Best book on Federalist papers / anti-Federalist debates

Dalgonar said:

Right. I forgot that the US started as a Confederation with these Articles serving as its first constitution for 11 years (1777-1788). What were the main economic issues, how were they related to the Articles of Confederation, and how did the new Constitution fix it?

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See my post I just did :Madison's Vice of the Political System of the United States 1787

Dalgonar said:

Right. I forgot that the US started as a Confederation with these Articles serving as its first constitution for 11 years (1777-1788). What were the main economic issues, how were they related to the Articles of Confederation, and how did the new Constitution fix it?

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The economic problems were two-fold. The war years were dominated by massive currency inflation and debt creation. Then, the post-war years were wracked by the deflationary blow-back from the previous currency inflation and the huge pile of economically choking debt that became a political football over which Federalists and Anti-Federalists struggled.

Inflation and Debt Creation

By the end of the war, Massachusetts’ total debt was nearly £1.5 million; Rhode Island, about $0.5 million; Connecticut, over $3.75 million; Pennsylvania, over £4.6 million; Virginia’s over £4.25 million. As a result, payment of interest on the debt amounted to an overwhelming proportion of the state budget, and one estimate is that 50–90 percent of state expenditures went for this purpose: out of South Carolina’s total budget of roughly £104,000 in 1786, over £83,000 went to pay interest on the debt; of Virginia’s budget of roughly £256,000 in 1784, over £207,000 went to payment of interest.

These numbers can be expressed roughly terms of per capita values. In 1774 New Englanders had a per capita income of about £0.7 while the Upper South states, which included Virginia, per capita income was £1.0. With Massachusetts having a population of slightly under 250,000 people and Virginia being slightly under 450,000 (over half being slaves) to retire the war debt would require in both locations over 90 years of a 100% tax rate (assuming no economic growth.) Obviously, these were horrific numbers just in regard to the debt, but there were additional problems as well.

During the Revolutionary War, vast amounts of paper money had been printed as part of a chaotic effort to finance the war. By the end of 1775, just six months after the Battle of Bunker Hill and with formal independence still another six months in the future, 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. As paper money issues flooded the colonies, the dilution of the value of each dollar caused prices in terms of paper money to increase radically.

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 an extreme monetary inflation – a total issue of over 235 million new dollars in a five year period superimposed upon a pre-existing money supply of $12 million representing an increase of over 1,900 % in just five 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 gold; 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; thus arose the phrase to describe something of minimal value as “not worth a Continental.”

As the Continental currency collapsed, the Continental Army turned to theft – seizures of goods – to supply what the distorted market did not, 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 famous Yorktown campaign where the British finally gave up was financed almost completely by federal and state impressment certificates. Even apart from state issues, federal certificates issued during the war amounted to another $200 million addition to the money supply. The certificates, which didn't even pay interest, rapidly depreciated to almost nothing. In effect, they were just another form of paper money.

By 1779, nothing could conceal the obvious fact of runaway paper depreciation and monetary breakdown. When the state governments tried to impose taxes in order to retire old Continental paper according to scheme devised in March 1780, Americans balked. Citizens of the various states insisted on paying their taxes in the nearly worthless certificates that had been issued, so the state governments found it impossible to retire the old Continentals in an “orderly” fashion. The scheme to prop up and retire Continental paper had proved a total failure; the value of the paper money soon collapsed completely and the Continentals began to pass out of circulation. Before long they could hardly be found; and if they were used they passed at less than 500 to 1 in gold dollars.

Deflation and the Burden of Debt

The contraction of the swollen mass of paper money, combined with the resumption of imports from Great Britain after the war, cut prices by more than half in a few years. This had the effect of increasing the relative burden of the debt and raised the political stakes of how to deal with since unlike the paper money, Congress did not allow it to pass out of existence.

Over time, especially as questions arose about how to retire this debt that was being allowed to linger became a growing political issue, federal debt instruments moved from their original owners to brokers and speculators who bought at steep discounts, the concentration of holdings sharply increased. In Massachusetts, original holdings of federal securities generally amounted to less than $500 for any one person; but by 1790, the top 7 percent of all subscribers owned 62 percent of the federal debt, while the lowest 42 percent of holders owned less than 3 percent of the debt. Sixty-one percent of the securities were owned by citizens of Boston.

Similarly in Pennsylvania, 3 percent of the holders owned 40 percent of the securities and 9 percent of the holders held 61 percent of the debt. Again, the great bulk of public securities had been transferred by the late 1780s to a relatively few large speculators. The story was similar in Maryland, Rhode Island and other northern states where the much of debt was owned. The concentration of the debt into relatively few hands created a special interest group stood to profit handsomely if the debt was to be repaid at full face value rather than the depreciated price for which the current owners had paid for it. Members of that special interest group would soon be loud supporters of the Constitution and its economic funding authority.

The disorder state of the American economies impacted the soldiers as well as the citizenry. Resulting from Washington's creation of a conventional army, the officer core often thought of itself as a professional class. They aspired for the standard European practice of half-pay pensions for life after the war; and in the fall of 1780, the controlling nationalists in Congress, eager themselves to establish an officer caste and a permanent standing army as an integral part of their nationalist plans, promised half-pay for life to the officers. The famous 1873 Newburgh Conspiracy was the result where discontented officers and centralizing nationalists sought to manipulate the army to pressure Congress.

Ron Chernow in his biography of Alexander Hamilton noted:

“The provisional peace treaty raised the unsettling prospect that the army might disband without officers receiving either back pay—as much as six years owed, in some cases—or promised pensions.”

So not only was the army not being paid (Chernow commented that, “some soldiers had been left so indebted by the fighting and the devalued currency that they feared they would be jailed upon their discharge from the army”) but officers’ vision of a future career of pay and respect was threatened at well. Washington squashed the whole effort – insurrection would only “open the floodgates of civil discord and deluge our rising empire in blood” – in which Alexander Hamilton had played his usual calculating role toward centralization, although this time he was more subtle in his maneuvering efforts as getting on the wrong side of George Washington was not advisable.

Chernow commented on Washington’s view:

“‘More than half the perplexities I have experienced in the course of my command, and almost the whole of the difficulties and distress of the army, have their origin here,’ Washington wrote of congressional weakness. At the same time, Washington saw a certain Machiavellian streak in Hamilton and bluntly told him of grumbling in the army about congressmen who tried to use the soldiers as ‘mere puppets to establish continental funds.’ He lectured Hamilton: ‘The army…is a dangerous instrument to play with.’ Washington must have seen that Hamilton, for all his brains and daring, sometimes lacked judgment and had to be supervised carefully. “

The war-driven expansion of the American economy exacerbated by the paper money and credit expansion triggered an economic contraction that in the immediate postwar period and brought a serious depression in mid-1784 and 1785. Murray Rothbard, whom I mentioned previously, detailed the economic backbiting:

“As early as July 1783, a group of manufacturers from Philadelphia met to petition the Assembly for protection against foreign imports. This was followed the following year by a group of Boston manufacturers who submitted a similar plea. During the depression year of 1785, the urban artisans banded together in earnest. The Boston manufacturers in twenty-six trades formed The Association of Tradesmen and Manufacturers of the Town of Boston in the spring of 1785 to agitate for a protective tariff in their state, and they were followed by the formation of a General Committee of Mechanics in New York, which soon merged with the Manufacturers Society of New York to fight for protection. Mechanics from Philadelphia, Baltimore, Providence, and Charleston were also active though not formally organized. In particularly hard-hit New England, the town of Nantucket actually asked the state legislature in 1785 for permission to secede and rejoin Great Britain in order to try and regain prosperity. In Philadelphia, the master cordwainers, the shoemakers of the city, decided in March 1785 to engage in concerted economic pressure to try and block further imports of boots and shoes.

