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Remember_Salamis Rethinking the Articles of Confederation by Scott Trask August 8th, 2003 An assumption that dominates American historical studies is that the weal th and prosperity of the country would be much less without the existenc e of a powerful central government. This theme is but part of a larger, and now international, orthodoxy that larger political jurisdictions, as long as they are "democratic," foster liberty and economic growth while smaller ones stifle it. In Europe, elites hold up an all-European government as the golden road t o a brighter and wealthier future. Others go further, such as Atlantic M onthly correspondent Robert D Kaplan, and argue that eventual "world go vernance" by "global elites" is both inevitable and desirable. Kaplan, w hose books are read by high-ranking government officials and journalists , believes that free markets, democracy, and liberty shall thrive under a world regime. All of history attests that the centralizatio n and concentration of power breed despotism. In the history of European civilization, liberty and civilization have thrived when political powe r has been dispersed and checked. Contrast the Greek city states with th e polyglot Alexandrian empire, the Roman Republic with the world-sprawli ng Roman Empire, medieval Europe with 20th century Europe. The nature of man being what it is, irresponsible, unchecked power has been, and alwa ys will be, abused, and there is no better way of rendering state power oppressive than by concentrating rather than dispersing it. If your children attend a public or private university in this country, t hey will be taught that President Roosevelt "saved" capitalism from itse lf with his New Deal legislative program in the 1930s. They le arn that these years were a tumultuous and tragic follow-up to the Revol ution. Without a strong central authority, the country was convulsed and confused by violent internal rebellion, economic stagnation, the petty rule of "bad men" (ie local-minded and self-interested), and national weakness in the face of predatory commercial rivals. Into this despairin g void, stepped a shining band of broad-minded, far-seeing, disintereste d, nationalist leaders who realized the impotent and inept government of the Confederation had not the powers to deal with the crisis or guide t he country into the regulated, centrally managed future. Students graduate thinking that were i t not for the federal Constitution, we would all be sitting on the front porch of our cabin spitting tobacco, drinking home-made whiskey, and ki cking our dog Blue. The prevailing historical interpretation of the country under the Article s of Confederation is an example of the harm that has resulted from the ignorance of economics among generations of historians. Let us consider the work of Richard B Morris, the Columbia University historian, whose book The Forging of the Union, 17811789 (1987) is considered the standa rd history of that decade. Morris ascribes the postwar depression (1784 88) to four causes: the "dumping" of low-cost British goods upon the Ame rican market (imagine the gall of those sneaky Brits; For Morris, the calling of a constitutional convention was a necessity re cognized by nearly all. "Businessmen, mechanics, and artisans witnessed a Confederation government incapable of controlling the money supply, of paying interest on the public debt, or of regulating and encouraging fo reign and domestic commerce. Little wonder that these groups recognized the grim necessity for setting up a stronger central government." The economy was beginning to thrive again in 1788, the year the Constitut ion was ratified, and Morris naturally awards credit to the new governme nt for the change. "The ratification of the federal Constitution seems t o have laid a basis for economic recovery." It never occurs to him that the recession was bound to end sometime, or that its end was due to caus es unrelated to the creation of a new national authority. Our best guides to the critical decade of the 1780s are two of the few Am erican historians who understand economics and are true liberalsWilliam Graham Sumner and Murray Rothbard. Although Sumner was a nationalist an d antidemocrat who favored the new constitution for other reasons, he un derstands as well as Rothbard that the depression of the 1780s was not d ue to the lack of a powerful central government. Both explain that after the war, there was a great pent-up demand for British goods, which were preferred to all others, including domestic, both for their quality and their cheapness. There was also an abundance of specie in the country, due to French and B ritish disbursements, the Havana trade, and French and Dutch hard-money loans. However, there was also a large quantity of paper money still afl oat. As the paper money was serving as the principal circulating medium, the merchants shipped much of the nation's specie abroad to help pay fo r their large importations of capital and consumer goods. Lacking credit cards, the American consumer was soon "tapped out," and merchants found themselves holding large stocks of unsold merchandise. At the same time, there were many manufacturers and mechanics whose busin esses had been profitable only during the autarkic wartime conditions. N ow that peace and commerce had resumed, they were in trouble. An additio nal negative factor was the British decision to place the Americans on t he outside of their colonial system after the war. The Americans found t he British West Indies closed to them, the North Atlantic fisheries forb idden, and the British home market tightly restricted. The capital losses had to be made up and the debts paid. In summation, the Americans were suffering the natural aftereffects of a long war financed by debt and inflation, and exacerbated by the continui ng circulation of inconvertible paper currency. As Sumner records, "mise ry was great throughout the country, owing to paper money and debt and t he losses of the war." The postwar depression was a necessary period of hardship during which Americans readjusted to new trade patterns and eco nomic realities, paid debts, and repaired the damage and neglect wrought by war. No government could have legislated or regulated away these fac ts of life. Americans, flush with soaring hopes unleashed by the Revolution, wanted t o believe otherwise, but there was no political substitute for hard work , reconstruction, self-denial, and patience. Regrettably, as is the case so often in our history, many sought political panaceas to escape econo mic realities. Mechanics and manufacturers petitioned their state legisl atures for protective tariffs to exclude lower cost British-made goods. Ship builders and owners lobbied for navigation laws to exclude British shipping from American ports, and southern exporters and northern mercha nts pleaded for retaliatory legislation to force open closed British mar kets. Farmers demanded that paper money be issued and lent on the securi ty of land. Only a few years after independence, Americans were trying t o replicate the main features of the British colonial and mercantile sys tem from which they had just freed themselves. With his usual perspicuity, Sumner observes how the collapse in prices an d the prostration of business following a period of currency inflation l ed to a movement for protective tariffs, setting a recurring pattern.
The panic and depression of 1819 would give birth to a protectionist movement culminating in the high tariffs o f 1824 and 1828. The panic of 1837 and the depression of 183943 would r evive protectionism again, leading to the tariff of 1842. Sumner also observes that whenever the economy has floundered, many blame foreign trade for somehow draining the country of its wealth. For insta nce, James Madison warned in 1786 of "the present anarchy of commerce." He blamed the "unfavorable balance" of trade for "draining us of our met als" and furnishing "pretexts for the pernicious substitution of paper m oney." It was the habit of using paper money that was driving the nation's specie abroad, as coin would not ci rculate alongside pap...
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