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America’s Depression of 1784–1787 and th...

Bruner, Robert F.,...

Case

America’s Depression of 1784–1787 and the Advent of Nationalism

Bruner, Robert F.; Miller, Scott

F-1778 | Published July 11, 2018 | 36 pages Case

Collection: Darden School of Business

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In June 1788, James Madison prepared to attend a convention in Virginia to consider ratification of the proposed Constitution for the United States. The recent depression (1784–87) had triggered a major civic reaction over the weaknesses of the Articles of Confederation and inflamed differences among various groups in the country. As an architect of the new Constitution, Madison needed to prepare to defend it in the ratification convention. Vigorous opponents sought to prevent ratification and the loss of states’ power to a central government. How should Madison make his case? Madison’s dilemma occurs in the midst of a dramatic regime shift in American politics. The social reaction to the depression had inflamed divisions throughout the country: urban versus rural, farmers versus merchants, wealthy versus poor, and so on. Outbreaks of civil unrest mark 1784–87 as a historic pivot point. It is useful to consider how the depression of those years contributed to that pivot and how the subsequent civic reaction responded to the depression conditions.

This case is a vehicle for achieving some or all of the following objectives: (1) Consider the role of a national constitution as a strategic plan for the country, outlining both political and economic means for reaching national goals. The case enables discussion of the economic incentives and constraints created by the Constitution, as well as the relative pros and cons of detailed constitutions as opposed to those consisting of broad principles. (2) Illustrate constitutional change as one kind of civic reaction to an economic crisis. Latent in this case is the famous debate about economic determinism and the extent to which the terms of the new Constitution reflected the framers' self-interest. (3) Illuminate the dynamics of Irving Fisher's theory of the debt-deflation cycle. The desperation of western farmers and their civil unrest highlight the privations imposed by price deflation.