Who Bankrolled the American Revolution?
“Money makes the world go round,” the cynical old maxim, and Broadway show tune, runs. “Follow the money,” a maxim minted in the film “All the President’s Men,” has become just as familiar. Yet in practice we rarely follow the money far enough to discover how it actually moved, or who set it in motion. The financing of the material conditions of history—how buses are hired for a great march; who pays for the guerrillas’ guns and grub—mostly remains opaque in our chronicles. When we look at the famous painting of Washington crossing the Delaware, the last question we ask is the first one we should: Who paid for the boat?
One reason for this absence is that economic history seems boring when compared with military history, and that economic forces are hard to dissolve into a stream of stirring, distinct individual choices. Money flows more than it leaps; that’s why we follow economic change in charts, with slow, incremental movements up and down, and arrows telling us what is really going on behind the jumpy shadow puppets of politics. Who won the battle? can be simplified, dramatically, into strategic decisions and pivotal moments. Who paid for the soldiers to get there?—and thus made it possible for the battle to be fought at all—usually involves a long-distance jumble of government bonds, loans, and guarantees complex enough to send us back to the battle itself. “One if by land, and two if by sea” is a memorable phrase as we picture Paul Revere on his midnight ride; learning that the British were coming by sea because, so to speak, shifts in Amsterdam bond markets affected British decisions about financing ships feels too remote and intricate to capture our attention.
Any number of good books and studies aim to remedy this gap in our understanding, and one of the best ways of doing it, paradoxically, is to fix complicated impersonal finances into a figure of a single person who can be thought to have made military-style strategic decisions. In Richard Vague’s new book, “The Banker Who Made America: Thomas Willing and the Rise of the American Financial Aristocracy, 1731-1821” (Polity), we have a hero worthy of the enterprise. Indeed, it is telling that Willing’s name is presented only in the subtitle, on the understandable ground that, without giving the role he played top billing, his name would mean nothing.
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Willing, it turns out, was the very model of a successful Colonial merchant. Born in Philadelphia but trained in law at the Inns of Court in London, he returned home in the late seventeen-forties to become a leading citizen in what was then the unquestioned capital city of the new continent. Philadelphia was founded by the Quakers as a utopian project, but thrived as a commercial port—as a city of merchants, printers, bankers, and speculators. Willing, an Anglican, kept a sharp, cool mind sheathed in a convivial exterior, and moved easily between commerce and politics. He was readily elected mayor in 1763, and took pains to insure that he and his family intermarried with the other stalwarts of his class.
Like Antonio in “The Merchant of Venice,” however, Willing had all his fortune out upon the water. Along with his younger partner, Robert Morris, he traded in wheat and sugar and rum and, occasionally, enslaved Africans. Though the business appeared to be a simple exchange of hard goods for hard money—wheat delivered from America in return for pounds paid in England—the shipping trade was, in fact, the cradle of the market in financial “paper.” The long voyage from home port to market created seemingly endless intervals of uncertainty, often stretching to months and sometimes years. With your goods out on the water, you had to wait ages to be paid and to take your profit. The ocean is an illiquid place.
And so merchants like Willing would draw up what were, in effect, I.O.U.s anticipating their sale. These “bills of exchange” turned goods still on the water into paper that could be traded and discounted as investments in their own right. Like the banks that treat bundles of mortgages as assets to be sliced, parlayed, and traded independently of the condition of the underlying loans, Philadelphia’s maritime merchants could transform cargo at sea—and conceivably already beneath it—into financial instruments with a speculative life of their own. This was, of course, highly risky: there was no guarantee that the goods would ever arrive; if the ships didn’t sink, they could be taken by “privateers,” semi-official pirates licensed by rival European powers. That risk, in turn, generated a parallel market in maritime-insurance policies, which eventually acquired as remote a connection to the actual cargo as the bills of exchange themselves. “Derivatives” were the lifeblood of American commerce from the very beginning.
Willing, though in one sense a cold-blooded, high-stakes gambler, played a cautious, centrist part in pre-Revolutionary Pennsylvania politics. And those politics prove far more intricate than the patriotic, tricornered-hat history a child growing up in Philadelphia today might encounter in the ubiquitous sound-and-light shows outside Independence Hall. Quakers still held a special role in the city’s and the colony’s politics, yet they had mainly been crowded out of power by a new merchant élite, largely Anglican or Presbyterian, and by the ascendant farming class in western Pennsylvania. The Quakers, though they would become the beating heart of the American abolitionist movement and, later, the civil-rights movement, were fiercely anti-patriotic; their principled ban on violence of any kind made them wary of even implicit military fervor. Libertarian in their quietist way—people should be free to think their own thoughts—they were not about to pick up a gun for any cause, however estimable.
