Introduction

Hello, and welcome to American Legends

Episode 3: Robert Morris and the Financial Crisis

Part 1: Who is Robert Morris?

For people who haven’t mined the historical depths of the Revolution, it’s easy to be at a total loss when someone asks you, “Who is Robert Morris?” Even I, until researching for this podcast, someone with a history degree who has a deep fascination with this period, did not know who he was. Unlike other founders like Washington, Jefferson, and even Hamilton, very few extensive works have been written about him. This partly has to do with his later death and failure as a businessman, but also because in many ways his legacy was subsumed by Hamilton. I will endeavor to give you a better understanding of who this man was before moving into how he fits into the story of the fledgling American Confederation. 

Robert Morris was born in January 1734 in Liverpool, England to a tobacco factor. These factors would be known today as a broker, the same sort of men George Washington worked through to sell his tobacco. These men were the backbone of the transatlantic trade. Morris’s father, however, was unmarried and almost nothing is known about his mother other than her name. Robert Morris was one of at least two founding fathers that was a bastard. The other prominent example being Alexander Hamilton. Morris moved to America with his father when he was 13 after his father began extensively developing the tobacco export business in Virginia. However, instead of staying with his father, he was sent to Philadelphia in the care of one of this father’s associates, and quickly began working for a merchant named Charles Willing. It’s not known whether Morris knew what kind of a windfall this would produce for him personally, but under the tutelage of Willing, he grew a friendship with Willing’s son, Thomas, and quickly rose with the company as it grew. Upon the death of his father, Morris inherited a small fortune about the same time that he became vested as a partner at the Willing firm, which then changed it’s name to Willing, Morris and Company.

The Willing Morris Company was a shipping company responsible for moving freight, usually food staples, across the Atlantic, and Morris had a knack for it. He managed the unloading and loading of cargo, while writing up orders and balancing budgets from his desk on the Philadelphia docks. By the time of the Revolution, the Willing-Morris outfit may have owned completely, or had stakes in, up to fifty ships. Morris’s partner, Thomas Willing, navigated the social and political sinew of Pennsylvania politics while Morris was left to manage the business much on his own, and while under his control, the company grew from a small shipping concern to a transatlantic behemoth. The Willing Morris company had ties with countries across the western world. In 1769, when the price of wheat took a downturn in Philadelphia, Morris somehow managed to discover that there was a high demand for wheat in the Spanish colonies.  That demand had skyrocketed due to a series of hurricanes that wiped out harvests. Even though the Spanish held strict control over the trade in their colonies, they actively encouraged the use of Willing and Morris to deliver grain to their colonies for years in spite of how it detrimentally affected the Spanish Monopoly. In addition, Morris was the first to offer insurance for shipping vessels in the Americas by getting his company and his competitors to pool together money in order to underwrite the necessary policies.

Robert Morris was a resourceful and inventive merchant power in Philadelphia.

In addition to being a smart man, Robert Morris was a physical presence. He was a large, round man, and stood six feet tall when the average height in the colonies was five feet, eight inches tall. He was gregarious and a social butterfly, as he used his social connections to gain standing amongst his peers, but Morris seemed to always have been the type of man, much like Washington, that felt they had to prove their worth by their deeds and not by their words. Morris wasn’t an orator or a politician even. Even at the cusp of the Revolution, Morris continued to dispatch his fleet with a hurried intensity. He hoped for better days ahead, but as a pragmatist took steps to secure as much financial security as he could just before the outbreak of war.

Morris was reluctant to enter politics. This may be due in part to his lack of education, erudition, or social standing. Morris was a self made man in a time where family connections, legacy, and education meant everything. Even though the Americas never fully took to the aristocratic excess of Europe, they still had stratified into an order of peoples in most areas of the country, and especially in the south. Morris belonged to the ever growing class called the middling sort, known today as the middle class. There were usually merchants, artisans, mechanics, watch makers, bricklayers, and bakers. These men were usually small business owners with little to no family connections of their own to rely on. They were poorly educated, but had taken up a profession. They didn’t live off the land, but served as a valued component to the growing American economy with their specialized skills. Unlike those that styled themselves as gentlemen, Morris wore plain clothing, and neither wore a wig or powdered his hair, even though he’s always portrayed as wearing a wig due to a portrait done around the time of the Revolution where he wears one. Nevertheless, it was this non-political capitalist merchant that kept getting assigned to congressional committees once he was forced to enter the political fray. By 1775 he represented Pennsylvania in the Second Continental Congress alongside Benjamin Franklin and John Dickenson, and soon Morris was in charge of enforcing the colonial non-importation agreement and the committee of safety, which was to oversee the purchasing and supplying or provisions for the general defense of Philadelphia.