By 1786, indeed, virtually every state had passed a navigation law against British shipping…

…Typical of the eastern mercantile oppression over the mass of citizens and farmers was the imposition of excise taxes, which harmed the bulk of consumers. Thus, the tax on spirits (e.g., cider brandy) distilled from one’s own apple orchard was twice the level of the tax on New England rum: a clear privilege to the Boston and other eastern merchants over the western farmers. Tax oppression upon the Massachusetts people was enormous, and the courts ruthlessly threw those who could not pay into jail. Tax defaulters’ property was seized, but in the time-honored way of neighborhood solidarity, local mobs prevented anyone but the owner from bidding for the property.”

This chaotic situation fueled a widening belief in the futility of the Articles of Confederation when a more accurate analysis would point to financial mistakes already made rather than to a lack of authority. Whatever anyone thinks about the Federalist-Anti-Federalist contention, the primary drivers of the struggles of the Confederation were the depressed state of the post-war economy, debt owed to foreigners, and questions about what to do with the massive overhang of debt instruments held by American speculators, who eventually became no small element of the Federalist Party.

Part of the issue is that the Confederation Congress had no real ability to enforce its legislation. States held a veto power over whatever the Congress could pass, and it required a 2/3rds majority of state's legislatures to make the laws passed, actually law. This seldom if ever occurred, and like as not whatever the Congress passed was a dead letter once it reached the states.

Everything from the minor to the major was impacted. States passed duties on products passing between states, foreign parties had no idea with whom they should negotiate (the Congress or with the states), many foreign nations began sending diplomats to both. Rights of individuals were at complete variance between states, contracts in one state would be unenforceable in another.

Worse, despite the Articles prohibiting it, states began manufacturing their own currencies.

One could easily look at the Swiss confederacy and see that the likelihood of war between the states was bound to happen. Boundaries were many in contention between various states.

Even the Anti-Federalists of the time admitted that the Articles were not only unworkable, but they were in fact, not reparable. The question wasn't if they had to be replaced, but how.

As to the defense of the nation, there was absolutely no answer at all.

U S Grant said:

Part of the issue is that the Confederation Congress had no real ability to enforce its legislation. States held a veto power over whatever the Congress could pass, and it required a 2/3rds majority of state's legislatures to make the laws passed, actually law. This seldom if ever occurred, and like as not whatever the Congress passed was a dead letter once it reached the states.

Everything from the minor to the major was impacted. States passed duties on products passing between states, foreign parties had no idea with whom they should negotiate (the Congress or with the states), many foreign nations began sending diplomats to both. Rights of individuals were at complete variance between states, contracts in one state would be unenforceable in another.

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U S Grant said:

Even the Anti-Federalists of the time admitted that the Articles were not only unworkable, but they were in fact, not reparable. The question wasn't if they had to be replaced, but how.

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In regard to your last four posts, as usual, we agree probably more than we disagree.

I think it boiled down to what kind of nation the people envisioned – and there certainly was no unanimity in that. But if you think about it that tends to argue for a loose confederation rather than a unitary state.
There were real problems to be sure. The colonies had just fought a long war with a centralized power and they had no wish to build a powerful central state after having just got free of one.

Certainly, there was agreement that changes were needed. Liberal voices like Timothy Bloodworth of North Carolina; James Warren and Elbridge Gerry of Massachusetts; George Mason, Patrick Henry, and Richard Henry Lee of Virginia; George Bryan of Pennsylvania; and Governor George ....... of New York; all, at one time or another, had recognized the necessity of strengthening the central power, particularly in imposts and regulation of commerce.

In fact the idea of a Convention was accepted for the purpose of a comprehensive revision of the Articles so as “to render the Constitution of the Federal Government adequate to the exigencies of the Union.” But Hamilton, exhibiting his redirection and verbal manipulation, assured everyone that this would be a legal revision—in short, a revision that would have to be approved first by Congress and then by every state in order to go into effect. His resolution affirmed that a revision to be recommended by the general convention would be reported “to the United States in Congress assembled, as when agreed to by them, and afterwards confirmed by the Legislatures of every State.”

