“Rhode Island was notorious for its populism and its debtor-inspired paper money emissions, Madison especially disliked it.”

Gordon Wood: Power and Liberty: Constitutionalism in the American Revolution (2021)

Epilogue

Why didn’t Rhode Island attend the Constitutional Convention in 1787? Answering this question might help explain the dynamic way America, or least the northern part of it, developed in the early Republic. In refusing to attend the meeting in Philadelphia, the Rhode Islanders weren’t fools. They knew that the Convention was out to change things in ways that would especially harm them. Thus Rhode Island missed the Constitutional Convention, the only state to do so. Not that anyone really cared. The absence of Rhode Island, said one Boston newspaper, was a “joyous” rather than a “grievous” occasion. No one concerned with orderly and virtuous government wanted Rhode Islanders present at the Convention. Because Rhode Island was notorious for its populism and its debtor-inspired paper money emissions, Madison especially disliked it. It was the only state he singled out for condemnation in his memorandum on the “Vices of the Political System of the United States.” “Nothing,” he said, “can exceed the Wickedness and Folly which continue to rule there. All sense of Character as well as of Right is obliterated there.”1

Most other leaders agreed with Madison. Rhode Island, they said repeatedly, represented everything that was wrong with the nation in the 1780s, and they called the state every vicious name one could imagine. Rhode Island was a state “verging into anarchy and ruin from democratic licentiousness.” Its people were a disgrace to the human race. The state was the continual butt of jokes and poems, such as this from a Connecticut newspaper in 1787: “Hail! realm of rogues, renown’d for fraud and guile, / All hail, ye knav’ries of yon little isle.”2

Yet, as strange and peculiar as Rhode Island seemed in 1787, the little state anticipated and epitomized developments of nineteenth-century northern middle-class society more trenchantly, more clearly, than other northern states, and for that reason alone its story is worth telling, however briefly.

Rhode Island was a very unusual state and had been a very unusual colony. Overwhelmingly middle-class in character, it anticipated the vibrant capitalistic society of northern antebellum society as no other state did. Quirky from the beginning, it was settled in the seventeenth century by several individuals who are best described as misfits and oddballs. Both Roger Williams, who founded Providence, and Ann Hutchinson, who together with her followers settled in Portsmouth on Aquidneck Island, had been expelled from Massachusetts Bay for their extreme religious views. William Coddington, reputedly the richest merchant in Boston, had come with Hutchinson, but in 1639 he decided to move to the other end of Aquidneck Island, where he founded the town of Newport. Because Coddington had been one of the Puritan judges who had banished Roger Williams from Massachusetts Bay, he and Williams never got along, and he struggled to keep Aquidneck Island, later renamed Rhode Island, separated from Williams and Providence Plantations. Warwick was settled by Samuel Gorton, the oddest of all the colony’s founders and a self-educated mystic who preached a theology that no one in New England had ever heard of.

These four towns—Providence, Portsmouth, Newport, and Warwick—with their obstreperous founders and rival patents couldn’t get together. A makeshift confederation fell apart in the 1650s and divided into two separate governments with two sets of officials. The royal charter granted by Charles II in 1663 saved the colony from being gobbled up by its neighbors, Massachusetts Bay and Connecticut. The colony’s commitment to being a “lively experiment” in religious freedom appealed to the Catholic leanings of the newly restored Stuart king. Partly because of its extreme religious liberty, however, the reputation of the colony remained that of a kind of sewer into which all sorts of cranks and riffraff flowed.

Despite the existence of the royal charter, Rhode Island’s towns remained extremely autonomous. So mistrustful of central authority and so jealous of one another were the people of the colony that they had to rotate the capital among the towns. By the eighteenth century the colony had five capitals, one in each county—Newport, Providence, South Kingston, East Greenwich; and the fifth, Bristol, added in 1746.

