Hippocampus United States History: Land Ordinances in the Old Northwest

[Print]

Throughout the Revolutionary War era, America did not have an effective centralized government to address a growing financial crisis. The British Navigation Acts once benefited the colonists, but now that they were a new country the Navigation laws restricted trade with the West Indies and other British ports. Manufacturing had been stimulated by pre-war non-importation agreements and by the war itself, and now there was nothing sustaining America’s manufacturing industry. Individual states were levying duties on goods from their neighboring states causing financial strife. In addition, several states were again printing depreciated paper currency. America experienced a severe economic contraction between 1770 and 1790.

Key revolutionary figures suggested assisting the individual states with war funding to relieve the economic depression. George Washington proposed a national taxation system as a possible remedy for the struggling state governments, but the Continental Congress did not adopt his recommendation. At the conclusion of the war, economic troubles persisted and a depression continued through 1786.

The economic downturn affected all classes. Farmers who sold primarily to local markets found themselves facing depressed crop prices and mounting debts and struggled to maintain their livelihood.

Commercial agriculture, which was more dependent on trade with foreign markets, also suffered a severe downturn. The once thriving commerce in tobacco, wheat, timber, and indigo declined greatly as European powers barred American exports to the West Indies and other European ports.

The end of the war brought problems for merchants, as well. Businesses that supplied armies on both sides during the war could no longer participate in the British mercantile system and were forced to sell their goods at home. Although the states developed tariff policies that gave preference to American goods, the tariff rates were inconsistent among the states. The British ships would land and sell their goods in the states with the lowest duties and at prices that local merchants could not meet.

The economic depression left the Continental Congress without means to pay off the nation’s war debts. Individual states, with their own economic problems, were not supplying the monetary requisitions made by Congress. The Continental Congress could not pay many of the individuals who had lent them money during the war, nor could they pay many veterans who fought in the war.

By early 1783, with a formal peace almost secured, the Continental Army, headquartered at Newburgh, New York, had grown bored and restless. The soldiers at Newburgh had gone without pay for a long time, and by March of 1783, many men and their families were in desperate straits.

An anonymous letter began to circulate among the officers at Newburgh, condemning the Continental Congress for failure to honor its promises to the army. The letter encouraged the soldiers to defy Congress in a military uprising if the accounts were not promptly settled and hinted that it was time to employ swords, not words. A revolt was brewing that threatened to destroy the new and fragile republic.

In March of 1783, Washington addressed a regular meeting of the officers at Newburgh. Washington asked the soldiers to abandon their talk of rebellion. He advised patience and promised expeditious congressional action on the salary and pension demands of the soldiers. But the soldiers held deep dissatisfaction, and were unconvinced by Washington’s promises.

In a final effort to secure the soldiers’ loyalty, Washington pulled a crumpled note from a Congressman out of his pocket to read to the assembly. Washington then spoke a few powerful words: "Gentlemen, you will permit me to put on my spectacles, for I have not only grown gray but almost blind in the service of my country." This humble act and statement by their commander, who had done so much, made the soldiers feel shameful and brought tears to their eyes. The threat to revolt at Newburgh collapsed.

During the war the Continental Congress and the individual states issued large amounts of paper money, resulting in high inflation throughout the Confederation. Directly following the war, some states imposed heavy taxes and limited the printing of new money in hopes of restoring their credit. However, the unfavorable balance of trade and a shortage of cash resulted in sharply lower prices and wages, which in turn increased pressure to print paper money and to pass laws to postpone debt payment.

Between 1785 and 1786, more than half of the states yielded to the economic pressures and put more money in circulation. Pennsylvania, New York, New Jersey, South Carolina and Rhode Island loaned the newly issued money to farmers to cover their mortgages. It was also used to pay off state debt and veterans’ claims.

In some states they printed so much money that it rapidly depreciated. Rhode Island, where the government issued the most paper money in proportion to the size of the population, experienced the worst depreciation. Creditors left the state and merchants closed their doors to avoid being paid in worthless paper. The Rhode Island government passed a law fining anyone who refused to take the money at face value. Eventually the law was ruled unconstitutional and repealed in 1789.

The one source that the Continental Congress could generate income from was the sale of the western lands. Thomas Jefferson’s Ordinance of 1784 called Congress to grant full statehood and self-government to a western territory only when the population equaled that of the smallest of the existing 13 states.

In the mid-1780s, the Continental Congress planned to sell the area commonly known as the Old Northwest, situated north of the Ohio River, east of the Mississippi River, and south of the Great Lakes. Congress passed the Land Ordinance of 1785, in which the delegates outlined a plan for surveying western territories into 36 square mile townships along east-west and north-south lines. Each township was subdivided into 36 lots or sections that were exactly one mile square, or 640 acres, in size. This plan eventually stamped a rectangular pattern on much of western America’s surface that is still visible from the air in many parts of the country today. The one mile square lots were then sold at auction for no less than $1 per acre, or $640 per lot.

The sale of land was aimed at private individuals; however the terms favored land-development companies because very few citizens had that much money or could work that much land. In later years Congress made smaller plots available at lower prices, but in 1785 America needed money to pay off the national debt.

The sixteenth section of each township was set aside to be sold for the maintenance of public schools—a farsighted decision on the Continental Congress’ part. In earlier colonial times, the Puritans established education laws to help disseminate their religious beliefs. Their laws stated that a village with 50 families had to have a teacher, and a village with 100 families had to have a teacher and a schoolhouse. The Continental Congress perpetuated the notion of public education in the Old Northwest. In contrast to the Puritan model, the new schools were not designed for religious purposes but to educate citizens of the new republic.

The methodical division and sale of the Old Northwest served as a nationalizing force because once the land had been ceded to the national government citizens realized what a priceless national asset the land was. The systematic division also simplified the task of defending America’s frontier. The Land Ordinance of 1785 set a precedent for American expansion all the way to the Pacific Ocean.

In 1787, the Continental Congress passed an even more important ordinance for the Old Northwest that established a specific frame of government for the area. The new plan, The Northwest Ordinance of 1787, receded Jefferson’s recommendation of self-government. Congress instead devised stages of evolution for governing the Old Northwest.

First, the Continental Congress stated that until the adult male population reached 5,000, the territories would be subject to a governor and three judges chosen by Congress. Congress planned that the territory would be divided into no less than three and no more than five states. When any one territory had 5,000 voting age males they could elect a legislature and send a nonvoting delegate to Congress. Finally, once any territory’s population reached 60,000 settlers it would be granted statehood with all the rights and privileges of the 13 original states. The Ordinance outlined one clear divergence from the original states—it excluded slavery permanently from the Northwest.

The Land Ordinance of 1785 and the Northwest Ordinance of 1787 validated property rights in America, and the Old Northwest eventually became the states of Ohio, Illinois, Indiana, Michigan, and Wisconsin. The methods used to settle the Old Northwest worked so well that the principles were carried over to other frontier areas, forming the basis for America's public land policy.