State Banking in Early America: A New Economic History, and: Republic of Debtors: Bankruptcy in the Age of American Independence (review)

During the formative years of the United States, bold entrepreneurial ventures offered both the promise of financial windfalls and the specter of complete economic ruin. On October 28, 1800, for example, the Philadelphia merchant Thomas Cope reflected on the career of one of the great patriotic figures of the American Revolution, financier Robert Morris. "This once great man," Cope wrote in his diary, "now pines in the gaol of this City, loaded with the curses of thousands whom his overgrasping & inconsiderate speculations have reduced to poverty & wretchedness." Morris was not alone in his misery. Many high-flying merchants of the early republic found financial success elusive; some even sunk into insolvency and debtor's prison. How did debtors and creditors respond to such a highly volatile economy? What institutions arose to make sense of the chaotic monetary system left in the wake of the American Revolution? How did early American entrepreneurs negotiate this razor's edge between prosperity and devastation?

Two important works on the early American economy shed light on these and other questions. Bruce H. Mann, in Republic of Debtors, examines the meaning of debt, broadly construed, in late eighteenth- and early nineteenth-century America. Howard Bodenhorn tackles a different subject. His encyclopedic State Banking in Early America chronicles a pivotal period in the history of American banking. Although Bodenhorn's study is grounded mainly in the antebellum period, the legacy of the American Revolution is pertinent to his story as well. In 1813, after all, Thomas Jefferson compared paper money during the American Revolution with contemporary bank notes. The point of congressional issues of paper money was "a holy one" that "saved our liberties and gave us independence," whereas a bank that issued paper money sought to "enrich swindlers at the expense of the honest and industrious part of the nation." In both of these works, then, the authors explore the intersection between republican politics and economic activity. In the end, they both help us to make sense of one of the most compelling—and complex—periods of American economic development.

Mann begins Republic of Debtors by introducing the reader to the complicated world of eighteenth-century debtors and creditors in colonial America, in which the collection of unpaid bills and loans took many forms. Without a standardized system encompassing the American colonies, the responsibility of collection fell largely to creditors, who could draw on a number of writs to force legal action. Debtors, in turn, could employ legal delaying tactics of their own or simply flee from their responsibility. Mann argues that, following the American Revolution, the legal options available for debt collection moved slowly toward standardization, as professional debt collectors emerged to aid creditors and local courts gained experience in bankruptcy cases. A national bankruptcy law, however, would not appear in the United States until 1800. So, for much of the period covered by Republic of Debtors, creditors and debtors operated in a world bereft of clear-cut choices and procedures.

The ways in which Mann traces the meaning of insolvency in its broader social and political terms is one of the real strengths of this study. Other historians of early American entrepreneurship, most notably Thomas M. Doerflinger in A Vigorous Spirit of Enterprise: Merchants and Economic Development in Revolutionary Philadelphia (1986), have demonstrated that merchants borrowed on reputation and that moral standing could supplant real collateral in the Atlantic world. Within a relatively small community of merchants, such a moral economy could function. As the number of debts increased, however, this moral economy began to break down, and colonial authorities began to seek ways to provide...