By the eve of the Revolution Rhode Island had a population of about fifty thousand persons, scarcely a fifth the size of Massachusetts Bay. The extreme localization of authority, the weakness of its social hierarchy, the dominant middling character of its people, and the high percentage of eligible voters made Rhode Island the most democratic colony in the entire British Empire. Between 75 to 80 percent of the adult white males could vote, a higher percentage of eligible voters than any other colony, and surely the highest in the world at that time.

The colony’s politics were precocious—anticipating the democratic politics of northern America in the nineteenth century—and unlike the politics of any other colony. In no other North American colony did the people at large directly elect all the officers of the central government. Every April the voters elected on a colony-wide basis the governor, the lieutenant governor, the secretary, the attorney general, and the treasurer, together with ten assistants who constituted the upper house of the legislature. For these colony-wide elections, Rhode Islanders developed a peculiar system of party ballots, which they called proxes. For at-large elections, these party proxes were essentially ballots and the only means by which people would know whom to vote for.

The deputies, the representatives in the lower house, were chosen on a local basis. Unlike the non-corporate colonial legislatures, they were elected twice a year, in April and again in August. This Rhode Island assembly was extraordinarily powerful. The April assembly, sitting as committee of the whole, elected for the year the sheriffs, justices of the peace, judges and clerks—that is, all the colonial officers—which in the 1760s numbered more than 250. In nearly all the other colonies, the governors appointed these officials. This is what made Rhode Island’s assembly so powerful.

With so much popular participation, the colony’s politics took on a raucous volatility that was unmatched anywhere else. The colony was continually racked by something resembling modern party politics. In fact, it was the only colony to develop a modern two-party system, with one faction centered in Providence led by Stephen Hopkins, the other centered in Newport led by Samuel Ward. These political parties were better organized and more modern than any similar factions in the other colonies. To win elections, the parties used every weapon they could, including bribery, name-calling, trickery, corruption, fraud, and lots of rum. Campaign expenses were considerable. In the election of 1763 the Brown brothers of Providence contributed the enormous sum of £1500 to the campaign.

No other colony in North America, probably no other place in the entire world, had this degree of chaotic populist politics. Imperial officials in other colonies shook their heads in bewilderment at what they called a “a downright democracy,” where the governor was “a mere nominal one, therefore a cipher, without power or authority, entirely controlled by the populace, elected annually, as all other magistrates and officers whatsoever.” In the 1760s the minister of the Congregational Church in Providence labeled this system of politics “Rhode Islandism.” “Surer methods,” he said, “cannot be taken to ruine a people. . . . For these abominations, our land mourns.”3

Precisely because its society was so middling-dominated and its elites so weak, the colony became the most commercially advanced of all the colonies in North America. That is, a higher proportion of its people were occupied in buying and selling than anyplace else. The culture of the colony is perhaps best expressed by the Bristol merchant who declared that he “would plow the ocean into pea-porridge to make money.”4

With all of its ocean harbors, the colony was deeply involved in overseas trade, especially with the West Indies. Ever since the Molasses Act of 1733, designed to protect the rum industry of the British sugar planters in Barbados and Jamaica, smuggling of molasses from the French West Indies became rampant in the colony. Molasses, which was essential to the production of rum, was a byproduct of sugar production. Since the French government prohibited its colonial sugar planters in the French West Indies from producing rum, a product France did not want rivaling its wine and brandy industry at home, the Rhode Island merchants were ready buyers for the surplus French West Indian molasses.

Since the Rhode Island merchants had no intention of paying the prohibitory duty on this foreign molasses, smuggling and systematic corruption became a way of life in the colony. The merchants even worked out lists of how much to pay in bribes to the various British customs officials. The rum industry in Rhode Island flourished, with as many as thirty rum distilleries existing in the tiny colony in 1764. Some 10 percent of the rum that the colony produced was taken to Africa in exchange for slaves who were brought to the Caribbean or to the southern colonies. Rhode Islanders themselves consumed half the rum.

More important than this overseas trade was the domestic trade that Rhode Islanders carried on with each other and with their immediate neighbors. What was crucial for that domestic trade was paper money. Lacking specie—that is, gold and silver, which was to everyone the only real money—the farmers of Rhode Island between 1710 and 1751 pressed the General Assembly to pass no less than nine paper money emissions, flooding New England with paper. A minister in South County named James McSparran explained the unique technique the colony had developed. “Rhode-Islanders,” he said, “are perhaps the only People on Earth who have hit upon the Art of enriching themselves by running in Debt.”5

This paper money, of course, was not good for paying bills in the French West Indies or in London, and consequently merchants in Newport who had overseas creditors deeply resented having to take it. The merchants continually pressed their correspondents and creditors in Britain to put pressure on Parliament to do something about all the paper money in New England. In 1751 Parliament passed a currency act that forbade the New England colonies from making paper money legal tender. But the Rhode Islanders’ use of paper money did not stop. Once it became an independent state in 1776, its commercial farmers continued to favor the issuing of paper money.

But in the mid-1780s, during a brief economic downturn, the state’s popular passion for paper money outdid itself. In 1786 more voters participated in the spring election than at any time since independence. The so-called Country Party dominated by debtors fearful of losing their farms were overwhelmingly victorious and immediately enacted a radical economic program. The legislature issued £100,000 of legal tender paper money and set penalties for those who refused to accept the paper.

This was too much for Madison and other elites. “Paper Money is still their idol,” Madison moaned to Virginia Governor Edmund Randolph in the spring of 1787.6 Indeed, elite creditors everywhere complained about the excessive paper money being issued by popular state legislatures. Because Rhode Island was the most notorious issuer of paper money, it came to represent all that seemed wrong with American politics in the 1780s. This was why it was the only state Madison expressly criticized in his paper on the “Vices of the Political System of the United States.”

Rhode Island and the other states emitting scads of paper money in the 1780s were committing a great injustice, or so it seemed to gentry elites. Debtor majorities in the states were using their majority power to inflict damage on the minorities of creditors who had lent them money. This was striking at the heart of the social order. Unlike the English aristocracy who lived off the rents from long-term tenants, the American gentry elites who constituted whatever aristocracy America possessed had relatively few tenants, land being so much more available in the New World. The American gentry relied instead on the interest earned from money out on loan. In other words, they were creditors lending money to members of their local communities—in effect, acting as bankers in a society that had very few, if any, banks.7

In America, as John Witherspoon, president of the College of New Jersey (later Princeton) pointed out in the Continental Congress, rent-producing land could not allow for as stable a source of income as it did in England. In the New World where land was more plentiful and cheaper than it was in the Old World, gentlemen seeking a steady income “would prefer money at interest to purchasing and holding real estate.”8 When merchants and wealthy artisans wanted to establish their status unequivocally as leisured gentlemen, they withdraw from their businesses, and apart from investing in property, they lent their wealth out at interest. Franklin did it. So too did Roger Sherman, John Hancock, and Henry Laurens. It was the way “men of fortune” subsisted, said John Adams. They “live upon their income” from money out on loan.9

Consequently, for these gentry creditors, inflation caused by the printing of excessive paper money could be nothing but devastating. For many of them the Constitution was a godsend.

Madison had wanted his new federal Congress to possess a veto over all such unjust debtor-relief legislation enacted by the runaway state assemblies. But he had had to settle for Article I, Section 10 of the Constitution that prohibited the state from doing certain things, including the printing of paper money and making it legal tender. Most gentry welcomed the Section’s prohibitions on the states as the righting of a moral and social wrong. In the Virginia ratifying convention Madison told his fellow delegates that paper money was unjust, pernicious, and unconstitutional. It was bad for commerce, it was bad for morality, and it was bad for society. It destroyed “confidence between man and man.”10

Thus most elite supporters of the Constitution did not see themselves as just another economic interest in a pluralistic society. They were standing up for righteousness itself. “On one side,” said Theodore Sedgwick of Massachusetts, “are men of talents, and of integrity, firmly determined to support public justice and private faith, and on the other side there exists as firm a determination to institute tender laws and paper money, . . . in short, to establish iniquity by law.”11

Many supporters of the Constitution thought that the desire for paper money was the real reason people opposed the Constitution. “Examine well the characters and circumstances of men who are averse to the new constitution,” urged David Ramsay of South Carolina. Many of them turn out to be debtors “who wish to defraud their creditors,” and therefore, for some of them at least, Article I, Section 10 of the Constitution may be “the real ground of the opposition.” Even Madison thought that many pamphlets opposing the Constitution were omitting “many of the true grounds of opposition.” He believed that the articles relating to treaties and “to paper money and contracts, created more enemies than all the errors in the System positive & negative put together.”12

For those who favored the Constitution, its prohibition of state paper emissions was sufficient reason to support the document. If the new Constitution, said Benjamin Rush, “held forth no other advantages [than] that [of] a future exemption from paper money and tender laws, it would be enough to recommend it to honest men.” This was, Rush explained, because “the men of wealth realized once more the safety of his bonds and rents against the inroads of paper money and tender laws.”13

In the debates over the ratification of the Constitution, the Federalists were able to identify paper money emissions with iniquity and injustice to the point where few dared to justify publicly the printing of paper money. Indeed, the gentry in their writings and speeches, declared William R. Davie in the North Carolina ratifying convention, attached such dishonesty and shame to paper money that even “a member from Rhode Island could not have set his face against such language.”14

Whether or not paper money could be justified publicly, people undoubtedly wanted it and were determined to get it. The paper money and the debt incurred by people’s borrowing of money were not signs of poverty and despair. Far from it, they were signs of progress and intense commercial activity. In fact, if the prohibition on the states’ printing of paper money in Article I, Section 10 in the Constitution had been strictly enforced, it would have stifled the economy of the early Republic. The states soon got around the restriction by chartering banks, hundreds of them, that in turn issued the millions of dollars of paper notes that passed as money needed by enterprising middling Americans doing business with one another.

No place in the world had more paper money flying around than did America in the early Republic. By the time the federal government began regulating the money supply in the aftermath of the Civil War, there were more than ten thousand different kinds of notes circulating in the United States.

This proliferation of paper money supplied much of the credit and capital that fueled the extraordinary expansion of the middle-class northern economy of the early Republic. That economy was unbelievably wild and risky, with many failures and bankruptcies; even some states went bankrupt. But success brought great rewards, and ambitious entrepreneurs were everywhere, especially in the norther parts of this rough-and-tumble world; and they needed readily available credit and capital to engage in business. So desirous were people of money that the counterfeiting of bills flourished, with as much as 80 percent of the legitimate bills successfully counterfeited. Criminals fashioned fraudulent copies of the notes issued by the banks and slipped countless amounts of them into circulation alongside the presumably more genuine paper. Storekeepers and businesses often turned a blind eye to the counterfeit bills as long as people were willing to accept them.15

Madison and the other founders scarcely comprehended what was happening, and none of them welcomed all the wildcat banks and the helter-skelter economy developing in the North. Even Hamilton, who at least understood how a bank worked, misread the future and was never in control of events. He never really grasped the way the American economy was developing. He and the other Federalists tended to favor big merchants and financiers and to ignore the middling artisans, small businessmen, and commercial farmers. He was confused by the rapid spread of hundreds of state-chartered banks, for he had expected his Bank of the United States (BUS) to create several branches that would eventually absorb the state banks and give the BUS a monopoly of the nation’s banking. Moreover, he intended his BUS to make credit available only to large merchants engaged in overseas commerce and to others who wanted short-term loans of ninety days or less. At the outset most Federalist banks, including the BUS, did not want to get involved as yet with long-term mortgage loans to farmers; to do so would tie up money for too long a time. It was the states that created the many banks that ordinary people wanted.

