Monday, October 06, 2008

Rogues' Island Nation

Prior to the United States constitution each state was essentially a nation unto itself. Most state governments were overwhelmingly dominated by the legislature. Democracy was unrestrained or if the state constitution had a bill of rights is was what Madison called a “parchment barrier” that was easily ignored when inconvenient. The will of the people was unfettered and impassioned.

In New England, many a landholder found himself in crushing debt. Farmers demanded relief. In 1785 the bailout party gained control of the Rhode Island legislature by championing the creation of paper money to pay off the debt. John Fiske writes:

“The legislature of 1786 showed an overwhelming majority in favor of paper money. The farmers from the inland towns were unanimous in supporting the measure. They could not see the difference between the state making a dollar out of paper and a dollar out of silver. The idea that the value did not lie in the government stamp they dismissed as an idle crotchet, a wire-drawn theory, worthy only of ‘literary fellows.’ What they could see was the glaring fact that they had no money, hard or soft; and they wanted something that would satisfy their creditors and buy new gowns for their wives, whose raiment was unquestionably the worse for wear.”

The script was not respected as a store of value or a unit of trade. It was heavily discounted as fast as it was printed. Fiske writes:

But the depreciation began instantly. When the worthy farmers went to the store for dry goods or sugar, and found the prices rising with dreadful rapidity, they were at first astonished, and then enraged. The trouble, as they truly said, was with the wicked merchants, who would not take the paper dollars at their face value. These men were thus thwarting the government, and must be punished. An act was accordingly hurried through the legislature, commanding every one to take paper as an equivalent for gold, under penalty of five hundred dollars fine and loss of the right of suffrage.”

Those evil greedy merchants! How dare they want real money! What did those selfish mercenaries do next?

“The merchants in the cities thereupon shut up their shops. During the summer of 1786 all business was at a standstill in Newport and Providence, except in the bar-rooms. There and about the market-places men spent their time angrily discussing politics, and scarcely a day passed without street-fights, which at time grew into riots. In the country, too, no less than in the cities, the goddess of discord reigned. The farmers determined to starve the city people into submission, and they entered into an agreement not to send any produce into the cities until the merchants should open their shops and begin selling their goods for paper at its face value. … the farmers threw away their milk, used their corn for fuel, and let their apples rot on the ground, rather than supply the detested merchants.”

That’ll teach ‘em. Those damn farmers! The people are to blame!

“The farmers were threatened with armed violence. Town-meetings were held all over the state, to discuss the situation, and how long they might have talked to no purpose none can say, when all at once the matter was brought into court.”

The court ruled that no one had to take the paper money at face value but the legislature removed the judges. But …

“… among the farmers there were some who had grown tired of seeing their produce spoiled on their hands; and many of the richest merchants had announced their intention of moving out of the state. The new forcing act accordingly failed to pass, and presently the old one was repealed. The paper dollar had been issued in May; in November it passed for sixteen cents.”

The attempt to evade economic law leads to far worse consequences both materially and spiritually as society degenerates into warring factions.

“These outrageous proceedings awakened disgust and alarm among sensible people in all the other states, and Rhode Island was everywhere reviled and made fun of. … and forthwith the unhappy little state was nicknamed Rogues' Island.”

Events such as these motivated our founding fathers to “form a more prefect union” where legislative power was checked, mob rule discouraged, judicial review protected the rule of law, property rights respected, and economic regional warfare avoided.

Rhode Island sent no delegates to the convention and was the last to ratify the new constitution.

Have we become a Rogues’ Island nation?


Anonymous Anonymous said...

I appreciated the lessons of “Rogues’ Island Nation”, including: the loss accruing to using unsupported paper money; inflated money causing higher prices; falsely blaming those who attempted to avoid the financial loss; the degeneracy into warring factions. Moreover, I wish to address the underlying economic fallacy in believing that one can create wealth without earning it.

Now surely one can obtain wealth by taking it from others, but that merely transfers it, with attendant losses. Let us illustrate several attempts to create wealth without earning it.

When a counterfeiter prints bills, he hasn’t taken them from anyone, so hasn’t he added wealth? No, since the total wealth is unchanged, the bills of others are now worth less, due to higher prices. So it is a transfer of wealth from the public to the counterfeiter.

Kings would debase coins, replacing some of their precious metal by cheaper ingredients. There might then be double the number of coins, and almost double the King’s wealth. But as with counterfeiting, it is a transfer of wealth from the public to the king and his minions.

