The Economic And Political Climate In 1780s History Essay

The economic and political situation in New Jersey mirrored in many ways what was happening throughout the country in the 1780s. To understand the nuances in New Jersey one must have a general understanding of the situation at large in the newly emerging United States.

The American victory over the British left the country with some advantages but unfortunately there were also severe disadvantages. Among them being: general decline in prices, especially for agricultural items; high unemployment rates, in the cities; American merchants excluded from the British West Indies; America no longer a favored trade partner of England but now a competitor; and the British Navy no longer protecting American shipping.

But surely, the greatest adverse economic legacy of the war was the lack of adequate specie (hard money) and an enormous debt. The United States owed approximately about $54 million dollars to various parties; $11.7 million in foreign debt primarily to France and private citizens in the Netherlands, about $40.4 million in domestic debt and the balance for some miscellaneous items. State governments owed approximately $25 million, mostly in war debts [1] . The consequences of this debt profoundly affected most Americans of the period in one way or another and the inability to deal with the problem by the government under the Articles of Confederation led directly to what amounted to a second revolution otherwise known as the Constitutional Convention of 1787.

After the Treaty of Paris ended the war, many merchants tried to take advantage of the resumption of trade. Easy credit was available and many merchants bet on American demand for imported goods. This worked out reasonably well for a couple of years because of pent-up demand. However other issues surfaced: the demand for goods was not anywhere near what many had predicted; the economy of the United States at this time was not equipped to produce large amounts of commodities to pay for imports; trade with the West Indies, previously a mainstay of American merchants and ship-owners, was prohibited by the Treaty of Paris; and both France and Spain also closed their West Indian ports to American merchants.. At this period of history a nation could only pay for its imports by specie or exports. Merchants were in trouble. Since most merchants did not have specie to settle their debts, many fell deeply into debt and eventually into bankruptcy and debtors’ prison. A prime example of this is Robert Morris.

Worse still was the situation farmers confronted. They had fought in the revolution and been paid with promissory notes (this is part of the domestic war debt of the central government and the states) that could not be exchanged for specie (because there was not enough) or used to pay off debt or taxes so they had to sell these notes at deep discounts (30 to 40 cents/dollar) to speculators for money to live on. They had borrowed other money (mostly from private lenders as there were no banks yet) to plant crops and accumulated a lot of debt. They had been feeding a number of armies who disbanded at the end of the war. Prices for agricultural goods naturally fell and farmers could not sell what they grew. Many had their property seized and sold for debts. The lucky ones were those whose debts were covered by the sale of property. Many moved west for a new start. The British had ceded all of the land east of the Mississippi River which they had taken from the French during the Seven Years War. But in a lot of cases the debts were not cleared by property sales and the people were put in debtors’ prison with no hope of getting out.

While not a lot of manufacturing existed in America what did also suffered mostly because of the significant imports of manufactured goods from England and the inability to export what they made. Many suffered losses or were driven into bankruptcy. Workers were let go. In New England and Pennsylvania, protective tariff acts were passed to protect these domestic industries. This only exacerbated the situation. Personal debt, government debt and business failures pushed the national economy toward depression. Prices had fallen 50 percent by 1787 [2] .

Continental paper currency was literally “not worth a Continental”, largely because so much of it was printed during the war that its value fell to nothing. There was not enough coined money (specie) in circulation to pay back the debt. There was not enough silver or copper to pay workers, pay taxes or to facilitate small everyday transactions.

Under the Articles of Confederation, the central government did not have authority to print money, or to set up a nationally-regulated system of currency. Some states intervened to compensate for the weakness of the central government. Several passed moratoria, suspending creditors’ right to collect payment. All but four states printed paper money to try to help by issuing paper money. The states that did not Massachusetts, Maryland, New Hampshire and Virginia all saw considerable public disturbances and in several cases outright riots. Debtor citizens of these and other states protested the failure to address their concerns. In September 1786 in Exeter New Hampshire, a mob of angry farmers surrounded the legislature and demanded elimination of all debts and the printing of state paper to tide them through these tough times. In backcountry Virginia court houses were burned so that records would vanish. The most famous of these incidents occurred in Massachusetts. Farmers and others had been struggling under the burden of debt [3] . In the summer of 1786, farmers and other citizens from the western part of the state held local conventions to demand that the state government address their concerns. They drew up a petition, which expressed their objections to the expensive and aristocratic state senate (upper house of the legislature); high taxes on land; and the high fees of lawyers and county courts. After the conventions, groups of citizens took over the county courts, interfering with their functioning so that debts could not be collected. In the winter of 1786-1787, about 2,000 farmers in western Massachusetts, led by Revolutionary War veteran Daniel Shays, took up arms in rebellion. The Massachusetts militia easily controlled the rebellion, but the incident alarmed many across the nation, who were concerned about the potential dangers of anarchy.

Thomas Jefferson, who was serving as an ambassador to France at the time, refused to be alarmed by Shays’ Rebellion. In a letter to a friend, he wrote that “a little rebellion now and then is a good thing. The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.”[17] In contrast to Jefferson’s sentiments George Washington, who at the time was urging many through letters about forming a better and more energetic national government through the union of the states, in a letter to Henry Lee wrote in regards to the rebellion, “You talk, my good sir, of employing influence to appease the present tumults in Massachusetts. I know not where that influence is to be found, or, if attainable, that it would be a proper remedy for the disorders. Influence is not government. Let us have a government by which our lives, liberties, and properties will be secured, or let us know the worst at once.” [18]

Ultimately Shays’ Rebellion while not succeeding, brought the inadequacies of the government created by the Articles of Confederation to the attention of the nation and led to the convention that wound up creating a replacement for the Articles of Confederation, the United States Constitution.

It is this context that shaped similar events and actions in New Jersey. New Jersey is a case of being stuck in the middle, literally and figuratively. It was geographically stuck between the two most important cities; New York and Philadelphia each of which had ports. New Jersey had no ports. It was also geographically in the middle of the 13 states. It had been the battleground of the revolutionary war and eleven percent of the central debt was held by New Jersey citizens. It had a weak economy due in large part to the dependence on New York and Philadelphia and very little scope for raising revenue except through direct taxes: as there were no ports to tax also there was no Western land beyond the Appalachians to sell off. A lot of the farmers, laborers and business people were heavily in debt. The legislature was somewhat balanced between supporters the farmers and small business people [mostly from East Jersey] who were in dire straits and the more wealthy creditors [mostly from West Jersey] who were not. Abraham Clark was one of the significant figures in New Jersey politics during this critical period. He was from Elizabethtown and Essex County. He had signed the Declaration of Independence and had represented New Jersey in either the Continental Congress or the New Jersey Assembly for most of the period from 1776-1994. He championed the causes of small businessmen and farmers. The legislature had passed a number of pro-debtor bills in the past few years. Bills to force creditors to accept paper money rather than specie; releasing debtors from prison; preventing the forced sale of debtor property at fire sale prices; and process for delaying court actions.

In the 1785 session the legislature had a vigorous debate on the paper money bill [also know as the loan office bill] with Clark on one side and Livingston and Patterson on the other. The Bill did not pass in the 1785 session but was brought up again in the 1786 sessions and passed in May. The legislature then took up a the issue of specie for small transactions which is the subject of the next section.