Morris became critical for the war effort, even though he was opposed to outright Independence, and actually abstained from voting on the Declaration of Independence in 1776 (although he did sign it once ratified). After this vote, however, He became personally responsible for supplying the continental army with gunpowder and arms throughout the war. In addition, Morris in many ways was the first de facto Admiral of the Navy. He was responsible for outfitting old merchant ships, including some of his own, into warships, and supervised the construction of new ships dedicated to war. In addition he directed the Navy itself in harassing British shipping. From there Morris transformed into the one of the most crucial members of congress, who’s influence and access was unmatched by any other delegate. The Continental Congress had two secret committees, one that oversaw foreign relations, and the other that sought supplies and trade from Europe. Only Benjamin Franklin and Morris served on both, and after the death of one chair and Franklin’s departure to Europe, Morris became to head both. Only Washington rivaled Morris as the person more essential to the cause for independence than himself.

Part 2: The Economy of the United States

To understand the financial mess that the United States had fallen in to, its important to briefly touch on some economic theory and what was happening just previous to Morris’s introduction of the Bank of North America and his tenure as Superintendent of Finance.

The United States was operating largely within an advanced Mercantile framework. Merchantilism was a economic theory devised in the 16th century by the French that was based largely on the possession of specie and a “favorable” trade balance. Specie is precious metal used in making coins, such as gold or silver, and having a favorable trade balance meant you exported more than you imported. The whole idea was twofold: it allowed for the mother country to store up liquid capital that could be used to fund internal improvements and wars, and it also created a forced dependency on colonies for manufactured goods. What this meant was, in circa 1770, the Spanish colonies were forced to trade only with Spain, the French colonies only were to trade with France, and British Colonies only to the British, where Treaties did not give the right for other states to trade within those colonial boundaries. Of course smuggling became a large part of the American economy as a result of this system, but we will save that bit for later. This system forced Americans to trade raw materials for manufactured good, and was basically a giant transatlantic barter system, a system in which Morris was intimately familiar with.

George Washington himself was locked into this system. Early in his career as a planter at Mount Vernon he grew tobacco which was sold by his agent in London in exchange for manufactured goods or luxury products like wine, but not money. Often times, the amount that he sold at market fetched a continuously lower price than what he would order, sending him into a debt spiral. Two years after his marriage to Martha Washington, the source of much of his personal wealth, he was two thousand pounds sterling, which would equal 374,000 today, in debt to his London agent, who served as both broker, purchaser, and bank. It was this lack spending irrespective of income that plunged Revolutionary Virginia into massive debt. By 1776, Virginia owed more debt to British banks than the rest of the colonies combined. The reason, however, that Washington could do this was because of his personal credit.

Now credit, even today, has a bad smell to it in some circles, and especially in the south, where gurus advocating for a debt free lifestyle have taken hold of the popular imaginations in responses to exploding personal debt through the use of high interest credit card and subprime loans, but at it’s most basic level, both today and in the 18th century, credit simply meant your ability to pay back a loan. Washington, and others, were continuously able to do this because they were a producer of raw materials desired in London. The problem in the case of Virginia planters was not only the distance between them and these agents who they never met in person, but the constantly changing prices of these good within the market fostered the idea that the trades were not equitable, and in an age where you could not research the prices yourself without physically being at the market, lended legitimacy to these claims. Moreover, the fact that you couldn’t ship your goods to another country where you could fetch a better price, always rubbed Virginia planters the wrong way. The veritable mountains of debt Virginia planters were in during the dawn of the American Revolution was one of the primary motivators for Virginians to break off from the mother country.