We know that end up in the trash can, and Hamilton’s record at the Convention itself makes it had to believe that he meant what he said. Once the Constitutional Convention went rogue and eradicated the Articles of Confederation, the Anti-Federalists were forced to play defense. They may have played defense badly, but a study of their arguments illuminates a path no taken.

U S Grant said:

Worse, despite the Articles prohibiting it, states began manufacturing their own currencies.

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Well, this is case of someone living in a glass house throwing stones. The central war-time government had flooded the country with paper money and while still in in Washington’s first term, Treasury Secretary Hamilton would establish paper debt instruments as circulating currency – something that was not as well managed as we are generally told.

The Bank of the United States promptly inflated the currency by issuing millions of dollars in paper money and demand deposits, pyramiding on top of $2 million in specie.

The Bank of the United States invested heavily in loans to the United States government, thereby making a market for them. In addition to $2 million invested in the assumption of pre-existing long-term debt assumed by the new federal government, the Bank of the United States engaged in massive temporary lending to the government – easy money eh?

The result of the outpouring of credit and paper money by the new Bank of the United States was an inflationary rise in prices. Wholesale prices rose from an index of 85 in 1791 to a peak of 146 in 1796, an increase of 72 percent. In addition, speculation boomed in government securities and real estate values were driven upward.

Pyramiding on top of the Bank of the United States’s expansion and aggravating the paper money expansion and the inflation was a flood of newly created commercial banks. Whereas there were only three commercial banks before the founding of the United States, and only four by the establishment of the Bank of the United States, eight new banks were founded shortly thereafter, in 1791 and 1792, and 10 more by 1796. Thus, the Bank of the United States and its monetary expansion spurred the creation of 18 new banks in five years.

In a gesture of continuity the corrupt practices with the Revolutionary War’s Bank of North America, the latter’s longtime Bank of North America president and former partner of Robert Morris, Thomas Willing of Philadelphia, was made president of the new Bank of the United States, where he became the richest man in America. Imagine that? The name “Willing” might ring a bell with you. Thomas Willing was the brother of Elizabeth Willing Powel, whom Benjamin Franklin told the U.S. had a republic “if it could keep it.”

Trouble started right away on July 4, 1791, when the Bank of the United States’ subscription books opened to the public. What was actually for sale that day were derivatives – scrip – pieces of paper that would allow the bearer to eventually buy a share in the bank, which of course would never be allowed to fail, so it looked like a sure bet. A classic speculative bubble arose. By August 11, 1791, bank scrip bought at $25 fetched over $300. Hamilton, whose system was eminently corruptible even if he was not, was dismayed at events. But, because many of the scrip holders were his political friends: thirty of them members of Congress, and one other none other than Secretary of War Henry Knox, he dared say nothing publically.

New York and Philadelphia bankers squelched the frenzy by cutting credit to the speculators and scrip prices fell back some, which given the previous borrowing frenzy put the financial structure in danger of a credit collapse. Hamilton convened a meeting of the Commissioners of the Sinking Fund and gotten them to authorize open market purchases of U.S. debt in amounts of $300-400 thousand at Philadelphia and New York. He authorized the Bank of New York to purchase up to $200 thousand of public debt in New York; and about $150 thousand was purchased by the U.S Treasurer in Philadelphia. He wanted it to be known that the Treasury was acting to alleviate financial distress by supporting the bond market, but probably recognizing the moral hazard in bailing out reckless rent seekers, he wanted the announcement to be muted rather than trumpeted. He was, after all, bailing out the gambling of his own supporters. When Alan Greenspan did pretty much the same thing 200 years later it became the infamous “Greenspan Put.” Funny how no one ever mentions the "Hamilton Put."

