Economic Problems

Question 1

5 points

What economic problems were there after 1783?

Answer 1

• Trade regulations were chaotic and there was lots of public and private indebtedness.
• After 1783 the Americans imported large amounts of British goods. Between 1784 and 1786 they imported a total of goods worth £7.5 million from Britain. American debt to meet the trade deficit helped to depress trade and slow economic deficiency.
• The fact that each state controlled its trade weakened America’s position. When Massachusettes wanted to prevent the dumping of British goods in America, New Hampshire eagerly absorbed them.
• After 1784 there was a demand that the Articles be amended to allow congress to control both national and international trade. However, each area had different interests. The north wanted a protextive tariff against British products, whilst the south (as expoerters of agricultural products and the benefiters of slavery wanted free trade.
• There was a nearly worthless currency and huge debts. The national debt in 1783 was £41 million, (£8 million national, £33 million international), with a yearly interest of £2.4 million.

Question 2

5 points

What were the positives about the economy?

Answer 2

• The US population grew from 2.75 million in 1780 to 4 million in 1790.
• The prospect of Western expansion was a great bonus.
• There were new markets available in Europe and the Far East.
• Many of the British trading restrictions could be evaded, especially by Americans trading in the West Indies.
• Barriers to interstate trade were dismantled in the 1780s.

Question 3

Who was Robert Morris and what were his beliefs?

Answer 3

Robert Morris was a Philadelphia Merchant (who made huge profits during the war) who was appointed the superintendent of finance in 1781. He avoided bankruptcy for the country through his dexterity and wealth. He thought it essentail to make a strong national government with powers to do the following:
* Set up a national bank.
* Secure control of public debt.
* Levy import duties.

Question 4

Was Morris’ idea for a Bank of America a success?

Answer 4

Morris hoped that his privately funded bank would act as a national bank (servicing the outstanding loan obligations and allowing it credit), but this failed and the government cut ties with the bank in 1784.

Question 5

Were Morris’ plans for taking control of the public debt a success?

Answer 5

Morris wanted the national government to take control of the public debt, but this failed as states preferred to assume responsibility for their debts. This meant that states absorbed large parts of the national debt into their state debts, giving congress little reason to seek enlargened financial powers.

Question 6

Were Morris’ plans for import duties a success?

Answer 6

Morris supported efforts to ammend the Articles so as to give Conress the ability to levy a 5% duty on all imports. However, the vote did not reach the necesary unanimity and the plan failed.

Question 7

4 points

What was the situation like by 1787?

Answer 7

• Morris resigned in 1784.
• By 1786 Congress had levied over £15 million in requisitions from states but only £2.5 million had been paid, and there was nothing Congress could do to force states to pay.
• The only major independent source of income for Congress was the sales of Western Land, but this developed slowly yielding only $760,000 before 1788.
• There was still a large overseas debt, and Congress couldn’t afford to pay the income let alone the acutal amount.

Question 8

4 points

What was the situation with the creditors vs debtors?

Answer 8

• The state governments weere facing serious problems. To reduce their war debts they imposed heavy taxes, which affected those already in debt badly.
• By 1783, the paper continental currency had ceased to circulate and some states stopped issuing paper currency.
• Debtors demanded an increase in paper money to repay their debts. Creditos opposed this since it would lead to inflation and economic instability.
• By the late 1780s it seemed debtors had gotten thier way. In 1787, seven states were issuing paper money. Rhode island even compelled creditors to accept it. The value of Rhode island’s money fell rapidly and creditors fled the state to escape having to accept it.