The American Revolution: Part 3

0:00On to the American Revolution. Now we all know how that came out and it's got a very interesting history to it. We're not going to cover most of that, of course, but it is important to understand that the Continental Congress was very much a radical thing to stand up and to oppose the British Empire with something that you don't do lightly. So it was a group dominated mostly by the radicals, who fought to found the Continental Congress on a natural law, sort of libertarian perspective and they set out on the usual course of a voluntary government A boycott against English goods, voluntary boycott where all the colonies agreed not to buy British goods.

1:09This boycott was one of the most effective against the British, shutting down about 95% of imports, British imports into the colonies. The State of Georgia, their delegation to the Continental Congress was not very radical, and they actually opted out of the boycott, so they sided with the British, those dogs, the colony of Georgia. However, in this case, even though the boycott was very successful, Parliament was even more obstinate than ever, and instead of repealing the coercive acts, Great Britain decides to step it up a notch and bans the colonies from trading with anyone else.

2:10So basically the British reinforce their naval forces and create a blockade of the American colonies. I'm sorry, the boycott that you were just talking about? Yes. The Continental Congress. So like what year? This would be 1775, 1776, would be the first year of the boycott. Lexington and Concord, of course, is an important component of that history.

3:00For our purposes, it's very important for illustrative purposes. You know, the shot fired around the world. The most important aspect of that story, however, is the results.

3:30At this point, the British were afraid of the Americans. They had their troops stationed in Boston offshore, in forts and on islands away from the people, because it was just causing trouble to have the soldiers interact with the people. Well, General Gage had been Reinforced, and he decided that he had to make it some sort of British presence felt. So he decided to secretly send a large contingent of British soldiers to capture the radicals or the rebels' military stores. So the colony had set up military depots in Concord and Lexington.

4:21When the soldiers reach Concord, British soldiers reach Concord, they are accosted by a group of American militiamen and the American militiamen are outnumbered and they stand there and fight shooting at the British and the British are shooting at the Americans in rather typical European fashion and the Americans are cut down and eventually end up running away and the British suffer very few casualties, the Americans suffer several casualties as a result the British go to Concord also successfully raid the military stores there and basically at this point in the day it's a complete british victory and they start on the way back back to their strongholds and at this point is when the american militiamen independently start fighting a guerrilla battle against the british And so the militiamen are running, getting out in front of the British troops who are marching in the redcoats and the militiamen shooting from behind trees, behind walls, from around buildings, start picking off the British one at a time.

6:04there's no real command structure on these soldiers people are just sort of joining in independently as they hear shooting of course if you hear shooting what do you do you go get your gun and then if you see your neighbors are shooting at the British the tendency is for people just to join in and so more and more these militiamen are joining in they're not getting shot at because they're hardly being seen by the British the British send And so the British are being slowly cut to pieces as they move back to Boston in their stronghold.

6:50And if it wasn't for the fact that the British sent reinforcements, almost twice as many Reinforcements is the original group and the fact that the British Navy came and picked them up it probably would have been a complete victory for the Americans and the reason that this is important is that it helps to show the cost and benefits of fighting different, with different methods In particular, fighting against the world military power. If you're just a bunch of miniature little colonies and you're fighting against the world's leading military power, guerrilla tactics are very effective and standard military tactics are very ineffective.

7:57You can't become a good soldier overnight. Becoming a good soldier requires months and months and months of basic training and then years of experience. And regular farmers, mechanics, and artisans aren't going to be able to develop that overnight. However, anybody can become a fairly effective guerrilla almost instantly. Because you're only firing from a position which you can't get hit. So all you have to do is be able to fire in a general direction against the standard military target.

8:51This involves no cost. It involves no standard military structure. You don't need generals, colonels, sergeants, lieutenants, privates. You don't need quarter masters. You don't need a hospital arm to the military. You don't really need anything. Most of the pain inflicted on the British during the American Revolutionary War came came from guerrilla tactics, or in some cases it came from a combination of guerrilla and standard military tactics. One of my favorite tactics that they used, particularly in the The South was, you get this British army moving through the colonies.

10:17Much bigger, much better armed, much more experienced. Then you'd have the Americans. And by this time, later in the war, they had more military competence because the militia men had been fighting for several years. So what they would do is they would take, let's give us a couple of American colors They would take the untrained guerrillas and they would put them in front and the more standardized army would be hiding in the rear.

11:09So you'd have, you know, this would be trees and fences, and they might put the standard or the untrained military, militiamen, out in front in the open. And so the idea here was, of course, the British are going to attack in this direction, and the militiamen would be told, okay, all you have to do is wait until the British get within in Firing Range, and when they start deploying to fire, you shoot one time, and then run.

