IX

Economic Interests and Their Relation to the Constitution

THE foregoing chapters were designed to test the validity of Beard’s interpretation and were necessarily cast, in so far as it was possible to do so, in terms of the broad framework Beard constructed. In these terms conclusions drawn from the data presented were essentially negative. At the same time, however, it appeared that economic factors were by no means without influence in the making of the Constitution. On the contrary, in several instances economic elements were obviously of considerable importance. The critical question is whether, by reorganizing the data, it is possible to reduce them to an economic interpretive system or set of systems that will render intelligible the contests over ratification.

To do this it is necessary at the outset to broaden Beard’s classifications of the economic interest groups that existed in 1787, to reappraise their statuses under the Articles of Confederation, and to determine what were the effects upon them of the making of the Constitution. Only in this way can it be determined whether it is possible to devise a meaningful interpretive system or systems by using economic classes or interest groups as a cornerstone.

In re-analyzing economic interests and the effects of the Constitution on them, they can be brought into sharper focus if they are considered as activities of men before they are considered as forms of property—that is, first as occupations and professions, the means of making a living or acquiring wealth and the property incidental or necessary to those means, and then as investments of capital.

In the 1780’s substantially all free Americans fell into one or more of four broad occupational categories: farmers, nonagrarian producers, commercial groups, and professional men.¹ The following paragraphs analyze these groups by breaking them down into their lowest common denominators.²

Farmers, and by this term one here understands all persons who made their living directly from the soil, constituted the great majority of the population—about seventy-five per cent—and they may be divided into at least thirteen distinct groups with basically different statuses and economic interests.³ This agrarian class was broadly divided into subsistence farmers (two groups) and marketing farmers (eleven groups). The marketing farmers may be further divided into those not using slave labor (eight groups) and those using slave labor (three groups).

The subsistence farmers may be defined as those who produced nothing that was sold directly to consumers in commercial markets; they produced exclusively or almost exclusively for their own use, and their transactions consisted exclusively of barter with other subsistence farmers and sometimes with millers. Economically, each subsistence farmer was an island. There were some such farmers in every state except possibly Rhode Island. They were located in isolated, though not necessarily remote, places, and their problem was essentially one of transportation. Close examination reveals that there were two kinds of subsistence farmers, depending on the topography and location of the areas in which they lived.

The first group included those who were destined to remain subsistence farmers permanently;⁴ neither canals nor roads nor dredging of rivers nor treaties with foreign powers could give them an outlet to the outside world. There were sprinklings of such farmers throughout the country, particularly in hilly and mountainous regions, but the greatest concentration of them was along the stony ridges of New England. The farmers in the hill country north of Lake Winnipesaukee and between the three major rivers of New Hampshire, and those in corresponding areas in Massachusetts and Connecticut, comprised the great majority of the “permanent” subsistence farmers.

Their interests were almost identical everywhere, for they were touched by economic and governmental matters in only one way: through taxation.⁵ Since the taxes collected in these three states were used primarily for servicing their mammoth war debts, the formation of the government under the Constitution directly and immediately affected these farmers in a favorable way. The fiscal changes brought about by the new government—the funding of state and national debts, and the shifting of the principal burden of taxation to commerce (that is, to consumers of imports)—could be expected to have reduced the taxes of these farmers to almost nothing, and by 1791 they did just that. The action of these isolated farmers on the issue of ratification, however, as on most political questions, was erratic, for they were, by the nature of their situation, among the most poorly informed citizens of the country on current affairs.

The other kind of subsistence farmers was quite different. They were on or near transportation routes that were economically or politically susceptible of development, and their status was thus temporary. They were found along the Mohawk in New York, in the upper Delaware regions of New Jersey and Pennsylvania, along the Susquehanna and its tributaries, above the fall line of the Potomac and of the James, along the Roanoke and near the Great Dismal Swamp in North Carolina, high on the Cooper and Santee rivers in South Carolina, and west of the mountains, particularly on the Ohio, Tennessee, and Mississippi rivers and their tributaries.

In so far as they were farmers who had good prospects, depending for their progress on the development of better transportation facilities, these subsistence farmers had interests in common with one another and in sharp contrast to those of the first group of subsistence farmers. In other respects, however, their interests differed and sometimes even conflicted. Their interests varied with length of settlement, extent of contact with the outside world, indebtedness contracted to purchase land, the legality of land titles, the quality of land, and the proximity and disposition of Indian tribes.

More fundamentally, their interests differed according to the methods that were necessary to develop their transportation facilities. One or both of two general kinds of action was required: political and economic. Among those needing political action, for example, were the farmers whose outlet to the sea was via the Mississippi. Since Spain controlled New Orleans, their entire future depended on the possibility of negotiating a treaty or reaching some other settlement with Spain. On the other hand, the opening of the James River to the Blue Ridge Mountains depended entirely on the raising of private capital and the physical work of dredging and constructing locks around falls. The opening of the Susquehanna required both political and private economic action. Each subsistence farming area of this type required its own specific remedies.

The scrutiny to which the various interest groups from state to state and area to area were subjected in the preceding chapters indicates that some of these farmers felt that they were well off under the Articles of Confederation, some needed and desired the changes instituted by the Constitution, others saw their prospects threatened or temporarily ruined by the Constitution, and still others were unaffected by political change or were conscious of no effects. Beyond repeating that they had an identity of interest in that they shared a single basic problem, it is therefore impossible to generalize as to the way in which the Constitution affected them or the way in which they reacted to it.

Turning now to commercial farmers, those who regularly brought crops to market to exchange for money or goods, the first groups to be considered are those that employed no slave labor.

At the bottom of the scale of marketing farmers using free labor were what might be termed the wood farmers, those who tilled barren land and reached markets only with lumber and occasional garden products. The only real poor-farmer class in America, they resided in the rocky, infertile areas of New England and in the pine barrens and the depleted tobacco lands of the southern tidewater. Miserable and despised, these people were generally regarded as lazy, irresponsible, and drunken. Often hiring out as lumber-camp workers in the North and as semi-servile laborers in the South, they frequently made no attempt to till their poor soil. In some places they were deprived of the franchise and in others their votes were reputedly bought. Their most spectacular contributions to the politics of their states were noisy demonstrations and violence; in 1786 they enthusiastically supported Shays’ Rebellion in Massachusetts.⁶ They had little to gain or to lose by political change. Though lumber was cheap, the market for it was stable. The price of their labor was destined forever to be high; whenever they needed cash to buy rum or to pay taxes or to keep out of debtors’ prison, they could always work for others, though they exercised this privilege with great reluctance. One thing promised by the establishment of the new government might have disturbed them: more civil order.

The next class of farmers were the stock raisers of New England, who also occupied poor farmland but who were considerably better off economically than the wood farmers. The stock farmers, though often left out of account in discussions of New England’s economy, actually produced almost half the total value of exports from the ports of lower New England. About 15 per cent of New Hampshire’s exports consisted of beef and livestock, in Boston and Salem they constituted nearly 10 per cent, and in Connecticut livestock was the principal staple. Ten to twelve thousand horses were exported annually from Connecticut to the West Indies, along with an equal number of cattle, sheep, and hogs; animals constituted more than 75 per cent of the total value of the state’s exports.⁷

The interests of the horse and stock raisers had been enhanced by independence, which had opened the insatiable markets of the French West Indies, particularly the island of Martinique, to American livestock and American vessels. It was unlikely that the political changes expected under the new Constitution would affect them any further. They were unaffected by the fact that Congress, by obtaining power to regulate commerce, might be able to open the British West Indies to American shipping, for those markets were already open to American goods. In any event, the French markets were far more important to them. The attitudes and decisions of the horse and cattle farmers, as a class, were therefore shaped by considerations other than their economic interests.

