In Republic of Debtors,
Bruce H. Mann, professor of law and history at the University of
Pennsylvania, offers an informative account of the role played by
economic insolvency in the creation of the American republic. Nonetheless,
most students at the secondary level will struggle with Mann's prose
grounded in economic analysis. Teachers of American history, however,
would do well to consult this volume and incorporate Mann's research
into the historical narrative which all too often tends to uncritically
celebrate the unfolding of American economic growth and prosperity.
In the midst of a major
recession in which the economic gap between rich and poor continues
to grow in the United States, it is worth recalling that these issues
of economic and social inequality were present at the inception
of the American republic. Americans who struggle under the burden
of consumer credit card debt, while bemoaning the legal advantages
awarded to corporate debt, will discover from reading Mann's volume
that such conditions are hardly new to American capitalism. Indeed,
Mann's attention to issues of class is crucial, for this is a topic
which draws scant coverage in textbooks.
Mann argues that debt
in the English colonies of North America was considered a moral
issue and the failure to honor a debt constituted a character flaw.
This situation, however, began to change in the mid-seventeenth
century with the expansion of commercial capital activity. Yet,
the devastation of the Seven Years War and the tightening of British
mercantile regulations over the colonies resulted in an economic
downturn, rendering many colonial businessmen and speculators unable
to honor their financial obligations. Debtors called for relief,
and insolvency was increasingly perceived as an economic failure,
often due to market forces over which the individual exercised little
control, rather than a moral lapse.
Essential to Mann's
argument is that this evolving attitudinal shift regarding insolvency
extended to commercial rather than consumer debt. Thus, Mann asserts
that some colonial legislatures began to experiment with limited
bankruptcy laws. Also, many began to question whether imprisonment
for debt was a proper remedy for merchants who had fallen upon hard
times. Reformers complained that in the two major debtors' prisons,
the New Gaol in New York City and Philadelphia's Prime Street Jail,
respectable middle class businessmen and their families were often
incarcerated with common criminals.
Appeals for commercial
debt relief increased following the American Revolution and the
post war depression which disrupted traditional colonial trading
relationships. The uncertain financial times led to the imprisonment
of such prominent speculators as William Morris, William Duer, and
John Pintard. The ensuing social unrest culminated in Shays's Rebellion
and the belief that a stronger central government was necessary
to protect property and maintain order. Accordingly, the Constitutional
Convention of 1789 provided the national government with the power
to create bankruptcy legislation.
During the 1790s popular
perceptions regarding debt continued to evolve, and Mann devotes
considerable space to newspapers, pamphlets, and reform journals
in which debt was perceived as a threat to the independence of the
new republic. Thus, Virginia planters complained that their British
creditors were attempting to reduce them to the status of dependent
slavery. The irony of such rhetoric, however, was apparently not
recognized by the slave-owning planters. Some commercial debtors
attempted to escape the reach of creditors by moving to the west,
where they were able to reestablish themselves as entrepreneurs.
Others were not as fortunate, ending up in the New Gaol where Morris,
and others of his social background, attempted to maintain their
status by orchestrating an elaborate self-governing procedure for
the so-called "Middle Hall" of the New Gaol.
The debate over commercial
debt in the new republic culminated in the Bankruptcy Act of 1800.
Commercial debtors rejoiced in the passage of a law which, according
to Mann, "extended only to merchants, bankers, brokers, factors,
underwriters, and marine insurers, who owed a minimum of $1,000
and who had committed one or more acts of bankruptcy…"
(p. 222). Despite the class nature of this legislation and the fact
that the bankruptcy process could not be implemented without the
approval of creditors, the Bankruptcy Act of 1800 was unpopular
with creditors. Accordingly, in 1803 the law was repealed, and a
permanent piece of bankruptcy legislation was not enacted until
1898. While creditors continued to express some discomfort with
debt relief for all social classes, Mann's main point is that the
Bankruptcy Act of 1800 represented "a national statement of
the 'principle' that release from debts was a boon reserved for
capitalistic entrepreneurs, while simpler debtors should, by implication,
remember the sanctity of their obligations" (p. 256).
Mann concludes that
the American legal and economic system continues to grapple with
these issues of dependence and independence. Students and teachers
of American history should pay greater attention to the class origins
of this debate which is well outlined in Mann's volume. The promise
of equal economic opportunity in the United States remains an elusive
goal.