Due to the nature of this debt, and the low specie economy of the United States, exchanges between people usually took the form of barter or a bill of credit. These bills of credit are the foundation of our paper money today. These bills could be exchanged between people for goods or services, but there were huge issues with these. Each state churned out their own paper money both before, during, and after the revolution. These bills often suffered from massive inflation as states simply printed more bills if they needed to pay down on a debt, which resulted in devaluing the currency. This is why even during the revolution, most still participated in a barter system of trade. The government, however, did not have the luxury of paying their substantial debt to France with tobacco and other agrarian goods, although they did try that. They required liquid capital that could be used to pay vendors, planters, and workers necessary to supply the army in the field against the well fed and well funded British military. It was into this stew that Robert Morris stepped onto the stage.

Part 3: The Bank of North America

Morris understood, more than almost anyone, that this lack of capitol in the fledgling United States would hamper his new country’s great ambitions. People like Washington were already speaking of the US in terms like the great “rising empire.” He knew that without credit they would not be able to secure loans from foreign powers in order to fund the army. By 1781, the situation had grown more dire. As discussed in episode 1, the American army had been starving for the last two years, and hadn’t been paid in four years, and stirrings of mutiny abounded. The only problem was that no one wanted the job of setting the United States fiscal policy. It was obvious to everyone who had served with Morris in congress, and to everyone outside of congress, that Morris was the only one for the job. He was not only by this point the richest man in America, but was the only one with the acumen of managing complicated nation-state finances. Most barely understood the nature of credit, but less how to develop it on a national scale like Morris had with his company. They knew this because it had been Morris’s personal credit and connections that had funded the war from 1775-1779. It was only after Morris left the Continental Congress in 1778 that supply issues began to be exacerbated.

The only issue with Morris taking the job was Morris himself — he didn’t want the job. During his brief stint in politics, Morris had soured on it. He had become the indispensable man at the cost of his personal fortune. His estate was burned down by the British after they captured Philadelphia, and worst of all, his personal honor was attacked very publicly and brutally by none other than Henry Laurens and Richard Henry Lee. Being southerner planters, each had a natural distrust of monied men and after a very public battle in 1779, between Lee and Silas Deane, Morris’s principal agent in France, Morris had become the target of very personal attacks. Essentially, they argued that he was a war profiteer, and that he was making money through graft at the expense of the cause. The battle became so public during the Deane scandal that Thomas Paine, the writer of Common Sense, actually began writing a flurry of attack pamphlets in Philadelphia papers. This drew Morris back into public light as he and Paine dueled openly in the papers. It was only after this that Henry Laurens, the former President of the Congress (and man who we discussed being imprisoned by the British after being captured en route to Europe in episode 2), began to openly attack Morris as well. It’s not really important to go into the details of the accusations here, but suffice it to say that it involved defrauding the government of money. These were weak allegations that stems from a misunderstanding of what Morris’s smuggling operation entailed. Basically, he was smuggling gunpowder and weapons out of Europe. You can’t do that in anything but the most discrete and secretive of ways. The way in which Morris also mixed private and public money worried people as well, but they were all Southerners with an innate distrust of merchants and bankers. Morris, during the whole affair, enjoyed the full support of Washington, who understood the immense contributions and personal sacrifice Morris had made for the cause. Nevertheless, the very public and bitter debate that had not only hampered his personal reputation, but also had the potential to endanger his credit, soured Morris on returning to public life. Even if he was the only one in the states who could fix the American Economy, Morris didn’t want to do it.

However, in January 1781, the Pennsylvania line mutinied and began their march on the capital, and everything changed. After the mutiny was resolved, congress opted to dismantle the committee system, where a committee sat in control of things we’d associate with with what we’d consider a president doing, and replaced it with a ministry system, where a single person controlled the departments of war, finance, marine, and foreign affairs. Of all the positions, the Finance Minister would be the most powerful, and would be allowed the broadest discretion available.

I feel like I don’t have to go into too much more depth to explain it, but the Americans were broke, and they had bad credit. Governments wouldn’t loan them money because there was practically no way for them to pay it back. They could hardly afford to feed and cloth their soldiers, and the foreign agents in Philadelphia new it, regardless of how much American ministers in Europe obfuscated. Therefore, to begin to create a mechanism for generating credit in the states, Morris founded the Bank of North America.