An almost forgotten group, the Narragansett planters, made up the third class of farmers using free labor. Their principal product, horses, was the same as that of the Connecticut stock farmers, but there the resemblance ends. Located on Rhode Island’s western shore, these northern aristocrats had once greatly resembled the southern planters, having all the trappings of a great landed gentry, including even slave labor. They had declined greatly by 1787; their slaves were almost all gone and their wealth consisted of little more than land. They still exercised a powerful influence on Rhode Island politics, however, and they still produced their famous luxury staple, the Narragansett pacer.⁸

The Narragansett planters were in a peculiar economic-political situation, one that helped produce the spectacularly radical government of Rhode Island during the 1780’s. Both political power and the tax structure in Rhode Island rested on the ownership of land, a basis long since obsolete in Rhode Island’s highly developed commercial and manufacturing ecoomy. This conflict between economic realities and political forms came to a crisis in the 1780’s when the state’s immense war debt necessitated a tax load which the land could not support, and the tax system broke down. The Narragansett planters were among the leaders of the movement for the radical and extremely complex series of fiscal measures enacted by the state. This was elaborated earlier; for present purposes it is sufficient to recall that in 1787 the program hung in the balance and would have been destroyed by a transfer of supremacy in fiscal matters to the United States, as was provided for in the Constitution. The interests of the Narragansett planters, like those of most citizens of Rhode Island, were closely tied to the success or failure of this fiscal program, and a vote for the Constitution would have been, at least for two or three years after 1787, a vote for their economic ruin.⁹

The fourth group of farmers using free labor were the small farmers of Rhode Island and the immediately adjacent areas of Massachusetts who produced no staple. Bred to the sea and forced by the scarcity of good land to live by their wits, almost all of them combined farming with some kind of maritime or commercial activity. The most common method was for a group of small farmers to build or buy a small sailing vessel jointly. When crops were harvested, instead of selling directly to merchants in Providence or Newport, they loaded their vessels and sailed to better markets to the south. By playing off the differences in prices between the several ports and by following seasonal price variations carefully, they pyramided the income from their crops to as much as two or three times their local value. The confused currency systems prevalent under the Articles of Confederation—four different systems were used by various states, and Congress used a fifth—made possible further profits from an early form of arbitrage.

Their interest was in free trade. Indeed, free interstate commerce and free access to the ports of the West Indies were almost a requisite for their survival. A superficial appraisal would thus seem to indicate that their interests would have dictated an enthusiastic reception of the Constitution. Perhaps of more immediate importance to them, however, was the Rhode Island fiscal program. Their attitudes as a self-conscious interest group toward ratification would not have been easy to predict. If it could be assumed, however, that they would gamble that American ports would be free and open to their vessels even if they did not join the new Union, it could probably be further assumed that they would be hesitant about joining the Union. But to both groups of Rhode Island farmers, as to many groups elsewhere, their interests as economic classes were overshadowed by their interests as inhabitants of a particular state.

There was a fifth group of farmers in New England: the tobacco and wheat farmers of the Connecticut valley. Blessed with an abundance of rich land and easy access to market, these farmers ordinarily enjoyed success and prosperity. But they were vitally affected by two political considerations.

Prior to the Revolution they had generally exported and imported via Boston, which they reached by sleds during the winter. After 1783, for various reasons, they traded almost exclusively via the Connecticut through New York City. Beginning in 1784, however, New York levied heavy duties on imports, which meant that farmers (and other consumers) in the Connecticut valley who traded through New York City paid duties for the support of the New York state government. They were also subject to heavy direct or excise taxes, borne chiefly by the farmers, for the support of their own state governments, particularly for servicing their huge war debts. In all likelihood the import duties would be continued or even raised under the Constitution, but the income would be used to cover the assumption of war debts. Thus a vote for ratification was a vote against double taxation, a vote for tremendous tax relief.¹⁰

The other political consideration, considerably more subtle, affected wheat farmers everywhere. In 1781-1782 Spain had opened some of its American possessions, including Havana, to United States shipping. Havana was such a good market for American wheat that many felt it had saved the United States economy during the hardest war years. But after the peace of 1783 Spain reconsidered its position, looked with alarm at the ambitious new country it had helped create, and adopted a general anti-American policy. The main features of this policy were two: 1) it closed all its American possessions to the goods and vessels of the United States and 2) fearful that the westward expansion of the United States would encroach upon its possessions, it blocked navigation of the Mississippi through its control of New Orleans. In this situation some kind of treaty with Spain was highly desirable for wheat farmers and absolutely necessary to westerners. Hence it might seem that both interests should have welcomed the Constitution because it put the United States in a stronger treaty-making position.

But it was generally felt that commercial concessions could be extracted from Spain only by guaranteeing that Americans would not encroach on New Orleans and the west. Wheat farmers and merchants were willing to go this far, for the opening of Spanish-American markets could raise wheat prices by 50 to 100 per cent. On the other hand, trans-Alleghany westerners would gladly sacrifice such markets for the opening of the Mississippi. They were not afraid to offend Spain; indeed, many favored a show of force or at least a general encouragement of filibusters or other forms of physical pressure and extra-legal activity. Thus the interests of the wheat farmers and merchants were directly opposed to those of the trans-Alleghany inhabitants and land speculators.

The ratification of the Constitution did not, of itself, preclude either interest group from realizing its ambitions. In general, however, it could be expected that under the Constitution a policy of force would be rejected in favor of a policy of peaceful negotiations for commercial concessions. In addition, the Jay-Gardoqui negotiations of 1786 had made westerners particularly fearful that easterners would surrender claims to the Mississippi at the first opportunity.¹¹

Closely akin to the Connecticut valley farmers were the members of the sixth group, the yeomanry of the middle states: New York, Pennsylvania, Delaware, and New Jersey. Owning from 30 to 240 acres of good land, these farmers concentrated on wheat as a staple, and they were generally prosperous throughout the postwar years. Their farms were not often laden with debts, and they usually lived within their means. As wheat farmers they shared an interest with similar farmers on the Connecticut.

On the other hand, the political interests of these farmers were, by and large, unfavorably affected by the changes resulting from the making of the Constitution. Politically they were probably the most vocal and possibly the strongest single interest group in the United States. About a fourth of them were of Dutch, German, and other national stocks; the remainder were the renowned Scotch-Irish Presbyterians. They had ridden to political strength on the crest of the Revolution, and in the 1780’s they exercised substantial control of New York and Pennsylvania politics and played important roles in the politics of New Jersey and Delaware. The shifting of sovereignty from the states to the general government threatened their political supremacy by upsetting the state legislative and administrative programs on which it was based.

The seventh group of slaveless farmers, the Hudson valley patricians, was a unique class. As owners of vast estates of rich farmland which was tilled mostly by tenants, they were primarily landlords rather than farmers. Another characteristic that set them apart from most American farmers was their close identification with mercantile interests. There was hardly a family among them that did not pursue, through one or more of its members, commercial activity on a large scale. As men of great wealth, most of them also had large investments in still other ventures and personal property.¹²

It is therefore impossible to make precise generalizations about their interests. Professors Beard and Cochran have assumed that the burden of taxes had an important bearing on their political attitudes, but this viewpoint neglects the vital fact that, according to the terms of carefully drawn contracts, the taxes on their lands were invariably paid by their tenants. As wheat producers, merchants, holders of public securities, and investors in other fields, they were affected in many ways by politics, but since New York seemed willing and able, at least in the short run, to give them everything they needed, there was little economic reason why they should desire the changes brought about by the Constitution.¹³

The final group of non-slaveholding farmers were the tenant farmers of New York. Economically and politically they were hardly distinguishable from the Scotch-Irish landowning farmers of New York; only their special tenure status made them a distinct group. Until the Revolution a viva voce system of voting had made them politically subservient to their manor lords, but Clinton’s party had established the secret ballot, accomplishing at once the liberation of a strong new force in state politics and a virtual guarantee that that force would support Clinton candidates.

Since the tenant farmers paid a large share of the direct taxes in the state, it might seem that Beard’s argument relative to the shifting of the tax burden (that ratification, by depriving New York of her impost, would necessitate the resumption of heavy land taxes to support the state government) would apply to them. But as a matter of fact ratification in New York meant the virtual elimination of all state taxes, as was explained earlier, and it is hardly likely that many in the state were unaware of this fact. Furthermore, the tenant farmers, like other wheat farmers, had an interest in a Spanish treaty. Thus if they were guided solely by their economic interests these farmers would have voted for ratification.

Among those farmers who held slaves, the economic importance and economic value of slavery varied widely with individual cases, as even the most casual glance reveals. In general, however, farms employing slave labor fell into three broad categories: 1) those to which slavery was an auxiliary labor supply, 2) those which were based on slavery but to which the real economic value of slavery was questionable, and 3) those to which slavery was both practical and necessary. Each of these three broad classes consisted of two subgroups.

Generally speaking, the farmers who employed slaves as an auxiliary labor force were classifiable into two groups, on the basis of the permanence of their status. The first group included those who, either from physical necessity—by reason of limited area, distance from markets, quality of land, or other such conditions—or from personal choice, would continue to use only a few slaves indefinitely. The greatest concentrations of such farmers were in the Valley of Virginia and in North Carolina. The entire economy of North Carolina was one that employed slavery but was not based on it. The second group consisted of farmers who used few slaves only because they were in areas that were still in early stages of development, and fully intended ultimately to establish great plantations manned by slaves. These were the farmers of Kentucky and Tennessee, of many parts of the Virginia piedmont, and of the back country of Maryland, South Carolina, and Georgia.

