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Did Democracy Cause the Recession That Led to the Constitution?
Woody Holton
| The supporters of the United States Constitution touted it as, among many other things, the only solution to a terrible economic slump. Nearly all free Americans believed much of the responsibility for the recession of the 1780s lay with the thirteen state legislatures. Yet not everyone was of the same mind about what the assemblies, which controlled debtor-creditor relations, the money supply, and the collection of "Continental" as well as state taxes under the Articles of Confederation (1781–1789), had done wrong. The Federalists believed the lower houses of the legislatures—which in most states were annually elected and essentially omnipotent—had damaged the economy by caving in to taxpayers' and debtors' demands for release from their legal obligations. They claimed relief legislation was unjust both to government bondholders (the primary recipients of tax money) and to private creditors—and that it had provoked them to stop supplying the capital and credit that were the lifeblood of the American economy. For them, one of the most attractive features of the proposed Constitution was its abolition of relief. |
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The best-known opponents of the Constitution concurred in the Federalists' judgment that the state assemblies had caused, or at least exacerbated, the recession of the 1780s by yielding to grass-roots pressure for tax and debt relief. So have most historians of the Constitution. They say the federal convention that met in Philadelphia in the summer of 1787 paved the way for economic revival by creating a new government that was more responsible than its state-level counterparts because it was less responsive to the public will.1
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| Yet in the years leading up to the Constitutional Convention, thousands of Americans offered a starkly different analysis. In their view, state-level fiscal and monetary policies were not too lenient, but too harsh. Accordingly, they denied that the only remedy for the downturn was for the states to surrender their most crucial economic responsibilities to a new federal government that would be even less amenable to popular influence. The half decade between the conclusion of the war and the opening of the Constitutional Convention in May 1787 was thus one of those rare periods in American intellectual history when citizens who disagreed with their most illustrious contemporaries left a rich record of their own ideas. |
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Despite their numerous regional, temperamental, and other differences, nearly all of the fifty-five Constitutional Convention delegates shared a common motive: to rescue the American economy from the clutches of the thirteen state legislatures. Throughout the 1780s, taxes had been delayed, reduced, and made payable in farm produce or depreciated war bonds. In some states, debtors had received permission to pay their debts over a period of years, in others with farm animals, worthless pine barrens, or other property. Worst of all, in 1785 and 1786 alone, seven of the thirteen state legislatures had printed paper money, much of which depreciated, allowing both debtors and taxpayers to pay less than they really owed. Those policies discouraged would-be creditors from lending Americans the investment capital they needed to get the economy moving again. |
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