James Madison, America’s fourth president and an indispensable co-author of the Constitution, wrote Thomas Jefferson a letter in 1796 in which he described the Swiss-born American Albert Gallatin (1761–1849) as “a real Treasure ... sound in his principles, accurate in his calculations and indefatigable in his researches.”
Madison was not exaggerating. Gallatin was a remarkable public servant and a financial whiz of firm convictions, celebrated by all but the most partisan of Americans in his day. While serving two presidents (Jefferson and Madison) as their Secretary of the Treasury, Gallatin eliminated federal excise taxes, reduced government spending, cut the national debt in half, and financed the Louisiana Purchase.
Nonetheless, on at least one occasion, Gallatin did violence to his own principles. He enforced the greatest folly of Jefferson’s presidency, the Embargo of 1807–1809. Here’s the story.
Britain and France fought each other almost continuously from 1793 until Napoleon’s defeat at Waterloo in 1815. The conflict prompted the combatants to target neutral shipping, American commercial vessels in particular. Britain rubbed salt into the wound by boarding American ships and forcing British deserters (even if they had become American citizens) into its navy, a distasteful practice known as “impressment.”
The Jefferson administration faced limited options, all fraught with danger and no guarantees of success. How could the United States force Britain and France to stop their harassment and respect U.S. sovereignty, neutrality, and property?
One possibility was a declaration of war, but America’s tiny military was in no shape to take on a major foreign power. A second option was to shut down trade so American shipping wouldn’t be in harm’s way. A third option—avoid both war and trade restrictions and simply advise American ships to sail at their own risk—might have seemed cowardly to many and therefore politically unpalatable. Jefferson opted for the second option. At his behest, Congress passed the Embargo Act in December 1807.
Confronted with the kind of offensive British measures another administration might have considered justification for war, the Jefferson Administration could not coax Congress in that direction. After all, Republicans had on assuming control of the Legislative and Executive Branches significantly pared back the military and Federalist-era taxes used during the Adams Administration to expand the navy. Instead, it launched an experiment in economic coercion: the Embargo. It wrecked the domestic economy.
Jefferson should have listened to Gallatin, who warned him that “government prohibitions do always more mischief than had been calculated; and it is not without much hesitation that a statesman should hazard to regulate the concerns of individuals as if he could do it better than themselves.” Gallatin even let it be known that between war and an embargo, he would prefer war.
Over the Treasury Secretary’s opposition, the Embargo prohibited all exports from the United States (to any country), greatly limited imports, and forbade American ships to sail overseas. It backfired spectacularly, crippling federal revenues and pulverizing the economy. Smuggling, in defiance of the law, became a fine and popular art.
Jefferson thought the Embargo would force at least the Brits to the bargaining table, but Gallatin thought otherwise. “To the hope that it may ... induce England to treat us better,” wrote Gallatin to Jefferson, “I think is entirely groundless.”
Forbidding all American ships from engaging in practically all foreign trade was at odds with the libertarian economic views of both Jefferson and Gallatin. Jefferson rationalized it in his mind and left the dirty business of enforcement to Gallatin.
“It was a huge self-inflicted wound,” opines Gallatin biographer Nicholas Dungan, “and resistance to it from citizens whose livelihood and freedoms were directly threatened by the embargo took Jefferson completely by surprise.” Moreover, writes Dungan,
Gallatin’s pragmatism, or perhaps his sense of duty, caused him to carry on. Gallatin decided, however distasteful it may have been, to remain in his position and enforce the policy of his president and the Congress. It is surprising, maybe even disappointing, that he did not choose to resign on principle, so much did the embargo violate all his precepts of sound financial management, individual liberty, and limited central government. Worst of all, from Gallatin’s perspective, the embargo cut off the revenues of the federal government, virtually all of which were duties on international trade, depressed American economic activity with unprecedented brutality, and upset in one blow the careful calculations and prudent frugality that Gallatin had implemented over the prior eight years.
- Fish and fishery products—down 70 percent
- Forest products—down 74 percent
- Tobacco—down 85 percent
- Cotton—down 84 percent
- Wheat and flour—down 82 percent
- Rice—down 90 percent
Though many a smuggler made a fortune through dishonesty, many a law-abiding merchant went bankrupt. Many thriving ports groaned uneasily under the blasting effects of the embargo, many involuntarily idle sailors and fishermen cursed with quiet or noisy vehemence while their families endured the agonies of hunger. Commerce, however, was not annihilated [thanks largely to smuggling], though it was grievously injured.
Meanwhile, