Problems with the Army
The most pressing problem the nation faced was raising troops to wage the next campaign. Although the actual strength of the army was about 40,000, the reporting procedures were so bad that the administration thought there were only about 30,000 men in uniform.3 Even though the army was larger than supposed, it was still well below the authorized level (62,500) and well below the nation’s needs.
Without enough regulars to protect its frontiers, the nation was forced to rely increasingly on militia, but these troops were costly and inefficient. James Monroe estimated that it took three times as many citizen soldiers to do the work of regulars. Relying on militia had other disadvantages. Besides disrupting normal life, frequent calls deprived the regular army of potential recruits because they were siphoned off by men willing to pay large premiums to secure substitutes for militia duty.4 Although most Americans recognized the liabilities of militia, few were optimistic about raising additional regulars by conventional means. “It is nonsense to talk of regulars,” said Jefferson. “We might as well rely on calling down an army of angels from heaven.”5
The administration had trouble not only raising troops but also controlling those already in the service. Dueling became so prevalent among officers in 1814 that the War Department had to threaten to dismiss those who engaged in the practice.6 More serious was the problem of desertion, which increased dramatically in 1814 because of bounty-jumping. Men agreed to join the army, accepted the first portion of the bounty, and then disappeared. “Desertion prevails to an allarming Extent among the Recruits before they join the Army,” complained Major General George Izard in July 1814.7 A statistical study has shown that 12.7 percent of American troops deserted during the war, and almost half of these were recruited in 1814.8 In the last year of the war it was not uncommon for newspapers to run side-by-side ads that offered bounties for new recruits and rewards for the capture of deserters.9
How to deal with deserters posed a dilemma. Executing those who were caught might serve as a deterrent to others, but, as one officer pointed out, this undermined the recruiting service.10 Moreover, men who deserted when sickness was prevalent, pay in arrears, or rations short seemed entitled to a measure of mercy. Often what the army did was to sentence first-time deserters to death and then pardon them, while reserving execution for repeat offenders.11
As the incidence of desertion increased, however, some people called for tougher measures. “Examples must be made of Deserters,” said William Jones, “as the evil is greatly increasing.” “We believe nothing would put a stop to this growing evil sooner,” added the Lexington Reporter, “than the certainty of suffering death for the first offence.”12 The president, however, preferred a more cautious policy. In June 1814, he issued a proclamation (as he had in 1812) promising to pardon all deserters who surrendered within three months. In addition, the War Department authorized a $50 reward for the capture of deserters.13 But the problem continued to plague the nation, and the number of executions carried out by the army steadily mounted: from three in 1812, to thirty-two in 1813, to 146 in 1814.14
National Bankruptcy Looms
The nation was also plagued by financial problems. Financial conditions had deteriorated badly since the beginning of the year. The $6 million loan offered in July had netted only $2.5 million at a 20 percent discount.15 This left the government far short of the funds it needed for 1814, and the prospects for raising money in 1815 were bleaker still. “Something must be done and done speedily,” said William Jones, “or we shall have an opportunity of trying the experiment of maintaining an army and navy and carrying on a vigorous war without money.”16
The proportion of military executions during the War of 1812—mostly for desertion or mutiny—was much higher than in any war since. This illustration accompanied what was almost certainly a fictional account of a soldier who was executed for twice deserting to visit his mother. In an extraordinary and improbable twist, the story claims that the firing squad included the elder brother of the condemned man. (United States Military Magazine, February, 1841)
The service chiefs were already scrambling for funds to meet their most pressing obligations. Secretary Jones reported that the Navy Department was “destitute of money in all quarters” and that he had no funds for even “the most urgent contingent purposes.”17 Captain Stephen Decatur was unable to meet the operational expenses of his ship, and Commodore Isaac Chauncey complained that his men were “very clamorous for their pay.”18 In some port cities the lack of funds brought recruiting to a standstill. “Not a man can be procured here,” said one officer. “Men will not ship without cash,” declared another. “With treasury notes,” added a third, “it will be impossible to enter men for the service in this part of our country.”19
The War Department faced similar problems. Lack of funds idled the Springfield armory, and according to Major General Thomas Pinckney, recruiting was “completely at a stand for want of the necessary means to carry it on.”20 In Virginia, militia from “the most democratic part” of the state mutinied for want of pay, and in New Hampshire paying off discharged militia with treasury notes “disaffected many of them against the cause of their country.”21 Elsewhere discharged militia remained in camp for want of funds or sold their government claims at a steep discount.22 The pay of many regulars was six to twelve months in arrears and in some cases even more.23 According to one Federalist, it was notorious that the army paymaster “was unable to meet demands for paltry amounts—not even for $30.”24
The lack of funds was felt in other ways. Joseph Willcocks, the renegade Canadian who organized the Canadian Volunteers, said that recruits who received no bounty considered themselves in the service only as long as they were actively campaigning and that his authority over them was “slender, Limited and uncertain.”25 In one district lack of funds prevented army officials from pursuing deserters or paying the reward advertised for their return.26 In New England government officials could not afford to care for prisoners of war, and in New York the apothecary general was completely destitute of supplies.27 “The Supply of Hospital stores . . . for the use of Our Armies on the Northern & western Frontier,” he said, “has been for some time exhausted.”28 Having stretched public credit to the limit, many government officials and contractors had to borrow money on their own signatures to get badly needed supplies.29 The failure to pay contractors or soldiers could have wider consequences. In faraway St. Louis, members of a Ranger company had borrowed heavily in anticipation of their pay. When the pay was not forthcoming, the local economy shut down. “The bankruptcy of the U.S. Treasury,” said a resident, “causes a complete stagnation of business in this place.”30
The government also had trouble meeting its obligations abroad. Funds were needed to support the diplomatic corps, pay the interest on that portion of the national debt held overseas, and provide for the care of American prisoners of war in England. Unable to raise the money it needed, the government fell $128,000 in debt to its Dutch bankers and had to rely on advances from the House of Baring in England. By the end of 1814, these advances totaled almost $200,000.31
Public credit, already slipping badly, received another blow in November when the government defaulted on the national debt. Unable to pay the interest in specie (as required by law), the Treasury Department offered bondholders in Boston treasury notes, depreciated bank paper, or government bonds.32 War bonds fell to 75 percent of their nominal value in most cities and were quoted as low as 60 percent in Boston. Treasury notes also declined in value, often circulating at a 15- to 25-percent discount.33 To make matters worse, the government defaulted on the notes that fell due in late 1814.34 By this time, most banks were unwilling to accept treasury notes as security for government loans, and only the neediest of government contractors would take them in payment.35 “I[t] is impossible to procure wood, labour, or forage, without Cash,” reported a deputy commissary in New Hampshire.36 Even in the specie-rich West, banks refused to lend m
oney because of “the great amt. of Bills drawn on the Govt. returning under Protest—or unpaid.”37
Suspension of Specie Payments
The government’s financial woes were further compounded by the suspension of specie payments in the summer of 1814. After the dissolution of the national bank in 1811, the number of state banks had risen dramatically, from 117 in 1811 to 212 in 1815.38 According to the Washington National Intelligencer, new banks had sprung up “like a crop of mushrooms in a night,” and many were “unincorporated and irresponsible.”39 Without a national bank to restrain them, the banks greatly increased their note issue, both to accommodate needy customers and to invest in war bonds. From 1811 to 1815 the face value of bank notes in circulation rose from $66 million to $115 million.40
During the same period the amount of specie in the country actually declined. The dissolution of the national bank drained $7 million to pay off European stockholders, and during the war specie flowed from the middle and southern states to New England and from there into Canada to finance illegal imports and the purchase of British government notes and British bills of exchange. According to contemporary reports, $2 million in gold was shipped from the United States to Canada in early 1814 and another $1.8 million the following summer.41 “The Specie is constantly going in Cart Loads to Canada,” said a Massachusetts Federalist. Between New England and Canada, “there is an uninterrupted trade in Bills of the British Gov’t.”42 The result was an acute shortage of hard money. “The scarcity of money throughout the UStates,” claimed a Virginia firm, “has never been equalled.”43
With their specie reserves shrinking and their note issue expanding, many banks found themselves in a precarious position. In August 1814 the British invasion of the Chesapeake started a run on the banks in Washington and Baltimore, forcing them to suspend specie payments. Other banks in the middle and southern states quickly followed suit, and eventually those in the West did, too. Only the New England banks, which had large specie reserves and were closely regulated by state law, held out. But even they had to retrench in order to remain solvent.44
Once the banks went off a specie-paying basis, they stopped honoring each other’s notes. As a result, the administration could no longer transfer funds from one part of the country to another. Although government surpluses accumulated in some banks in the middle and southern states, federal funds were quickly exhausted in Boston, New York, and Philadelphia, where most of the interest on the national debt was due. The suspension of specie payments hurt the government in another way. Bank paper circulated at a 15- to 30-percent discount, and yet the Treasury accepted it at par for taxes and loans. With only depreciated bank notes and treasury notes coming into the Treasury, the government had no currency that could readily be used to meet its obligations.45 For all practical purposes, public credit was extinct and the government was bankrupt. “Public as well as private, credits,” said a government contractor, “are lower than I have ever known either before.”46
Growing Trade with the Enemy
Were these problems not vexing enough, the administration also had to contend with trade with the enemy. Although the embargo and non-importation acts had been repealed the previous spring, Americans were still barred from trading with the British or importing British-owned goods. Nevertheless, the influx of British troops into the New World created such a demand for provisions that trade with the enemy rose dramatically in 1814. Smugglers and government officials waged a running battle, and the smugglers were winning.