The farmers and small merchants of western Pennsylvania, meanwhile, were egalitarian in affect, at least, but also, shaped by their evangelical faith, far more religiously conservative than the often British-educated Philadelphians, whose Anglicanism could tilt toward an abstract Enlightenment deism. The Pennsylvania farmers and pioneers wanted to be free from domination by condescending city people; the city people wanted to be free to make money and speak their minds without the farmers’ prejudices. The populist farmers believed in equality and called it liberty; the educated élite believed in liberty and called it equality. It was a divide that would never really end.
Vague is especially good at explaining why the British demanded the notorious “taxation without representation,” and why the colonists responded so furiously. British banks—and, with them, the British government—had, after fighting wars in Europe, sunk into an almost absurd level of debt, producing bank failures and, in 1772, something like a Great Recession at home. In effect, the mother country turned to its thriving colonies to pay the bill for its European wars. The so-called Intolerable Acts, as well as the Stamp Act and the tax on tea that enraged Boston’s patriots, were efforts by the British government to claw back money from the colonies to cover the imperial deficit. The colonists shrieked at being asked to pay in ways they never had before, but the British believed that this was precisely the point of having colonies: like dutiful children, they were meant to acquire, in maturity, the ability to settle accounts when the parents faltered. As Samuel Johnson, a paid propagandist for imperial authority, put it, “We do not put a calf into the plow; we wait till he is an ox.”
This ox was gored, or felt itself to be. Yet the proper response was endlessly debated, with agrarian radicals pressing for immediate independence, city-bound conservatives searching for ways to placate London without surrendering Colonial rights or money, and a smaller group remaining loyal to the King. Vague makes much of the inherent civil conflict within Pennsylvania. Perhaps he makes too much of it. What is impressive is not that the American Revolution in Pennsylvania, as elsewhere, was more divided than later patriotic histories and pageants suggest—what else would one expect?—but that, unlike the coming French Revolution, or indeed the earlier English one, it somehow avoided sliding into a mutual massacre or an authoritarian party seizing control. Sectarian disputes were annealed by cultural habits of consensus-building and grudging coexistence, possibly rooted in the thinness of Colonial society and the brevity of its history, with the brutal frontier and the Indigenous “enemy” a constant presence.
So the real political question was whether maritime merchants like Willing—outraged by British bullying but with little appetite for political revolution—would ultimately throw in their lot with the radicals and the idealists. Vague is clear that Willing was unwilling. A reluctant delegate to the Continental Congress in 1775 and 1776, he voted against the Declaration of Independence and then retreated into private life in Philadelphia. And yet, over the next several years, he and his firm continued to play a central role in financing the rebels, even while cagily keeping their distance from the revolutionary cause. When the British invaded Philadelphia during the war, most patriots fled; Willing stayed behind, negotiating—and even working closely—with the occupying British authorities.
Yet even as he played it close to the vest he was throwing tricorne hats to the Army. Willing and Morris could ship goods in demand—tobacco, flour, rice—to Europe on consignment, while converting the anticipated profits of those voyages into bills of exchange, the proceeds of which they passed on to George Washington to buy uniforms, guns, and horses for his army. Throughout the war, the good word of Willing and Morris was enough to keep the system afloat.
How did this work? It is startling for a reader to discover that, fully fifteen years ago, the late California journalist Charles Rappleye wrote a biography of Morris that essentially claimed for him the role Vague reserves for Willing—as the “financier of the American Revolution,” to use the earlier book’s subtitle. Although Rappleye & Vague sounds like a Colonial law firm dreamed up by Henry James, it is nonetheless odd that two books about two conjoined partners should make such different cases. Nor does Vague—himself a career financier and once the secretary of banking and securities for Pennsylvania—mount any assault on Rappleye’s interpretation. Apart from one cryptic aside noting that Morris was always in a subordinate role, Vague simply tells his own story, without contesting the truth of the earlier one.
It would appear, in synthesis and to borrow a pleasing opposition of human types from John Milton, that Morris was the active Allegro principle of the firm, while Willing was the more withdrawn but vigilant Penseroso. Morris evidently took the lead during the war in supplying Washington’s troops; Willing remained the presiding presence and, not surprisingly, emerged financially intact, even as Morris ended up in bankruptcy.
