During the years following the American Revolution, foreign relations remained contentious. The Revolution freed American trade from the restrictions of British mercantilism. Americans could now trade directly with foreign powers, and a valuable Far Eastern trade developed where none had existed before. The Empress of China sailed from New York to Canton, China, carrying furs, cotton, and the spice ginseng and returning with silk, tea, and other luxury goods of East Asia. Exclusion from the British imperial trade union also resulted in great losses for the Confederation.
Immediately after the Revolution, Parliament debated the issue of trade with the former colonies. Some argued that restricting trade with America was wasteful, and that if trade were restricted neither party would benefit. Others, still angry about the Revolution, argued against a commercial treaty with the former colonists. Lord Sheffield, a member of the British Parliament, in his 1783 pamphlet entitled Observations on the Commerce of the American States, argued that Britain could trade with America without signing a treaty and making any concessions. Parliament voted to increase exports to America, while at the same time holding American imports to a minimum.
Parliament also refused to repeal Britain’s Navigation Laws, which prohibited American commerce with the British West Indies. The effect was devastating to American trade in wheat, fish, and lumber. West Indian demand for American goods remained strong, so shippers resorted to smuggling products to the islands on a much smaller scale.
British merchants began to ship low-priced goods of all kinds to the Confederate States. Americans eagerly purchased British products that they were deprived of during the Revolution. The influx of cheap foreign goods further aggravated the already bleak economic situation for American merchants. Some demanded that the Confederation impose restrictions on Britain’s imports, but the Continental Congress did not have the power to regulate commerce, and the states could not agree on a uniform tariff policy.
America and Britain were also involved in a dispute over post-war borders. Britain promised to withdraw all of its troops from America after the Revolution, and they did from the settled portions of the 13 states. In the northern frontier, however, the British refused to surrender several military posts on American soil that ran from the northern end of Lake Champlain down to the tip of the Michigan peninsula.
The British justified their position by citing America’s failure to honor the terms of the peace treaty. Specifically, America did not allow British creditors to collect pre-war debt and also did not restore confiscated Loyalist property as promised. The British soldiers remained in their positions to gain the favor of the local Indian tribes and deter America from future attacks on British-held Canada.
Although Spain had also recently been at war against Britain, it quickly became clear that they were not an American ally. During the peace negotiations Spain had won back Florida and the Gulf Coast region east of New Orleans. Spain also controlled the mouth of the Mississippi River, which the growing American settlements in Kentucky and Tennessee used to transport their farm products to eastern and European markets. In 1784, Spain closed the river to American commerce. Eventually, the Spanish governor reopened the river but required Americans to pay a tariff to use the passageway.
Spain captured Fort Natchez during the war, and although it was far north of Spanish holdings and well into American territory, they refused to relinquish it. Like the British, the Spanish made alliances with local Indians in order to dissuade Americans from spreading west of the Appalachians.
Post-war economic issues even strained America’s relationship with their ally, France. The French demanded repayment for war debts and restricted American trade at some of their busiest ports. A stronger central government in America may have resolved these foreign policy and commerce issues, but the Continental Congress did not have the power to intervene.
Throughout the Revolutionary War era, America did not have an effective centralized government to address a growing financial crisis. The British Navigation Acts once benefited the colonists, but now that they were a new country the Navigation laws restricted trade with the West Indies and other British ports. Manufacturing had been stimulated by pre-war non-importation agreements and by the war itself, and now there was nothing sustaining America’s manufacturing industry. Individual states were levying duties on goods from their neighboring states causing financial strife. In addition, several states were again printing depreciated paper currency. America experienced a severe economic contraction between 1770 and 1790.
Key revolutionary figures suggested assisting the individual states with war funding to relieve the economic depression. George Washington proposed a national taxation system as a possible remedy for the struggling state governments, but the Continental Congress did not adopt his recommendation. At the conclusion of the war, economic troubles persisted and a depression continued through 1786.
The economic downturn affected all classes. Farmers who sold primarily to local markets found themselves facing depressed crop prices and mounting debts and struggled to maintain their livelihood.
Commercial agriculture, which was more dependent on trade with foreign markets, also suffered a severe downturn. The once thriving commerce in tobacco, wheat, timber, and indigo declined greatly as European powers barred American exports to the West Indies and other European ports.