But the speculation continued – quite possibly furthered by knowledge of Hamilton’s previous bailout intervention in the market. This time, speculation was in the millions of Dollars in promissory notes that the bankrupt Continental Congress and state governments had issued to soldiers, farmers, and others who had supported the Revolution. The same notes Congress had refused to allow go out of existence that were largely owned by “friends” of the government. The Panic of 1792 was the result. There was another Panic in 1796–1797 as a result of a land speculation bubble bursting in 1796. That too looked like a sure thing since everyone knew the U.S. would expand west.

The Panic of 1792 sent Hamilton’s friend, relative by marriage, and ex-Treasury employee, speculator William Duer to debtor’s prison where he died. It was a long fall for Duer. He had been born into the upper class, he lived just around the corner from Wall Street, and when he was married his bride was given away by none other than George Washington. He had been a member of the Continental Congress, a New York judge, and was a signer of the Articles of Confederation. The Panic of 1796-97 caused the famous (and corrupt) Robert Morris to join Duer in prison. Morris owed close to an unthinkable three million dollars to creditors at a time when total federal government revenues were slightly over six million.

Since the root of such problems reside in flaws with fractional reserve banking (not a good subject for here), it might easily be argued that the paper “money” problem just went national with the creation of the Constitution.

U S Grant said:

One could easily look at the Swiss confederacy and see that the likelihood of war between the states was bound to happen. Boundaries were many in contention between various states.

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I agree, but that is a government problem in general and not just a state government problem. There have been many American examples of that problem in my lifetime, but the pointless War of 1812 is certainly a case of it and John Adams pretty much courageously stood alone in opposing a war with France just a decade after the Constitution became law.

U S Grant said:

As to the defense of the nation, there was absolutely no answer at all.

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This is a notably weak argument. The colonies had just finished holding off the most powerful military in the world and no one was close to threatening the U.S. Not only was geography against it, but Spain had been fading for centuries and France had substantially aided the American Revolution and was bankrupt to boot.

In fact, with the possible exception of Robert E. Lee’s march into Pennsylvania, the U.S. has never been threatened by a foreign power. Looking back, we can see that the Constitution over centralized power. With its powerful chief executive (the Commander in Chief), it authority to control commerce, its lack of institutional limit on taxation, and it potential for a standing army the Constitution was clearly an enabler of empire and the financial distortions that Madison sought to avoid in his concern about factions.

I think any suggestion that my last sentence is anachronistic is refuted by the writings of the Anti-Federalists, which, unlike the Federalist Papers, grow more relevant all the time.

I admit, there were major problems, but allowing all that war debt to simply expire would have resolved most of them. Taxes could, and almost certainly would have been, cut, and the very problematic Coinage Act of 1792 that established a bimetallic dollar standard probably would not have happened

BrutusofNY said:

I admit, there were major problems, but allowing all that war debt to simply expire would have resolved most of them. Taxes could, and almost certainly would have been, cut, and the very problematic Coinage Act of 1792 that established a bimetallic dollar standard probably would not have happened

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You know Brutus you and I should sit in a room with a glass of brandy or sherry and discuss this and it would be more fun!! Especially if there are cigars....

First of all you can't simply "expire" the war debt. Thousands of soldiers, and individuals who had staked their financial worth on the rebellion would have been destroyed. I know that you are going to bring up the speculators, but Madison wanted those people not to be paid more than what they had paid for the original document, and the original owners to be fully paid. Foreign investors, amongst whom was France, Holland, and Spain wanted their money and could just as easily have taken it, I'd rather we paid it. FYI Jefferson would never have been able to have made the Louisiana purchase were it not for Assumption and the hated object the 1st National Bank.

I can imagine all of the permutations of the arguments you will make, and you might surprise me with a few more. However the truth is that the nation needed 1st a secure and dependable currency that was backed by something that was financially tangible, and the only thing that the nation had to offer was the US Government.

That government couldn't pay the bills, and the only way it was feasible to do so, was via bonds, which is exactly what they did.

