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Economic and Foreign Policy problems Previous Next
Digital History ID 3227


The Revolution was followed by a severe economic depression in 1784 and 1785. To raise revenue, many states imposed charges on goods from other states. By the mid-1780s, Connecticut was levying heavier duties on goods from Massachusetts than on those from Britain.

The national government was on the verge of bankruptcy. The Dutch and French would lend money only at exorbitant interest rates. A shortage of hard currency made it difficult to conduct commercial transactions. Inflated paper money issued by the individual states was virtually worthless. Many of the new nation's infant industries were swamped by a flood of British imports.

Economic problems were especially pronounced in the South. Planters lost about 60,000 slaves during the Revolution, including about 25,000 in South Carolina and 5,000 in Georgia. New British trade regulations prohibited the sale of many American agricultural products in the British West Indies, which had been one of the South's leading markets.

Lacking the protection of the British flag, sailors were seized from American ships by North African corsairs and sold into slavery. In 1785, Algerian pirates boarded an American merchant ship sailing off the coast of Portugal, seized its 21 member crew, and enslaved them for 21 years. Over the next 8 years, a hundred more Americans became captives.

Meanwhile, Britain refused to evacuate its military posts in Detroit, Otswego, N.Y., and elsewhere in the old Northwest because the states refused to restore loyalist property that had been confiscated during the Revolution. At the same time, Spain refused to recognize American claims to territory between the Ohio River and Florida and in 1784 closed the Mississippi River to American trade. Spanish authorities secretly conspired with westerners (including the famous frontiersman Daniel Boone) to acquire the area that would become Kentucky and Tennessee.

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