This bank was founded using a load of french silver and was the first central bank founded outside of Europe, and only the third one to be created in the world. It was a massive accomplishment that has largely disappeared in the annals of history. The bank actually survived longer than the Bank of the United States, which died in 1841, whereas the Bank of North America existed in some capacity (with changes in name), until 1908. This was Morris’s most understated accomplishment.

Part 4: Death and Taxes

Morris’s second strategy to economic solvency was to simply do one thing, make sure the Confederate Government was generating revenue. There was just one giant problem with that. There was not a real mechanism in the Articles of Confederation that allowed that. You see, the whole American Revolution was a tax revolt, plain and simple. The chief slogan was twofold, “No Taxation without Representation.” and “Give me Liberty, or Give Me Death.” Both were about the same thing. The distant British government had no right to tax the Americans. That right belonged to their local representatives. When constructing the Articles, the founders took this view, and understood that people in Massachusetts would have the same opinion of a central government in Philadelphia as they would of one in London. It was, in every sense, a foreign government. That feeling was mutual throughout the colonies.

That being said, they did write something in the articles about funding the government. It reads thusly:

“to ascertain the necessary sums of money to be raised for the service of the United States, and to appropriate and apply the same for defraying the public expenses – to borrow money, or emit bills on the credit of the United States, transmitting every half-year to the respective States an account of the sums of money so borrowed or emitted – to build and equip a navy – to agree upon the number of land forces, and to make requisitions from each State for its quota, in proportion to the number of white inhabitants in such State; which requisition shall be binding.”

Pretty straightforward, right? That’s what Morris thought too. He began by writing a letter to the states saying that these “requisitions” were mandatory, and that they needed to pay up. Morris also laid out at massive restructuring of finance in the US by seizing the opportunity to propose a national impost or tariff, a land tax, a poll tax, and a whiskey tax, in addition to the assumption of state’s debts by the confederate government. If this seems eerily familiar to another plan that pops up during Washington’s presidency, that’s because it is. In fact, month’s before Morris proposed these things he received a letter from a 26 year old colonel in the Continental army on the verge of resigning his commission. This man’s name was Alexander Hamilton.

Hamilton was a lot like Morris. Hamilton was also an immigrant, born on the Caribbean island of Nevis. His mother was descendant from French Huguenots and his father was either descendant from Scottish nobility or was a local merchant. There is some speculation that his mother was of mixed African ancestry, meaning that Hamilton was either a “quadroon” or an “Octaroon.” It’s possible, partly because systemic racism wasn’t a thing in the French Caribbean until the 1770s, and it wasn’t frowned upon by white French settlers to marry a free black person — or even a slave — like it was in the United States. In fact, the French didn’t codify variations in mixed children legally until the 1780s, which was far later than any other European slaveowning powers, nor did the French really keep those records. So, it’s possible that Hamilton had some mixed ancestry, but no evidence has yet to surface that this was the case. More than likely he wasn’t mixed, but even if he was mixed, he possessed no African features and looks just as white as any other founding father.

Hamilton, like Morris, was intimately familiar with the nature of transatlantic trade and finance. As a teenager he ran a import/export business in the Caribbean in much the same way Morris ran his shipping business. He even was responsible for not just selling the typical carribean staples of rum and molasses, but also slaves. In fact, he would have been the person oiling up and cleaning fresh slaves for Africa for sale in the local square. It’s possible that this prolonged proximity to the indignity of slavery is what made Hamilton a lifelong abolitionist. Hamilton’s life was changed after his island was hit by a devastating Hurricane in 1772. After the account was published in the local paper, Hamilton became a popular celebrity and was soon patronized by the locals and shipped off to New York City, probably in the hopes of learning medicine so that he could return to the island. Hamilton never looked back.

