Funding the Revolution: Monetary and Fiscal Policy in Eighteenth-Century America

Abstract

Abstract The success of the Federalists in the late 1780s had a profound influence on how Americans viewed the relationship between military spending, taxation, and the monetary system. For almost 100 years, the colonists funded military campaigns by means of paper money rather than direct taxes, an approach that helped finance several imperial wars and the American Revolution. By the late 1780s, however, many Federalists realized that paper money alone could not solve America's financial woes, much less pay for its defense. Although the entire era of the American Revolution was characterized by struggles over taxes and money, little attention has been paid to the financial history of the period. This chapter examines domestic fiscal and monetary policy during the American Revolution, starting with the colonists' use of paper money in the late seventeenth century in lieu of taxes. To understand the evolution of monetary and fiscal policy in this period, it considers the genuine radicalism—and ultimately, conservatism—of the American Revolution.