The mushrooming trade with Canada was particularly alarming. This trade brought British goods into the United States, drained specie from American banks, and put food in the mouths of British soldiers. Much of the trade was carried on by sea, and not all of it violated American law. When the British seized eastern Maine in September 1814, they made Castine a port of entry. Swedish vessels ran immense quantities of British-made goods from Castine up the Penobscot River to Hampden, and from there the merchandise was distributed to other parts of New England. Neutral ships flying Swedish and Spanish colors also operated on Lake Champlain.47 The trade with Canada ran heavily against the United States, draining specie from the nation’s banks. Nevertheless, the government condoned it as long as it was conducted in neutral ships. “A neutral vessel and Cargo coming from any part of the British dominions,” said a Treasury official, “may be admitted to an entry in any part of the United States.”48
The overland trade—both with British-occupied Maine and with Canada—was even greater. Cattle, grain, and other provisions flowed into Castine and other parts of occupied Maine in enormous quantities. “The trade appears as free & open as in time of peace,” said William Eustis; “20, 30, & 50 waggon loads are passing almost daily.”49 Livestock and provisions also poured across the border into Canada. “From the St. Lawrence to the Ocean,” reported Major General Izard in the summer of 1814, “an open Disregard prevails for the Laws prohibiting Intercourse with the Enemy. The Road to St. Regis is covered with Droves of Cattle, and the River with Rafts destined for the Enemy.”50 As a result of this trade, British troops feasted on American provisions. “Two thirds of the army in Canada,” Governor George Prevost boasted in August 1814, “are at this moment eating beef provided by American contractors, drawn principally from the States of Vermont and New York.”51
Americans also shipped naval stores to Canada. On several occasions Master Commandant Thomas Macdonough seized ship timber and other materials destined for British warships on Lake Champlain.52 Military intelligence flowed across the border as well. “The turpitude of many of our citizens in this part of the country,” Macdonough complained, “furnishes the Enemy with every information he wants.”53
American officials found it difficult to halt this growing trade. Customs officials could not legally search every type of vehicle or make preventive seizures, and the enemy trade act of 1812 was so loosely drawn that some exports to Canada were actually legal. Revenue officials in Vermont were further hampered by a series of unfavorable judicial decisions. The state courts had ruled that the inspectors employed by customs officials had no authority to make seizures and were liable to damages even if the merchandise they seized was condemned.54
Federal attorneys could offer little help because it was difficult to indict and almost impossible to convict smugglers. Moreover, the attorney general had ruled that visiting the enemy was not illegal. The prosecution had to prove that the accused furnished “improper information” or “supplies.”55 Canny New England farmers circumvented the law by marching their livestock to the border, where a Canadian cohort would entice the animals across with a basket of corn.56
According to the Salem Gazette, smuggling had become “the most lucrative business which is now carried on.” The profits were so great that smugglers could “afford to lose one half by custom house spies, and yet make money faster than those who follow the ‘dull pursuits’ of regular business.”57 Moreover, anyone who interfered with the trade risked a damage suit or worse. A Vermont militia officer who sought to prevent livestock from reaching Canada was thrown into jail, and a mob assaulted a Boston customs official who had seized a wagonload of suspected British goods. In the interior, the possibility of violence was greater. Two revenue officers were killed and two others wounded in a clash with smugglers near Belfast, Maine.58 According to Major General Izard, “Nothing but a Cordon of Troops, from the French Mills [in northern New York] to Lake Memphramagog [in northern Vermont] could effectually check the Evil.”59
The Wartime Economy
Lack of men and money and mounting trade with the enemy all contributed to the crisis of 1814. So too did deteriorating economic conditions, which eroded the nation’s tax base and generated political discontent, especially in New England. In spite of their many differences, the South and New England shared a common fate in this war. In different ways both were tied to the sea and both experienced economic hardship. The middle and western states, by contrast, fared much better. In thes
e states money could still be made, especially from government contracts and manufacturing, and the result was at least a modest prosperity.
Pennsylvania fared particularly well. Most of the army’s principal supply officers used Philadelphia as a base of operations, and one of the army’s two major supply routes ran from Philadelphia to Pittsburgh and thence further west. Large quantities of army supplies were purchased in the state, and a great deal of money passed through Pennsylvania’s banks. In the last quarter of 1812 alone, the Treasury Department deposited more than $1 million in two Philadelphia banks.60 “The pressure of the war,” said a Philadelphia merchant in 1813, “has been as yet but little felt.” “The war-hawks,” added a Federalist newspaper, “are thriving and fattening upon the hard earnings of the industrious and peaceable part of the community.”61
According to one report, more buildings were constructed in Philadelphia in the summer of 1814 than at any time in memory. “Real Estate in Town & Country has in general considerably advanced since the war,” said a merchant. “Lands are at least 1/3 higher & many plantations have sold for double what they would have brought three years ago.” Not until the fall of 1814, when several business failures in New York sent shock waves through Philadelphia, did business finally slow down.62
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