12:03And then, so you shoot once, and then run. The idea here is kill as many British soldiers as possible before they line up to fire. And then run, get the British running after you, and then join the regular army behind the wall, behind the trees, in a protected area where they can fire from at the British But again, it was the guerrilla tactics that inflicted most of the pain on the British.

12:52Conventional warfare methods on the part of the Americans usually resulted in losses to the British. Most of the battles that were fought in the American Revolution, the British won. High School and American History class or your college American History class would probably tend to talk more about the ones we won, but generally we lost. George Washington had a terrible military record. He lost almost all of the battles he fought against the Indians before the American Revolution and he lost almost all the battles he fought during the American Revolution.

13:38His record, I mean, the record of the Tampa Bay Devil Race would look great compared to George Washington's record. In fact, his best tactic was to run away from the British Army, so he was constantly moving and the British were constantly following. And that was his, unfortunately, that was his best tactic, because that gave the guerrillas more of an opportunity to kill the British and to steal their supplies. In other words, it got them out of their fortresses where the guerrillas could pick them off and steal their stuff. However, the Continental Army was also hugely expensive. It was the biggest expense of the Continental Congress.

14:32And the Continental Congress was kind of caught in between a rock and a hard place in terms of financing this war. Because they had mostly radicals in the Congress initially, the radicals didn't want Congress to have the power to tax. They reasoned and reasoned rightly that if you're going to fight a tax rebellion against Great Britain, The last thing you want to do is to come in there and say, okay, we are going to be the ones taxing you.

15:18And plus, they realize that if the Continental Congress levied large taxes on the populace, they wouldn't be very popular. So for that reason, the Continental Congress was not given any taxing authority. The idea was that they were supposed to be given money by the colonies, now states, in order to finance their expenditures. The Continental Congress raised money in a variety of ways. They got money from the states, they got foreign loans.

16:04but their main source of revenue was paper money and this is a very familiar pattern that's going to emerge in history something you should be all too well aware of by the time we finish this class about paper money. They said well we're going to need about two million dollars to fight this war. And of course two million dollars back then was a lot of money and the population in the United States was much smaller. There's more people in Alabama now I think than there were in the colonies.

17:00So it's a small number of people and a dollar was worth a lot more back then. So two million dollars is a lot of money. And they pledged that the states or colonies would retire this paper money after the war was over. So the Continental Congress was not going to redeem that money in gold because it didn't have any way of getting the gold. it said that this money will be redeemed at the end of the war so if a state were had a fee for the federal government say of a hundred thousand dollars that year it could send it could collect the paper money locally in taxes and send it to the Continental Congress thereby retiring the paper money.

18:01Well that two million dollar limit didn't hold out for very long. By the end of the year they had issued six million dollars in paper notes. So the whole money supply of all of the colonies combined was about twelve million dollars. so before the war there's about twelve million dollars in species species or gold and silver coins in existence and they add fifty percent more to that in the first year of the war the next year they had another nineteen million which is more than doubling of the money supply that they the first year they had fifty percent and then they doubled the whole thing the next year in seventeen seventy seven they had thirteen million in seventeen seventy eight they had sixty four million again more than doubling the money supply seventeen seventy nine they had a hundred and thirty five million so what Repeat the numbers, yeah, the money supply is initially six million, 1774, and then 1775 they had six million, 1776 they had nineteen million,

19:341777 they had thirteen million, 1778 they had sixty-four million dollars of paper money, 1779 they had for a total of $135 million.

20:06This money was called the Continentals. When they were first issued, they were supposed to circulate one-for-one against Coining Money, of course, they rapidly depreciated in value, so that towards the end of the war where it would take 168 continentals to equal $1. And the common phrase, which is not really common anymore, is that something was not worth a continental, so it wasn't worth anything at all. And the economy was experiencing hyperinflation. Prices of goods were rising and they were rising at an increasing rate. Right along with the inflation of the money supply was inflation of prices which eventually snowballed into a hyperinflation.

21:36The Continental Congress also borrowed money from foreign governments. Another big advantage of an insurgency fighting a military power doesn't have to be the number number one military power, but if it's a military power and it's an unfriendly military power, it has enemies, those enemies will help out insurgencies. And so the French were very helpful to the Americans and we also got help and supplies from Spain, from Holland. So as an insurgency against a world power, you very often can get free stuff from the enemies of that world power.

22:34State governments also issued paper money almost as much as the Continental Congress. They issued over $200 million in paper money. And so that paper money thing is, you know, there's a usual course of events. It's like, gee, we really would like to do this, But we don't want to pay for it and we don't want to tax the people because they might not like that enough and vote us out of office. So we'll issue paper money, but we're only going to issue this amount and we're going to redeem it very soon.