The economic interests of the “permanent” small slaveowners were not directly affected by the Constitution; in a very general way they could expect to benefit from the overall economic improvements anticipated under the new government. More important was the fact that their non-dynamic economic status often gave rise to a provincialism that made them immediately suspicious of basic change and reluctant to place their fortunes in the hands of outsiders.¹⁴ The war experience of North Carolina had aggravated rather than mitigated this attitude. In the view of North Carolinians, Congress had got North Carolina into a war but had been impotent in the face of the invading British, and it had been Carolina troops and money alone that had saved the Carolinas.

The interests of the “temporary” small slaveowners, a great deal more complex, were more vitally affected by the proposed Constitution. Since for many of them future development depended on the improvement of transportation facilities by private capital, the creation of an abundance of such capital by the funding of the war debts under the Constitution worked immediately to their advantage. Again, many such farmers were in areas where Indians were a menace to development, and the promised strength of the new general government could considerably improve their lot in this respect. Against these advantages deriving from the new system the would-be planters across the mountains weighed the overriding fear that navigation of the Mississippi would be bargained away by the new government. In general, therefore, it could perhaps have been expected that the majorities of both groups of small slave-owning farmers would, if the dictates of their economic interests were obeyed, be reluctant to support ratification, but that their attitudes would vary from one area to another.

The great majority of the second group of slaveholders, those on the “uneconomical” plantations, were in Virginia and Maryland. Caught tight in the grip of their own “tobacco complex,” these planters had accumulated great estates and multitudes of slaves, but both their land and their slaves were, as often as not, economic burdens rather than assets. Decades of exploitation by merchants and factors had left many of them hopelessly mired in debt, and decades of tobacco planting had burned up the soil and made barren vast stretches of once-rich farmland. Generally speaking, it was the planters of the older, most aristocratic parts of Virginia and Maryland, the tidewater and the Eastern Shore, who had most nearly exhausted their soil and were most completely entrapped in a web of debts. Those in the newer piedmont areas usually had better land and most of them were not so heavily burdened with debts.

The plantation aristocrats of Virginia and Maryland were a tightly knit group, and socially they were a single, cohesive class. Economically, however, their interests varied widely. They raised different crops: wheat and tobacco. The wheat planters in each state were a fairly unified group, having interests in common with the less aristocratic wheat farmers to the north. The tobacco planters, on the other hand, were as heterogeneous an economic group as could be imagined.

In politics the Virginia and Maryland planters rarely acted as a unit except when their interests as a social class were challenged by some outside group. On so broad an issue as ratification of the Constitution, they could be expected to be as individualistic as any class in America, and their conduct as a class was unpredictable.

The third class of slaveholders, the great rice and indigo plantation aristocrats of the South Carolina and Georgia low country, were a quite different sort. There was no doubt that to them slavery was profitable as well as necessary. Furthermore, a continuous supply of new slaves was imperative, for the oppressive heat and the diseases of the swamps took a heavy toll of laborers.

Blessed with a virtual world monopoly of their staples, these lordly souls were rarely concerned with the international commercial problems that beset tobacco and wheat farmers, and in normal times they almost invariably reaped substantial profits from their crops. Normally they required only two things from government, both of which were offered by the Constitution: stability and protection of the slave trade (or, in a broader sense, a large measure of free trade).

But the 1780’s were not normal times. The aristocracy had been forced to start from scratch in 1783, for during the war their lands had been neglected, their buildings destroyed, and their slaves confiscated. During the first two years of peace the price of money, goods, and slaves skyrocketed, and planters were plunged deep into debt. One or two good crops would have put them on their feet, but unfavorable weather and other conditions brought one rice and indigo crop failure after another. The additional burden of the taxes necessary to service large state war debts—neither Georgia nor South Carolina had received any substantial financial aid from Congress—forced the planters in both states to resort to radical fiscal legislation in 1786. In that year the full range of debtor-relief legislation, included paper money, laws staying executions, and tender laws, was forced into passage by the wealthy aristocrats of the two states.¹⁵

Then a bumper crop in 1787, harvested two months after the close of the Philadelphia Convention, suddenly brought prosperity to most planters and eliminated the need for such debtor relief. By the time the South Carolina ratifying convention met, the constitutional prohibition of such legislation, which in 1786 might have made the document unpalatable to these planters, was no longer significant. On the other hand, the new system promised them three important advantages: stability, protection of the slave trade, and tax relief through the payment of war debts by Congress.¹⁶ If, therefore, they were guided by their economic interests, most of them would have voted for ratification.

One aspect of the economic situation of all slaveholders, however, tended to make them reluctant to surrender control over their affairs to any other body. This was a peculiar commercial vulnerability that attended one-crop economies. The economically sound, as well as the traditional way, for southerners to reach world markets with their staples was to export at harvest time in the late fall and to import on return voyages in the spring. This meant that the large vessels engaged in the tobacco, wheat, rice, and indigo trade could make only one major voyage a year. This in turn meant that it was not economically feasible for any of the southern states to own enough vessels to carry all their shipping. Thus dependent upon outside shipping, their only protection against commercial exploitation was competition in the carrying trade. If the Constitution were ratified, it was certain that northern commercial groups would attempt, perhaps successfully, to obtain legislation that discriminated against foreign shipping. At least one of the reasons the southern states had joined the movement for independence was their desire to escape the monopolistic control of British and Scotch merchants that prevailed under the Crown, and many planters were reluctant to subject themselves to the possibility of a similar monopoly by Yankee shippers. For this reason some southerners in the Philadelphia Convention had insisted, in vain, that a two-thirds majority of both houses of Congress be required for the enactment of commercial legislation. For the same reason, many southern planters could be expected to oppose ratification of the Constitution.

Of the various non-agrarian occupational classes, the largest, though perhaps politically the weakest, was the manufacturers. Manufacturers fell into three broad categories: 1) service industries, 2) producing industries that had long been integral parts of the American economy, and 3) relatively new capitalistic or corporate manufacturing enterprises.

The service industries included a wide range of crafts that were carried on incidentally to other lines of economic endeavor, such as those of blacksmiths, printers, coopers, carpenters, and the like. Some of these crafts were closely related to farming, some to trade, and others to both farming and trade. Generally speaking, the interests of producers of this kind were similar to those of the economic groups they served, and except where friction between debtors and creditors existed they generally tended to side politically with such groups. That is, a country blacksmith ordinarily saw eye-to-eye on political questions with the farmers in his neighborhood, and ship carpenters ordinarily agreed politically with merchants and ship-owners. For this reason, as well as because a large number of them were disfranchised by the widespread landed-property qualifications for voting, men engaged in service occupations were of little weight in the contest over ratification.

The industries that manufactured finished goods for sale in America had grown up in the colonies because their products, though essential to the American economy, could not be produced or transported on a sufficiently large scale or economically enough to warrant production in Britain for export to the colonies. These included such establishments as lumber mills, paper mills, commercial flour mills, distilleries, and pearl ash and potash works. Having sprung up because they were relatively immune to competition, most of them were secure and needed no special governmental protection. Except for the general benefits of good government, which were enjoyed in some states and sadly lacking in others, the interests of these manufacturers would be little affected by the proposed new political system. Their economic interests dictated no particular stand on ratification.

The third general type of manufacturing establishment in the United States, capitalistic or corporate manufacturing, was the opposite of the second type. For the traditional proprietor-manager-worker who hired only a small number of workers it substituted absentee ownership and large numbers of employees —the factory system. This kind of manufacturing venture was new, and it sought to break into fields dominated by foreign producers, particularly British. Though it was more a potential field for investment than an existing occupational interest, the number of such places was multiplying rapidly in the last five years of the 1780’s. Many of the new firms concentrated on the textile industry. The Hartford (Connecticut) Woolen Mills, a cotton mill in Beverly, Massachusetts, the carding business in Providence and elsewhere in New England, the Connecticut silk mills, and countless fulling and dyeing mills came into being between 1785 and 1790. In Pennsylvania the iron business was growing rapidly, and such iron products as nails and tools were being produced in new establishments in Rhode Island, all the middle states, and North Carolina.¹⁷ This kind of manufacturing obviously needed the promotion and protection a strong government could offer, and on this ground men engaged in it would be disposed to respond favorably to the new Constitution.

But the number of friends the Constitution would win through its promise of the promotion of manufactures was far greater than the number of persons with economic interests directly at stake. Manufacturing was a great new field for investment and, with the large amounts of liquid capital about to be created by the funding of the war debts, a field that was very attractive to public security holders. To the already skilled inhabitants of overcrowded areas in New England, particularly Connecticut, it offered prospective employment. Finally, the promotion of manufacturing had a strong patriotic appeal as a symbol of the completion of independence and the moulding of a powerful nation.

