The Anti-Federalists’ Toughest Challenge: Paper Money, Debt Relief, and the Ratification of the Constitution

Abstract

During the mid-1780s many American states facing widespread financial and social instability in the aftermath of the Revolutionary War actively managed their economies. They authorized paper money, adopted debtor-relief measures, or both. Several historians of these anti-recession measures conclude that such efforts were beneficial. But despite that, the Constitution, as contemporaries understood it, abrogated state powers to issue paper money or provide debtor relief in Article I, Section 10. During ratification, Anti-Federalists were often silent on Section 10, though there were exceptions and popular support for paper money and debtor relief probably prevented ratification in some states. Anti-Federalists did not propose a single amendment to change Section 10's key provisions. What light can this sharp disparity between widespread support for economic management and limited public opposition to Section 10 shed on Anti-Federalism and ratification? Historians have argued that Anti-Federalists muted their criticism and failed to prevent adoption of Section 10 because of Federalist process or agenda manipulation, Anti-Federalist leaders' divisions, or their self-interest. This article traces the politics of paper money before the Constitutional Convention, and argues instead that it was less popular than is often thought, could only be adopted with public creditor support in several key states, and was then subject to a public backlash. This emboldened the Constitution's drafters to adopt Section 10's broad prohibition. The Constitution's tax provisions then fractured paper money coalitions. The article's new ratification evidence shows that as a result the Anti-Federalists faced their toughest challenge in opposing Section 10.

During the mid-1780s many American states actively managed their economies in the face of widespread financial and social instability following the Revolutionary War. Seven states authorized paper money emissions, and there were unsuccessful efforts to obtain them in others. Several states adopted extensive debtor-relief measures. Some historians of these state anti-recession measures conclude that such efforts to fight deflation, increase money circulation, and protect debtors were beneficial for various reasons. But despite that, the Constitution, as contemporaries understood it, abrogated state powers to issue paper money or provide debtor relief such as property tender laws in Article I, Section 10. Terry Bouton writes that Section 10 ‘‘left a host of popular policies in ruins—all in less than fifty words. . . . [it] created a tidal shift in power that favored the interests of moneyed Americans (and European financiers) over ordinary Americans.’’ Moreover, contemporary observers saw Section 10 as a major weakening of state sovereignty.¹

Nevertheless, Anti-Federalists in the eleven originally ratifying states were often silent on Section 10 despite Federalist claims that it was one of the Constitution’s most important provisions. However, they did make various attacks tailored to local circumstances. For example, some Anti- Federalists argued that it harmed states; others, that it was also bad policy that favored the wealthy and would hurt ordinary citizens. Ultimately, though, Anti-Federalists did not propose a single amendment to change its key provisions in any of the thirteen states. What light can this sharp disparity between widespread support for economic management and the remarkably constrained public opposition to Section 10 shed on Anti-Federalism and the ratification of the Constitution? Past answers to this question have usually depended heavily on a historian’s perspective on what was at stake, who the Anti-Federalists were, and what they stood for.²

Charles A. Beard, for example, famously asserted that economic forces played a central role in the Constitution’s creation. On ratification, his primary conclusion was that ‘‘personalty’’ property owners and their allies engaged in rent-seeking were its main supporters, while those who lacked property or had other forms of it, including many paper money supporters, were its principal opponents. For Beard, Section 10 was central to ratification. He contended that popular forces lost...