The Quartet: Orchestrating the Second American Revolution, 1783-1789

by Joseph J. Ellis

  But the most serious problems facing the not-so-united states, more ominous than all the others put together, was the ballooning debt. Under the Continental Congress the main source of revenue was the printing press, meaning that Congress mass-produced paper money in the form of dollars, called continentals. It also issued what it called certificates, which were promissory notes given to merchants and farmers as payment for food and clothing needed by the Continental Army. In short, apart from French loans, the entire fiscal policy of the Continental Congress was based on a massive hoax, which resembled what today would be called a Ponzi scheme.8

  There was nothing to back the continentals and certificates because the annual requests for money from the states, called requisitions, had become laughably plaintive pleas that the state legislatures, with debts of their own to pay, simply ignored. In 1781, for example, the Congress requested $3 million from the states and received $39,138 in return. A standing joke within Congress was that the “binding Requisitions are as binding as Religion is upon the Consciences of wicked Men.”9

  Unable to coerce the states to pay their annual tax bill, since coercion smacked of Parliament’s infamous Stamp Act, which had started all the trouble, in 1780 the Congress proposed what was called an impost as an alternative source of revenue. The impost placed a 5 percent duty on all imports—in effect an indirect tax, or perhaps a tax by another name. But once again the ghosts of the American Revolution haunted the conversation, since the impost was a domestic version of the Townshend Acts (1767), which the colonists had opposed as an overly clever way to tax them without their consent. For obvious reasons, the impost was controversial, and when the Articles went into effect, no vote on it had yet been taken. Because the Articles contained a clause prohibiting the Congress from raising revenue, passage of the impost required the equivalent of a constitutional amendment, which meant unanimous approval of all the states, a near impossibility.10

  Somehow the full implications of the fiscal crisis facing the government had been conveniently obscured before the Articles were ratified. At least the correspondence of the delegates to the new Confederation Congress registered a genuine sense of shock upon realizing that the exchange rate for the continental had fallen to 500 to 1, meaning that it was essentially worthless. They had also inherited a federal debt of between $30 million and $40 million, swelling each month because of interest payments. The president of the Congress, Samuel Huntington, sent a circular letter to the states in May 1781, apprising them that “our Northern Army is starving,” and there was no way for the Congress to raise funds for their relief unless the states paid their requisitions in full.11

  That was not going to happen. The unimaginable and, until now, unspeakable implication was that all those ardent and heartfelt soliloquies to virtue and “The Cause” were in the process of evaporating before the sordid reality of American bankruptcy. It was entirely possible that the war for independence could be lost because the American government was broke and was configured in such a way that rendered any resolution of the problem impossible.

  If there was no structural solution to the fiscal problem—indeed, the state-based structure of the Articles was the core of the problem—the only possible answer was personal leadership. That is, find the right man, vest him with the requisite authority, then trust in his judgment to balance the books and rescue “The Cause” and the Continental Army from disintegration. There was only one man eligible for this desperate mission, who happened to be the wealthiest man in America. His credentials were entirely financial, meaning that he was a latecomer to the movement for independence, but he was an acknowledged genius at reading account books, understanding markets, and winning the trust of his creditors. For all these conspicuous talents, he had acquired the nickname “The Financier.” He was also shrewd enough to realize that rescuing American fiscal policy from insolvency was a thankless task that no sane man would ever assume, a reluctance that rendered him even more attractive. His name was Robert Morris.12

  For several reasons, Morris did not want the job. As he wrote in his diary soon after receiving the offer: “A vigorous execution of the duties must inevitably expose me to the resentment of disappointed and designing Men and to the Calumny and Detraction of the Envious and Malicious. I am therefore absolutely determined not to engage in so arduous an undertaking.” He was probably remembering his earlier service on what was called the Secret Committee of the Continental Congress, where he and Benjamin Franklin had orchestrated a series of covert negotiations with French suppliers to provide arms, food, and equipment for the Continental Army. Because France was still a neutral nation at the time, all these dealings were clandestine and exposed Morris to the charge (groundless, it turned out) of profiteering at the public expense. He was a big man in all senses—physically, economically, and socially in Philadelphia—and so was a conspicuous target for newspaper editorials questioning his integrity as a merchant whose profits came at public expense.13

  Benjamin Franklin knew firsthand that all the accusations were misguided, that in fact Morris had actually used his own credit to underwrite loans that rescued the Continental Army from starvation in the early years of the war, probably losing more money than he made in the process. Writing from Paris, Franklin urged Morris to assume the responsibility for directing American fiscal policy, all the while realizing that no matter how well Morris performed, his decisions would be criticized and his very character vilified: “You are sure to be censured by malevolent Criticks and Bug Writers, who will abuse you while you are serving them, and wound your Character in nameless Pamphlets, thereby resembling those little dirty stinking Insects that attack us only in the dark, disturbing our Repose, molesting and wounding us while our Sweat and Blood is contributing to their Subsistence.” No good deed, in short, would go unpunished.14

