Disputes over western lands were deeply intertwined with the economic difficulties that plagued the new nation. Victory in the Revolution was followed by years of economic depression and mushrooming debt. While the war fueled the demand for domestic goods and ensured high employment, both the demand and the jobs declined in peacetime. International trade was also slow to recover from a decade of disruption. Meanwhile the nation was saddled with a huge war debt. Individuals, the states, and the federal government all viewed western lands as a solution to their problems. Farm families could start over on “unclaimed” land; states could distribute land in lieu of cash to veterans or creditors; and congress could sell land to fund its debts. Yet there was never enough land to meet these conflicting needs, nor did the United States hold secure title to the territory.

Some national leaders, including Hamilton, focused on other ways of repaying the war debt. Fearing that wealthy creditors would lose faith in a nation that could not repay its debts, they urged states to grant the federal government a percentage of import duties as a way to increase its revenue. But states had their own problems. Legislators in Massachusetts and other states passed hard-money laws that required debts to be repaid in gold or silver rather than in paper currency. Affluent creditors favored these measures to ensure repayment in full. But small farmers, including veterans, who had borrowed paper money during the war, now had to repay those loans in hard currency as the money supply shrank. Taxes, too, were rising as states sought to cover the interest on wartime bonds held by wealthy investors.

Failures of American diplomacy weakened the nation’s economy further. In 1783 the British Parliament denied the United States the right to trade with the British West Indies. The following year, Spain, seeking leverage over disputed western territories, prohibited U.S. ships from accessing the port of New Orleans. Spain and Great Britain also threatened U.S. sovereignty by conspiring with American citizens on the frontier and promising them protection from Indians. At the same time, British troops remained in forts on America’s western frontier and urged Indians to harass settlers there.

REVIEW & RELATE

What challenges did the new nation face in the immediate aftermath of the Revolutionary War?

How did farmers, financial leaders, foreign nations, and Indians react to government efforts to address challenges after the Revolution?