Woody Holton, Unruly Americans and the Origins of the Constitution. New York: Hill and Wang, 2007. Now available in paperback at River City Books.
At the end of the Revolutionary War, the United States found itself in the midst of a financial crisis. In order to pay its army during the war, Congress had issued bonds. Cash-strapped soldiers—most of them farmers—quickly sold the bonds to speculators in exchange for cash. In an effort to pay interest on the bonds, states levied taxes which fell most heavily on the poor farmers who had sold the bonds in the first place. Taxes had to be paid primarily in hard money, which was in increasingly short supply as their massive trade imbalance with Europe drained gold and silver from the states. The farmers, who risked losing everything to the tax collector, demanded that the states print paper money. The holders of government bonds (investors like Abigail Adams) insisted on interest payments in hard money, fearing that paper money would flood the market and depreciate. The state governments were caught between a rock and a hard place: between the pressure to provide debt relief to farmers and the pressure to provide regular interest payments to influential bondholders.
Capital was fleeing the states. Influential men like James Madison were unable to raise capital to invest in real estate. European investors routinely refused credit to Americans. Meanwhile, thousands of ordinary Americans were losing their farms to the tax collector. As the post-war recession deepened, some farmers resorted to active revolt—the most famous case being Shays's Rebellion in western Massachusetts. Elsewhere, farmers banded together to close the courts where debtors were tried. And there was a pamphlet war between the proponents of tax relief and the opponents of paper money.
Something had to be done. The state governments were under too much pressure to pass debt relief legislation, and too responsive to that pressure. What the United States needed, men like Madison reasoned, was a strong central government that was less responsive to the immediate demands of the people, and that was governed by a charter that expressly prohibited debt relief. To achieve this end, Madison and other like-minded men met in Philadelphia in the summer of 1787 to draft a Constitution.
Woody Holton's Unruly Americans, a 2007 National Book Award Finalist, tells this story well and in great detail, showing how the tug of war between debtor and creditor, between the populism and the moneyed interest shaped the United States Constitution. The book could be seen as an historical commentary on a few key words in Article I, Section 10: "No State shall...coin Money;...make any Thing but gold and silver Coins a Tender in payment of Debts;...pass any...Law impairing the Obligation of Contracts..." No state-issued paper money, no state-legislated debt relief.
Holton also tells the story of how the Framers of the Constitution managed to win ratification for a document with such a strong anti-democratic bias, one that denied farmers the relief they had sought for so long. In short, the realization that the Constitution would have to pass muster with the people tempered the Framers' elitist tendencies. The farmers as well as the Framers had a hand in shaping the Constitution.
The book is a fascinating look at how a massive credit crisis and prolonged recession led to the making of the United States Constitution. In its successful effort to put money into the hands of the holders of government securities and restore American credit, the Constitution was the ultimate bailout.
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