  Morris brooded for four months before accepting the job of superintendent of finance in May 1781. “Pressed by all my friends, acquaintances, and fellow citizens,” he explained, “and still more by the necessity, the absolute necessity of a change in our moneyed system, I have yielded and taken a load to my shoulder.” He knew what he was up against because he possessed a clear vision of what was needed to restore public credit, and an equally clear recognition that what needed to be done collided head-on with the state-based political structure of the Articles. The majority of delegates in the Congress initially welcomed Morris as the Messiah and granted him unprecedented powers to deliver them from the financial abyss. Morris realized from the start that he would need to lead them in a direction that most delegates, and most Americans, were unprepared to go.15

  Much like Franklin’s, Morris’s biography has an opening scene in which a teenage boy arrives in Philadelphia with little more than his wits and the clothes on his back and twenty years later has become the most prominent—in Morris’s case, the wealthiest—citizen of the city. A century before the Horatio Alger story of rag to riches took hold in American mythology, Morris lived that story to perfection.16

  Unlike Franklin, Morris was an immigrant, born in Liverpool in 1734, the son of a merchant and a woman, Elizabeth Murphet, who disappeared from his life soon after delivering him into this world. His father migrated to the Eastern Shore of Maryland soon thereafter, pursuing his vocation as a tobacco merchant. In 1747 he brought his son over to join him, but parental duties apparently bored him, or conflicted with his mercantile aspirations, so the thirteen-year-old Morris was sent to Philadelphia to serve as an apprentice with the shipping firm headed by Charles Willing. Eight years later, in 1757, at the tender age of twenty-one, Morris was made a full partner in Willing, Morris and Company, the largest and most lucrative mercantile house in Philadelphia.

  How that sudden surge happened is not fully recoverable, but young Morris, who had no formal education and showed little interest in books, apparently possessed an uncanny instinct for the way markets worked. For example, when Willing was away on business, Morris learned that a drought in Europe had creat
ed a market for flour, and on his own he purchased all the available wheat crop in eastern Pennsylvania, which when sold as flour in Paris and Madrid yielded huge profits. Under his canny eye the company tripled the size of its shipping fleet, established agents in all the European capitals and throughout the West Indies, and made Morris a very rich man.

  He cut quite a figure in Philadelphia society in the 1760s: tall, slightly over six feet, with a Celtic complexion and pale blue eyes. In 1763 his sexual ramblings produced an illegitimate daughter, whom he supported financially until she married. He never forgot his impoverished origins. Walking the wharves, he knew most of the workers on a first-name basis, and he did much of his business with a wineglass in hand at City Tavern, where the bartenders and waiters relished his arrival and the huge tips that always followed. In 1769 he married Mary White, who came from a prominent Maryland family, and built a baronial estate called The Hills just outside the city for his family, which eventually included seven children.

  Morris supported the protests against the Stamp Act but, much like Washington, left the political theorizing to others. Although it hurt his business, he supported the nonimportation agreements as a more effective form of protest than constitutional arguments. Appointed to the Continental Congress in 1775, he sided with the moderate faction led by John Dickinson, which sought, as Morris put it, “to procure Accommodation on terms consistent with our just claims.” By the spring of 1776, as the prospects for reconciliation dissolved, he grudgingly embraced the inevitability of American independence. He absented himself from the vote for independence on July 2, explaining that the war would prove ruinous for both sides, but then he signed the Declaration on August 2, probably the most reluctant signer in the Congress.

  He then threw his full energies and his matchless list of European and West Indian contacts into the procurement of arms and equipment for the Continental Army. He came under criticism for mixing his own private accounts with public trades, thereby making a profit on the war. But the awkward truth was that Morris’s credit in the international marketplace was a kind of gold standard that enhanced the purchasing power of the American government. Most of the money his firm made during the war came from the fleet of privateers he outfitted that captured British cargoes in the Atlantic and Caribbean, which Morris regarded as a splendid example of patriotism and profit in one seamless package.

  When he accepted the call to put America’s financial house in order, he was forty-seven years old. The portrait painted by Charles Willson Peale about that time reveals a man comfortable with himself, with the customary accoutrements of middle age on display—a receding hairline and expanding girth. In addition to an enormous fortune, he brought two convictions to the task at hand: first, a firm belief that patriotism and its intellectual accomplice, virtue, were less effective motivating forces than interest; and second, an answer to the question everyone was asking—what will hold the states together once the war ends? Washington believed the answer was the western domain. Morris believed the answer was debt.

  He also brought a way of thinking about money that did not yet have a name. (The term capitalism did not appear until 1850.) The key concept in this emerging mentality was credit, a word derived from the Latin credere, meaning “to believe.” Credit refers not just to the money you possess but also to what others believe you will be able to pay. One economist has described credit as “money of the mind,” which focuses attention on the psychological dimension of a capitalistic marketplace. When Morris gave his note to a customer in Madrid or Kingston, for example, he seldom had the cash on hand to pay for the purchase, but he could make the trade because the customer believed he would eventually make good on his promise, when one of his many ships delivered its cargo somewhere else in Europe or the West Indies.