At the pinnacle of the economic order were the mercantile classes. All men in commerce shared certain interests in that they performed similar operations, but it is a mistake to consider them as a single economic class. They dealt in different products and exchanged on different bases; some imported, some exported, some traded only locally; some were vessel-owning shippers, others had no hand in transportation, and so on. In short, different individuals performed different functions in the trading process, and a half dozen such men could be affected in a half dozen ways by a given economic or political situation. Only in so far as the preponderating portions of their interests and functions coincided can they be considered as special interest groups or economic classes.

The various mercantile classes can perhaps be most clearly delineated by reference to their functions in the process of the exchange of goods. There were four general levels of operators, exclusive of ultimate producers and consumers: 1) tradesmen or retail storekeepers, who bought imports from merchants and sold them to consumers, and who bought exports from producers and sold them to merchants; 2) factors, the agents of foreign merchants, who established a direct link between producers in one country and consumers in another, and who dealt either at wholesale or at retail; 3) merchants, who generally bought and sold only at wholesale, and who ordinarily traded only with other commercial people (American or foreign merchants and American tradesmen); and 4) shippers, who might be American or foreign merchants who transported their own goods, or third parties, citizens of any nation, who transported the goods of others in the carrying trade.¹⁸

The general interests of tradesmen or storekeepers everywhere were similar, the chief variable being the economic characteristics of their customers, particularly the goods or crops which their customers produced. Thus, for example, a storekeeper in Exeter, New Hampshire, had much in common with one in, say, Richmond, Virginia, but his practical problems were obviously quite different, both in terms of the volume and basis on which he did business and in terms of the produce he received in exchange for goods and which he in turn was faced with marketing. Another important variable was the financial condition of individual storekeepers; many were heavy debtors or creditors or both, others were relatively unentangled. Finally, while most dealt in general merchandise, some had separate interests by virtue of specialization in particular lines of goods, such as wines, books, or fine clothing.

On the question of ratification of the Constitution, tradesmen fell into three general groups. Those in the larger cities, who had formed organizations and were strongly class-conscious, generally favored ratification; most of them, particularly those in the ports which were in serious economic difficulties, had been enthusiastic supporters of earlier movements for a general government.¹⁹ Country and village storekeepers, on the other hand, had no awareness of class identity whatever. Their attitudes toward ratification, as toward most political questions, normally depended upon the prevailing attitudes of the other groups in their areas. The third group of storekeepers included those who were in unusual debtor or creditor circumstances. Creditors for large sums in states that had passed extreme debtor-relief legislation could be expected to be strong supporters of the Constitution; debtors in a desperate plight who had benefitted or expected to benefit from such legislation could be expected to oppose the Constitution.

Factors were few in number, and the great majority of them were foreigners (almost exclusively British); at the most, perhaps two or three hundred American citizens were engaged in this business. But because of their great economic power in some areas, particularly among southern planters, the influence of the factors far exceeded their numbers, and the effect of the Constitution on their interests, as well as their attitudes toward it, must be considered. The Constitution had two vital economic aspects to these men, who viewed it through British or pro-British eyes. In the first place it created a Congress with power to regulate commerce and levy duties on imports, and this power would probably be exercised to discriminate against foreign merchants and ships, particularly those of Britain. To offset this disadvantage the Constitution promised the factors an even more important advantage. Debts due British merchants before independence had been sequestered during the war by Virginia and Maryland, depriving those merchants of an estimated two million pounds sterling. The Constitution, by establishing the peace treaty as supreme law and by creating the federal court system, provided a means not only of recovering these losses, but also of facilitating collection of debts in the future.

Merchants were a fairly cohesive class, held together by regular communication and close personal and family connections as well as by common interests and business relations. Even so, one economic factor divided them into two broad camps. Some merchants combined shipping and trading and made profits from transportation as well as from the exchange of goods, whereas others were exclusively buyers and sellers. Though some vessel-owning merchants operated in every port, their greatest concentrations were in New England; elsewhere they were outnumbered by merchants who owned no shipping.²⁰

The interests of merchants who did not own vessels, like those of storekeepers, varied with the commodities they dealt in, the volume of their trade, and other factors. Only one group of merchants had a special interest in political action beyond what was needed for the entire mercantile class: the wheat merchants, whose situation has been outlined in the discussion of wheat farmers above. Except for these, all merchants had a vital interest in free trade, and in this respect their interests conflicted with those of some shippers and the nascent capitalistic manufacturers. At best legislation designed to promote American shipping at the expense of foreign shipping failed to help the merchants, and at worst it was clearly inimical to their interests. Protective tariffs were definitely against the interests of importing merchants. While duties for revenue could, within limits, be passed on to consumers, protective duties, by their very nature, are designed to force prices of imports above a competitive level, thus depriving importers of commodities and markets.

Despite their interest in free trade most merchants had reasons for favoring ratification, albeit with less ardor than shippers and manufacturers. Merchants in some ports, particularly Philadelphia, New York, and Boston, had experienced economic difficulties in 1786 and 1787, for different reasons and to different extents in each instance. People are more inclined to accept political change in times of economic difficulty, whether the change affects them directly or not. Too, there was a general feeling, energetically stimulated by pro-ratificationist propaganda, that the adoption of the Constitution would somehow bring an economic boom. Another consideration, often overlooked, which tended to make merchants favor ratification was their acute consciousness of vulnerability during war. Inland residents could talk boastfully of state sovereignty in 1787 and 1788, but to inhabitants of such port cities as New York, Newport, Charleston, and Savannah, which had been occupied and devastated by British troops virtually until the end of the war in 1783, such talk did not come easy.²¹ The force of all these reasons made it easier for most merchants to favor the protection of their interests inside the framework of the new Constitution rather than under the existing political arrangements.

More strongly in need of positive help from government than any other group in the American economy were, the shippers and ship-owning merchants. Certain needs were felt by all shippers, others only by special groups.

The more general difficulties which shippers faced were the direct result of the independence of the several states. Without the powerful deterrent of the British flag, American shipping began to fall prey to the piratical raids of Algerian corsairs immediately after the establishment of peace. For a decade after 1784, except for a brief spell in 1787-1788, when an epidemic of the black plague slowed down the Algerians, no American vessel could sail into southern European or north African waters without danger of plunder and capture by pirates. Somewhat related to this problem were the discriminatory insurance, rates charged on American shipping in London: 5 per cent on American vessels and only 2 per cent on British or French vessels making identical voyages. The Constitution, by promising a United States navy, could protect American shipping and reduce the need, if any real need existed, for such high insurance rates. Perhaps more important, by creating a surplus of liquid capital through the funding of the war debts the Constitution would enable American shipping to free itself of this London influence by establishing American insurance companies. Another vital concern of all shippers was free interstate commerce, and this was guaranteed by the Constitution. Though tariff wars between states existed only in Federalist propaganda, it was not inconceivable that they could ultimately break out, and certain barriers had already been raised.

On the other hand, restrictions placed against American shipping by foreign powers, while designed to operate against all shippers, bore hardest on certain ones. The two groups hardest hit were both concentrated in New England: those in trade with the British West Indies and operators of fishing vessels.

The closing of the British West Indies to American shipping late in 1783 did not merely deprive Americans of a share in a heavy and lucrative freight business; it almost paralyzed the New England carrying trade. The New Englanders depended on having, for their larger vessels, one annual European voyage with a staple supplemented by two or three trips to the West Indies, either for direct trade in provisions or for freight from the islands. The trade with the newly opened French West Indies was largely a trade in livestock and lumber, which were best carried in specially built smaller craft, and for this reason the new markets could not take the place of the old. Without the British West Indies the larger Yankee vessels could make only the one main voyage with a staple; for the rest of the year they were idle. Their difficulties were aggravated between 1784 and 1787 by Virginia merchants, who built a large fleet and reduced the availability of tobacco cargoes.

The fishing trade had been treated somewhat better in 1783, John Adams having negotiated a clause into the peace’ treaty which guaranteed free access to the best fishing banks. But the act that closed the British West Indies to American vessels in 1783 was followed two years later by a French arret that substantially closed the French West Indies to fish from the United States. As a result fishermen suddenly found themselves with an abundance of fish and almost no place to sell them. The whaling industry suffered even more. Whaling fleets were destroyed and activity was suspended during the war, and when whalers resumed business they found that the whales had either been annihilated or had migrated from their traditional haunts. To make the calamity complete, Britain levied a prohibitive import duty on whale oil, thus closing the major market for the principal whale product.

Exactly what the Constitution could do about these things, or whether it could do anything, was open to question. But New Englanders, led by those in Boston, thought the only solution was to fight Britain with tariffs and embargoes. The all-out effort Massachusetts had made in 1786 to fight Britain with state legislation had proved ineffectual, but the Constitution made it possible to conduct such a cold war on the national level, where success seemed more likely. It mattered little to the shippers that they were being brought into head-on conflict with some other economic groups. Almost all shippers, except possibly those in Virginia (who benefitted in the tobacco trade by favorable state legislation), expected to gain from the ratification of the Constitution.

