Articles of Confederation vs. Constitution
The Articles of Confederation and the Constitution, although vastly different in their philosophies of governing the nation, both played a big role in setting the stage for Americas economy in the upcoming nineteenth century. A few years after the Articles of Confederation were drafted many politicians and economists, such as Alexander Hamilton, began to see problems with the decentralized form of government that was created by this document. These advocates of a more centralized government were referred to as federalists, and although they were not in favor of a dictatorship, like that of Englands, they saw the need for a central governing system to reside over the individual states.
In the Federalists opinion some of the detrimental consequences of the confederate system were the lack of an organized treasury, military or government system. Furthermore, the nation suffered from poor commerce; a result of insecure financial transactions, non-regulated interstate trade, and poorly enforced tax laws. They believed that instead of ridding the country of oppression by a superior government, the Articles of Confederation creates conflict between the states and hinders economic prosperity. The emergence of these difficulties early in the life of our nation indicated, to those in favor of the constitution, the fundamental imperfections and the dire need for reform. Hamilton and the Federalists contend that a unified, federal system is more equipped to govern the nation.
On the other hand the anti-federalists, such as Virginias Patrick Henry, were harshly opposed to the doctrines of the Constitution, which promoted a centralized government. They though that the economic problems of the time were a consequence of excess spending on behalf of the consumer, and had nothing to do with the government. The anti-federalists believed that the federal system places the economic, and political, responsibilities of the nation in the hands of a select few. In their opinion, the proposed constitution did little more than facilitate an oppressive government, and in essence cause America to take a giant step backwards, towards the oppressive dictatorship they had fought so fiercely to escape.
The Articles of Confederation was created as a result of a young nations distrust for a powerful centralized government, and because of this distrust the anti-federalists were blinded to the problems that arose under this document. Shays Rebellion exemplified the manifestation of the problems of the Article of Confederation. The decentralized government was unable to provide a stable currency that was backed by gold securities, and as a result of this the paper money that was issued was extremely weak and under valued. Problems such as this violent mob of farmers, clearly indicated that the current system was failing and the need for a centralized government was great.
Both of these documents were extremely important for the economy of the ensuing 19th century. Although the Articles of Confederation did not do a good job of facilitating economic growth, it did act as an important indicator of what needed to be mended by the Constitution. Although Hamiltons vision of a central banking system was way before its time, as the Federal Reserve System was not formed until 1913, he did play an instrumental role in the formation of the constitution.