The end of the war brought problems for merchants, as well. Businesses that supplied armies on both sides during the war could no longer participate in the British mercantile system and were forced to sell their goods at home. Although the states developed tariff policies that gave preference to American goods, the tariff rates were inconsistent among the states. The British ships would land and sell their goods in the states with the lowest duties and at prices that local merchants could not meet.
The economic depression left the Continental Congress without means to pay off the nation’s war debts. Individual states, with their own economic problems, were not supplying the monetary requisitions made by Congress. The Continental Congress could not pay many of the individuals who had lent them money during the war, nor could they pay many veterans who fought in the war.
By early 1783, with a formal peace almost secured, the Continental Army, headquartered at Newburgh, New York, had grown bored and restless. The soldiers at Newburgh had gone without pay for a long time, and by March of 1783, many men and their families were in desperate straits.
An anonymous letter began to circulate among the officers at Newburgh, condemning the Continental Congress for failure to honor its promises to the army. The letter encouraged the soldiers to defy Congress in a military uprising if the accounts were not promptly settled and hinted that it was time to employ swords, not words. A revolt was brewing that threatened to destroy the new and fragile republic.
In March of 1783, Washington addressed a regular meeting of the officers at Newburgh. Washington asked the soldiers to abandon their talk of rebellion. He advised patience and promised expeditious congressional action on the salary and pension demands of the soldiers. But the soldiers held deep dissatisfaction, and were unconvinced by Washington’s promises.
In a final effort to secure the soldiers’ loyalty, Washington pulled a crumpled note from a Congressman out of his pocket to read to the assembly. Washington then spoke a few powerful words: "Gentlemen, you will permit me to put on my spectacles, for I have not only grown gray but almost blind in the service of my country." This humble act and statement by their commander, who had done so much, made the soldiers feel shameful and brought tears to their eyes. The threat to revolt at Newburgh collapsed.
During the war the Continental Congress and the individual states issued large amounts of paper money, resulting in high inflation throughout the Confederation. Directly following the war, some states imposed heavy taxes and limited the printing of new money in hopes of restoring their credit. However, the unfavorable balance of trade and a shortage of cash resulted in sharply lower prices and wages, which in turn increased pressure to print paper money and to pass laws to postpone debt payment.
Between 1785 and 1786, more than half of the states yielded to the economic pressures and put more money in circulation. Pennsylvania, New York, New Jersey, South Carolina and Rhode Island loaned the newly issued money to farmers to cover their mortgages. It was also used to pay off state debt and veterans’ claims.
In some states they printed so much money that it rapidly depreciated. Rhode Island, where the government issued the most paper money in proportion to the size of the population, experienced the worst depreciation. Creditors left the state and merchants closed their doors to avoid being paid in worthless paper. The Rhode Island government passed a law fining anyone who refused to take the money at face value. Eventually the law was ruled unconstitutional and repealed in 1789.
The one source that the Continental Congress could generate income from was the sale of the western lands. Thomas Jefferson’s Ordinance of 1784 called Congress to grant full statehood and self-government to a western territory only when the population equaled that of the smallest of the existing 13 states.
In the mid-1780s, the Continental Congress planned to sell the area commonly known as the Old Northwest, situated north of the Ohio River, east of the Mississippi River, and south of the Great Lakes. Congress passed the Land Ordinance of 1785, in which the delegates outlined a plan for surveying western territories into 36 square mile townships along east-west and north-south lines. Each township was subdivided into 36 lots or sections that were exactly one mile square, or 640 acres, in size. This plan eventually stamped a rectangular pattern on much of western America’s surface that is still visible from the air in many parts of the country today. The one mile square lots were then sold at auction for no less than $1 per acre, or $640 per lot.
The sale of land was aimed at private individuals; however the terms favored land-development companies because very few citizens had that much money or could work that much land. In later years Congress made smaller plots available at lower prices, but in 1785 America needed money to pay off the national debt.