There remains the fourth broad occupational category, the professions. Professional men can be divided into two groups, lawyers and “all others.” The “all others” class was very small, consisting mainly of physicians and a sometimes nebulous office-holding class. Physicians were affected by political change only if they had investments in nonmedical ventures that were affected; they had no interests as a class. The other group, the officeholders, is considerably more interesting.

Professional officeholders, in colonial days by far the most powerful single class, still existed in every state, though they were relatively scarce in New England. Concentrated most heavily in the states between the Potomac and the Hudson, they administered and sometimes virtually controlled government in three vital areas: fiscal operations, collection of customs, and dispensation of justice. The most important offices were those of comptrollers and treasurers, collectors of customs and vendue masters, and judges and clerks of courts. Most of these offices were lucrative—officeholders were the only persons in the country assured of an income in specie—and all were powerful.

The support of the officeholding class was important to both friends and enemies of the Constitution, but its attitudes toward ratification varied from state to state and from one individual to another. The offices would continue to exist or even multiply under the new national government, but the vital question to officeholders was who would fill the offices under the new regime. Support or opposition would depend largely on the answer to this question. In general, those who were insecure in their positions would be somewhat inclined to gamble for better things; those with a bird firmly in hand would be reluctant to surrender it for an identical bird in the bush. And in general, where the officeholding class was weakest, it would tend to follow the lead of dominant political groups; where it was bolder and more solidly entrenched, it would tend to fight ratification.

The last major occupational group, the lawyers, comprised the most influential class in America, though their influence was probably weaker in the 1780’s than in any decade in the last half of the eighteenth century. In a sense, a key to the history of the period is the breakdown of the noblest ideal of the Revolution, the concept of a government of laws, and its replacement by a resort to government of expediency, government which could exercise unlimited power on behalf of the majority of the people. The Constitution reversed this trend, and in this respect it was philosophically a lawyer’s document if ever one was written. It is not unjust to observe that this philosophical appeal had a practical foundation, for supremacy of law is obviously a prerequisite of supremacy of lawyers. The Constitution had a powerful appeal to lawyers everywhere.

A number of factors, however, worked to dilute this appeal. The political careers of many lawyers and the investments of others were jeopardized by the Constitution. Perhaps more important, the economic interests of lawyers were not entirely severable from those of their clients. Economically, lawyers were divided into two broad camps, country lawyers and lawyers in mercantile cities, and there were as many subgroups as there were classes in the American economy. Thus while the majority of the lawyers were friends of the Constitution, many of them would oppose ratification.

*  *  *

These were the principal occupational classes in the United States, the ways in which they were affected by the proposed Constitution, and the stands they would have taken on ratification had they followed the dictates of their personal economic interests. Since a large number of persons and groups were not vitally affected either way by the Constitution, so far as their occupations were concerned, investments of surplus capital outside one’s occupational field could have had great weight in shaping individual attitudes. Those whose occupations were affected in one way by the Constitution while their investments were affected in an opposite way—the interests of a large number of commercial people, in particular, were so split—would have to weigh their interests with special care.

Excluding capital incidental to the occupational fields listed above, capital existed in six major forms. These were money, public securities, vacant lands sold or for sale by the governments, confiscated loyalist property, capitalistic manufacturing, and chartered internal improvement companies.

CAPITAL IN THE FORM OF MONEY

BEFORE any discussion of money is possible it is necessary to make clear the various ways by which money was reckoned. All states used the pound-shilling-pence unit system, a pound consisting of twenty shillings and a shilling of twelve pence. The value of the units varied, however. In addition to sterling, four sets of values were in use in the several states. To reconcile these currency differences in interstate and international transactions, the Spanish milled dollar was used as a common measuring standard, and the Congress used dollars exclusively in figuring its accounts.

The currencies used in the various states are depicted in the following table:

SHILLINGS IN ONE DOLLAR	STATES	VALUE OF ONE POUND IN DOLLARS
8s.	New York, North Carolina	$2.50
7s. 6d.	Pennsylvania, Maryland New Jersey, Delaware	$2.67
6s.	Massachusetts, Rhode Island, New Hampshire, Connecticut, Virginia	$3.33
4s. 8d.	South Carolina, Georgia	$4.28
4s. 6d.	(Sterling)	$4.44

Thus familiarity with six basic rates of exchange was required by persons engaged in commercial activity that extended beyond state borders. Eighteenth-century Americans knew these values as well as twentieth-century Americans knew their own various coins, however, and they knew the exchange values of various foreign coins almost as well. Though the multiplicity of exchanges may be somewhat confusing to historians, it occasioned no great difficulty for Americans of the period, and it was adequate for their transactions. The promise of the Constitution that a uniform system of values would be instituted therefore had a strong appeal only to theoreticians. The ordinary person, businessman or not, was content to continue the use of the basic exchange most familiar to him.

The various articles that served as money constituted as complex a system as did the rates of exchange. Excluding certificates of public debt, “money” fell into four broad categories: specie, public bills, quasi-public paper, and private paper.

Specie requires little comment; it was hard money, gold or silver. Some states had coined money, but the most common forms of specie in circulation were British, Spanish, French, and Dutch coins. There was not then, nor was there ever to be in the continuously expanding American economy, sufficient specie with which to transact all normal business. Though specie was often considered to be the only “real” form of money, Americans of the post-Revolutionary eighteenth century were considerably more sophisticated in their understanding of the need for and the theory and practice of paper transactions than were their descendants a hundred years later. Consequently the economy was considerably less sensitive to fluctuations in the supply of available specie than it was to be during the last half of the nineteenth century.

Public bills were of two general kinds, those of the Congress and those of the states.

Continental paper consisted exclusively of bills of credit, which were actually public obligations, issued to pay in “cash” for war services and supplies; it was backed by nothing more than a vague pledge to redeem the bills at some future date, and the faith of the people in the intention and ability of Congress to carry out this pledge. Unlike the regular public debt certificates, this paper bore no interest. Public faith in the bills proved to be virtually nonexistent and justifiably so. By about 1780 the bills, issued early in the war, had depreciated to a thousand for one and most of them were retired by the states through taxation and various other methods. By the end of the war they had virtually ceased to circulate. The Congress never thereafter manifested any serious intention to redeem these bills, and the Constitution contemplated no such redemption. Provision was made for redeeming a few of them under the Loan of 1790, at the rate of a thousand for one. But this form of currency had ceased to have any practical existence after 1783, and with one exception it did not figure as an element in either private exchanges or public policy.

The exception concerned the citizenry of Massachusetts. When the continental paper was depreciating rapidly, many citizens of Massachusetts had continued to accept it, with a stubborn faith that Congress would ultimately redeem it. Shrewd operators in Connecticut and Rhode Island bought up large quantities of the paper and dumped it on the Massachusetts market. When it became clear that the paper would not be redeemed, hapless citizens of Massachusetts were incensed at Congress for having broken its pledges. They were still more incensed when the Constitution appeared and there was high talk of “restoring public faith and credit,” for the Constitution and the new government left the holders of continental paper still holding the bag. Consequently many holders of this form of public paper opposed the Constitution. A large number of the opponents of ratification in Massachusetts were holders of continental paper money.²²

The state paper was of three major forms: bills of credit, state-bank money, and tax anticipation certificates. Almost all the state bills of credit had been issued to help finance the war and they were, with few exceptions, called in and retired at depreciated rates before 1784. Except in the two states which issued postwar bills of credit, only insignificant amounts of such bills were in circulation in 1787. The two states were North Carolina and Georgia. In 1786 North Carolina issued £ 100,000 ($250,000) of bills of credit for the retirement of various state obligations, mostly accrued interest on war debts. This money quickly depreciated to about half its face value, but thereafter it circulated at that rate as a more or less satisfactory medium of exchange. The Georgia paper money of 1786, amounting to £30,000 ($128,751), was issued to finance an expected Indian war. When the war failed to materialize, most of the money was called in and destroyed, and the remainder circulated approximately on a par with specie.

The state-bank paper, on the other hand, was an important medium of exchange in the five states which had issued it: Rhode Island, £ 100,000 ($333,333); New York, £ 200,000 ($500,000); New Jersey, £ 100,000 ($266,667); Pennsylvania, £ 150,000 ($400,000); and South Carolina, £ 100,000 ($428,-571). These were the issues created during the so-called “paper-money movement” of 1785-1786. For the issuance of most of this money the states had gone into the banking business, printing notes and issuing them on loan, the borrowers paying interest and furnishing the state real-estate and other mortgages as security. The notes so loaned were legal tender only in Rhode Island and New Jersey. In Rhode Island the paper money circulated, with some difficulty, at about ten for one; in the other states, it was widely accepted and circulated at 85 to 100 per cent of its face value.

