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because they perceived an economic benefit from the threat the pirates posed to the merchant shipping of other European nations. Until the Revolutionary War, merchant ships from the American Colonies were protected by the British Royal Navy and by the treaties between England and the Barbary States. American shipping lost this protection in 1783, and within the next two years three American ships were captured, one by Morocco and two by Algiers. Morocco soon freed the American crew in exchange for a ransom of $25,000. The crews held by the Algerians were captive throughout 1786 and for some time thereafter. Historical Background The capture of American ships by the Barbary pirates created an early and important foreign policy crisis for the United States. The U.S. response to the Barbary crisis was strongly influenced by two factors, one military and the other financial. The military consideration was that the U.S. had no navy. The Continental Navy of the Revolutionary War was disbanded in 1784, and the navy was not reestablished until 1798. During the intervening years, the United States had minimal naval power. Disbanding the Continental Navy was primarily a cost-savings measure. However, there were also important non-financial arguments for and against the navy. Some Americans who favored reestablishing close ties with England feared that the presence of a U.S. navy on the high seas would lead to confrontations with the British Navy. Other Americans, including John Adams, viewed a strong navy as the best national defense against foreign threats. Many Americans preferred the prospect of building a navy over an army due to their general distrust of standing armies-the result of their experience with the British occupation in America during the latter part of the Colonial Era. The financial factor that influenced the U.S. response to the Barbary pirates was that any effective response would require a significant expense relative to the government's available funds. The U.S. government found itself in a precarious financial condition in the years immediately following the Revolutionary War. The Continental Congress and individual states borrowed over $40,000,000 to finance the war, including about $6,000,000 from France. From 1781 to 1788, the period during which the United States operated under the Articles of Confederation, the federal govemment did not have the power to tax its citizens, levy tariffs, or regulate commerce. The cost of operating the
government during this time was about $500,000 annually, not including funding the debt. Some income was generated by the post office and from sales of public lands, but the two principal revenue sources available to the government were requesting support from the states and issuing paper money. State contributions to the federal government constituted only a small fraction of what was needed, and issuing paper money was an inflationary measure that had already been used extensively during the Revolutionary War. The financial plight of the new nation was sufficiently acute that during this period, the government borrowed from foreign sources just to meet the interest obligations on existing foreign debt. The ratification of the Constitution in 1788 greatly enhanced the powers of the Federal government, and allowed the new Congress to levy and collect duties and taxes. However, the ability of the new government to actually enact and enforce revenue-generating measures was untested. and evolved over time. In 1786, during the Confederation period, and again in 1794, during Washington's presidency, popular opposition to taxation led to civil unrest. The first incident, Shays' Rebellion, arose in Massachusetts when the State Legislature levied taxes to pay off the war debt. The second incident, the Whiskey Rebellion, occurred in Western Pennsylvania when the federal government imposed an excise tax on distilled liquor. Also, although the Federal government had more potential resources under the Constitution than under the Articles of Confederation, it soon had more obligations. In 1790, under a plan advanced by Secretary of the Treasury Alexander Hamilton, the federal government assumed the remaining war debts that were owed by the individual states. However, despite financial tribulations at both the state and federal levels, economic conditions in the United States during this period were generally good. A short recession that occurred after the Revolutionary War was followed by a period of economic growth. The strong economy led to increased federal revenues, and that fact, combined with the success of American leaders in keeping the nation out of the growing conflict between England and France, enabled the government to become current on its obligations under the national debt during Jefferson's administration. The Adams-Jefferson Correspondence In 1786, John Adams was the leading U.S. diplomat in London, and Thomas Jefferson was the U.S. ambassador to France. A few years earlier, in 1784, the Continental Congress had authorized Adams and
Jefferson to negotiate treaties with the Barbary States. Consequently, the responsibility to negotiate the release of the captured American seamen, and to establish U.S. foreign policy that would protect U.S. shipping in the Mediterranean, fell largely to these two men. Against this backdrop, Adams sent Jefferson a letter that included the following analysis: Adams to Jefferson Letter Dear Sir, "The first Question is, what will it cost us to make Peace with all five [Barbary States]? Set it if you will at five hundred Thousand Dollars, though I doubt not it might be done for three or perhaps for two. The Second Question is, what Damage shall we suffer, if we do not treat. Compute six or Eight Per Cent Insurance upon all your Exports, and Imports. Compute the total Loss of all the Mediterranean and Levant Trade. Compute the Loss of half your Trade to Portugal and Spain. These computations will amount to more than half a Million dollar a year. The third Question is what will it cost to fight them? I answer, at least half a Million dollar a year without protecting your Trade, and when you leave off fighting you must pay as much Money as it would cost you now for Peace. The Interest of half a Million Dollar is, even at Six Per Cent, Thirty Thousand Guineas a year. For an Annual Interest of 30,000 dollars then and perhaps for 15,000 or 10,000, we can have Peace, when a War would sink us annually ten times as much". In the last paragraph of the excerpt, Adams states interest expense in terms of guineas. A guinea was worth about one dollar. Jefferson responded to Adams a few weeks later: Dear Sir, "I ask a fleet of 150 guns, the one half of which shall be in constant cruise. This fleet built will cost $ 450,000. Its annual expense is $300 a gun, including everything: this will be $45,000 a year. Were we to charge all this to the Algerine war it would amount to little more than we must pay if we buy peace. But as it is proper and necessary that we should establish a small marine force (even
were we to buy a peace from the Algerines,) and as that force laid up in our dockyards would cost us half as much annually as if kept in order for service, we have a right to say that only $22,500 per year should be charged to the Algerine war". Adams and Jefferson exchanged numerous letters in old age, after both men had retired from public life. One of these letters is relevant to the current discussion, because it reveals Jefferson's attitude towards the Navy, and more specifically, his assessment of the economic life of a ship: Jefferson to Adams Dear Sir, "Yet a navy is a very expensive engine. It is admitted that in 10 or 12 years, a vessel goes to entire decay; or, if kept in repair costs as much as would build a new one. And that a nation who could count on 12 or 15 years of peace would gain by burning its navy and building a new one in time".
5. A complete cost-benefit analysis of the alternative courses of action for responding to the pirates requires a consideration of non-financial factors. What non-financial factors can you identify that you think Adams and Jefferson should consider in weighing the pros and cons of fighting the pirates?