I can be as Austrian as you want economically, but here I draw a line. Nations will incur debt, the issue is the repayment plan, That has to be realistic, which as it turns out the plan Hamilton offered was.

Members of Congress generally agreed with Hamilton. Article VI of the Constitution provides that "All Debts contracted… before the Adoption of this Constitution, shall be as valid against the United States under this Constitution, as under the Confederation." Many in Congress, including James Madison, pointing out that the inflation and depressed conditions of the 1780s had forced many of the original individual’s due payment, including revolutionary war soldiers, to sell them at substantial losses. Madison proposed offering speculators less, and distributing the savings to the original owners.

The third element of Hamilton's policies was the proposal that the federal government take over the $25 million in debt that the state governments accumulated during the Revolution. To Jefferson, assumption threatened the Republic by dangerously centralizing financial power. Madison agreed with Jefferson. By July, however, Madison and Jefferson had softened their opposition. Madison and Jefferson became worried that if the fledgling government failed to pass a funding bill, the divergence of sectional interests might break up the new union.

The fourth central element of Hamilton's financial program, was taxation. In August 1790, Congress passed four separate acts that adopted, with only minor changes, Hamilton's proposals for paying off foreign debts, redeeming domestic debts, assuming state debts, and increasing tariffs.

In December 1790, Hamilton also proposed the federal chartering and funding a national bank, which would be called the Bank of the United States and modeled to some extent on the Bank of England. The bank could expand significantly the size of the nation's money supply and thus enhance economic activity.

In February 1791, Congress passed a bill that adopted most of Hamilton's specific ideas for the new bank.

In January 1791, while the Bank of the United States was still under debate, Hamilton submitted the "Report on the Establishment of a Mint." Hamilton's goal was to create a system of coinage uniform across the United States and provide monetary stability. Congress adopted most of the proposals in the Coinage Act of 1792.

There is a corollary here that isn't well understood about this time. Britain had through negligence, legislation and greed, taken the majority of hard currency away from the American Colonies prior to the ARW. The population and the industry of the nation had no choice but to go to paper currency which was nothing but at the time a wish and a hope of redemption.

At the end of the war the problem had multiplied. But there was no gold or silver to resolve the currency issue, and without currency the economy itself couldn't function in ways that it could grow.

If there was rational reason to be concerned about the sanctity of a Federal Bank, the banks of the States and the currency they produced was that times many thousands.

I have a lot to say about Hamilton, and much of it is bad, but his system worked, and it saved the nation. FYI there would have been no nation without Assumption.

I’ll make a couple of quick statements and then bail on the money-inflation thing so as to not hijack the thread.

U S Grant said:

First of all you can't simply "expire" the war debt. Thousands of soldiers, and individuals who had staked their financial worth on the rebellion would have been destroyed.

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They could have just expired the debt – and should have. Those local “soldiers and individuals” you refer to had dumped it for whatever little they could get long before. That is why the speculators had so much of it.

The original holders of that debt had already lost. It is exactly like modern bailouts – Wall Street gets bailed in the name of Main Street, but Main Street twists in the wind anyway.

I do recognize that Madison did not want to reward the speculators, but they were rewarded anyway and it is a statement on the whole program that Congress was immediately corrupted and the Federalists were on the road to extinction.

U S Grant said:

Nations will incur debt, the issue is the repayment plan,

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Repay who? I agree repaying foreign loans was important. But the domestic mess was extremely poorly handled. In the end, it helped ruin the Federalists. The bank cost them Madison’s support and Hamilton initiated the now well-honed technique of slicing and dicing the meaning of the Constitution itself to justify what he wanted to do.

The question of the economic-political nexus at the Convention has been argued up and down American history Charles Beard, E. James Ferguson, Joseph Dorfman, Bray Hammond, Forrest MacDonald, Murray Rothbard, etc. and the only question is how large was that impact – no one thinks it was small.

