitutional mandate for a religious (i.e., a Congregational) establishment in Massachusetts.

The military was to be under the complete control of the governor, who could also appoint all judges. The governor was to be fully as powerful as in the New York constitution where he had a right of veto. Furthermore, judicial tenure was to be on good behavior (for all practical purposes for life), thus setting up an unchecked and long-lasting judicial oligarchy.

The heaviest opposition to the constitution came over the declaration of rights and its weakness in insuring freedom of speech or habeas corpus. Many towns opposed the property qualifications, as well as the appointive power of the executive and the oligarchy of independent judges. Also bitterly fought in the press and in the towns was the clause on establishment of religion. The conservatives insisted that a government religion was crucial to the government’s own existence, as well as to the existence of religion. As one clergyman fulminated, “Let the restraints of religion once be broken down, as they infallibly would be by leaving the subject of public worship to the humor of the multitude, and we might well defy all human wisdom and power to support and preserve order in government and state.” One rightist attributed much of the opposition to religious establishment to “profane and licentious deists” and “avaricious
worldlings.” Even so, many towns rebuffed the religious establishment clause, including Boston, Bristol, Granville, and eight towns in Berkshire as well as seven in Middlesex County.

The towns objecting to the high property qualifications were concentrated in the West. They cogently raised the all too familiar issue of taxation without representation. Entering the lists once more for battle against the restricted suffrage of the new Constitution was Joseph Hawley, the only leading Massachusetts radical at the outbreak of the Revolution to keep firmly to the left path. He pointed out that the suffrage requirement was in direct contradiction to the constitution’s professed devotion to the equal natural rights of all. The provision violated the principle of taxation only with representation.

Other demands by opposition towns were for election of local officials, a tight rein on the governor, a unicameral legislature, and a loosening of the highly restrictive provisions for amendment of the constitution.

Even though such articles as the bill of rights really failed to receive the required two-thirds ratification by the people, the Massachusetts Convention fraudulently declared the entire constitution ratified. On June 16, 1780, the precedent of popular ratification was thus continued, but with a heavy admixture of chicanery. The first American constitution formed and ratified by democratic processes was therefore a highly conservative one—more conservative, indeed, than the one it replaced. In part this reflected and foreshadowed the growing conservative sentiment in America beginning in 1780; in part, too, it reflected the absence of radical leadership in Massachusetts to give a statewide lead and cohesion to the opposition towns. Sam Adams’ complete adherence to the conservative line of John is a case in point. Of the eminent leaders in the state, only the ailing Hawley could give even partial leadership to the radical cause. Even the town of Pittsfield, the Reverend Thomas Allen, and the Berkshire Constitutionalists, weary of their long struggle, yielded now and meekly submitted to the new constitution, eliminating their own
raison d’etre.

But old Hawley did his best. As his biographer states, “Unlike most of his old colleagues, he had not turned away from political liberalism.”
*
Bitterly critical of the religious establishment and the constitution’s requirement that all legislators take a church oath, he was not allowed to take his seat in the Massachusetts senate because he refused to take the oath. Hawley decried this as an infringement on free elections and on the rights of the individual.

The constitution of 1780 disoriented what remained of the Massachusetts
left, and conservatism swept into power in the state. The opportunistic conservative John Hancock, personally very popular in the state as a charismatic symbol of the Revolution, was easily elected governor. His efforts to drive Sam Adams from political power culminated in Adams’ ouster from the Continental Congress in 1782.

Conservatives also took control of the pivotal state of Pennsylvania during 1780. The high-water mark of radical control of Pennsylvania had come on October 4, 1779, when radical hatred of the leading conservative “Republicans” erupted in mob action. For some time before, the radicals had been planning to seize the families of all defecting Tories, and to deport them to British-occupied New York City. But at a Philadelphia militia meeting on October 4, their goal spontaneously changed to ousting the major conservative leaders from Philadelphia. This mob of militia seized three Tories and advanced upon the house of the hated James Wilson. Wilson, Gen. Thomas Mifflin, and other Republican leaders gathered there with arms, and a battle ensued at the Wilson home. The mob broke in and several persons were killed at this “Battle of Fort Wilson,” but Pennsylvania President Joseph Reed managed to arrive with a “silk-stocking” troop of light horse militia, and they carried the day.