As with doubling the gold coins, doubling the paper money leaves the total wealth unchanged, resulting in a transfer of wealth.

Destroying property, such as by breaking windows, creates wealth for those who repair them, and for those whom they spend on. Yet this too is a transfer of wealth from those who pay for the repair, and from those they would have spent on.

In sum, one cannot create wealth without earning it, but can only transfer it to those who artificially gain by stealth. Were one to have a moral perspective, he would seek wealth solely by earning it.


10/6/08, 5:20 PM  
Blogger Jeffrey Perren said...

Brilliant! Where do you find these gems?

10/17/08, 10:26 PM  
Blogger Jeffrey Perren said...

Brilliant! Where do you find these gems?

10/17/08, 10:58 PM  
Blogger Always On Watch said...

A very appropriate and timely lesson here.

Of course, I've not seen this mentioned anywhere else. Figures.

10/18/08, 12:04 PM  
Blogger Charles N. Steele said...

Very nice post. I didn't know this story. It's a useful addition to my knowledge.

One important difference between RI and today's US: tiny RI could basically make the problem go away by joining enetring the US Constitutional framework. We have no such way out today.

10/23/08, 11:54 PM  
Blogger Right Truth said...

I wasn't aware of the name Rogues Island. Very interesting article.

Debbie Hamilton
Right Truth

10/27/08, 5:26 PM  
Anonymous Anonymous said...

Dateline: Day After the Election--

We're all "Rogues' Island Nation" now. But good news: the Annointed One will repeal the laws of economics!

11/5/08, 11:18 AM  
Blogger Jim Babka said...

Jason, I just started reading some of your more "recent" historical blog posts, and I'm both learning and enjoying them immensely. -- Jim Babka

2/9/09, 1:55 PM  
Blogger Jason Pappas said...

Welcome, Jim. I'm glad you've found some of my past posts. This tidbit of history seemed timely given current events.

I've learned much from reading others and getting feedback. There's much one can miss, especially in history. That's why I enjoy reading the comments by you and your friends on your group blog.

2/9/09, 10:58 PM  
Blogger Mikewind Dale (Michael Makovi) said...

Very interesting. Thank you. I'll go read the original article you're quoting. But I wanted to make one comment.

You say, "Events such as these motivated our founding fathers to 'form a more prefect union' where legislative power was checked, mob rule discouraged, judicial review protected the rule of law, property rights respected, and economic regional warfare avoided."

Perhaps I am being paranoid, but I see in this quote the possibility of arguing, as another has (with rebuttal by me) that the Constitution limited liberty and the power of popular rule, etc., and as such, should not be viewed as an inspiration or banner for the Tea Party.

What I would argue here, then, lest someone make the above argument, is that in our case of Rogues' Island, the issue was of the popular mob rule subverting limited government and rule-of-law and classical liberalism, in that the mob wanted to debase money and ignore proper economic theory, and give the government unwarranted power. Likewise, Shays's Rebellion was a case of the same. By contrast, the Whiskey Rebellion and today's Tea Party are not acts of popular mob rule subverting liberty, but quite the opposite, of the mob seeking redress against a government doing the subverting. We must distinguish between these, for not all mobs are created equally.

11/2/10, 12:21 PM  
Blogger Jason Pappas said...

Thanks, Mikewind, I agree ... especially with your concluding paragraph. I'll have to visit your blog.

11/3/10, 10:57 AM  
Blogger Mikewind Dale (Michael Makovi) said...

[ I found Roger Sherman's important work A Caveat Against Injustice online. ... (I found Fiske's words on this subject thanks to Jason Pappas's entry "Rogues' Island Nation" (URL: (e)) at his blog Liberty and Culture.): ... ]

12/5/10, 2:19 PM  
Anonymous LindaF said...

This is a wonderful story - I hadn't heard about it before. I'm going to promote your blog in my blog, as I believe that we need to support other bloggers that are less well known than the heavy hitters. So, you'll be on this month's Bloggers You Need to Read list (out on the 15th of this month).

3/13/12, 9:08 AM  
Anonymous Anonymous said...

I had been told that Rhode Island was called Rogues Island but the story I never did know and it makes more sense than the pirates I imagined. Thanks. So far I have read two of your articles and I liked both and shared one. i will be reading more.

4/24/12, 11:38 AM  

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