After arriving in New York, he actually made his way to New Jersey to join Princeton. This leads to a bunch of interesting connection, for people who know the arch of Hamilton’s life. Hamilton was was skilled as Washington and Morris about attaching himself to potential father figure/patrons. His first was Hugh Knox, a presbyterian minister and part time journalist. Knox’s mentor in the faith had been none other than Aaron Burr, the father of THAT Aaron Burr, who had also been the President of Princeton. At the time it was actually referred to as the “College of New Jersey” but for sake of ease I’m going to keep referring to it as Princeton. While attempted to get into Princeton, Hamilton stayed at the house of Robert Livingston, a future adversary. He however was trying to finish what we would consider a pre-law program today in 2 years. It surely would have been a herculean effort that would have taxed Hamilton to his fullest capacity, as he already was lacking in the preparatory education that would have been expected at the time. However, it’s possible he could have still gotten in under these circumstances with his given connections except for one thing: Princeton refused to admit any other students in an accelerated program because one of their previous students had almost worked himself to death doing the same 2 year course. His name was James Madison. Fortunately for Hamilton, this forced him to attend Kings College, modern day Columbia University, in New York. This allowed Hamilton to become an early pamphleteer for the cause of independence, allowed him to make connections to the local patriots that would form the core of his support in later years, and also join the local militia, which would get him noticed by Washington in the New York Campaigns. This would lead to Hamilton serving as Washington’s chief aide from 1776 to 1781. Hamilton wrote the majority of Washington’s correspondence during those years, and according to Ron Chernow’s biographies of both men, much of Washington’s papers survive to this day in Hamilton’s handwriting. It was this level of access to America’s most renowned figure that gave Hamilton the balls of writing a totally unsolicited, thirty three page long letter detailing a total fiscal reform plan for the United States to the new financial minister. There’s no doubt that Hamilton had actually written to Morris before, just as Washington. Morris was so astounded with Hamilton’s level of knowledge that he offered him the position of tax collector of the state of New York.

Maybe it was the close proximity to the army, or the proximity to the total ineptitude of congress and it’s petty regional bickering, or the fact they were both immigrants which fostered a lack of local identity, but during the fight for the impost and fiscal solvency, it became clear that both Morris and Hamilton were nationalists. Shortly after writing Morris, Hamilton began writing a series of essays titled, The Continentalist. In these essays, Hamilton laid waste to the regionalism of congress and that in order to prevent the tyranny of the British King, that they had  constrained the government’s ability to govern so much that it had prolonged the war and endangered the very idea of victory.

It was in the midst of Morris’s correspondence with Hamilton, that he received word of the plans to besiege Yorktown. There was only one issue with it. Washington didn’t have the supplies to move his army south and hem in the British. Morris literally had to pay for the campaign out of his own pocket. Morris continually did this as congress simply had no money. Ironically, it was possibly the victory at Yorktown that sabotaged Morris’s economic plan more than anything else. The danger of a mutinous army that could turn on it’s own government made for a good example as to why the impost was necessary. After all, the war had still been going, but after Yorktown, about everyone except John Adams and Washington thought the war was over. The victory of Yorktown was completed in October 1781, but the battle for the impost raged in congress until November 1782. Morris managed to use his not inconsiderable influence to gain approval from all 13 states except 2: Georgia and Rhode Island. Georgia was constantly being occupied by British forces so it’s approval wasn’t considered necessary, but Rhode Island’s was, and in December 1782, congress learned that Rhode Island rejected it, killing any chance at financial stability. By this point Hamilton had become a member of the Confederate Congress representing his adopted state of New York, but neither he, nor Morris could cajole the states into paying their requisitions or accepting the impost.

The fight over the impost represented the biggest flaw in the Articles. More so than the fact that states could interpret their payment on the nation debt as optional, which it wasn’t, was that bills had to be passed by unanimous consent of the states, and it was virtually impossible in practice. This would be the fatal flaw, a flaw that would keep men like Hamilton, Morris, Washington, and James Madison up at night. Hamilton foresaw the United States turning into, “a number of petty states with the appearance only of union, jarring, jealous and perverse, without any determined direction, fluctuating and unhappy at home, weak and insignificant by their dissensions in the eyes of the nation.”

Next week we will see how these fractured, petty, and disorganized states response to some unruly settlers that decide to pick up the slogan “no taxation without representation” and form their own state, totally on their own initiative.

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