The Constitution prevented the states from issuing any further bills of credit, and from making anything but specie legal tender. Yet, whatever the intention of the members of the Philadelphia Convention may have been, the states were not specifically forbidden to issue paper money on loan. Thus the “paper-money movement” of 1785-1786, the movement which is generally assumed by Beard and most other historians to have been cut off by the Constitution, was not cut off at all! Indeed, the paper of New Jersey and Pennsylvania continued to circulate as a medium of exchange until the early 1790’s, and that of New York, Rhode Island, and South Carolina until well into the nineteenth century. Furthermore, the state of New York issued new paper on loan, on exactly the same basis as the issue of 1786, in 1796 and again twenty-five years later. It is thus doubtful whether the constitutional restrictions against bills of credit and legal tender laws would have influenced many of the friends of paper money to oppose ratification, or many of its enemies to support ratification. The data presented in the preceding chapters indicates, in fact, that such influence was almost nonexistent.

Tax anticipation certificates, the third form of state paper, were issued from time to time by most states. They were just what their name implies, certificates issued to pay current obligations when the treasury was temporarily without adequate resources. The salaries of the civil list were more commonly paid in these certificates than were any other state obligations. The certificates were redeemable in specie as soon as sufficient taxes were collected, usually within three months’ time. This form of money was not affected by the Constitution, and the states continued the practice of issuing it occasionally after the inauguration of the government under the Constitution.

Quasi-public bills were the tobacco warehouse notes of the tobacco-growing states, Maryland, Virginia, North Carolina, and South Carolina. After tobacco was prepared for market and before it was actually shipped, it was stored by its owners in publicly owned warehouses. Notes were given as receipts for the individual amounts so stored. The notes were negotiable and, on proper identification and proof of ownership, enabled the bearers to withdraw the stored tobacco from the warehouses. They thus provided a realistic and ideal medium of exchange in the tobacco-growing states, a medium that was to continue in use long after the adoption of the Constitution. The value of the notes was directly dependent upon the prevailing prices of tobacco.

Private credit existed in three general forms: banking, money-lending, and commodity credit. There were three banks in the United States, the Bank of North America at Philadelphia, the Bank of New York at New York City, and the Bank of Massachusetts at Boston, capitalized at $2,000,000, $318,250, and $100,000, respectively. Their notes provided an important medium of exchange for mercantile transactions in the three cities in which they operated, but their scope of operations did not ordinarily extend beyond these narrow limits.

The Constitution did not affect the notes as currency, nor did it affect the relationships between the bank operators and their mercantile clients. It did, however, affect the stockholders in various ways. Should a national bank be established by the new general government, it was conceivable that it would be a competitor of these private institutions. On the other hand, the relatively huge fiscal transactions of the new government might bring large amounts of new business to the existing banks. Special considerations, however, were more important than general factors, and they predisposed the directors and a large number of the stockholders of each bank toward a favorable reception of the Constitution. As a chartered corporation the Bank of North America had been under direct attack by the Pennsylvania legislature, and such attacks were precluded by the contract clause of the Constitution. The Bank of Massachusetts had recently been given a great fright by Shays’ Rebellion (and by the wild rumors that were circulated about the alleged aims of the Shaysites), and for all persons connected with the Bank the constitutional provision for use of federal troops to quell domestic insurrections had a warm and immediate appeal. The Bank of New York was operating without a charter, and in view of its identification with Alexander Hamilton, a bitter political enemy of powerful Governor George Clinton, a charter did not appear to be forthcoming at any time in the foreseeable future. The protection of a national government, though not needed at the moment, was thus felt to be desirable insurance for the Bank.

Money-lending by private individuals was widespread, but its private nature makes it difficult to measure its importance. In a very general sort of way the Constitution affected creditors favorably and debtors unfavorably, by prohibiting stay laws and other state legislation interfering with the payment of debts. But this restrictive clause would not have influenced creditors to support and debtors to oppose the Constitution unless two concrete conditions existed: 1) the passage or immediate threat of passage of such legislation, and 2) the likelihood of dishonesty on the part of debtors.

Including the three states which had issued paper money and had made it legal tender, seven states had enacted or seemed likely to enact laws interfering with the relations between creditors and debtors: Massachusetts, Connecticut, Rhode Island, New Jersey, North Carolina, South Carolina, and Georgia.

The likelihood of dishonesty on the part of debtors varied with the kinds of loans made to them. Three principal kinds of personal, non-bank loans were common: those made by professional money-lenders, those made as investments in real estate mortgages, and those made on a personal basis with little or no security. There were a small number of professional money-lenders in most American port cities. Their total number in the nation did not exceed one hundred, and perhaps no more than forty or fifty in the seven states named above. Hence, however strained may have been their relations with their debtors from time to time, their influence in favor of or in opposition to the Constitution was infinitesimal. The investment of money in real estate mortgages was somewhat more common, though in 1787 the lands being bought were principally state lands available on easy terms in Vermont, Maine, and the west. This factor made relatively unimportant the number and value of private real estate loans in the seven critical states. The personal loan was by far the most common type of loan but its very nature reduced the likelihood of friction between creditor and debtor and the probability of dishonesty among the debtors. All things considered, the features of the Constitution that protected creditors did not weigh heavily in the contest over ratification.

Commodity credit was a considerably more important factor. Between 1783 and the end of 1787 Britain had exported to the United States goods of various kinds whose value exceeded the value of her imports from the United States by about six million pounds sterling.²³ True, when allowance is made for shipping costs and for the fact that the worth of American products is based on prices in America, not on the much higher sales prices in England, this nominal deficit is greatly reduced, perhaps by half. Furthermore, American trade with other countries almost invariably brought favorable balances to the United States. Even so, a conservative estimate of American debts for commodities imported since the war would be about fifteen million dollars. In addition, southern planters, particular those in Virginia and Maryland, owed at least another ten million dollars for prewar purchases.

The pattern of distribution of these debts, and consequently the effect of the Constitution on the relations between debtors and creditors, was an extremely complex one. In one form of trade consumers owed factors who, in turn, owed British merchants; in another, consumers owed storekeepers who owed merchants who owed British merchants and often shippers as well. Ordinarily the largest debtors were also the largest creditors. When debtors were engaged in occupations or had investments that would benefit substantially from ratification, and were thus enabled to meet their obligations, creditors and debtors alike gained from the constitutional change. Otherwise, because the Constitution prohibited further legislative interference with the collection of debts, and because the new federal courts would be open to suits by British creditors, the benefits that creditors would derive from the adoption of the Constitution depended on where in the pyramid of debts they were situated. The general rule was, the higher one’s place in the pyramid, the greater the benefits.

In summary, while the fiscal policies inaugurated by the Federalists under the Constitution simplified and systematized the various forms of money and introduced more order into the relations between creditors and debtors, they did not by any means substitute a “hard money” system for the existing paper system. The essential change was a concentration of the machinery which controlled the issue and set the face value of the paper. Before 1789 fiscal power was diversified and divided between private and public agencies inside each state. After 1789 it was largely concentrated and lodged in private and public agencies operating on a national level.²⁴

CAPITAL IN THE FORM OF PUBLIC DEBT

THE champions of a general government of the sort established by the Constitution had assumed since as early as 1782 that the public debt was potentially the strongest bond of the Union. By 1787 this expectation had become, in very large measure, only wishful thinking.

The subject of the public debts is an extremely complex one. There were not merely two kinds of public debts, those of the states and those of the United States, but there were seven basic kinds of United States securities and in each state from three to ten kinds of certificates of public debts. In 1787 at least seventy-five forms of public securities were in general circulation.

Now it is true that all war debts were to be funded by the new general government and that the gains to security holders from the appreciation in the market value of the sixty million dollars face value of public securities was between twenty and thirty million dollars.²⁵ But this fact had a different significance to different kinds of security holders, for the status of the several forms of securities varied widely. The holders of low-priced, unfunded securities obviously had a great deal to gain from the creation of a government that would fund all the war debts. On the other hand, those who held securities that were funded on a solid basis and who were receiving prompt interest payments from the states—much of the continental as well as of the state debts had been so funded—merely had nothing to lose by the adoption of the Constitution. In analyzing the effect of the Constitution on their interests, virtually all security holders weighed their occupational interests, their other investments, and their obligations as well as their security holdings.

The holders of public securities were thus a much divided interest group. In a few states their interests clearly dictated support of the Constitution, and in those states many of them were leaders in the movement for ratification. In others they could support or oppose the Constitution without jeopardizing their investments, and in these states the security holders, as such, were virtually without influence as an element in the ratification.

