that the treaty called for a return to the status quo as it existed before the war: why did the Royal Navy agree to stop impressm ent? About a week before war was declared by the M adison administration back in June of 1812, the Admiralty in London had abandoned the Orders in Council regard ing impressment, but without any fast means of communication this information fai led to make it across the Atlantic in time to avert war. W h en the war was fin ally concluded two-a nd-a-half yea rs later, they had to live with this decision in perpetuity. Prisoners of war wo uld be returned to their rightful countries as quickly as possible after they had paid any debts incurred during their captivity! And an important article delineated-again-the borders between the United States and Ca nada. Any disputes wo uld be resolved by reverting to the lines set by the T reaty of Paris signed in 1783, ending the American Revolution. Wh ile it didn't happen, the treaty also called for a cessation of hostilities between the United States and all nations and tribes oflndians with whom there had been fighting during the war. In a "feel-good " article of the treaty, it also required the Indians cease and desist all hostilities as well (q uestion able, as the Indians were not signatory to the treaty). Finally, a very short article within the treaty suggested both sides should work toward the abolition of slavery (which the British accomplished long before the Americans did). The return of the " liberated " slaves never happened; after more than a yea r of negotiations, the United States agreed to accept a payment of $35 0,000 in lieu of the ac tual return of the slaves, though it is doubtful that the funds ever made it back to the individuals who h ad incurred the loss. While the Treaty of Ghent was not as all-encompassing as either side had wa nted, both countries had grown tired of the war and were suffering from severe shortages of cash; compromise, as is frequently the case with negotiations, seemed the right course of action. But while England had a more substantial treasury on which to fall back, as well as a long established system of taxation, the United States, still reeling financially from expense of the War oflndependence, was in dire straits. Let us look for a moment at how the United States managed to pay for the W ar 22
of 1812. W hen war was declared in June of 1812, the federal government was still struggling to rebuild a treasury drawn down to nothing by the Revolutionary War. Several wealthy individuals stepped up and made voluntary contributions to pay the troops, buy materiel, and keep the country running. One of those generous patriots was Robert Morris of Pennsylva nia, a Liverpool-born American merchant who was signatory to the D eclaration of Independence, the Articles of Confederation, and the US Constitution. In 1781, Morris became the US superintendent of fi nance, charged with rebuilding the country's finances and managing the economy of the fl edgling Un ited States. At the sa me time, he served as Agent of Marine, a position he took without pay and from which he controlled the Continental Navy. H e was one of Pennsylva nia's original pair of US senators, servi ng from 1789 to 1795. Ironica lly, some poorly timed personal investments led to personal bankruptcy in 1798, and he spent several months in debtors' prison, until Congress passed a bankruptcy act to release him . After he left prison in 1801 , he lived a quiet, private li fe in a modest home in Philadelphia until 1806 when he died, barely more than a pauper. Albert Gallatin, treasury secretary from 1801 to 1814, wanted to use tax revenue (excise taxes, mostly) to cover the day-today needs of the government and take out loans to finance the war. His plan called for doubling customs duties and reinstating the excise taxes that had cost the Federalists the election in 1800. Needless to say, the Republicans wanted nothing to do with the excise taxes h e proposed ; they were fearful it would not only make their party unpopular, but would hamper the war effort as well. Nonetheless, shortly after war broke our, they did agree to double the customs duties. Any shortfall in covering the costs of the war, they offered, wo uld be met by loans and interes t-bearing treasury notes. Unfortunately, the charter of the Central Bank, formed by Alexander H amilton in 1791, had just expired in 1811 and had fa iled to draw sufficient votes for renewal. This eliminated a major source of fundin g at the federal level, and many states, most notably those in New England where the idea of a new war was particularly unpop-
ular, refused to contribute funds for military operations on a national level. Several refused to pay for their own militias! Without a central monetary authority, the local banks began to print their own currency, further aggrava ting an already strained situation. A yea r into the war, everyo ne realized the funding in place was insufficient to cover the substantial expenses involved in pursuing the conflict, and Congress voted to impose the hated excise taxes that Gallatin had earlier proposed. And the new taxes were even more punitive than anything the Federalists had proposed; in fact, the new taxes would be the most comprehensive taxes to be passed right up until the C ivil War. Even this endeavor was inadequate and, in the summer of 1814, public credit collapsed completely. The government was unable to borrow the money it needed that year, and all bur a few of the most patriotic contractors refused to accept treasury notes in settlement of their bills. This was followed by the suspension of specie payments; no longer would banks exchange p aper notes for gold or silver. So many local banks had issued so much currency that it had become more or less worrhless. 1 Compounding the problem, banks stopped honoring each other's paper notes, thus preventing the administration from using the banks to move funds around the country. The federal government, however, continued to accept the depreciated locally issued paper currency at face value in payment of taxes and loans, wh ich further reduced public revenue and exacerbated the already perilous situatio n. Truly a debacle, the war continued by expenses being met with credit, ap peals to patriotism, and pluck. Fortunately, the p eace treaty came in the nick of time! Taxes, customs duties, and the formation of a new central bank in 1816 ultimately restored the country to some level of solvency, despite the new bank 's turbulent first seven yea rs that were fraug ht with mismanagement and fraud. 1 With no cenrralized federa l bank, individual banks printed currency, which was generally acceptable to the public and usually was backed by silver or gold . In late 1814, the ad ministration proposed (again) the creation of a national bank. The war ended before ag reement was reached.
SEA HISTORY 150, SPRING 20 15