  Credit multiplies the amount of money in circulation, thereby giving a capitalistic economy greater productive potential, while making it vulnerable to endemic “bubbles,” when projections prove illusory, credit collapses, and market adjustment takes the form of a depression. Morris was able to avoid that fate by adroitly juggling his expenses and his sales and by making Willing, Morris and Company into a de facto bank, with cash reserves that allowed him to survive the inevitable cargo lost at sea.17

  All this became strikingly relevant when the Financier took command of the American economy. For Morris’s way of thinking was terra incognita for most southern delegates in Congress, especially the Virginians, who still regarded land, not money, as the ultimate measure of wealth, and for whom the manipulation of numbers on a balance sheet came across as some sinister form of magic, eerily similar to the calculations their English and Scottish creditors were employing to drive them into bankruptcy.

  At the public level, Morris’s chief task was to restore the credit of the United States government. (Actually, restore is not right, since nothing had existed beforehand to be restored.) He faced some pressing problems that required immediate attention, chiefly the deplorable condition of the Continental Army. But his main task, as he saw it, was to establish the credit of the confederation as a whole, as if it were a unified fiscal entity. His initial impulse was to think about his goal in personal terms, bringing his own reputation to the rescue of the republic. “My personal Credit, which thank Heaven I have preserved through all the tempests of the War, has been substituted for that which the Country had lost,” he wrote to the governor of Virginia. “I am now striving to transfer that Credit to the Public.”18

  There was also an implicit but deeply nationalistic motive in his mission: namely, to persuade the marketplace, meaning the European bankers and governments, that the United States was fully capable of honoring its foreign and domestic debts and becoming a reliable presence in the global economy. For a man who was on record as doubting the wisdom of the war for independence, it was a bold transition from reluctant patriot to ardent nationalist. But he had made his living, and an enormous fortune, anticipating before anyone else where the market was headed. And he brought the same confidence in his judgment about the marketplace into the political arena, where nothing less than America’s destiny was the crucial question. He was accustomed to making all-or-nothing wagers in his business and almost always winning the bet. He carried that same confident mentality into his new role as custodian of the unforeseen implications of the American Revolution.19

  Morris’s first act as America’s Financier was to announce the creation of the Bank of the United States. Since most Americans did not know what a bank was, Morris published an explanation in the Pennsylvania Packet. He described the bank—modestly capitalized at $400,000, with shares selling at $400—as a first step in the direction of national solvency: “I mean to render this [bank] a principal Pillar of American Credit so as to obtain the money of individuals for the benefit of the Union and thereby bind those individuals more strongly to the general cause by ties of private interest.” Left unsaid was Morris’s assumption that he was overseeing a national economy and that the bank was an institutional embodiment of that fiscal reality.20

  He began sending a series of circular letters to the states in which he apprised the governors that the annual requisitions were mandatory obligations, not charitable requests. “As to the complaint made by the People of a want of money to pay their taxes,” he observed, “it is nothing new to me, nor indeed to anybody. The Complaint is I believe quite as old as Taxation itself, and will last as long.” All of a sudden there was a decisive presence in charge of fiscal policy, declaring that the days of mounting debt and routinized recalcitrance were over. “It is high time to relieve ourselves from the Infamy we have already sustained and to rescue and restore the public credit,” he lectured. “This can only be done by solid revenue…. We may be as happy or miserable as we please.”21

  He also launched an all-out campaign for passage of the impost, the equivalent of a national tax, which, for substantive and symbolic reasons, was the acid test of the union’s viability. He apprised the governors that all t
he European bankers were watching the vote on the impost, and if it failed, they would plausibly conclude “that we are unworthy of Confidence, that our Union is a Rope of Sand, that the People are weary of Congress and that the respective States are determined to reject its authority.” The fact that the vote had to be unanimous was obviously a political challenge, all the more reason that the states had to speak with a single voice, since the impost was an essential instrument in paying off the debt they all shared together.22

  Upon entering office, Morris had announced that his eye was focused on the long-term health of the American economy, and that he therefore was not going to divert funds to pay the army. However sensible this decision was fiscally, it soon proved politically and even morally untenable. Letters from Nathanael Greene, who was commanding slightly more than a thousand troops in South Carolina, described men who were literally starving to death and walking around in loincloths.

  And then Washington apprised Morris that a providential version of the perfect storm was occurring: that the French fleet had sailed up from the West Indies to the Chesapeake, just as the British army under General Cornwallis, 7,700 strong, had placed itself on the Yorktown peninsula. There was now an opportunity to trap and capture the largest British force on the continent, but Washington lacked the resources to move the Continental Army and its invaluable French allies from New York down to Virginia. Morris wrote personal checks to provide rations and clothing for Greene’s troops and to cover the costs of Washington’s Yorktown campaign, believing that he would recover his losses when a cargo of silver from France arrived in Boston the following month. This was the kind of juggling act that he had practiced and perfected as America’s premier merchant, now deployed to assure success in what proved to be the culminating battle of the war.23