Why the U.S. Founding Fathers Wanted an Activist Government

2018--1-25-Founding Fathers

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Yale professor Steven Pincus discusses why the U.S. Founding Fathers wanted an activist government.

2018-01-25-Founding FathersMore than 200 years ago, the Founding Fathers gathered in Philadelphia to pen a document declaring the North American colonies free from British rule. Today, the Declaration of Independence is often cited by some groups as proof that the founders believed in a limited government. But Yale professor Steven Pincus argues that the founders actually thought the British did too little for the colonies, in his new book, The Heart of the Declaration: The Founders’ Case for an Activist Government. He discussed his views on the Knowledge@Wharton show, which airs on SiriusXM channel 111.

An edited transcript of the conversation follows.

Knowledge@Wharton: This book is your review of the Declaration of Independence?

Steven Pincus: That’s right. I start from the perspective that all of the founders were British Americans before they were Americans, so I think about their engagement with British political debate. That’s kind of the starting point of my revision.

Knowledge@Wharton: You’re talking about a lot of things surrounding the time of the Revolutionary War. Some of the figures behind the Declaration of Independence felt they were being given short shrift in terms of what they could do as colonies of the British Empire.

Pincus: They were writing the Declaration in the context of a British imperial debt crisis that had been going on since the 1760s. At the end of the great Seven Years’ War, what we call the French and Indian War, the British government was in debt. Just like in the 21st century, there was a vibrant debate about how to deal with the debt. The governments, the ministers, the prime ministers who tended to dominate British politics after the succession of George III were people who thought the best way to pay down the debt was to pursue austerity measures, to stop spending money and to tax the people who couldn’t vote in parliamentary elections — the colonies in North America, Ireland and India.

Their opponents argued that the best way to get out of the debt was to try to stimulate the economy. In their view, the most vibrant sectors of the economy were the colonies, so they thought it was best to subsidize growth in the colonies. That had been the long-term policy of the British Empire up until 1760.

What the American colonists were complaining about was, in fact, all of these kinds of subsidies to support growth in the colonies. Subsidizing industry, subsidizing immigration, helping open up trade for the American colonies, all of that had come to an end in 1760. They wanted the British government to restore these things. When it became clear that the British government was not going to do that, they turned to independence as a second-best option.

Knowledge@Wharton: This happened during the height of the British Empire?

Pincus: Absolutely. It’s important to realize that not only were there British colonies in North America and in the West Indies — and it should be realized that places like Jamaica were incredibly prosperous in the 18th century — but there was also a new massive British Empire based on Bengal, in India. At the time, Bengal was the most advanced manufacturing place in the world. It was a global empire very much at this time, but it was a global empire that needed to get itself out of debt.

“They turned to independence as a second-best option.”

Knowledge@Wharton: Is it safe to say that if the British government had not changed that philosophy around 1760, the path to revolution may have been different?

Pincus: Absolutely. I think there are two reasons to believe this. First, in the declaration itself, the founders dated all of the problems that they experienced not to the beginning of the British Empire, but to when George III came to the throne. From their perspective, everything had changed then. Their rhetoric was very much that had the British Empire continued to govern the way it had before 1760, everything would have been fine.

The second reason to believe this is that there was a simultaneous revolution, or a movement towards revolution, going on in Ireland with almost identical complaints of the Americans. That there had been too many restrictions on trade, that the government was interfering on internal taxation, that they were taxing them directly, that they stopped subsidizing their growth. But the timing was slightly different and everything came to a head in 1782, six years after the Declaration of Independence. Ireland declared legislative independence and judicial independence, but they didn’t break away from the British Empire in large part because the ministry that had been governing since the 1760s fell in 1782 and the new government made the concessions.

At that point, all of the desire for independence in Ireland stopped. North Americans were extremely conscious that their cause was the same. In fact, George Washington wrote a letter to Henry Grattan, the leader of the Irish movement, and said, “Your cause is our cause.” He understood the parallels.

There are two good reasons to think that had the government not pursued these reasons, things would have ended up differently. First, in the declaration itself the founders said so. Secondly, the parallel revolutionary movement in Ireland came to an end when the British ministry fell and a new government pursued different policies.

Knowledge@Wharton: You mentioned immigration, trade and economic stimulus as very important back then. Those are still relevant issues for the government today.

