Stateside With Rosalea: Rhode Island

The state so small that even its initials don’t fit on most maps. And if its full name were printed, it would stretch halfway across the Atlantic—Rhode Island and the Providence Plantations. It was the first colony to declare independence from Britain, and the last of the 13 original colonies to ratify the US Constitution.

For a reason. The citizens of Rhode Island were so suspicious of the power that was being concentrated at a federal level at the expense of the states that, in a popular referendum in 1788, they rejected ratification of the Constitution outright. It wasn’t until eight months after the Bill of Rights was passed by Congress in September 1789, that Rhode Island became the thirteenth member of the United States.

Right from the get-go, Rhode Islanders never did play well with others. According to this essay, “Rhode Island was unique among the New England colonies. The four original towns of Rhode Island --- Providence, Portsmouth, Newport and Warwick --- were all founded so that their inhabitants would not have to live with others. Providence and Portsmouth were founded by people who had been banished from Massachusetts colony because they were causing great turmoil in the Puritan communities by their dissenting religious views. They, in turn, fought amongst themselves and founded two more towns. In addition, Rhode Island was long seen as a ‘cesspool’ of heresy, blasphemy and apostasy by the other colonies.”

How things don’t change: Go Stewie! Go Brian! Family Guy is the brainchild of a graduate of the Rhode Island School of Design, Seth McFarlane, and is set in the fictional RI town of Quahog. The State Shell is the ‘quahaug’ or hard clam (mercenaria mercenaria). Which words bring me to about where I want to be in this idle idyll about the Ocean State.

Mercenary. Money. And the ingenious way in which Rhode Island dealt with its own very early financial crisis. In The Documentary History of the First Federal Elections, 1788-1790, available on Google Books here, the author explains how the post-Revolutionary War depression hit RI hard because it had so little land on which to produce surplus crops for export and its mercantile centers were heavily dependent on trade.

By 1784, both personal and public debt had ballooned out of control (sound familiar?), and much of that debt had “gravitated into the hands of speculators” who demanded payment of interest from the state and complete payment from private debtors. At the time, the common currency was made from gold or silver, aka specie, and it was in short supply. Many towns and the rural inland of the little state decided that printing paper money would solve the problem, but the merchants and bankers in Newport and Providence adamantly opposed the idea, refusing to accept it in settlement of debts.

Politically speaking, the result was a “country” party and a “mercantile” party, and in May 1786, the country party gained the upper hand in the RI legislature and set about its ingenious plan to get the state’s economy and financial system moving again. The General Assembly approved a paper money issue of one hundred thousand pounds, and loaned the money to citizens, secured by real estate, with a 4 percent interest charge. Borrowers had to pay the interest for seven years, after which the principal would be retired in seven annual installments.

Because of the mercantile faction’s opposition to paper money, the RI legislation not only defined paper money as legal tender for all debts, but if a creditor refused to accept it, it required that a notice of the tender be published in the newspaper for three consecutive weeks and the debtor’s money was deposited with a court. If the creditor refused to claim the money within three months, the money was forfeited to the state. The new U.S. Congress and neighboring states hated the idea, and the battle over legal tender is one of the biggest reasons for Rhode Island’s opposition to the strengthening of the federal government’s role in the new Constitution.

I rather love the plan, and wonder why the Treasury doesn’t adopt it now. Instead of just printing new Dead Presidents and putting them into circulation, where it will cause inflation, print Living President money, lend it at 4 percent interest to those citizens who can back it with a tangible asset—even currently toxic real estate—let them pay off the interest over seven years and then write off the principal over the following seven years. And publish the names of creditors (including financial institutions) that refuse to accept it, so we know for sure who doesn’t want the current economic turmoil to end any time soon.

And, just like Rhode Island did, put any refused New Money into a holding account for three months, returning it to the Federal Treasury if it remains unclaimed at the end of that time. Brilliant! After all, it’s not like actual physical notes change hands across national boundaries these days, so how can China complain?

rosalea.barker@gmail.com

--PEACE—

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