Forging a nation state: The Continental Congress and the Financing of the War of American Independence

Abstract

I n July 1776 the Continental Congress declared that the former British colonies were to have all of the political and economic powers associated with free and independent states. Having done so, however, Congress was committing itself to undertaking simultaneously two very daunting tasks. First, a necessary condition for a nation to be independent is not to be under the military occupation of a foreign power. For the Continental Congress this meant the formidable undertaking of expelling the powerful, experienced and, during wartime, extraordinarily well financed British military. In addition, Congress was committing itself to the development of institutional arrangements for government which would provide for the production of public goods such as defence, administrative bureaucracies, and judicial systems. Since the provision of public goods has to be financed in some manner, the process of nation building also involved the creation of institutional arrangements for public finance such as the establishment of credit, monetary, and tax systems. The political outcome of the onset of the War of American Independence was the beginning of a decade-long process of developing an institutional structure to finance the war. Over time the process involved redefining the financial powers of the Continental Congress vis-a-vis the states. Although the waging of war and the creating of governing institutions are national activities usually considered separately by historians, this article will explore their interrelationship.2 Having taken on the responsibility for gaining independence, Congress was not initially given