War is what drives national borrowing. And every war America fought has brought damaging political and economic results – Revolutionary War, 1812, Mexican War, Civil War, Spanish-American War, WWI, WWII, and the apparently permanent war economy established around 1947. And the last repayment plan was after WWI. And you and I both know war, spending and national banks are all closely related.

U S Grant said:

In December 1790, Hamilton also proposed the federal chartering and funding a national bank, which would be called the Bank of the United States and modeled to some extent on the Bank of England. The bank could expand significantly the size of the nation's money supply and thus enhance economic activity.

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This is a Keynesian argument that the money supply had to grow for the economy to grow. But the entire economic history of the 19th century proves that false. With a stable money supply, productivity growth lowers prices and the cost of living. Something no one alive today has ever experienced.

Growing the money supply distorts the economy and blows asset bubbles. That is what happened in 1790s and repeatedly in American (and European) history.

U S Grant said:

At the end of the war the problem had multiplied. But there was no gold or silver to resolve the currency issue, and without currency the economy itself couldn't function in ways that it could grow.

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Hmmm…more Keynes

With lower amounts of gold and silver the value of each coin rises and it buys more. Falling prices are good as long as there is no large debt overhand that suddenly weighs relatively more with a higher value currency. There is no optimum money supply. What is optimum is a stable money supply.

Even sudden increases in the precious metal supply distorts the economy as Spain experienced after it plundered its New World Colonies while the British Empire ran out of gas just as Rhodes got his hands on South African gold.

U S Grant said:

You know Brutus you and I should sit in a room with a glass of brandy or sherry and discuss this and it would be more fun!! Especially if there are cigars....

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We agree there. But you soon grow weary of me demanding a stable money supply!!

I really to get it that Madison is not the bad guy here. But he was onboard with Hamilton in 1787 and Hamilton’s system actually did not work. It blew bubbles and corrupted Congress. Its Mercantilist underpinnings persevered, and that has become a major problem that remains still.

The U.S. did not have good, balanced economic growth until Jefferson’s election, although that growth was clobbered and Jefferson’s Party ruined by the war of 1812.

Arthur Schlesinger Jr. commented that:

“...the approval of the Second Bank of the United States in 1816 by the man (Madison) who had been the ablest opponent of the First Bank was an appropriate commentary on the breakdown of the Jeffersonian ideal…”

Dalgonar said:

Right. I forgot that the US started as a Confederation with these Articles serving as its first constitution for 11 years (1777-1788). What were the main economic issues, how were they related to the Articles of Confederation, and how did the new Constitution fix it?

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I suspect the economic discussion relating to the Constitutional Convention has gone far enough.

I sometimes put some of thinking on a substack site, where my verbosity enjoys a much larger limit on word count and implications newer than the year 2,000 can be discussed – even though I strongly agree with the time frame restraint on Historum.

The article liked just below is one of those longer articles. It starts out with the Benjamin Franklin quote at the Constitutional Convention I referenced earlier, as well as Franklin’s famous bon mot to Mrs. Elizabeth Willing Powel about “A republic, if you can keep it.”

It also discusses Madison, Hamilton, the Anti-Federalist author Mercy Otis Warren’s 1788 pamphlet, Observations on the new Constitution, and on the Federal and State Conventions and the French Abbé de Mably, who had warned John Adams about the dangers of a “commercial elite” seizing control of the new Republic and using it to their own advantage.

Such was the sexism of the day that Mercy Otis Warren’s pamphlet, for a good while, was erroneously attributed to Elbridge Gerry. She also wrote a three-volume History of the Rise, Progress, and Termination of the American Revolution that is seldom-remembered today. But it is worth looking nonetheless if for no other reason that it gives an 1805 perspective on the Revolution and its “termination.” Of course, all revolutions must terminate – we have seen how crazy some Marxists became over the idea of permanent revolution and even Jefferson theorized their regular necessity far more than his pragmatic side was willing to tolerate. But how it was terminated is significant for America’s future.

