The Continental System - The united states confronts economic warfare

The Rambouillet Decree underscored the cruel position in which the wars of the French Revolution and the continental system placed the United States. Articulation of the continental system, however, merely sharpened a major question confronting the United States since 1793: Would Britain or France become the primary benefactor of American trade? Federalist administrations essentially had answered that question through negotiating Jay's Treaty (1794) with Britain, but American ratification of this treaty contributed to the Quasi-War with France between 1798 and 1800. The war led to internal unrest, the eclipse of the Federalist Party, a widespread assault upon the civil liberties of dissenters, and a national hope that such a war would not again be necessary.

During the four years prior to enunciation of the continental system, and the responsive British measures, American commerce prospered remarkably. British, continental, West Indian, and South American markets all contributed their share to this era of great commercial prosperity. It was President Thomas Jefferson's and Secretary of State James Madison's mistake to believe that this lucrative interlude could and should continue. Nor did many American merchants seem to grasp fully that the continuing flow of trade and relatively open markets remained entirely at the discretion of the belligerents. When the belligerents began to announce their regulations concerning neutral trade, many Americans reacted with shock, indignation, and a determination that the measures be repealed or modified.

Jefferson and Madison's perspective on how to resist the continental system and related British measures is complex and interesting. Both were sympathetic to the larger purposes of the French Revolution yet distressed by the rise of Napoleon Bonaparte and his bold aggressions against those nations resisting his program of conquest. However, both wished to keep their indignation within bounds, partly because they fervently hoped to persuade Bonaparte to help the United States deprive Spain of the Floridas at some opportune moment. Also, they struggled to keep some perspective on Napoleon; in essence, they viewed him as scum temporarily floating on the beneficial and permanent wave of the French Revolution. They believed that such a person should not be allowed to disrupt permanently the spirit of American and French comradeship arising out of their revolutions, so close in time and in their larger purposes.

In addition, Jefferson and Madison shared with Bonaparte the view that Britain was the greatest enemy of their respective nations. After all, they reasoned, Britain seized American sailors and forced them into naval service (impressment), in effect denying many Americans their right to life and liberty. Quite clearly, Britain remained the major culprit on the maritime trade issues, because it exercised effective naval power in regulating American trade while Bonaparte had power only to harass the trade lanes with commerce destroyers or to close continental ports to American trade. Finally, Britain continued to demonstrate contempt for the U.S. government by its ongoing intrigue with Native Americans in the Northwest Territory.

The historian Paul Varg has emphasized Jefferson and Madison's conviction that their infant nation should do its best to establish the rights of small naval powers. Since 1776, in fact, Americans had worked to expand the rights of neutral powers. Terms of the model treaty of 1776, the Treaty of Amity and Commerce with France in 1778, a commercial treaty with the Netherlands in 1780, Jay's Treaty in 1794, Pinckney's Treaty of 1795, and the Convention of 1800 with France all reflected America's intense concern to defend or expand neutral rights. Although Napoleon's trade restrictions were painful, the most bitter disappointments in defending neutral rights had occurred with the British, particularly with Jay's Treaty. A certain principled rigidity therefore operated in American-British diplomacy that was not active in defining the American-French relationship.

As they contemplated measures to counter the economic systems established by France's continental system and a series of British orders in council, Jefferson and Madison, his successor, were confronted by a puzzling domestic situation. Jefferson in particular was regarded by fanatical New England Federalists as a devotee of everything French and a tool of Napoleon. Federalist merchants presumed his persistent hostility to Britain and to the advancement of American trade, though on the latter point they were very mistaken. The belief that Jefferson and Madison acted from partisan motives when dealing with both Britain and France became especially troubling when such views were held precisely by those who would be severely affected if the United States pursued a course of economic retaliation. Another complicating factor arose because these same Federalist merchants expressed willingness to endure most maritime hardships imposed by Britain, including a system of licensed trade, mainly because such conformance guaranteed the continuance of their trade and profits. They also shared Britain's horror of Napoleon and the French Revolution that had spawned him. The fact that these merchant-Federalists were largely located in New England also raised Jeffersonian anxiety that coercive commercial measures might be interpreted as politically inspired punishment for the one geographical section having continuing Federalist strength.

Thus, whatever policy or series of policies Jefferson and Congress adopted in reaction to the continental system or to British measures, certain difficulties lay ahead. Submission to foreign commercial regulations would disturb militant patriots and those who believed neutral rights should be defended on principle; resistance promised to alienate both merchants and agriculturalists with a vested economic or political interest in continued trade. It is therefore interesting to note how decisively Jefferson eventually pressed for an embargo, a measure certain to have profound internal consequences. Jefferson and Madison, however, were intellectual cousins to Bonaparte and to British statesmen in believing that severe economic measures were likely to bring offending nations to reason. In this sense the continental system, the British orders in council, and the embargo (with subsequent American commercial laws) were all grounded in common postulates about the persuasive power of protective economic measures. As events turned out, only the American economic measures had their desired impact, but even repeal of the offending British orders in council came too late to prevent war between the United States and Britain in 1812.

Neither Britain nor France fully grasped Republican anger concerning their economic measures because they did not fully understand the principled, lengthy stand of Republicans for unfettered free trade. As Drew R. McCoy has shown, Republicans committed early to expanding America's commerce as a means to develop a citizenry that would be industriously and usefully employed. In such conditions, a virtuous citizenry would develop, equipped to support the ideals of republican government. At the same time, free markets must contribute to happiness and prosperity abroad and thus lead to a more humane and peaceful world. Clearly, when France and Britain destroyed the free exchange of trade, causing unemployment and disruption, they were attacking not only America's direct economic interests but sabotaging one basis of building a sound republic and an enlightened world.

