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  | 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