Corporatocracy in the Revolution

Merrill Jensen: “The New Nation; A History of the United States During the Confederation 1781 – 1789”

NB: The term “federalist” is to mean those favoring a confederation, counter to the usurped meaning.  The term “nationalist” is used for those who favor a strong central government.

Debt and Inflation

Jensen continues, offering details regarding the various methods by which the United States financed the war.  Suffice it to say, most involved inflation and much of the rest involved borrowing from various European entities.  One item of interest is the action taken by Congress in March of 1781, when the Articles of Confederation went into effect:

…Congress was advising the states to do away with their legal tender laws.  Shortly thereafter it advised them to do away with paper money entirely.  By the end of 1781 paper currency had stopped circulating as money. (Page 41)

This is interesting, and – beyond speculating – I admit I don’t understand the reasons why such a step was taken.  Perhaps the paper money was by then so obviously worthless that there was no longer any point in pretending?

In any case, some states were still collecting paper money as taxes, then turning it over to Congress to destroy; some speculation in the market remained regarding paper currency.  Beyond this, it carried no importance. (Page 41)

This did not end the saga of the public debt, however.  Speculators of various forms bought it up – by 1783, 80% or more of it was held in the northern states, according to Hamilton. (Page 42) 

Disdain for Democracy

Such men, as you might expect, included in their ranks the chief proponents of a coercive centralized government – the nationalists:

Their plans and the measures they took, shape much of the history of the years 1781 to 1783, and frustrated though they were as the treaty of peace was proclaimed, their program for the future was revealed almost in its entirety.  It had as its chief end the destruction of that self-government within the states which the separation from Great Britain made possible.  They looked upon that self-government as an evil, an evil which they described as “democracy.” (Page 42, 43)

This strikes me as crucial on several points: first, the desire by many to achieve a coercive central government was plainly evident well before the Constitutional Convention in Philadelphia (and before any of the trumped-up calamities under the Articles); second, I have often read of the disdain of many of the founding generation for the idea of “democracy.”  This is usually presented in a context of favoring a republican form or for avoiding the tyranny of the majority. 

It seems it was neither.   Jensen here sheds new light on the reason for the disdain – it wasn’t because of a fear of the tyranny of the majority; instead, it was precisely to ensure the control by the minority.  Democracy to this generation meant “self-government”; a thing to be avoided if the merchant class had their way. 

National Government is the Objective

As initially drafted, the Articles of Confederation gave significant power to the national government.  This concept gained little traction among the federalists of the time.  The Articles of Confederation as finally ratified left sovereign power with the states, with the central government as “their creature.”  This was the result despite the opposition from the colonial ruling class, desirous of independence under a new, central coercive government. 

This was the stated position of this group beginning even before the Declaration of Independence was signed.  They feared the lack of control offered by a more decentralized system:

…their desire for “national government was intensified rather than diminished, and they showed no more intentions of accepting the Articles of Confederation as a permanent constitution than they did of accepting some of the more democratic constitutions adopted by some of the states. (Page 43)

As the Articles could not be changed, they worked to bring on their desired changes incrementally – by establishing precedents that increased the authority and sovereignty of Congress.  Gouverneur Morris favored such a strategy as early as 1775. (Page 43) Incremental change: this strategy has been effectively carried out from then until now.

There were powerful classes in favor of a strong central government.  First were the land companies centering on the “landless middle states: the Indiana, the Illinois, and the Wabash companies.”

They had appealed to centralized government (Great Britain) before the revolution; they appealed to Congress once war began…. (Page 44)

This class included men such as James Wilson and Robert Morris.

The second group was the public creditors:

Great riches for them lay in the mass of depreciated paper used to finance the war if Congress could get and enforce the power of taxation. (Page 45)

Most famously, Alexander Hamilton declared: “A national debt, if it is not excessive, will be to us a national blessing.  It will be a powerful cement to our union.” Robert Morris, not to be left out, declared that “a public debt supported by public revenue will prove the strongest cement to keep our confederacy together.” (Page 45, 46)

Is it possible that someone was writing the talking points for this crowd?

The nationalists went further – calling, in 1780, for the appointment of a dictator.  That spring, it was proposed in Congress that a committee be sent to Washington to propose “a kind of dictatorial power….”  As the war effort was growing worse, the desire for a dictator grew stronger: “the necessity of appointing General Washington sole dictator of America” was talked if with increasing frequency. (Page 46, 47)

A motion was made in Congress: to give Washington absolute power to choose his own means to bring 25,000 men into the field; to clothe, arm, and equip those men; and to call on any state militia he might want.

In addition to all this he was to be vested with power “to do all such other matters and things as shall appear to him necessary to promote the welfare of these United States,” and to draw on the treasury of the United States for such sums of money as he needed to carry out such powers.  Furthermore Congress should agree to ratify everything he did.  (Page 47)

The only limitation on this proposed power was that it was to expire on 1 December 1781.

