Solving History’s Economic Mysteries 3:Early Republic

Deborah Kozdras, Ph.D.University of South Florida

Stavros.coedu.usf.edudkozdras@usf.edu

http://tinyurl.com/historymystery3

3

After the Revolutionary War

• American colonies defeated the British army• Great leaders emerged from the conflict• https://www.richmondfed.org/publications/education/

historical_figure_bookmarks • SS.8.E.2.1 - Analyze contributions of entrepreneurs, inventors, and other key individuals from

various gender, social, and ethnic backgrounds in the development of the United States economy.

George Washington John Adams Thomas Jefferson

Great Figures Bookmarks

https://www.richmondfed.org/publications/education/historical_figure_bookmarks

ReadWriteThink Activity

Using images from FCIT Clip Art Galleries, create trading cards for influential people.

Lesson 8 Problems under the Articles of Confederation

• No protection of the Navigation Acts

• No British navy• Huge debts• No power to tax• Tariff fights between

the states

http://www.loc.gov/rr/program/bib/ourdocs/articles.html

SS.8.A.3.9 - Evaluate the structure, strengths, and weaknesses of the Articles of Confederation and its aspects that led to the Constitutional Convention.

Visual 8.1 The Problems Following Independence

• “There is scarcely anything that can wound the pride or degrade the character of an independent nation which we do not experience . . . we owe debts to foreigners and to our own citizens. . .these remain without any proper or satisfactory provision for their discharge . . . .We have neither troops, nor treasury, nor government. . . . Are we entitled by nature and compact to a free participation in the navigation of the Mississippi? Spain excludes us from it. Is public credit an indispensable resource. . .? We seem to have abandoned its cause. . . . Is commerce of importance to national wealth? Ours is at the lowest point. . . . Is respectability in the eyes of foreign powers a safeguard against foreign encroachments? The imbecility of our government [under the Articles of Confederation] even forbids them to treat with us.”

“The Federalist, No. 15” (December 1, 1787)

Visual 8.2 What Would You Do?

1. People choose2. All choices involve costs3. People respond to

incentives4. Economic systems

influence choice5. Voluntary trade increases

wealth6. The consequences of

choices lie in the future

What were the consequences of the war?

Activity 8.1A New Beginning in 1781: One nation of Thirteen?

1. Debt• You are a member of the Congress of Confederation in

1781, considering the issue of war debts. • Predict the consequences likely to follow if war debts are

not repaid.• Explain your prediction briefly, making use of the

economic principle that people respond to incentives.

Activity 8.1A New Beginning in 1781: One nation of Thirteen?

2. The Power to Tax• You are a member of the Congress of Confederation in

1781, considering whether the federal government should be granted new powers to tax.

• Predict the consequences likely to follow if the Congress gains no new power to tax.

• Explain your prediction by reference to the economic principle that people respond to incentives.

Activity 8.1A New Beginning in 1781: One nation of Thirteen?

3. Tariff Wars• You are a member of the Congress of Confederation,

considering whether Congress, rather than the several states, should be authorized to regulate interstate commerce.

• Predict the consequences likely to follow if the several states retain exclusive authority to govern interstate commerce.

• Explain your prediction by reference to the economic principle that people gain when they trade voluntarily.

Activity 8.1A New Beginning in 1781: One nation of Thirteen?

4. Military Strength• You are a member of the Congress of Confederation,

considering whether the federal government should be authorized to develop a strong military force to provide for Americans’ defense and security.

• Predict the consequences likely to follow if no such authority is granted.

• Explain your prediction by reference to the economic principle that people gain when they trade voluntarily.

Who Made the Constitution?

http://ed.ted.com/lessons/who-made-the-american-constitution-judy-walton https://www.youtube.com/watch?v=uihNc_tdGbk

SS.8.A.3.10 - Examine the course and consequences of the Constitutional Convention

Document Analysis from LOC

http://www.loc.gov/teachers/classroommaterials/primarysourcesets/constitution/

Student Discovery Sets

http://www.loc.gov/teachers/classroommaterials/primarysourcesets/constitution/

Document Analysis Political CartoonTitle: The looking glass for 1787. A house divided against itself cannot stand. Mat. chap. 13th verse 26Creator(s): Doolittle, Amos, 1754-1832, engraverDate Created/Published: [New Haven] : 1787.Medium: 1 print : engraving and rocker work, with watercolor on laid paper ; 28.7 x 36.7 cm. (image)Summary: A satire touching on some of the major issues in Connecticut politics on the eve of the ratification of the U.S. Constitution. The two rival factions shown are the "Federals," who represented the trading interests and were for taxes on imports, and the "Antifederals," who represented agrarian interests and were more receptive to paper money issues. The two groups were also divided on the issue of commutation of military pensions.