Jefferson had no comprehension whatsoever of what was taking place, especially in the middle-class strata of the North. All Jefferson could see were “banking establishments,” which he claimed were “more dangerous than standing armies.” They were dangerous because of all the paper money they issued—paper money, he said, that was designed “to enrich swindlers at the expense of the honest and industrious part of the nation.” He never grasped how “legerdemain tricks upon paper can produce as solid wealth as hard labor in the earth. It is vain for common sense to urge that nothing can produce but nothing.”16

John Adams was as innocent of banking as Jefferson. To the end of his life he was convinced that “every dollar of a bank bill that is issued beyond the quantity of gold and silver in the vaults, represents nothing and is therefore a cheat upon somebody.”17 Of course, the only way a bank could earn any money for its investors was to issue more paper than it had gold or silver in its vaults.

Like other members of the gentry, Adams condemned all the paper money flooding the countryside. He disliked what Rhode Island was doing in the 1780s as much as Madison. “The Cry for Paper Money,” he said in 1786, “is downright Wickedness and Dishonesty. Every Man must see that it is the worst Engine of Knavery that ever was invented.”18

Because Rhode Island was more dominated by middling people than any other state in the Union, it knew what paper money could do, and it had known that for decades. Rhode Islanders were never a poor, backward people sunk in debt. It’s true that the recession of 1786 threatened overextended farmers who were able to take advantage of the state’s democratic politics with an excessive emission of paper money. But for most Rhode Islanders paper money was capital, and they wanted it now more than ever. It didn’t take long for them to realize that they could get around the restrictions imposed by the Constitution by chartering banks. Once they had belatedly joined the Union in 1791, they took the lead in the issuing of paper money, as they had in the colonial period. The Rhode Island legislature went wild in the creating of banks.

By 1819 Rhode Island had thirty-three banks, nearly one in every town. As Pease’s Gazetteer of 1819 pointed out, “the amount of banking capital here [in Rhode Island] is much greater, in proportion of population, than in any other state.” Those banks were spread all over the state, even in agricultural districts; Rhode Island was the only state in the Union, said the Gazetteer, to try this “experiment, as to the utility of the general distribution of banks.”19

Some of the banks issued more paper than was sensible. The Farmers Exchange Bank of Glocester emitted over $600,000 in paper, but had only $86.45 in specie to support these notes. This was too much, even for Rhode Island, and in 1809 the state legislature closed the bank, making it the first bank to go bankrupt in United States history.20

All this paper money and the participation of the state’s commercially minded middling farmers and artisans in the early nineteenth century prepared the way for Rhode Island’s extraordinary commercial success. In the course of the nineteenth century Rhode Island became an economic powerhouse. Inventions flourished, and more patents per capita were issued in Rhode Island than in almost any other place in the English-speaking world.

This extraordinary commercial development, in turn, attracted wave after wave of immigrants from Ireland, Canada, Italy, and elsewhere. By the last part of the nineteenth century, Rhode Island had become a major industrial center. The state dominated manufacturing in textiles, steam engines, baking powder, jewelry, silver, and small tools. Five factories—the Corliss Steam Engine Co., Nicholson File Co., Gorham Manufacturing Co., American Screw Co., and Brown and Sharp Manufacturing Co.—were the largest of their kind, not only in the United States but in the world.21

Rhode Island had a flourishing economy, but its politics were as corrupt as ever. Bribery, electoral fraud, and sleaziness were rampant and seemed to have always existed; indeed, at the beginning of the twentieth century “Rhode Islandism” was still being used to characterize the state’s politics. Lincoln Steffens, the muckraking journalist, thought that “the political condition of Rhode Island is notorious, acknowledged, and it is shameful.”The democratic legislature still dominated. “The General Assembly, corrupt itself,” said Steffens, “is a corrupting upper council for every municipality in the State.” It was as if nothing had changed in a century’s time. But Rhode Island was no longer an outlier, and its peculiar system was just an exaggeration of what was going on elsewhere. Its system had produced Senator Nelson Aldrich, the most powerful political figure in the country and one of the most powerful politicians in the nation’s history—”the general manger of the United States,” Steffens called him. Just as it had in 1787, Rhode Island had become an object lesson in what progressive reformers needed to change, and, like Madison, they were still yearning for a “dispassionate and disinterested umpire” to set things right.22