CAPITAL IN THE FORM OF VACANT LANDS

THE size of the public domain in 1787 staggers the imagination. In addition to confiscated British and Loyalist property, which will be considered separately, it included vast acreages in Vermont, Maine, western New York, western Pennsylvania, and Georgia and almost the entire area between the Alleghany Mountains and the Mississippi River. The total amount of good unoccupied lands was many times the amount of lands already settled.

The sale of the public domain was thought to be a means of retiring the public debts. Consequently the states and, after 1789, the national government began to sell the lands to the highest bidders. The possibilities for making profits from the purchase and resale of these lands were enormous, and thousands of Americans invested their Surplus capital in land speculations.

Whether the Constitution would affect such investments favorably or unfavorably depended largely upon three factors: the validity of titles, the location of the lands, and the form of purchase.

If the validity of his titles to lands was unquestionable, the speculator had nothing to fear from the strong court system about to be established under the Constitution. But many titles were cloudy, and owners of such titles were usually better off under state jurisdictions. Others, however, sought national jurisdiction over such matters because their titles had been invalidated by state governments.

Lands located in areas where the Indians were a threat quickly appreciated in value in the face of the promised strength of the new general government. But in Vermont, Maine, western Pennsylvania, and parts of the transmontane region the values of lands were not affected by this possibility, and of the lands whose value was so effected, a large portion were in areas whose transportation route was via the Mississippi. As indicated earlier, the interests of absentee owners of these lands were identical to those of the settlers already established in such areas: that is, their betterment depended on the opening of the Mississippi for navigation, a goal that many felt would be sacrificed in exchange for commercial concessions from Spain.

If the terms of purchase were cash, or if the lands had already been paid for, the purchases were not affected by the Constitution. Since the land-sales programs were usually designed to help retire the war debts, however, the most common form of purchase involved securities as well as cash. Buyers contracted to pay specified sums, usually making a small down payment in specie and agreeing to pay the remainder in public securities at their face value within a specified period of months or years. In modern parlance, they were selling securities “short”--that is, they were agreeing to deliver to the seller of the land securities they did not at the time possess. Like “short” sellers of a later day, they expected to acquire the securities on the open market at a price less than that at which they agreed to deliver them. But whereas the modern “short” sellers obtain their profits from relatively minor fluctuations, these land speculators operated with enormous margins. Normally a land speculator would expect to make his profits by buying land in large quantities and selling it in small parcels to settlers, but under the special conditions that prevailed under the Articles of Confederation he had an additional opportunity for profit. For example, a speculator might contract to buy a hundred thousand acres of public lands for a dollar an acre, to be paid, let us say, in continental commissary certificates. Let us suppose that these securities were selling on the open market at a fourth of their face value. He would then acquire his lands for an actual cash outlay of only twenty-five thousand dollars, and he had to sell his lands at only their nominal cost to realize a profit of three hundred percent. Because substantial profit on any such venture seemed certain, many speculators, perhaps the majority, tended to extend themselves to the limit of their resources.

But when the Constitution was ratified, the market price of these securities began to rise, both because of the prospective funding of the Continental debts and because land speculators were busily competing with one another to acquire the necessary securities with which to fulfill their contracts. Our hypothetical purchaser would then find that instead of having to pay only twenty-five thousand dollars in hard money for his lands, he would have to pay almost seventy-five thousand. If the amount he had expected to pay was a large fraction of his total financial resources, the appreciation of public security prices under the Constitution would thus bankrupt him. The panic of 1792, in which hundreds of speculators were bankrupted, came about in precisely this fashion, and it was a direct result of the funding of the debts under the Constitution.

CAPITAL IN THE FORM OF CONFISCATED ESTATES

THIS form of investment was similar to investment in public lands. It was, however, affected only adversely by the adoption of the Constitution. Titles to such purchases were invariably jeopardized, for the peace treaty had provided for the restoration of such property, and the Constitution made treaties part of the “supreme law of the land.” Furthermore, almost all purchasers of confiscated property bought on terms requiring installment payments in public securities. The appreciation in market prices of securities damaged the interests of purchasers of this property in the same way it damaged those of purchasers of government lands.

CAPITAL IN THE FORM OF MANUFACTURING

THIS form of capital has been treated earlier. Manufacturing stood to benefit considerably by the establishment of the new system, both because of the creation of liquid capital through the appreciation of securities and because of the possibility that protective tariffs would be enacted by the new government. It is important to observe, however, that the interests of manufacturers were in direct conflict with those of land speculators. The manufacturers needed appreciation of securities, the land speculators would suffer from it. The land speculators required governmental support of westward expansion, whereas the manufacturers benefitted from some immobility of the population and the accumulation of large pools of laborers.

CAPITAL IN THE FORM OF STOCK OF INTERNAL IMPROVEMENT COMPANIES

THREE important companies for the development of internal navigation had been chartered and organized during the 1780’s: the Potomac River Company and the James River Company in Virginia, and the Cooper-Santee Canal Company in South Carolina. The interests of all three companies would be favorably affected by the expected appreciation of public securities in that it would increase the capital available to them. The interests of the Potomac Company, which required legislation by three states in order to carry out its aims, would be furthered in another way by the establishment of the Constitution, for the new system was to bring interstate waterways under a single jurisdiction. This advantage was only a nominal one, however, for it was still within the power of states to prevent developments they considered undesirable.²⁶

SUMMARY

THERE were in the United States in 1787 at least twenty basic occupational groups having distinctly different economic characteristics and needs, and there were six basic forms of capital in addition to capital incidental to occupational activity. Most of the occupational groups and all the forms of capital may be divided into two to seventy-five subdivisions. Of the grand total of major economic interest groups and forms of investment, about 30 per cent were affected by the Constitution directly and immediately in a favorable way, and about 15 per cent were directly and immediately affected in an unfavorable way. The remaining 55 per cent were either not directly affected at all or were affected in indefinite, indecisive, or unpredictable ways.

Among the more important groups that were affected favorably there were numerous conflicts. The interests of manufacturers were opposed to those of importing merchants and of land speculators. The interests of public security holders were divided: the interests of those favorably affected by ratification coincided with those of manufacturers but conflicted with those of land speculators and purchasers of confiscated property. The interests of wheat merchants and wheat farmers also conflicted with those of many land speculators, and so on.

It is therefore not even theoretically possible to devise a single set of alignments on the issue of ratification that would explain the contest as one in which economic self-interest was the principal motivating force.

It may still be possible, however, to explain the contest as fundamentally an economic conflict. The effects of the Constitution on economic interests were born of a number of variables, the most important of which was the state jurisdiction under which interests were pursued. The holders of a particular kind of public securities and the shipowning merchants in New York, for example, were not affected in precisely the same way as were such groups in New Hampshire or Georgia. When allowance is made for this fact the data can be brought into focus and, within the framework of the new system of categories of interest groups presented here, some assessment may be made of the role of economic forces in the contest over the Constitution.

NOTES

¹  Eliminated from consideration here are those groups that were politically mute: children, women, and slaves. This leaves only some 600,000 free adult males who were entitled to express themselves on political questions. This figure takes no account of those few who were disfranchised by law.

²  In addition to the sources cited with the data presented in Chapters 5, 6, and 7, a multitude of sources have contributed to the following analysis. A few of the most important of them may be mentioned here. The most valuable manuscript collections used were tax evaluation lists, particularly those in the Microfilm Collection of Early Town Records in the New Hampshire State Library at Concord; the Evaluation of 1786 in the Massachusetts Archives at Boston; town records of Rhode Island, some of them in the Rhode Island Archives at Providence, but most in the several town halls; the Evaluation of 1786 in the Connecticut Archives at Hartford; Assessment Lists in the Dela ware Hall of Records at Dover; the magnificent collection of county property lists in the Virginia State Library at Richmond; assorted local records in the North Carolina Historical Commission at Raleigh; and the County Lists in the Georgia Department of Archives and History at Atlanta. Two major printed sources are of the same nature, the Pennsylvania Archives (lists in Series 3) and, for the southern states, the Census of 1790. Customs office records for twenty-four of the thirty leading American ports, 1783–1790, were used in the analysis of commercial interests, along with countless collections of merchants’ private papers. Newspapers formed an important auxiliary source of information on all interests. Of the more valuable secondary works, the following were especially useful: Victor S. Clark’s History of Manufactures in the United States (3 vols., New York, 1929); William B. Weeden’s Economic and Social History of New England (2 vols., Boston, 1891); James Defebaugh’s History of the Lumber Industry of North America (2 vols., Chicago, 1906, 1907); Lewis C. Gray’s History of Agriculture in the Southern United States to 1860 (2 vols., Washington, 1933); Richard P. McCormick’s excellent study of New Jersey, Experiment in Independence; D. Huger Bacot’s two fine articles on the South Carolina middle country and up country, in the South Atlantic Quarterly, vol. 23 (1924), and the American Historical Review, vol. 28 (1923), respectively; and Morris and Morris’ study of economic conditions in North Carolina in 1780, in the North Carolina Historical Review, vol. 16 (1939).