http://www.loc.gov/pictures/item/2008661778/

Shay’s Rebellion: Shays' Rebellion is the name given to a series of protests in 1786 and 1787 by American farmers against state and local enforcement of tax collections and judgments for debt.

http://www.loc.gov/pictures/item/2008661778/

Document Analysis Political Cartoon

http://www.loc.gov/pictures/item/2008661778/

Movie: Crash Course Constitution

http://econwriting.weebly.com/constitution-day.html

How has the Constitution shaped the economy of the United States?Market Economy Constitution

http://ecedweb.unomaha.edu/lessons/fecg1.htm

Bill of Rights: James Madison

SS.8.A.3.11 - Analyze support and opposition (Federalists, Federalist Papers, Anti Federalists, Bill of Rights) to ratification of the U.S. Constitution.

Rights in the Classroom• What specific protections for individuals

apply to students?• What specific protections for individuals

apply to teachers?• Are these sets of protections distinct from

one another or shared to some degree?• What limits are placed on the authority of

teachers?• What limits are placed on the authority of

students?• What limits on authority do they share?

(For instance, school rules and class policies limit student's authority to decide certain issues, while contracts and school policies limit certain actions by teachers.)

SS.8.C.1.5 - Apply the rights and principles contained in the Constitution and Bill of Rights to the lives of citizens today

https://www.archives.gov/legislative/resources/education/bill-of-rights

http://www.loc.gov/teachers/classroommaterials/lessons/bill-of-rights/

Amendment Movies

http://www.annenbergclassroom.org/page/all-videos for more

Economics of the Constitution

Lesson 9 The U.S. Constitution: Rules of the Game

SS.8.C.1.5 - Apply the rights and principles contained in the Constitution and Bill of Rights to the lives of citizens today

A Constitutional Mystery

• Many nations have adopted written constitutions but have failed nonetheless to grow economically.

• How is it that the U.S. Constitution became an effective force in promoting economic growth within a market system?

Wealth of Nations, 1776

• Smith attacked mercantilism.– Government subsidies,

bounties, monopolies– Such practices fostered

inefficiency• Smith proposed:

– Competition– Free markets to provide

incentives– Specialization and

division of labor

Jefferson• Thomas Jefferson, the

principal author of the Declaration of Independence (1776), and the third President of the United States (1801–1809).

• On May 30, 1790, in a letter to Thomas Mann Randolph recommending books for the study of law, Jefferson wrote: ... in political economy I think Smith’s Wealth of Nations the best book extant ...

Interest Groups

• James Madison argued that the aim of the founders should be to prevent one interest (faction) from controlling the political system.

• Madison’s idea was to make it more costly to redistribute resources from rich to poor or from poor to rich.

Well-Defined Property Rights• The Constitution provided a system of well defined

property rights that allowed for a market economy to develop.– Checks and balances – Enforcement of contracts– Regulation of interstate commerce– Enforcement of due process of law– Congressional power to tax– Congressional power to coin money– Enforcement of copyrights

Activity 9.1 The Constitution: Rules for the Economy

A. Contract Clause• Use economic reasoning

to predict what would happen if apartment renters today did not have to hold to the provisions of the lease agreements they signed.

B. Commerce Clause• The Illinois state

legislature, grown weary of the unearned and boastful pride of Wisconsin “cheeseheads,” approves a 10 percent tax on all cheese “imported” from Wisconsin.

• Use economic reasoning to predict what would happen if Illinois could impose such a tax.

Activity 9.1 The Constitution: Rules for the Economy

C. Fifth Amendment• The Soviet Union took

possession of the land of millions of peasant’s forcing them into collective farms by 1934. Soviet agriculture declined.

• Use economic reasoning to explain how the decline in agriculture might be related to the power of the government to take property by force.

D. Taxation Clause• The United States has

often run budget deficits.

• What would happen to confidence in U.S. bonds if the federal government did not have the power to tax?

Activity 9.1 The Constitution: Rules for the Economy

E. Coinage Clause• The 25 nations of the

European Union established a common currency, the euro, in 2002.

• Explain how the establishment of a common currency might help to stimulate economic growth in Europe.

F. Copyright Clause• Imagine that the work of

musicians could be acquired electronically without compensation to the artists.

• Explain how the prospect of not being able to copyright songs, and enforce copyrights, would influence the production of musicians.

Economic Consequences of Embargo Act

Problem: In 1805 France controlled much of Europe. Britain mastered the seas. Decision: Napoleon stopped British goods from being imported into Europe.What are the costs/benefits? What are future consequences of the decision?

Events Leading to Embargo Act

• As a result of Napoleonic wars, by 1805, France controlled land in Europe.