Death of the Republic: an American Cassandra

As far as other sources to study, I can only recommend Chapters 2 and 3 of Gordon S. Wood’s Empire of Liberty A History of the Early Republic, 1789–1815, A Monarchical Republic and The Federalist Program.

You might also consider a chapter in Paul Rahe’s massive three-volume Republics Ancient and Modern. Chapter 1 of volume 3 is entitled James Madison and the New Science of Politics.

Dalgonar said:

Dear Brutus,

First off, I'd like to thank you for the answers and references you suggest, down to tome and chapter. This selected bibliography - obviously learned and acquired through extensive reading - is rare and valuable, and will be put to good use. I am grateful for the food for thought and myriad of directions to explore that your posts provide. E.g. Benjamin Franklin's remark really makes one wonder what made him say that. As a new reader of the Age of endarkenment, verbosity or wordiness is a welcome trait when the bar is ambitiously high on form and content. Your dialogue with Grant (Publius?) was exactly the exchange I hoped for.

On Madison's Federalist No. 10, he proved visionary about factions. Of course, a blaring omission - or perhaps a faction that is contained in the "many lesser interests", although it should probably deserve its own entire faction - is the slave-owning faction, a fault line that would tear his country apart and give new meaning to Franklin's Cassandra cryptic omen.

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Thanks for the thanks.

As to why Franklin thought as he did, I don’t think we can say for sure. But I have two speculations, one which revolves around your point regarding slavery.

Earlier in his life Franklin owned slaves and allowed the sale of slaves in his store. But as he aged (he was over 80 at the time of the Constitution Convention) he had turned against slavery. In 1774 he and Benjamin Rush founded the Pennsylvania Society for Promoting the Abolition of Slavery and he published essays against slavery during the three years he had left to live after the Convention ended.

Murray N. Rothbard’s iconic Conceived in Liberty volume 5 that I mentioned earlier goes into considerable detail about what he called The Corrupt Bargain and the Preservation of Slavery at the Convention, whereby Northerner merchants, desiring the federal government to possess the Mercantilist power to control trade via the proposed Navigation Act, and Southern members of the Slavocracy, who desired protection for slavery, agreed to support each other in order that the votes would be there for both to get what they wanted. As Rothbard told it:

“In the midst of this critical rift, however, Gouverneur Morris, who had been one of the loudest talkers against slavery and had deemed it as ‘a nefarious institution’ and ‘the curse of heaven,’ now proposed a ‘bargain’: the slave trade, export tax, and navigation act clauses should all be recommitted to a special committee, and ‘these things may form a bargain.’ In short, Morris realized that the benefits of special privilege to northern merchants in a navigation act would undoubtedly outweigh in the minds of northern delegates the attraction of an abstract principle.”

A man of long experience and wise in the ways of deal cutting, Franklin was both and abolitionist and an advocate of free trade. He may have recognized that there was future dynamite buried in that bargain.

My other point is that Franklin, like the colonial elite in general, was well-versed in history. Polybius and his idea of a balanced Constitution was especially popular. But Polybius also wrote on the evolution of governments (Anacyclosis) as they move from one form and decay into another. That political systems are temporary things was generally accepted.

Along the same lines, Robert Molesworth's An Account of Denmark (1694) had profoundly influenced American colonial patriots regarding the fragility of democracy even leading up to the Revolution. In The Ideological Origins of the American Revolution (Pulitzer and Bancroft Prizes in 1967) Bernard Bailyn noted that Molesworth “established the general point, implicit in all similar histories but explicit in this one, that the preservation of liberty rested on the ability of the people to maintain effective checks on the wielders of power, and hence in the last analysis rested on the vigilance and moral stamina of the people.”

Given the struggles of the period 1776 to 1787, that the Constitution was a response to those struggles, and the considerable horse-trading that had been necessary to get through the Convention, Franklin almost assuredly knew the road ahead would not be an easy one.