³  The agrarian population in 1790 is commonly estimated at about 90 per cent. The lower figure used here is only an estimate, but it is based on a count of the known active places of nonagricultural employment, including shipping, and an estimate of the minimum number of persons necessary to activate such places. It is true that almost everyone was directly or indirectly connected with agriculture, but 75 per cent is, in my opinion, a liberal estimate of the number who derived their livelihoods directly from the soil.

⁴  That is, “permanently” under the existing technology. Ultimately, with the coming of the railroad, some of them were connected with the outside world; others remained economically isolated until the advent of the automobile.

⁵  These farmers joined with other groups in insurrectionary movements in New Hampshire, Massachusetts, and Connecticut in 1786, all as a protest against the excessive tax burden on real property and polls. In general, however, they often did not bother to participate in political affairs at all, not even to the extent of holding annual town meetings to vote for state officers.

⁶  An excellent description of this class in New England is contained in Jeremy Belknap’s History of New Hampshire (3 vols., Boston, 1792), 3:210 ff., 261. For graphic accounts of the purchase of votes in the South, see the writ ings of “Aristides,” “Observator,” and “An obscure Citizen” in the Richmond Virginia Gazette and American Advertiser, March 28 to April 25, 1787.

⁷  Records of the Port of New Haven, and An Abstract of Exports from Salem Previous to 1792, both in Customs Office Records in the Fiscal Section of the National Archives; Account of the Exports and Clearances of the Port of Boston for the Years 1787 and 1788, in Massachusetts Miscellaneous Manuscripts, in the Manuscripts Division of the Library of Congress; Hartford Connecticut Courant, January 16, 1786, January 15, 1787; Middletown Middle-sex Gazette, January 22, 1787; New London Connecticut Gazette, January 11, 1788; Providence Gażette, January 9, 1790.

⁸  See William D. Miller, “The Narragansett Planters,” in the Proceedings of the American Antiquarian Society, New Series, vol. 43, part 1, pp. 49–115; Edward Channing, “The Narragansett Planters, A Study in Causes,” in Johns Hopkins University Studies in History and Political Science, Series 4, No. 3 (Baltimore, 1886).

⁹  See the account of ratification in Rhode Island, Chapter 8, above.

¹⁰  See the accounts of ratification in Connecticut, Chapter 5, and Massachusetts, Chapter 6, above.

¹¹  The Jay-Gardoqui negotiations are treated at length in Samuel F. Bemis’ Pinckney’s Treaty: A Study of America’s Advantage from Europe’s Distress, 1783–1800 (Baltimore, 1926), and Arthur P. Whitaker’s The Spanish American Frontier, 1183–1795 (Boston, 1927). For an accurate and lively brief account see Jensen’s The New Nation, 170–174.

¹²  Virginia D. Harrington, “The Place of the Merchant in New York Colonial Life,” in Proceedings of the New York State Historical Association, 30:366 (1931).

¹³  Beard, Economic Interpretation, xv, xvi, 29; Cochran, New York in the Confederation; Spaulding, New York in the Critical Period, 154.

¹⁴  This statement does not apply to inhabitants of the Virginia Valley and their neighbors in what is now West Virginia, for the obvious reason that these places were newer, vigorous, and extremely dynamic. The Valley had a cosmopolitan complexion by virtue of being the main highway for migration from the north to Kentucky and Tennessee. Even so, few men in these areas contemplated the development of great plantations, and it is this fact that makes them akin to North Carolinians.

¹⁵  The prevailing notion is that the back-country farmers pushed these measures through over the objections of the low-country planters and merchants. Singer, in his South Carolina in the Confederation, page 116, says that in South Carolina the measures were produced by a coalition of back-country farmers and some planters. Actually there were no more than a half dozen delegates from the up country among the total of about one hundred delegates present at the session of the South Carolina legislature which passed these laws. The Georgia paper money was issued to finance an expected Indian war, but planters supported it, and they originated the debtor-relief laws. See the accounts of ratification in Georgia and South Carolina, Chapters 5 and 6, above.

¹⁶  Both South Carolina and Georgia were creditor states. That is, Congress owed them large sums of money for expenditures they made on behalf of the United States during the war. If Congress should assume the payment of state debts as well as liquidate its own obligations, these states would suddenly have large treasury surpluses, and state taxes would be unnecessary for years to come.

¹⁷  Weeden, Economic and Social History of New England, vol. 2; Clark, History of Manufactures; Bining, Pennsylvania Iron Manufacturing in the Eighteenth Century; “Industry,” vol. 2 in the Connecticut Archives. The most interesting accounts of these new ventures are those in the contemporary newspapers, particularly those of Hartford and Providence.

¹⁸  Historians of the period have been disposed to use the terms “merchants” and “tradesmen” interchangeably and to consider them as a single group, and also to use the term “tradesmen” to denote artisans and mechanics. In eighteenth-century parlance the terms “tradesmen” customarily meant retail storekeepers, although sometimes the more descriptive term “traders” was used. Four chief characteristics distinguished merchants from tradesmen: (1) their volume of gross business was larger; (2) they dealt largely at wholesale with storekeepers and other merchants; (3) they had direct sources of imports and direct connections with foreign markets; and (4) they operated exclusively in port cities.

¹⁹  In 1786 the tradesmen of Boston, perhaps the most troubled American port in the 1780’s, had attempted to establish committees of correspondence with such groups in other ports. The roster of cities from which Boston received answers to its circular letters constituted a list of ports that were in serious economic difficulty, and in which strong storekeeper support of the Constitution could be later expected: Newport, New Haven, New London, Hartford, Baltimore, and Charleston. These activities can be traced in a general way through the newspapers in the cities named.

²⁰  The occupational distribution of persons engaged in ocean-borne commerce was, in very rough figures, as follows. In Boston, of every 100 persons in such trade, approximately 20 were shippers engaged exclusively or almost exclusively in transportation—that is, the carrying trade; 65 were merchants who combined transportation and trading; 12 were merchants who had no interest in vessels; and 3 were factors. In Philadelphia, of 100 such persons, 5 were exclusively shippers, 35 were shipper-merchants, 58 were exclusively merchants, and 2 were factors. In Norfolk 25 were shipper-merchants, 25 were exclusively merchants, and 50 were factors. In Charleston 10 were shipper-merchants, 30 were exclusively merchants, and 60 were factors. These estimates are based upon long and careful study of manuscript port records and tax lists and of advertisments in newspapers of the above-named cities, but they do not represent actual tabulations.

²¹  It is interesting in this connection to observe that eighteen of the first twenty-nine numbers of the Federalist Papers are devoted, in the main, to discussions of the likelihood of future wars and the ability of the proposed general government under the Constitution to provide for defense. In view of the fact that New York City, for which the Federalist essays were primarily written, had been under occupation longer than any other place during the war-nearly seven years-this concentration on the military strength promised by the Constitution is not without significance.

²²  Ellsworth of Connecticut charged that Gerry of Massachusetts refused to sign the Constitution because he was a large holder of continental paper. He further charged that in the Philadelphia Convention Gerry had introduced a motion to redeem this paper at par. See Beard, Economic 1nterpretation, 98n. Though no such motion by Gerry appears in any of the records of the Convention, it is quite possible that it was introduced, for the feelings in Massachusetts on the subject were strong.

²³  Timothy Pitkin, Statistical View of the Commerce of the United States (New Haven, 1835). The statistics of Pitkin cited here were drawn primarily from McPherson, Annals of Commerce. McPherson made the tabulations from English customs records.

²⁴  It is also worth noting that many of the fiscal devices employed by the American states in the 1780’s, though denounced by Federalists and future his torians alike as quackery, were adopted in the twentieth century by the na tional government. The principles of the tax anticipation certificates, the land and commodity banks, and the tobacco notes all came to be accepted as or thodox in the twentieth century, and they formed vital parts of the fiscal machinery of the Federal Reserve System.

²⁵  Beard (page 35) estimated the profits from appreciation of securities at $40,000,000, and he cited Callender, who wrote in 1796, as having estimated the sum at $25,000,000. My own estimate, based on a rough tabulation of the amounts of each kind of securities and the prices quoted in newspapers from 1787 to 1791, is about $21,450,000.

²⁶  A good case in point is that of the Susquehanna River. The development of navigation on that river would bring substantial economic advantages to central Pennsylvania, but the principal benefits of the trade resulting from the development would go to Baltimore, the first major port below the mouth of the river. Such development was opposed by Philadelphia, which desired a less logical development, a canal from the Susquehanna to the Delaware. The Pennsylvania legislature, under the influence of Philadelphians, was able to block the development of the Susquehanna for decades.