• England controlled the sea.

Napoleon decided to close ports to stop British goods

from export to Europe.

• 1806, Britain passed Orders in Council: U.S. ships must stop at British port before landing in other European port. They also seized US merchants and cargo and forced impressment.

Napoleon demanded seizure of any ship that landed in

Britain before Europe • This hurt U.S. economy so 1807 Jefferson passed Embargo Act that stopped imports and exports from U.S. ports

. Embargo shut down New England trade and left

South and West with unsold goods

A

Economic Consequences of Embargo ActWhat do you see? (consider ograbme as an anagram or reversgram)What do you think? Who does the man with the barrel represent? What is he trying to do? What country does the ship belong to? What is the ship waiting for?What do you wonder? Is this cartoon for or against the act?

Decision: Embargo Act passed in 1807Consequences: Embargo shut down New England trade and left South and West with unsold goods so by 1808 illegal trade across U.S./Canada (not yet a country) border was rampant.

Want were the impacts of the Embargo Act on trade?

More War of 1812 documents http://neh.niagara.edu/assets/docs/DBQ-Documents.pdf

Florida: East and West

• FCIT Passage at grade level:http://fcit.usf.edu/florida/docs/f/florterr.htm

• FCIT Floripedia Secondary Source from 1905:http://fcit.usf.edu/florida/lessons/cur.htm#transfer

• St. Augustine under three flags timeline http://fcit.usf.edu/florida/docs/s/satimeln.htm )

Jefferson’s Covert Negotiations for Purchase of West Florida from Spain in 1804

• http://cdn.loc.gov/service/pnp/pga/04200/04246r.jpg

http://www.loc.gov/pictures/item/2002708977/

Castillo de San Marcos FCIT

http://etc.usf.edu/nps/ibooks/ Castillo de San MarcosRead ibooks on pc http://www.startribune.com/how-to-read-itunes-books-on-your-pc/160428925/ https://chrome.google.com/webstore/detail/readium/fepbnnnkkadjhjahcafoaglimekefifl?hl=en-US Pg. 7 Interactive timeline, Pg. 99 Manifest Destiny

Adams Onis Treaty 1821

https://www.polk-fl.net/staff/teachers/tah/documents/floridaflavor/lessons/B-9.pdf Treaty http://www.tamu.edu/faculty/ccbn/dewitt/adp/archives/documents/adams_oniz_treaty.html https://www.floridamemory.com/blog/2012/07/17/9-the-united-states-formally-takes-control-of-florida/

Problem Position: The United States of America, founded under the Articles of

Confederation, was beset with problems

• 1780’s widespread economic troubles

• War had disrupted commerce

• Citizens heavily in debt• Many people bankrupt• Paper money issued by

Continental Congress to finance war was worthless because too much was printed (saying: not worth a Continental).

Watch Federal Reserve First Bank Video

First bank video up to 2:49https://www.youtube.com/watch?v=1Nvxpj4vBDU&feature=player_embedded?d=1&s=fre

New america

From Problem Position to Decision Direction

“Most commercial nations have found it necessary to institute banks; and they have proved to be the happiest engines that ever were invented for advancing trade.-Alexander Hamilton, 1781

• Based on Alexander Hamilton’s quote, what did he propose?

• Alexander Hamilton argued that a national bank could:– Issue paper currency –

banknotes as money– Provide a safe place for

public funds– Offer banking for business– Collect taxes

We always want more than we can get and productive resources (natural, human,and capital) are limited. In order to deal with the scarcity problem, we must make choices.We choose the alternative that provides the most benefits with the least costs.

Arguments Against Hamilton

Thomas Jefferson • Thought a national bank would

hurt smaller state banks• Believed a national bank was

unconstitutional• Felt it clashed with vision of the

United States as mostly agricultural society, not based on banking, business, and profit

James Madison and others• Opposed the national bank for

similar reasons.• Madison felt a 20-year charter

was too long for something that was untried in a new country

• Others felt it was against state rights

All choices involve costs: When we choose one thing, we refuse another. Opportunity cost is the next best alternative you give up when you choose.

Hamilton vs Jefferson: From 1781 Letters

Who wrote it? What does it say about banks?

EXCERPT 1: Jefferson

Jefferson explains that the Constitutional Convention rejected the argument of implied powers of the federal

government. He recalls that a proposition to authorize Congress to create corporations, such as those formed to build

and run canals, was rejected by the convention. One of the reasons for rejecting the proposition was that it would

allow Congress to start a bank.

Hamilton vs Jefferson: From 1781 Letters

Who wrote it? What does it say about banks?