23:23and then they issue more and more and more and more and more and they usually don't redeem it and you get the price inflation and then you get reactions to the price inflation like price controls and the colonial governments or state governments put on price controls on the economy in the Economy, this caused shortages of goods and services. The Continental Army very often resorted to confiscation. Confiscation is legalized theft, where you just basically take stuff from people and I won't tell them you'll pay later, so that's a normal sort of thing that you see in history, normal sort of process.

24:24One of the things that we're usually told in history classes is that one third of the people supported the revolution, one third of the people did not, and the other third were disinterested. I'm not sure how they came up with that. I know they don't have any polling data from the period. And I suspect that's just some sort of concoction to tell the story. There certainly were Tories. There certainly were people who supported remaining with the British Empire. And there obviously were patriots. I don't think there was a whole lot of disinterested people. I think this is one of those things where you are either a forum or a guinem type of thing.

25:15Now you may have people that are not as interested as much in a revolution. You might have people who are more interested in the revolution. But I don't think you have a whole lot of people who are like sitting on the fence, so to speak. For one reason, sitting on the fence when people are shooting means that you're the ones that are most likely to get hit. My theory is that the Tories were probably a smaller percentage than one third. and that the group of patriots was much larger and that there were very few fence-sitters.

26:10The Tories were successfully suppressed by revolutionary county councils, so local groups based on local government would form councils to suppress the Tories or who were considered the traitors. These groups, these people would be disarmed, they would be harassed, they They would be ostracized, they would be talked about, they would be shunned, and if there was any issue about them informing the British about what the Americans were up to, then physical harm would likely come to them.

27:06to them so that they did a fairly good job of suppressing the Tories or the opponents of the revolution. One of the most successful aspects of the war was America's privateer Navy. Later in the war, basically, there was a world war going on and Britain was forced to spread out its Navy around the world to to protect all of its colonies and all of its territories. France and other European powers were in the war and supporting us. And with a privateer Navy, you have something that's akin to guerrilla warfare.

28:01And basically, the American government just says, okay, who wants to be a privateer? And you get a permit from the government. And that permit allows you to become the American Navy. And you retrofit your ship so that it's less of a cargo ship and more of a man carrying ship with cannons. And then you go out and steal ships from the other side. And privateering, which is basically private navies, was the dominant form of naval warfare before the American Civil War.

28:57If a country was at war, the majority of its ships were privateers. The big man-of-war type ships were largely unimportant and not very relevant. Navies really can't do anything at this point. We've got a great big navy. It really can't do anything except suppress trade. And big navies are not very good at suppressing trade. Their ships don't really work well for that because they are outrun by trading vessels. So you need other trading in order to stop the opponent's trade. That's why Germany during World War II didn't have much of a navy. They had one big ship. That's no problem for them.

30:16When they were spending money on naval resources, they built submarines, and they built submarines not for doing any damage to the opposition, but to damage the opposition's merchant marine, the trading arm of their opponent. So America's privateer navy was one of the big keys to its success, because it not only greatly hampered the British economy, it also greatly hampered the ability of the British to provision its army in the American colonies. So the success of the war rests largely with guerrilla warfare, privateers, and to a lesser to a larger extent on America's foreign friends.

31:22The Continental Congress was really not all that well liked by the citizens, primarily because of the inflation and the Continental Army which not only would take things from farmers or pay with worthless currency, But they also didn't win very often. And that didn't really matter, as I said. But it's kind of like, you know, the Vanderbilt football team. I mean, you know, the people from Vanderbilt would still like the Vanderbilt football team to win every once in a while. Just for morale purposes.

32:10Okay, who's our first president? It's a trick question, huh? Does anybody know who our first president was? Well, it's not George Washington. As a matter of fact, I hate to admit it, if I didn't have it here in my notes, I probably wouldn't remember the guy's name either.

32:58But a man named John Hansen was America's first president under the Articles of Confederation.

33:28The Articles of Confederation That's a good question. Yeah, they mean essentially the same thing. There's a lot of words like that though. Flammable and Inflammable.

34:07I'm not sure what, well I'll have to take a look at that, but they do essentially mean the same thing. The Articles of Confederation are our first form of government.

34:23Your standard history course tells us a story that runs something like this. The Articles of Confederation formed a weak government that could not govern, that couldn't could not carry out the responsibility of government, could not control the behavior of the states from infighting, from imposing protectionism on one another, of issuing, depreciating paper currency against one another, could not effectively deal with foreign problems, could not deal with the Indians, could not deal with the Spanish, could not deal with the British, could not deal with the pirates, couldn't pay off the national debt.