The sixteenth section of each township was set aside to be sold for the maintenance of public schools—a farsighted decision on the Continental Congress’ part. In earlier colonial times, the Puritans established education laws to help disseminate their religious beliefs. Their laws stated that a village with 50 families had to have a teacher, and a village with 100 families had to have a teacher and a schoolhouse. The Continental Congress perpetuated the notion of public education in the Old Northwest. In contrast to the Puritan model, the new schools were not designed for religious purposes but to educate citizens of the new republic.
The methodical division and sale of the Old Northwest served as a nationalizing force because once the land had been ceded to the national government citizens realized what a priceless national asset the land was. The systematic division also simplified the task of defending America’s frontier. The Land Ordinance of 1785 set a precedent for American expansion all the way to the Pacific Ocean.
In 1787, the Continental Congress passed an even more important ordinance for the Old Northwest that established a specific frame of government for the area. The new plan, The Northwest Ordinance of 1787, receded Jefferson’s recommendation of self-government. Congress instead devised stages of evolution for governing the Old Northwest.
First, the Continental Congress stated that until the adult male population reached 5,000, the territories would be subject to a governor and three judges chosen by Congress. Congress planned that the territory would be divided into no less than three and no more than five states. When any one territory had 5,000 voting age males they could elect a legislature and send a nonvoting delegate to Congress. Finally, once any territory’s population reached 60,000 settlers it would be granted statehood with all the rights and privileges of the 13 original states. The Ordinance outlined one clear divergence from the original states—it excluded slavery permanently from the Northwest.
The Land Ordinance of 1785 and the Northwest Ordinance of 1787 validated property rights in America, and the Old Northwest eventually became the states of Ohio, Illinois, Indiana, Michigan, and Wisconsin. The methods used to settle the Old Northwest worked so well that the principles were carried over to other frontier areas, forming the basis for America's public land policy.
The Economic difficulties that continued to plague Americans throughout the 1780s were the source of growing social unrest. All through the summer of 1786, popular conventions and informal gatherings in several states demanded reform of the state administrations. That same summer, an uprising known as Shays’s Rebellion took place in western Massachusetts. The leaders of Massachusetts were rigidly conservative, and rather than print currency to pay off the state’s debts, they increased taxes that fell most heavily on farmers and the poor. Several Massachusetts farmers, many of them war veterans, were losing their farms through mortgage foreclosures and tax delinquencies.
When the Massachusetts legislature adjourned in 1786 without providing the citizens with relief from high tax rates and debt, the western counties revolted. An armed mob began to stop foreclosures by forcibly preventing the courts from holding their sessions. Under the leadership of Daniel Shays, a farmer and former army captain, a group of nearly 1,200 disgruntled farmers marched to the federal arsenal at Springfield, Massachusetts. Shays’s followers sought a more flexible money policy, suspension of property confiscations, and the right to postpone paying taxes until the depression lifted.
The Massachusetts authorities summoned troops and quickly put an end to the uprising. Daniel Shays was condemned to death, but was later pardoned. When the next legislature came into session, the majority sympathized with the rebels and met some of their demands for debt relief.
Thomas Jefferson commented from Paris, where he was serving as minister to France, that this was just a small uprising and that it was good for the health of the government. However, most did not agree with Jefferson’s position and instead were of the same mind as the usually unexcitable George Washington, who felt that the country was on the verge of anarchy.
The conditions of the new nation, including diplomatic problems, a strong concern for property rights, economic depression, lack of commercial control, and Shays's Rebellion, were troubling and led to discussions about the need for a stronger central government. Advocates of a stronger central government began to demand a convention to revise the Articles of Confederation.
The first steps toward reform were taken when a dispute between Maryland and Virginia over navigation on the Potomac River, and thus control of commerce, occurred. The argument led to a conference of representatives at Annapolis, Maryland, in 1786. However, since the Annapolis Convention represented only five of the thirteen states, Alexander Hamilton convinced his colleagues to call all the states to appoint representatives for a meeting to discuss general commercial problems. The meeting was to be held the following spring in Philadelphia.The Annapolis group approved Hamilton’s recommendation for a conference to discuss governmental reform and trade between the states. The Continental Congress reluctantly endorsed the meeting when they found out that Virginia had elected George Washington as their delegate. On May 25, 1787, what came to be called the Constitutional Convention opened its proceedings at the state house in Philadelphia, unanimously electing George Washington as its president.
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