How the Founding Fathers Shaped America's Economy

Instructor: Nate Sullivan

Nate Sullivan holds a M.A. in History and a M.Ed. He is an adjunct history professor, middle school history teacher, and freelance writer.

In this lesson we will examine the role the Founding Fathers played in shaping the American economy. We will highlight key figures and examine their contributions to America's economic development.

The Men on Your Money

Next time you get a chance, get out your wallet and take a look at some of the men on your coinage and bills. You know, people like George Washington, Thomas Jefferson, and Alexander Hamilton. It's appropriate that these leaders appear on our currency, because many of them played an instrumental role in shaping the American economy.

However, while there were a number of leaders, such as Washington, Adams, and Jefferson, to name a few, that played a part in shaping America's economy, two individuals were indispensable to the formation of the American economy: Robert Morris and Alexander Hamilton. Let's take a look at how Morris and Hamilton, along with some of the other Founding Fathers, helped to create and grow the economic infrastructure of the newly-formed American Republic.

The Revolutionary War, Continental Dollars, and Robert Morris

The Revolutionary War was a ridiculously expensive endeavor. Think about it: ships, artillery, firearms, uniforms for the men, and of course, the soldiers weren't going to fight for free (at least not most of them.) The war was financed in a variety of ways, including loans from foreign states. Continental soldiers were paid in a variety of paper currency, much of which held no real value. Instead, soldiers had to rely on the promise that these bank notes would be redeemed following the war. American currency became known as Continental dollars, or more commonly, just the Continental. The overprinting of Continentals resulted in heavy depreciation, so much so that it spawned the popular phrase: 'Not worth a Continental.'

An example of Continental paper currency

One Founding Father who played an enormous role in early American economics, yet rarely receives the recognition he deserves (you won't find him on any of our bills or coins) is a man named Robert Morris.

In addition to personally helping to finance the Revolutionary War, Robert Morris served as America's Superintendent of Finance between 1781-1784. Considered by many as the most powerful man in America next to George Washington, Morris secured a French loan in 1782 and set up the Bank of North America. The bank was privately owned - through share-holding it basically belonged to the people of the United States.

Robert Morris was a wise and much-needed financial leader for the fledgling republic, but the American government at that time needed reform because it was too weak and had little power over economics. Reform would come in 1787 with the adoption of the U.S. Constitution.

Robert Morris, financier of the Revolutionary War and Superintendent of Finance between 1781-1784

The Father of the American Economy: Alexander Hamilton

Which Founding Father was most involved in the shaping of America's economy? You should be thinking of the man on your $10 bill: Alexander Hamilton. Hamilton can be thought of as the 'Father of the American Economy.' He was the premier architect of the American economic system.

Hamilton created national credit by consolidating state debt into a national debt. He believed the federal government should play a prominent role in economics and that it should have the authority to print and mint money.

The Constitution had only been ratified in 1788, and many people were unsure of how much power it granted the federal government. It needed to be 'interpreted', so to speak. Hamilton, a Federalist, favored a strong central government. He affirmed that the government had certain 'implied powers' that were necessary for it to function and maintain itself, one of which was authority over the nation's finances. As the first Secretary of the Treasury, Hamilton was responsible for the creation of the First Bank of the United States in 1791, which was America's first national bank. It lasted until 1811 when its charter expired.

The Father of the American Economy, Alexander Hamilton

Taxes, A Necessary Evil

The new government needed money to function, and the debt incurred from the Revolutionary War needed to be paid off. In order to do this, the government needed to raise money from somewhere. Hamilton's idea was to tax whiskey in 1791. Guess how that one went over?

To put it in perspective, the Americans of this time had just waged a violent revolution that began because the British were taxing their goods. Now all of a sudden, these Americans were being taxed by their own republican government! Some felt betrayed, and there were tax revolts, such as the Whiskey Rebellion, a series of protests and insurrections among farmers in Western Pennsylvania between 1791-1794. When President Washington sent troops to put down the rebellion, it showed the American people that the U.S. Government would use force if necessary to enforce its laws.

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