America’s reliance on cotton as an economic staple presented an opportunity for prosperity and an accompanying risk. In late 1818, the value of cotton fell as supply outpaced demand and “London banks decided there was no longer a need to extend more credit.” Daniel Walker Howe, What Hath God Wrought: Transformation of America, 1815-1848, 142. Then, the Second Bank of the United States, just two years into its life, “responded by shifting suddenly away from its own expansionist policy,” by the direction of William Jones, which only exacerbated the credit problem. See id. at 142-43. The Panic of 1819 erupted.
By 1787, the strength and stability of the states was under scrutiny. Shays’ Rebellion had erupted, citizens had become more licentious, and state legislatures appeared to be running rampant, doing significant damage to the health of the country as a whole. See Gordon Wood, The Creation of the American Republic: 1776-1787, 465.
Despite the fact that the Articles of Confederation loosely held the states together, there was still a remarkable union achieved. There were privileges and immunities granted, “reciprocity of extradition and judicial proceedings among the states,” no “travel and discriminatory trade restrictions between states, and the substantial grant of powers to the Congress in Article 9 made the league of states as cohesive and strong as any similar sort of republican confederation in history—stronger in fact than some Americans had expected.” Gordon Wood, The Creation of the American Republic: 1776-1787, 359. Read more
Americans had a keen understanding of the idea, popularized by Montesquieu, that “only a small homogeneous society whose interests were essentially similar could properly sustain a republican government.” Gordon Wood, The Creation of the American Republic: 1776-1787, 356. This idea created a fundamental problem for America: it was not a small homogeneous society, and it was rapidly expanding.