Economic Forces in American History The Constitution: An Economic Document

Economic Forces in American History The founding fathers were motivated to write the constitution for many reasons. Of course, most of the actual document is devoted the mechanics of how the federal government works, and its relation to the states. The parts that deal with the economy, however brief, are of enormous importance.

Economic Forces in American History Some of the economic provisions in the constitution were adopted because of “economic” reasons, that is, shared beliefs that certain economic policies would be good for the country. Other economic provisions were adopted for other reasons altogether. The need to build a stronger central government, and to control the centrifugal political forces that might tear the nation apart, often led the founders to reach compromises with economic consequences.

Economic Forces in American History I use four different approaches to the constitution when I present it to students: The Weaknesses in the Articles of Confederation The republican tradition and its effect, positive and negative, on ideas about government The state constitutions The relationship between government and individuals

Economic Forces in American History 1) The weaknesses in the Articles of Confederation and the explicit problems in governing that the Constitution was designed to address. - The unanimity rule. - The inability of the national government to levy taxes. - The consequent inability of the national government to repay its debts. - Interstate competition in commerce and trade, and the disruption and barriers that ensued.

Economic Forces in American History Questions: Why did the Articles create such a weak central government? Why didn’t the Continental Congress solve these problems in 1776?

Economic Forces in American History 2) The importance of republican traditions and inherent difficulties in creating a democratic form of government.

Economic Forces in American History On the “negative” side: The Madisonian concerns for the rights of minorities. This concerns the national level and operates through the checks and balances imbedded in the federal system. The original concern about strong central governments and protection of the independence of the state governments. This also operates through checks and balances at the national level (the role of the Senate), as well as explicit limits on the powers of the national government (e.g. reserved powers clause, ninth amendment).

Economic Forces in American History The relationship between taxation and representation: Article I, Section 2 “Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons. “

Economic Forces in American History On the “positive” side: - The creation of a national free trade area. (Article 1, section 8) - National regulation of the currency. - Regulation of domestic and international commerce. - Regulation of foreign affairs and the military. These are exclusive powers of the national government.

Economic Forces in American History Questions: How did the Constitution tie taxation and representation together? How were states, as governments, able to protect their interests in the federal system? What powers of the national government were absolute, which were shared?

Economic Forces in American History 3) The role of the states: The first state constitutions were put into effect even before the Declaration of Independence was signed. John Adams tended toward the view that the real declaration of independence was when the Continental Congress asked the states to write their own constitutions.

Economic Forces in American History We tend to forget that the national constitution was written after the state constitutions. Many of the functions of government regulated by constitutions (even in the limited terms of the 1780s) were already regulated by the states. Constitutional change occured steadily at the state level, all the way up to today.

Economic Forces in American History States have written almost 150 constitutions since 1776, and amended them roughly 12,000 times. The rate of amending has increased over time. Although the national constitution lays down fundamental principles, the nitty gritty of constitutional regulation of economic life is in the state constitutions.

Economic Forces in American History We should be very careful not to assume that the national constitutional guarantees are sufficient to establish a thriving market economy! In several places during my sessions this week, I will point out times when changes in state constitutions provided critical support for a stable and growing economy.

Economic Forces in American History 4) The relationship between governments and individuals: - The Bill of Rights. - The Contract Clause. (Article I, section 10) - Procedural guarantees: due process, speedy trial, property rights, etc.

Economic Forces in American History Questions: Is the relationship between governments and individuals specified in the original constitution or in the Bill of Rights? Is the relationship between states and the national government specified in the original constitution or in the Bill of Rights? Who wrote the first American constitutions?

Economic Forces in American History Lecture Guide Questions The Continental Congress’ lack of taxation and borrowing powers nearly lost the Revolutionary War, so the writers of the Constitution immediately established Congress’ powers to do both. Continental Congress had the power to borrow, Constitution established the power to tax Large portions of the Constitution are designed to do nothing more and nothing less than to create the basis for a sound economy. Maybe. Several of the important economic provisions of the Constitution and the Bill of Rights, are to protect individuals against the government. So “nothing more and nothing less” doesn’t apply.

Economic Forces in American History Lecture Guide Questions The Constitution also (and importantly through its impact on the nation’s economy) created the basis for a true unification of the states into a nation. Yes, and no. The Constitution as written and interpreted by contemporaries produced a civil war, despite the common interests created by the national economy. The Founders clearly recognized both the potential economic benefits and costs of government actions, and sought to design a document that would enhance those benefits and reduce those costs. The Founders clearly appreciated the value of secure private property, the free movement of goods and people over space, sanctity of contract and protection for individuals against arbitrary actions of government.