Under The Confederation

Commerce Of The United States. Colonial Period; Financial Policy; War of 1812.

By the treaty of Paris in 1783, the American Colonies secured their independence and became the owners of a domain embracing 1,400 miles of sea coast and consisting of 827,844 square miles of rich and productive land. The natural resources of this vast domain embraced every species of raw product, animal, vegetable and mineral, which might be needful in the growth and upbuilding of a nation in the arts of agriculture, manufacture and commerce. At that time the great majority of the population lived on farms, but three and one-third per cent, having their homes in the towns and cities, and there were but six cities having a population of over 8,000. Naturally the energies of the people were devoted to the utilization of the natural products of the soil and forests. Shipbuilding early became an important industry, owing to the abundance of excellent timber along the coast and rivers, and this led to the development of the fishing industry. New England ships were made in great numbers, and were largely engaged in whaling and in the cod fisheries of that coast. Dried codfish was used as money in the Massachusetts Colony at one time, and was one of the chief sources of wealth of that colony. Whatever of foreign commerce existed was carried on chiefly with the mother country. The northern colonies exported timber in the form of shingles and ship timber; and the southern colonies, tobacco, tar, turpentine, rice and cotton.

Several of the colonies made early attempts at the manufacture of woolen, linen and cotton goods for home consumption, but England regarded all such displays of colonial enterprise with a jealous eye. She wanted no rival manufactories in her colonies. It had been the uniform policy of Spain and Portugal to use their colonies for their sole benefit, and England fell into the same error. The English idea was that the colonies should produce only what England needed, should sell to England only, and in return buy what England had to sell. Accordingly, when the Americans began to make woolen goods to the extent of diminishing the demand for English woolens, they were promptly forbidden to export wool or woolen goods from one colony to another. When they turned their attention to the production of hats they met a like prohibition against the exportation of hats from colony to colony, and the number of hatter apprentices was limited by law. When they made an attempt to smelt a small quantity of iron ore, for their daily needs, a statute was passed which permitted the importation of pig iron into England duty free, but forbade the erection of "any mill for slitting or rolling iron, or any planting forge to work with a tilt-hammer, or any furnace for making steel." During the decade of 1760 to 1770, wonderful improvements were made by Hargreaves and Arkwright in machinery for spinning and weaving, and the colonists made great efforts to secure some of these machines, but the legislation of England prohibited the exportation of machines, tools, plans, and even the immigration of any one who knew how the machines were made. By these means, together with the navigation laws forbidding trade with England, including English Colonies, except in English ships, she made it exceedingly difficult for the colonists to supply themselves with even the coarsest articles of everyday use.

The strained relations between the colonists and the mother country became more aggravated, and the tie which had bound them together for a hundred and fifty years was broken by open hostilities in 1775. The American Revolution was carried Prohibition of Colonial Manufactures 1650 through to a successful issue, but peace did not bring prosperity. The war had shattered business, sapped the brawn of the country, and thrown the states heavily into debt. The confederation proved weak and ineffectual. It had no power to enforce its determinations, carry out its agreements or redress its injuries. In the treaty of Paris it was promised that Congress should "use its influence" to secure the payment of private debts due to Englishmen. But it turned out that Congress had no influence and the debts were never paid. In consequence the British refused to give up some of the military posts on the western frontier. American ships were captured or plundered by the Barbary pirates with impunity, the new republic being powerless to fight them.             

In order to prosecute the war of the revolution, Congress issued bills of credit, which were to pass as money. This continental currency at first was taken readily, but as million after million was printed and the credit of the Congress appeared more and more doubtful, its value declined, and at last it grew so cheap that "not worth a continental" became a byword to express utter worthlessness. During the summer of 1780 the currency became so depreciated that it required ten dollars of the paper to make one cent. Prices rose until corn sold in Boston at $150 per bushel and flour $1,575 per barrel. Samuel Adams is said to have paid $2,000 in paper money for a suit of clothes, and Washington to have remarked that it required a wagon load of money to buy a wagon load of provisions. The people of Rhode Island thought they had hit upon a solution of the trouble, and issued a legal tender paper currency. Any farmer could borrow this from the public treasury upon security of one-half the appraised value of his land. Nevertheless the currency depreciated, and all their efforts to keep it at par proved futile. In Massachusetts riots broke out in opposition to the efforts of creditors to collect their debts, and discontent and lawlessness were rife.