What exactly did they do? The answer seems to be that they took advantage of their reputation as solid conservative men of business to finance a radical cause. Scaling up the established practice of issuing lines of credit for ships out on the water, they took bills of exchange, payable in the ports of France and Amsterdam, and sold them, or borrowed against them, in the colonies, to pay for uniforms, guns, and horses. They basically took the credit they held abroad—Amsterdam being the Hong Kong of the period—and redeployed it locally to support Washington’s army.
The paradox was that their credit as merchants was sounder than the new country’s credit as a state. Morris later began issuing what amounted to a private currency: personal notes, denominated in sums of twenty, fifty, and eighty dollars. “My personal credit,” he explained, “has been substituted for that the country has lost.” And in the back of the minds of all wide-awake merchants was the shared understanding that the King of France, England’s great enemy, would ultimately stand behind the bills of exchange, even if the ships were sunk or the bills themselves went unpaid. Under the combined pressure of Benjamin Franklin’s diplomacy and the sympathies of Enlightenment-minded French courtiers, he did.
Yet one need not imagine Willing and Morris as proto–Bruce Wayne figures, secret radicals in conservative clothing. It seems more likely that they were making a complicated, coolheaded hedge on the outcome of the war. Even if the conflict appeared to favor British arms and the Royal Navy, it must have been clear that this David, though armed only with a slingshot, stood a real chance of felling Goliath, however large he loomed.
What gave weight to the slingshot, in this case, were two realities. First was the simple fact, common to all Colonial conflicts, that the colonized were in the colonies, while the colonizer was not, or at least not in sufficient numbers. The war, financed by the Americans on hope and a shoestring, was even more unaffordable for the British. Franklin made the grisly point in his correspondence with the London radical Joseph Priestley that the cost of killing an American soldier ran to some twenty thousand pounds per Yankee. Even if the British had prevailed in the immediate fighting, some form of national independence was bound to follow: there was no army large enough to pacify the rebels permanently.
And Willing and Morris must have known that, if the rebels lost, it was extremely unlikely that the British—whatever they did to military or political leaders—could, or would, hang or banish the merchants who had backed the rebels. Life, and business, would go on. And if the rebels won? Then the rewards would be immense for those who had financed the victory. When Philadelphia’s merchants finally banded together to form the Pennsylvania Bank, consolidating their credit, as Morris had earlier done on behalf of the new country, it was because they had come to see this as a sound wager. James Madison wrote that “our greatest hopes are founded on a patriotic scheme of the opulent merchants of this city.” Patriotic it was, but, by 1780, with Washington still in the field, having weathered even the loss of Charleston, the war’s worst defeat, it was also shrewd. This was the greatest consolidated special-purpose vehicle in American history: “opulent merchants” pooling their credit to take a chance on a high-risk new startup, the United States.
Both Vague and Rappleye, despite much research, have a hard time giving us an idea of what the daily lives and inner conflicts of their heroes were like. The usual material of political biography—the turbulent whirlpools these men survived, the emotional crises they surmounted—is largely absent. We learn of dynastic marriages, marooned brothers, house purchases, and expanded properties, but we never quite feel for our heroes as they struggle.
This is partly because neither man left behind intimate diaries or much by way of personal correspondence—but one reason they did not is that shrewd bankers and speculators tend toward a necessary caution and conformism, reserving their daring for their ledgers rather than their letters. To be a good poet or pamphleteer, like Thomas Paine or Samuel Johnson, requires a kind of day-to-day daring, with triumphs made in conversation and correspondence; a good banker or stockbroker makes his in columns of numbers. Money is earned by sensing where the collective mind will be six months from now, not by imagining what the world might look like in sixty years. The men who guessed right about “the big short,” in 2008, did not profit because they possessed a grand theory of capitalist collapse; they profited because they bet on November rather than on the following April. On this point, Ayn Rand could not have been more wrong. The successful men of money are not those who refuse to run with the herd but those who run just alongside it, alert to where it is likely to turn next.
Though many enterprising merchants can fairly be cast as corsairs or buccaneers, a surprising number are, as people, curiously pallid. J. P. Morgan and August Belmont are surrounded by drama, yet remain, in their own lives, as hooded as cobras. It is telling that the most successful speculator of our time, Warren Buffett, insists on his own drab normalcy (and attributes his fortune primarily to luck), and that the books about him, even when they strain to puncture this modesty, mostly confirm it. Like Gustave Flaubert’s ideal artist, who lives as a dull bourgeois in order to be radical on the page, great merchant bankers and speculators of this sort tend to keep their secrets hidden, becoming radical only on their own pages, those of their account books. The fruits of finance are not boring, but the facts of finance often are, involving fewer bold visions of posterity than subtle gradations of possibility.