At this time, the power in Congress was still in the hands of the federalist side of the revolutionary group.  They shelved the proposal without even submitting it to committee.  “Matthews [who made the proposal] was given such a verbal beating as he had never experienced before.  He declared that “such an insult I never saw offered to any member of Congress….” (Page 48)

Consider – this was during a time of extreme desperation in the war effort, yet Congress has the courage and principle to remain true to the Constitution then in existence…and to deliver a verbal beating!

The efforts of the centralizers did not end here.  A convention met in Boston, with merchants and lawyers from Massachusetts, Connecticut, and New Hampshire.  Following this, a further convention was called in New York to include New York and other states:

The resolutions of the Boston convention met with hearty approval in New York.  Some members of the legislature were for “appointing a dictator, with a vice dictator in each state, invested with all the powers conferred formerly by the Roman people on theirs.”  General Schuyler fully expected to go to Hartford “with instructions to propose that a dictator should be appointed.” (Page 49)

The Hartford convention urged that Washington be given power to collect supplies from the states and that Congress be given the power of taxation in order to pay the interest on the public debt:

It declared that the lack of coercive power was the greatest defect in the “general government of the continent.”  To remedy this, the idea of implied powers was set forth. (Page 49)

Implied Powers.  Thirty-five years before McCulloch v. Maryland….

Such ideas were startling to men like James Warren, who wrote to Sam Adams:

If one of them [the resolutions] does not astonish you I have forgot my political catechism. …in the height of our contest for public liberty and security [the convention] solemnly resolved to recommend to their several states to vest the military with civil powers of an extraordinary kind and where their own interest is concerned, no less than a compulsive power over deficient states to oblige them by the point of a bayonet to furnish money and supplies for their own pay and support. (Page 49)

This idea of implied powers did not spring up like magic.  Jensen points to the pen of Alexander Hamilton in the form of a letter to James Duane “one of the most consistent nationalists, who was once more a member of Congress.”

The root of evil, said Hamilton, is that Congress lacks the power to act upon the states collectively.  To get around this fact he conjured up the idea that Congress should use “undefined powers.”  Such powers could be limited only by the object of the establishment of Congress.  This object Hamilton defined as the freedom and independence of America…. [the Confederation] was defective because of the idea it contained of the “uncontrolled sovereignty in each state over its internal police…” (Page 50)

All of this was well before Philadelphia in 1787!

Hamilton proposed that a convention be called and that it be given power to draw up and adopt a new government without reference to Congress, the states, or the people.  This government would be a “solid, coercive union” with “complete sovereignty” over the civil, military, and economic life of the thirteen states. (Page 50)

It reads like a dry run for the Philadelphia convention several years later.

Another step was for Congress to consolidate behind it the power of the army, which, like the creditors, Hamilton described as an “essential cement of the union…”  Congress could attach the army to it by providing clothing and by giving the officers half pay for life. (Page 51)

Buying the loyalty of trained killers….

Hamilton’s readiness to use the force provided by the creditors and the army to achieve political ends foreshadows the attempted coup d’état of 1783, and is of a piece with the willingness of some of the nationalists to use force to obtain their ends in 1787. (Page 51)

By the end of 1780, the nationalists were gaining the upper hand: “The war was going from bad to worse.” (Page 51) War, of course, always favors the growth of coercive government.

Congress and the states were poverty-stricken but men like Robert Morris had made fortunes out of the war…. In Pennsylvania the “Republican” party dominated by the Philadelphia merchants won the elections in the fall of 1780.  In 1780 Massachusetts got a constitution which threw much power into the hands of the coastal merchants.  In 1781 Thomas Jefferson was replaced as governor of Virginia by Thomas Nelson who had opposed independence, and above all, any change in the established order in Virginia. (Page 51, 52)

Nationalist leaders were also elected to Congress:

Richard Henry Lee went back to Virginia and for the next two years the tone of the Virginia delegation in Congress was set by James Madison, who, in this period of his life, was ardent in behalf of centralized power.  James M. Varnum, an out-and-out believer in dictatorship, came to Congress from Rhode Island.  James Duane and Robert R. Livingston were back in Congress by 1780.  Alexander Hamilton came in 1781; James Wilson returned in 1783.  General John Sullivan from New Hampshire was no follower of the Lee-Adams group either, so that by the fall of 1780 Harrison was able to report to Hamilton that “our friends Sullivan and Carroll…have contributed immeasurably, by their independent conduct, to destroy the eastern alliance.” (Page 52)

Such was the situation at the time of the end of hostilities. The nationalists had hoped for a continuation of war long enough to consolidate power.  Ultimately, with the end of the war (and only for a time), their power quickly faded.  This is the subject of Jensen’s next section.