[Chapter 3 of Rothbard’s newly edited and released Conceived in Liberty, vol. 5, The New Republic: 1784–1791.]
Every depression generates a clamor among many groups for special privileges at the expense of the rest of society—and the American depression that struck in 1784–1785 was no exception. If excess imports were the culprit, then voluntary economizing could help matters, and the press was filled with silly fulminations against ladies wearing imported finery. Less foolish and more pernicious was a drive by the beleaguered and often sub-marginal artisans and manufacturers for the special privilege of protective tariffs.
As early as July 1783, a group of manufacturers from Philadelphia met to petition the Assembly for protection against foreign imports. The following year, a group of Boston manufacturers submitted a similar plea. During the depression year of 1785, the urban artisans banded together in earnest. The Boston manufacturers in twenty-six trades formed The Association of Tradesmen and Manufacturers of the Town of Boston in the spring of 1785 to agitate for a protective tariff in their state, and they were followed by the formation of a General Committee of Mechanics in New York, which soon merged with the Manufacturers Society of New York to fight for protection. Mechanics from Philadelphia, Baltimore, Providence, and Charleston were also active though not formally organized. In particularly hard-hit New England, he town of Nantucket actually asked the state legislature in 1785 for permission to secede and rejoin Great Britain in order to try and regain prosperity. In Philadelphia, the master cordwainers, the shoemakers of the city, decided in March 1785 to engage in concerted economic pressure to try and block further imports of boots and shoes. They agreed not to buy, sell, or mend any imported shoes, and they obtained the support of their employees, the journeymen cordwainers.
Since the bulk of the country’s imports came from Great Britain, it was easy for the protectionists to employ anti-British demagogy and denounce American economic troubles as a British plot. For their part, the urban merchants were of course happy to ban British importers or British ships, but did not want any restrictions on British goods; in short, each group sought its own special privileges. Thus, when the Boston merchants agreed to boycott all British merchants, the Boston manufacturers bluntly pointed out that they didn’t care whether British goods were imported by British or American merchants, and they petitioned for a comprehensive protective tariff in Massachusetts. Finally, in the summer of 1785 the Massachusetts General Court passed a protective tariff for artisans and a navigation act for the merchants. The navigation act banned any exports from Massachusetts in a British vessel, and goods imported in all foreign vessels were to pay double duties as well as a special levy. Import duties, for their part, were raised to a new high and were levied on almost every type of manufactured good; excise taxes were also levied on the consumption of luxuries. While the merchants chafed at the protective tariff, the Boston artisans maintained their organization as a pressure group and a vigilance committee to check upon local merchants. In August 1785, the Boston artisans wrote to “tradesmen and manufacturers” of the other large towns, urging them to put equivalent pressure for a protective tariff upon their legislature. Massachusetts raised the tariff rates again the following year. However, because its navigation law had also injured French shipping while all French ports were open to American vessels, Massachusetts was pressured into repealing her navigation act in 1786.
Rhode Island levied a schedule of protective tariffs in 1785; New Hampshire levied import duties in 1784, forbade exports of goods on British ships the following year, and added a protective tariff schedule in 1786. Much lower tariff duties were levied by Virginia, the Carolinas, and Georgia.
Most important was the drive for a protective tariff in the most industrialized and populous city in the United States, Philadelphia. Under artisan pressure the radical-dominated legislature passed a protective tariff in the autumn of 1785, as well as an anti-British navigation law. The conservatives, it may be noted, were far more enthusiastically in favor of a tariff than were the radicals. By 1786, indeed, virtually every state had passed a navigation law against British shipping. However, there were sharp differences in degree, with Connecticut, New Jersey, Delaware, South Carolina, and Georgia only discriminating against British shipping to a slight extent.
It soon dawned upon the manufacturers and the merchants, however, that state tariffs and state navigation laws were not as effective a grant of privilege as they desired. For while most of the manufacturing states of the North imposed high protective tariffs for the benefit of their manufacturers, the South, with less manufacturing, understandably imposed lower tariffs upon themselves. The growing manufacturing of Pennsylvania and the rest of the North now wanted to secure the large southern market for themselves. Even enjoying the mild tariffs of the South, they could not successfully compete with the more efficiently produced and lower-cost English goods, or with English shipping. Hence, the northern manufacturers concluded that a nationalist system in which only the federal government could set a uniform tariff was important for monopolizing the southern market—at the expense, of course, of the southern consumers and any of the consumers of the low tariff states. Hence, the urban artisans in the North began to look with favor on the old nationalist idea of a strong, overriding central government and began to ally their important mass support with the longstanding schemes of the northern financial oligarchy.