36:03Let's see, I think that's about it. and I couldn't do anything. Oh, most importantly, could not get the economy up and running again. So, yeah, I mean it fought the world's leading military power, made some mistakes, but it won and now it's just incapable of governing.

36:50So we have to go to a new form of government, the U.S. Constitution. Now what we're going to find out from economics is that this is just a story really and it lacks any use of economic analysis.

37:42So there's two main problems. One is that the story just doesn't make sense. But that also leaves us with a problem in terms of why did we go from the Articles of Confederation to the U.S. Constitution. Now if I had to sit down and list out all of the agreements upon which governments have been formed throughout history, the Articles of Confederation and the U.S. Constitution would probably be in my top ten. So they're both pretty good forms in terms of government. But I also, at the same time, I have to wonder, well, why did we go from one to another? People are very reluctant to change their form of government. Very reluctant.

38:45You know, as we were saying in the last, after the last class, Alabama's state constitution is over a century old. And people say, well, let's change the Constitution. Everybody goes, no, no, we can't have that. And, you know, you could write to your congressman and ask him, what is the likelihood of the U.S. having another constitutional convention to re-look at? You know, our document maybe make a few changes. Just re-look at it and maybe make a few changes. What is the likelihood of that happening? What is the likelihood of that happening? And they would say there's no likelihood of that happening. They might even think it's a crank letter and not even respond to you.

39:42So those are two important questions that we want to take a look at. Let's get back to the first issue about the ineptitude of the Articles of Confederation and this malaise that overtook the country after the American Revolution, an economic malaise and an economic depression. Okay, so the economy after a war, after the Revolutionary War, sinks into a recession or depression. Well, actually that's kind of what we should suspect that economy would go into after a A War. During the war, you have capital consumption and destruction. That's what war does is it destroys things and also during war you get capital consumption because nobody is fixing things and upgrading things

41:27renovating things we're just consuming our capital

41:43People are killed, people get older, there are fewer marriages, there are fewer births. So we should expect that sort of thing. In terms of American industry after the war,

42:22after the war was over,

42:30there was a pent-up demand for British goods. You know, Americans had been boycotting the British for a long time, And it was Britain who was producing some of the highest quality, lowest priced goods in the world. Okay, so that, so the Americans have been like boycotting Walmart, you know, so just envision that. Okay, America is going to boycott Wal-Mart for nine years and then after the war is over with you can go to Wal-Mart. Okay, you've been forced to buy from Kmart and Sears for seven or eight years and now all of a sudden you can go to Target and Wal-Mart.

43:21okay so there's a pent-up demand for British goods and actually one of the funny things here is well it's not funny haha but funny in the other way is that Americans actually have a lot of gold at this time they're not buying goods from Britain and they've been getting loans hard currency loans from France, Holland, in Spain which they've been spending in the American economy and Americans have been hoarding gold and silver and using the continental money to make trades and exchanges so the continentals the paper continentals have become the medium of exchange where the gold and silver perform the function of the medium of of Account, the Unit of Account, and the Store of Value. So Americans have been hoarding gold and silver money and using paper currency. So there's plenty of gold to buy this British, by British goods initially at the end of the war. American war industries, they're basically out of business and American manufacturers

45:07are in trouble because now they have to compete against British goods. So the prices of everything are falling and Americans are having a tough time competing against the British. Americans are also at a disadvantage now because they're no longer part of the British Empire. Okay, so the navigation acts now start to hurt the U.S. Okay, where the American shippers and traders were free to trade with Britain, they were free to sell PENT UP DEMAND

46:41You've got the gold and silver, and when the war ends and British goods come freely into port, they're low cost, they're high quality, they've been boycott. And so given all these issues as the war ends, it shouldn't be surprising that the economy goes into a recession. You've lost capital, you've lost labor, you've inflated, you've hyperinflated your economy. That's like causing a massive meltdown of economic order. People don't know the meaning of anything in a hyperinflation, you know, where a loaf of bread, a keg of beer, a bag of musket balls all have sort of more or less regular continuous In a hyperinflation, the prices of everything, labor, land, everything become discombobulated.

47:50Given all of that, you would expect a recession after the war. You really would not expect an immediate return to prosperity. So as a justification for a change of government, that doesn't make any sense. And that's really the main justification given by the proponents of the Constitution. By the time the Constitution rolls around, America is back into prosperity again. It's just as an economist would expect, you get a recession, you have bankruptcies, bad debts are wiped out, people go out of business, people lose their jobs, and then other people start up business, other people get different jobs and the economy returns to normalcy or prosperity.

48:53That's what a business cycle is, that's what you'd expect, and so that whole justification of all the economic issues related to that just doesn't hold much water.