Jefferson's embargo policy provoked consternation in Britain and New England, primarily because of the hardships it imposed on Anglo-American trade. But it also aroused deep anger because it appeared intended to complement Napoleon's continental system. Since the United States was not free to trade with France, given British control of the high seas, an American self-blockade seemed obviously designed to injure Britain. Jefferson's immediate objective, however, was not to aid Napoleon but through withdrawal of American trade to avoid war and to persuade Britain to modify its offensive trade regulations. If the chief culprit, Britain, modified its regulations, Jefferson and Madison felt confident that Napoleon would likewise be forced to ameliorate the continental system. Such a modification must in turn attract American trade to the Continent and to French colonies in the Caribbean. Jefferson, not a pacifist, continued to consider the possibility of war, though he met resistance to that idea within his own cabinet and circle of supporters.

American domestic pressures against the embargo eventually became so severe that Congress moved toward repeal in the last days of Jefferson's presidency. Pressures came from many directions, some anticipated and some not. Jefferson's support began to erode within his own party; this circumstance reflected the difficulties of enforcing embargo measures at the state level, even where the governors were Republicans and supporters of the administration. Madison's succeeding administration, together with a wavering and troubled Congress, never subsequently crafted a series of measures to persuade France and Britain to ameliorate significantly their virtual warfare on neutral trade. The Non-Intercourse Act (1809), which became effective three days before Madison entered office, proved to be an embargo measure with a difference: commerce was restored with every nation except France and Britain, but provision was made that trade with those nations would be resumed as soon as they repealed their noxious decrees and orders.

When this measure proved unavailing, Macon's Bill Number 2 was enacted in May 1810. This mischievous law reopened trade with France and Britain but provided that should either nation repeal its restrictive commercial measures, trade with the other power would be interdicted. Napoleon, who had learned about repeal of the embargo, saw an opportunity to stop American trade with Britain once again. He therefore informed Madison that as of 1 November 1810, he was conditionally revoking his Berlin and Milan decrees pertinent to American trade and called upon the United States to invoke noninter-course against Britain. Madison understood Napoleon's action to be conditional upon Britain's revocation of certain orders in council.

With his eyes open, Madison decided to take the biggest gamble of his political life and presume that Napoleon intended to revoke his decrees before his precondition had been met. With questionable haste, Madison issued a proclamation in November stopping trade with Britain within three months if it had not canceled its orders in council. Britain refused to do so pending evidence that Napoleon had repealed his decrees. Since Madison could not prove Napoleon had acted, Britain refused to alter its measures. Bitter and embarrassed, Madison nevertheless encouraged Congress to renew nonintercourse against Britain, which Congress voted to do in March 1811.

Through Napoleon's shrewd diplomatic tactic and through Madison's untimely willingness to gamble, the United States once again became a reluctant partner in strengthening the continental system. The results of this episode, and the bitterness engendered by it, helped to pave the way for the War of 1812, for many Americans believed Britain had been inflexible and petty when there had been a chance to be constructive and conciliatory. Britain, angry because the United States seemed willing to help an aggressive conqueror such as Napoleon, found American actions to assist Napoleon further evidence of the Madison administration's fundamental ill will toward Britain.

It seems fair to say that the continental system, as manipulated by Bonaparte, played a crucial role in bringing about the War of 1812. The acts committed by Napoleon under the mantle of the continental system were serious enough to have provoked war with the United States; indeed, between 1806 and 1812, France and its allies had seized over four hundred American ships. But after considerable reflection, Madison and the Congress backed away from declaring war on France, believing Britain to be enemy enough.

The whole complex of maritime belligerent measures, of which the continental system was the centerpiece, had significant consequences for the United States other than the War of 1812. Because of trade interruptions of varying length, the enormous American carrying trade was hurt, as were American hopes to nourish a promising trade with Latin America and possibly East Asia. Also, domestic objections to Jefferson and Madison's seemingly pro-French policies were sizable and significant enough to provoke New England's Hartford Convention of 1814–1815, though reforms requested by the twenty-six delegates were moderate in tone. Aggressive federal enforcement of trade measures in the ports and states raised questions about the Republican Party's commitment to the primacy of local governance. On the positive side, some argue that American exclusion from continental markets proved to be a healthy stimulus to American invention and to manufacturing enterprises even though other sectors of the economy suffered unduly.

America's struggle with both French and British economic measures had a decided effect upon Republican concepts of political economy. The older ideals of full employment producing an industrious and virtuous citizenry could not be guaranteed by increasing foreign markets; other powers had the ability and will to close markets or restrict the American carrying trade. Gradually, Republicans became better disposed toward major manufacturing enterprise as a way to produce full employment and a balanced economy. Also, developing the American market itself became an attractive alternative to relying upon overseas markets controlled by Europeans. With the vast Louisiana Purchase territory waiting to be settled, Americans turned away from Europe and focused on other endeavors, an option not available to them since 1775.

Imposition of the continental system demonstrated the cruel situation in which small, neutral powers are placed when great belligerent powers determine to direct neutral resources to their enemies only upon disadvantageous terms or not at all. Jefferson and Madison's unsuccessful attempts to bluff or to pressure France and Britain underlined that truism of statecraft. Also, the experiences with Napoleon and the continental system reinforced the American belief that Europe remained the home of politically and morally corrupt politicians. George Washington's farewell advice on avoiding unnecessary entanglements with foreign powers received added emphasis through American experiences with Napoleon's economic system and Britain's cynical manipulation of American trade.