Merchants, too, began to long for a uniform national navigation law. For those states which taxed or restricted foreign vessels very heavily (e.g., New Hampshire, Massachusetts, and Rhode Island) soon found that they lost substantial trade to those that retaliated very lightly against British shipping (e.g., Connecticut, New Jersey, Delaware, South Carolina, and Georgia) and they even had to abandon their much stronger laws. Hence, the merchant’s drive for a nationally imposed privilege to close the “loophole” of relative freedom and consumer choice in the other states. Again, a strong central government began to loom as a particularly attractive goal.
In April 1785, merchants and traders (retailers) of Boston turned to Congress for depression remedies, and Boston, a few months later, urged Congress to repel foreign merchants and shipping. In fact, James Bowdoin, the ultra-conservative governor of Massachusetts, urged that state to call a constitutional convention to endow Congress with greater powers, a plan endorsed by the Massachusetts legislature and by John Adams, then Minister to England. New Hampshire quickly followed suit. Also early in 1785, the New York merchants in the New York Chamber of Commerce urged congressional action against foreign traders, and the manufacturers and traders of the city joined in calling for greater power to Congress. Citizens of Philadelphia, in June 1785, asserted that only full powers to Congress over the commerce in the United States could bring relief from the economic depression; the Council of Pennsylvania followed with a plea for stronger congressional power. The Virginia and Maryland legislatures, as early as 1783, urged authorization for a congressional navigation act, and they were followed by the merchants of Philadelphia.
On April 30, 1784, Congress responded by asking the states for the authority to enact a navigation law for fifteen years, prohibiting British vessels from engaging in the United States coastal trade or from importing any goods not produced in Britain. In order to be ratified, nine states had to agree to this measure. Virginia agreed at once, but other states balked at the centralized control and the domination of the carrying trade that the law would grant to New England merchants. Delaware, South Carolina, and Georgia particularly balked at the restrictions of the law, and the attempt to gain agreement by the states failed.
No sooner was the Congress rebuffed than its power-seeking nationalist forces began anew. Early in 1785, the young Virginia lawyer James Monroe headed a congressional committee that urged an amendment to the Articles for perpetual congressional power to regulate interstate and international trade, and to levy duties on imports and exports. State powers were to be safeguarded, for all duties were to be collected by state authority and the funds were to accrue to the states where they were collected. The proposal, however, was defeated in the Congress, largely by southerners understandably reluctant to place a monopoly of the carrying trade in the hands of American merchants, a monopoly that at the same time would raise the price of imported goods and lower the prices of southern exports. The redoubtable Richard Henry Lee, back in Congress as its president, led the libertarian forces in staunchly opposing any sweeping powers for federal regulation of trade and managed to defeat the Monroe amendment in August 1785. A year later, a similar amendment again failed to pass the Congress.
A determined movement for national power was also welling up in Massachusetts. Governor Bowdoin’s scheme, propounded during mid-1785, for a new centralizing constitutional convention was stopped in its tracks by the refusal of the Massachusetts delegates to Congress to press for the plan. Writing sternly to Bowdoin in early September 1785, the delegates, headed by the redoubtable liberal Elbridge Gerry, blasted the schemes of the centralizers: “plans have been artfully laid, and vigorously pursued, which had they been successful, We think would inevitably have changed our republican Governments, into baleful Aristocracies. Those plans are frustrated, but the same Spirit remains in their abettors.” The Massachusetts legislature was forced by this rebuff to rescind its resolutions for a new centralizing convention.
Even more important to the nationalists than regulation of commerce was the acquisition of the taxing power. In the last gasp of nationalist dominance, Congress in April 1783 had accordingly proposed a new impost after the last one failed in 1782. This time, the impost power was only to be granted for twenty-five years and the states were to administer the collection of duties. The accompanying message sent by Congress to the states on behalf of the impost was drawn up by Virginia’s nationalist congressman James Madison. Around this proposed federal impost of 1783, there raged the most important political controversy of the postwar Confederation period. Here was the rallying ground for both the nationalist and the radical-liberal forces. In Congress, Jonathan Arnold and John Collins of Rhode Island had led the opposition to the impost. Now, first to raise public voice in opposition among the citizenry was the great George Mason. Drafting the Fairfax County (Virginia) resolutions, Mason found both in the impost plan and in Madison’s plea “strong proofs of the lust for power.” Trenchantly, Mason likened the plan to the arbitrary measures of the Stuart monarchs in England. Any congressional taxing power spelled disaster: “Congress should not have even the appearance of such a power. Forms generally imply substance, and such a precedent may be applied to dangerous purposes hereafter. When the same men or set of men, holds both the sword and the purse, there is an end of liberty.” To the nationalists’ plea for taxing power to pay the public debt, the liberals proposed that the debt be divided up and paid by the several states, according to their realistic depreciated value. Thus, there would be no amassing of centralized power.