Pincus: That’s right, so let me say something about immigration. One of the things that the British Empire had done until 1760 was to support immigration into Britain, into the empire and particularly into North America. They have been spending tens of thousands of pounds a year, which was a huge amount of money in those days, to apply for immigrants to come to the new world. They made it really easy to naturalize. In the Declaration itself, the founders castigated, blamed George III for endeavoring to prevent the population of these states.

They complained that he had obstructed the laws for naturalizing foreigners, and that’s in the Declaration. They complained that he had refused to pass laws to encourage migrations hither. The founders thought that one of the reasons to declare independence was precisely because George III was pursuing an anti-immigration policy. They thought that the American government should support immigrants because they thought immigrants would help to stimulate economic growth.

Knowledge@Wharton: On the trade issue, you talked about George III blocking the relationship the colonies wanted to have with the Latin American territories.

Pincus: Again, the hopes of the colonists were to have free trade with Spanish America. Spanish America at the time was extremely prosperous because of the silver mines in Mexico and Peru. Because their economy was so focused on mining, they had a huge demand for foodstuffs and a variety of manufactured goods, especially metal wares, pottery and textiles.

By contrast, the colonists didn’t have much coin. They wanted to open up trade, but the government in the 1760s had sought to restrict trade. They had seen a kind of British-first trade policy and had prevented the colonies from trading directly because they thought there would be unfavorable trade balances. The founders complained that George III had cut off America’s trade with all parts of the world. Benjamin Franklin, one of the committee of five who wrote the Declaration of Independence, demanded what he called a free commerce with all of the rest of the world.

“Washington was not somebody who was an America-first kind of guy.”

When the Declaration of Independence was drawn up, there were a series of other measures that the Second Continental Congress demanded or drew up at the same time. One of them was the so-called Model (Commercial) Treaty, which was to set up free trade relations with anybody who would be willing to sign it. There was a real commitment to free trade among the founders, and they complained very much that George III’s government had pursued a policy of tariff barriers and protectionism.

Knowledge@Wharton: I want to go back to the debt issue. Is it correct to say that one of the reasons the British Empire was in a debt crisis was because it was so massive at that point?

Pincus: Yes, indirectly. The size of the empire made it expensive to govern, but one can trace this massive increase of the debt over the course of the 17th and 18th centuries. British debt increased mostly during times of war, and the biggest jump in the British debt was in the French and Indian War of 1756 to 1763. That is why the debt grew dramatically.

Of course, it was difficult to decrease British governmental expenditures as quickly when you had a huge empire to govern. But one of the policies that the post-1760 governments pursued — governments after George III came to the crown — was to spend as little money on the empire as possible and to insist that the colonies always pay Britain, rather than the other way around. There were millions of pounds that were supposed to come in every year from the new colonies of Bengal. Much less was expected from North America. But the British government’s view was that they should be spending less money governing North America than North America should send to Britain in taxes.

Knowledge@Wharton: You had a piece in Time magazine on the founders and how they would react to President Donald Trump. Take us into that a little bit.

Pincus: That piece was written over a year ago now, but the points that I was trying to make then were that some of the issues that Donald Trump had been raising — immigration, trade, ways of dealing with the debt — seemed somewhat inimical to the principles of the founders. The founders were absolutely committed to immigration because they thought that the best way to make North America prosperous was to increase the labor force. The more people in the country, the lower the price of labor would be. There would be more stuff that would be produced, and they thought that was good for the economy as a whole.

They also were absolutely insistent that British North America be integrated into the world economy through trade because it was the best way in the short-term to get money to spend. They also thought it was through international trade that prosperity could grow most because then you could sell the goods that you had, you could import goods from other countries, and that would be the best way in the long-term to stimulate growth. Their view was that they could sell British manufactured goods to Spanish America much more cheaply than anybody else, and that would lead to profits. They thought in the medium term, after independence, that they could begin to develop manufacturing, which could then be exported to Spanish America for huge profits. That is why Alexander Hamilton in 1790 and 1791 wrote his essays on manufacturing.

Knowledge@Wharton: What role could George Washington have played to change the path of this?

