2.3 Post-war economic challenges and debt

The American Revolution brought economic turmoil. Inflation skyrocketed, trade disrupted, and debt soared. States and the Continental Congress struggled with repayment, leading to depression and unemployment. Agricultural oversupply caused crop prices to plummet.

The weak Articles of Confederation couldn't solve these issues. Multiple currencies, trade barriers, and inefficient regulations hindered recovery. Shays' Rebellion, sparked by rural economic hardship, became a catalyst for constitutional reform, highlighting the need for a stronger central government.

Post-War Economic Challenges

Economic challenges post-Revolution

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• Inflation soared as Continental currency depreciated rapidly lost 99% of value by 1781
• Trade disruptions severed British market access and restricted Caribbean trade routes
• Debt burden accumulated by individual states and Continental Congress strained resources
• Economic depression reduced economic activity and spiked unemployment to estimated 30%
• Agricultural sector struggles led to oversupply of crops (tobacco, wheat) and falling prices

War debt repayment impact

• Lack of centralized taxation authority hindered revenue generation for debt repayment
• State resistance to federal taxation impeded national debt repayment efforts
• Foreign creditors (France, Netherlands) grew reluctant to extend credit demanded repayment
• Domestic creditors faced distress veterans awaited compensation merchants unpaid for supplies
• Economic instability caused currency fluctuations deterred foreign investment inflows

Constitutional Reform and Economic Recovery

Articles of Confederation economic effects

• Weak federal government unable to regulate interstate commerce or impose taxes
• Currency issues multiple state currencies circulated no national currency established
• Trade barriers interstate tariffs restricted domestic trade foreign agreements difficult
• Debt management problems no unified repayment mechanism states approached debt inconsistently
• Economic inefficiencies duplicative state regulations lacked standardized weights and measures

Shays' Rebellion economic significance

• Causes stemmed from high taxes on farmers aggressive debt collection rural economic hardship
• Rebellion events:
  1. Closure of courthouses to prevent foreclosures
  2. Armed uprising in Massachusetts led by Daniel Shays
  3. Confrontations with state militia
• Government response highlighted federal weakness state-raised militia suppressed rebellion
• Impact on public opinion stoked fears of anarchy recognized need for stronger central authority
• Constitutional Convention catalyst accelerated calls for reform influenced federal powers debates
• Resulting constitutional provisions granted federal power to suppress insurrections balanced state and federal authority