It was after the war that Willing became central as an agent of the Hamiltonian vision. He and the Treasury Secretary became close allies, with Willing serving as the first chief of the Bank of North America, briefly conceived as a national bank. And, where Willing had stood off from the Continental Congress that produced the Declaration of Independence, he played an active, superintending role at the Constitutional Convention of 1787.
Vague reads the Constitution as a businessman’s document above all, only lightly amended by a last-minute agrarian-derived individualism; it’s a charter drawn up with a merchant’s hopeful gleam, uneasily matched by a farmer’s doubtful frown. The Bill of Rights, Vague reminds us, was tacked on at the end as a kind of grumbling, Southern, libertarian insurance policy against the centralizing, capitalist drift of the rest. It is Vague’s aim, as the book’s subtitle suggests, to show how the pro-business side produced a “financial aristocracy,” though the language of aristocracy made the new Constitution seem more monolithic than it was. Vague calls this a “counter-revolution,” but it looks less like a reversal than like a continuation of the Revolution’s own divided, grudgingly conciliatory spirit, carried forward by other means. The same uneasy coalition of democratic egalitarians and libertarian élites that made the Revolution also sustained it afterward, and remained in place, until our own time.
Both Vague and Rappleye do the good work of reminding readers of the financial current flowing into an ideological revolution. It is astounding to see that the habits of finance which we think of as recent and decadent—all that paper, all that venture capital, all that uninsured risk—were present at the creation. There is even a scent of crypto in the ease with which Willing and Morris circulated paper currency backed by nothing more than their backing.
Yet one comes away, in the end, more inclined than ever to respect the ideas that drove the interest rates more than the interest rates that drove the ideas. To say that the big question is who could afford to pay for the guns is to be reminded that the guns are where the power lies. Alexander Hamilton insisted that “tis by order of our finances—by restoring public credit—not by gaining battles, that we are finally to gain our object,” but finances mattered chiefly because they helped sew uniforms and supply arms, not because they made men fight. One reason we do not always follow the money is that it isn’t always decisive. Washington’s army remained a makeshift force, supported by matériel but sustained by morale.
It is true that bankruptcy can break a country on the battlefield—but almost invariably the battlefield defeat comes first, with the recognition of bankruptcy following in its wake. That was the pattern in France’s defeat by Prussia, in 1871, and in Russia against Germany in 1917: military collapse forced a belated reckoning with the depth of national debt. Even absolute immiseration has ambiguous effects. As W. H. Auden, one of the members of the American mission sent to assess the consequences of Allied bombing after the Second World War, discovered, the unimaginably brutal air campaign did little to erode German faith in the Third Reich. Communal commitment, national myth, shared passions—all the things we group under the heading of “ideology”—often prove more powerful than narrowly defined material “interests.” Washington seems to have grasped this intuitively. As long as he avoided outright defeat and kept his men sufficiently inspired to carry on, while waiting for the French Navy to arrive, he and his new country could survive.
For it turns out that the question of who rented the boat has an easy, if surprising, answer: nobody. Washington simply took it. He commandeered small crafts along the Delaware, seizing them under the claim of military necessity, and so won a “battle” at Trenton that was scarcely more than a skirmish but could be advertised as a victory. Once he had his men in camp, he neither paid nor clothed them particularly well, but he had Paine’s latest pamphlet read aloud to keep their spirits up. Willing and Morris helped to pay for horses and uniforms. Yet these were worthless unless the men on the horses and inside the uniforms believed that they were fighting for one another and for an ideal. They might grumble about the lack of boots and beer, but they stayed because they recognized the uncommon sense of “Common Sense.” It takes money to pay for uniforms, but it takes belief to keep them buttoned.
In reality, those American money maxims contain only partial truths. “Follow the money” was a poor guide to understanding Watergate, which arose not from motives of recognizable greed but to the still puzzling paranoia of a popular President who could not accept that he was popular. Interests may be downstream of ideology, but money is downstream of both. Bankers can rationally gamble on the consequences of events, but the events themselves are shaped by mysterious and often irrational forces—which is why the speculator needs to stay so close to the fine turnings. That old song may face the wrong way: the world goes round, and makes money go around it. ♦