Pincus: George Washington had been a military officer serving the British Army in the Seven Years’ War. He was somebody who was a great admirer of the empire, as were most people in British North America in the 1760s. Before the policy turned after the great British victories in the Seven Years’ War, most people living in North America thought that the British Empire was something that the world had never seen before, an empire for liberty. That is what George Washington and many others thought they were supporting.

Indeed, when the British government in the 1760s started pursuing these new economic policies of austerity and not helping the growth of the colonies, Washington was in very close contact with British critics of the policies that were being pursued. He adopted their economic perspective that the best way to stimulate the growth of the empire as a whole was to encourage the development of the most dynamic parts of the colonies.

Washington was somebody who was not predisposed to independence by any means. It was clearly the policies that had been pursued after 1760 that led him from being one of the greatest enthusiasts of the British Empire to somebody who wanted independence. The telling point comes when he received a copy of the Declaration of Independence. He was with his troops in Manhattan, watching the British Army disembark on Staten Island. He read the Declaration of Independence out loud to his troops, as one did in those days. Huzzah. They shot off their guns in celebration. He said to them, “See, this shows that we are fighting to defend the British Constitution against those guys who have perverted the British Constitution.”

“The big takeaway is not that the Americans thought that the British government was doing too much … but that they were doing too little.”

Here is this guy who reads the Declaration of Independence and understands it a defense of the British Constitution, the way it was meant to be. This is a document defending the British Constitution before it had been perverted by George III and his ministers after 1760. Washington was not somebody who was an America-first kind of guy. He was somebody who was very committed to a set of policies and ideas he associated with the British Empire, and he lamented that the British Empire had given up on those ideas.

Knowledge@Wharton: But as they got closer to what ended up being the Revolutionary War, were there elements in the British government that understood why there was unrest in the new colonies?

Pincus: Oh absolutely. British politics in the later 18th century, like our politics today, was deeply, deeply partisan. There were deep party divisions. The opposition party, those who wanted different policies, those who wanted freer trade, those who wanted to continue subsidizing immigration, etc., had huge support among the business interests in Britain because these were the people who were manufacturing textiles in Manchester )England) or nails and metal wares in places like Sheffield and Birmingham.

They realized that their biggest market and their most dynamic market for these goods was British North America. They thought these policies of taxing the colonies directly without their consent was a disaster for Britain on purely business terms because if you took the money out of the pockets of the colonists, they weren’t going to be buying British manufactured goods. There was absolutely a business interest that was arguing against the policies that had been pursued since 1760 in Britain.

Knowledge@Wharton: The Declaration of Independence was signed in 1776, yet it is still important today. It is at the core of what this country is about.

Pincus: This has been a key moment in American history. In moments of crisis, the Declaration is what American politicians, and also Americans more generally, have turned to. One needs only recall the Gettysburg Address that Abraham Lincoln delivered, which was in fact a gloss on the Declaration of Independence. Lincoln said over and over again that he believed that he derived all of his principles from the Declaration of Independence, which he understood as our founding constitutional document.

Every year on the Fourth of July, every politician worth her or his salt gives a speech on the Declaration of Independence. I think it is and should remain our touchstone. My point merely is that we should pay more attention to what is actually in the Declaration of Independence, what they were complaining about and what they hoped for.

It’s also really important to understand the economic ideas behind the Declaration of Independence. The big takeaway is not that the Americans thought that the British government was doing too much, that they were interfering too much in their lives, but that they were doing too little to support the prosperity and develop the North American colonies. Or, if you will, that they had shifted from supporting the economy of British America to seeing British America as merely a resource to pay down the national debt.

Knowledge@Wharton: There were also concerns around financial inequality in the colonies, kind of the 1% and the 99% that we talk about quite a bit today.

Pincus: Absolutely. One of the key elements of the thinking of not only the American founders but their political allies in Britain was that to have a dynamic economy, you need producers producing important things, but you also needed a broad base of consumers who were buying those goods. This was especially in true in a world of protectionism. When other countries, especially other European states in their competing empires, closed markets to British and British American goods, then the biggest market that you were going to have was going to be the domestic market.

Their view was that you needed consumers, but the more radical the inequality, the fewer consumers that you would really have in the marketplace. If only the wealthiest 1% had money and a consumer wherewithal, they would buy a lot of luxury goods, but that would pale in comparison to having everyday people buying new clothes all of the time, for example.

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