Financial History 25th Anniversary Special Edition (104, Fall 2012) | Page 34

ALBERT GALLATIN

FINANCING THE WAR OF 1812

By David J. Cowen

The Leopard’s attack was an act of war,
and everyone knew that President Thomas
Jefferson’s party preferred taking the side
of the French against the British. However, Jefferson realized that because of
his administration’s failure to maintain
the US armed forces, the nation was illequipped to fight. He opted instead for
economic sanctions, and he and his Congress passed the Embargo Act.
That invidious act, and the various
trade restrictions and acts that followed,
were the products of wishful thinking
on the part of the incumbent Republican Party. Jefferson believed that Britain needed America more than America
needed Britain. In fact, as major trading
partners they need each other equally.
Moreover, since Britain was locked in
a desperate struggle against Napoleonic
authoritarianism, it did not look kindly on
the actions of its former colonies. Worst of
all, the embargo decimated the American
economy because it hurt those involved
in international trade, which meant that
some farmers and artisans suffered along
with the merchants.

In early 1803 the French and the British went to war, as they had so often
during the prior hundreds of years. This
time, Napoleon Bonaparte’s visions of
grandeur were at the root of the conflict.
Initially, this war proved a bonanza for
American merchants. As a neutral third
party, they traded — and quite profitably
at that — with both sides. However, as
the war dragged on, one particular event
would change everything.
In June 1807 the British warship HMS
Leopard challenged USS Chesapeake in
the Chesapeake Bay to let her be boarded
in a search for British deserters. American crews were wary of this, as often
the British would “impress,” or draft on
the spot for service in the Royal Navy,
anyone suspected of being part of the
Crown’s empire. When the American captain refused, the Leopard, violating all
neutrality, fired relentlessly at Chesapeake
with the result of a rounding defeat of the
Americans, who managed to return fire
only one time.

32    FINANCIAL HISTORY  |  Fall 2012  | www.MoAF.org

STEPHEN GIRARD

Given the nation’s unfavorable financial
condition, it would have been best to avoid
war with Britain. But Americans felt their
sovereignty was at stake. In fact, what we
now call the War of 1812 was at the time
referred to as the Second War of Independence. British impressment of US sailors
and incursions into American territorial
waters were clear violations of the country’s nationhood. British forts on American
territory in the Northwest and a standing
army in Canada were also clear threats.
It is difficult to argue that the war was
inevitable because the British took a conciliatory tone near the end. Indeed, had
news of their more liberal policy arrived
earlier, war might have been averted. But
it would be equally difficult to argue that
the war was fought for light and transient
causes. Those with close commercial or
blood ties to Britain, however, wondered
why the United States did not go to war
with France, which had been equally abusive. In short, the war was controversial,
perhaps even more so than the conflict in
Vietnam would prove to be.
As in Vietnam, domestic division meant