EXCERPT 2: Hamilton

Hamilton contends that all of the arguments made against the new bank that are derived from the fact that there

were a few state chartered banks at the time were poorly founded because those banks could easily be gone quickly.‐

Hamilton vs Jefferson: From 1781 Letters

Who wrote it?What does it say about national banks?

EXCERPT 4: Jefferson

Jefferson agrees that it would be more convenient to have a national bank whose banknotes could serve as a

currency throughout the whole country. But, he also recognizes that a single global currency would make things

even easier. He argues that just because a single national currency would make things easier, it does not mean that

the federal government has the power to create the bank nor that the economy wouldn’t function just fine without

it.

Hamilton vs Jefferson: From 1781 Letters

Who wrote it?

What does it say about national banks?

EXCERPT 5: Hamilton

Hamilton explains that the bank would make it easier to collect taxes by increasing the

number of banknotes in circulation and the speed at which transactions take place.

Hamilton vs Jefferson: From 1781 Letters

Who wrote it?

What does it say about national banks?

EXCERPT 6: Hamilton

Hamilton argues that the bank bill does not prohibit states from chartering as many banks

as they want and for individuals to incorporate to create state chartered banks. Therefore, ‐

the bank bill would not create a monopoly since it does not impede others’ ability to operate

banks in the country.

Hamilton vs Jefferson: From 1781 Letters

Who wrote it?

What does it say about national banks?

EXCERPT 7: Hamilton

Hamilton explains that the bank would help in national defense. The bank could be

useful in raising funds to be used to protect the country’s western frontier.

Hamilton vs Jefferson: From 1781 Letters

Who wrote it?What does it say about national banks?

EXCERPT 8: Jefferson

Jefferson points out that those who support the bank bill have argued that a national bank would make it easier to

collect taxes. He explains that the Constitution expressly allows the means that are necessary and not convenient.

Hamilton vs Jefferson: From 1781 Letters

Who wrote it?What does it say about national banks?

EXCERPT 9: Hamilton

Hamilton argues that the bank would have a natural place in the regulation of trade between the states by providing a currency, in the form of banknotes,

that could be used to carry on that trade. The use of the bank’s notes would reduce the number of coins that had to be used to engage in interstate trade.

Money is the most important thing in making commerce happen. Lots of things have been used as money, including paper banknotes. Hamilton refutes

Attorney General Randolph’s argument that interstate trade should be carried out exclusively with coin.

“The institution of a bank has also a natural relation to the regulation of trade between the states. . . Money is the very hinge on which commerce turns. And this does not merely mean gold and silver; many other things have served the purpose . . .paper has been extensively employed. It cannot, therefore, be admitted with the attorney general that the regulation of trade between the states, as concerns the medium of circulation and exchange, ought to be considered as confined to coin . . .”

Hamilton vs Jefferson: From 1781 Letters

Who wrote it?

What does it say about national banks?

EXCERPT 10: Jefferson

Jefferson argues that the powers assumed in the bank bill have not, in his opinion, been delegated

to the federal government by the Constitution.

Who Said It?

Costs Benefits

Jefferson: Against a National Bank 1, 4, 8, 10

Costs Benefits

Hamilton: For a National Bank2, 3, 5, 6, 7, 9

Do you agree with Hamilton or Jefferson?Using evidence, debate for or against a national bank.

Building an Argument

Here are my reasons!

1. ___________________________________________________

2. _________________

_________________

_________________

3. _________________

_________________

_________________

You could argue that…

_________________________________________________________________________________________________________

. . .but here is the weakness . . .

_______________________________________________________________

Main Idea/Thesis

Here is what I think . . .

Counter-arguments

PRO

CON

When you weigh all the evidence

you conclude that . . .

Evidence to back up my reasons

Strong Ending: So this is what I think again!

__________________________________________________________________________________________________________________________________________

Answers

Jefferson: 1, 4, 8, 10Hamilton: 2, 3, 5, 6, 7, 9See handout for explanations

http://www.instituteofplay.org/work/projects/print-play-games-2/socratic-smackdown/

Hamilton vs. Jefferson Links • First bank video up to 2:49

https://www.youtube.com/watch?v=1Nvxpj4vBDU&feature=player_embedded?d=1&s=fre

• Lesson Plan Federal Reservehttp://www.federalreservehistory.org/Events/DetailView/94

• Timeline history of the Federal Reserve https://www.federalreserveeducation.org/about-the-fed/history

• https://www.minneapolisfed.org/publications/the-region/the-bank-that-hamilton-built

• http://www.palomar.edu/ehp/history/sgrenz/Study%20Guides/JEFFERSON-HAMILTON%20VIEWPOINTS.pdf

• http://teachinghistory.org/history-content/ask-a-historian/24094