Unanimity of agreement by the states was again required to adopt the impost of 1783. New Jersey, North Carolina, and Delaware, with little direct import trade, were willing enough to have national revenue derived from tariffs, and consented readily. New Jerseyites, furthermore, had invested large sums in federal securities. One of the few opponents in North Carolina was the old Regulator leader, Thomas Person. South Carolina followed suit in support of the impost, and Pennsylvania, still under the iron control of the right-wing, soon followed also, over weak objections by the Constitutionalists.
Massachusetts ratified the impost in the fall of 1783, but only after a tight struggle. Old radicals like James Warren and liberal merchants like Stephen Higginson led the opposition, but in general the commercial eastern and the Connecticut River towns favored the impost by a large majority while interior and especially western Massachusetts was bitterly opposed. Despite Massachusetts’ narrow approval in 1783, the urban towns continued to be restive, and the towns of western Suffolk County urged a county convention in 1784 against the impost, a request that was angrily turned down by Boston. As late as 1786, the country town of Rochester, in southern Plymouth County, attacked Congress’ half pay for army officers, and attacked the impost as eliminating “the Constitutional Check which the General Court had on Congress.”
The struggle was also intense in Connecticut, where agricultural opinion brought the impost to defeat, while Tory Fairfield County voted for it. The intense rural opposition to the impost in these states was not surprising since these were precisely the people who would have to suffer the burden. But after insisting that the revenue be paid only for public debts and not for any pensions, to which New England was bitterly opposed, the impost finally passed the Connecticut legislature in 1784.
Debate was more heated in Virginia, following that state’s crucial role in blocking the previous impost plan of 1781. Such powerful figures in Virginia as Thomas Jefferson lobbied for the plan, and Patrick Henry came out in its support. The opposition was led by George Mason and Richard Henry Lee; Lee, too, denounced the thirst for power and aristocracy exhibited by the plan, as well as the breakdown of the limits which the Confederation had hedged around federal encroachment on the liberties of the states. Patrick Henry’s sudden shift into opposition seemed to doom the impost, but open pressure by George Washington, combined with the surrender of Mason, secured Virginia’s approval of the impost at the end of 1783.
The story was similar in South Carolina. The state had first turned down the congressional request but, after pressure by George Washington, was finally persuaded to approve the impost. In Georgia, the opposition was so great as to delay approval until 1786. One by one, however, the states fell into line; even Rhode Island, over the bitter opposition of David Howell, who led the resistance against the 1781 impost, approved the impost in early 1786. Rhode Island’s shift was propelled by the change of heart of Nicholas Brown of Providence, one of the leading merchants of the state, and previously one of Howell’s major backers. Owner of $50,000 of federal securities, Brown decided that these securities were being “neglected,” so he swung over to the impost. As in Massachusetts, the opposition to the impost rested with the inland towns, while the urban interests, merchants, and mechanics favored the tax.
By August of 1786, every state but New York had approved the impost. While the oligarchs and the urban artisans united to favor the impost, the opposition was led by Abraham Yates, the Albany lawyer and cobbler who had risen to leadership of the radical forces in New York State. Yates stressed the thirst-for-power theme and, along with other opponents of the impost, cited the English theorist James Burgh in warning of the inner tendency toward the expansion of government power. Unerringly, Yates centered on the central importance of the taxing power and warned that it “is the first, nay, I may say the only object of tyrants. … This power is the center of gravity, for it will eventually draw into its vortex all other powers.” Yates also warned that true republicanism can only be preserved in small states, and keenly pointed out that in the successful republics of Switzerland and the Netherlands the local provinces retained full control over their finances. A taxing power in Congress would demolish state sovereignty and reduce the states, where the people could keep watch on their representatives, to mere adjuncts of congressional power, and liberty would be gone.
In New York the struggle was over congressional versus state control of collecting the proposed impost. In the critical vote in the spring of 1786, and again the following year, the New York legislature refused to grant Congress any control over collection, and insisted that New York’s paper money be accepted in payment of duties. Congress refused to accept these conditions, and the impost of 1783 was defeated. Thus, the unanimity principle under the Articles of Confederation had made all attempts to impose a congressional taxing power impotent.
The votes of the New York legislature aligned with the merchants of New York City and Albany, led by Alexander Hamilton and Philip Schuyler, and the bulk of urban mechanics, in favor of the impost, while the followers of Governor George Clinton from the other upstate counties, led by Abraham Yates, were overwhelmingly opposed. Similar lines would be drawn in the ratification debates over the Constitution.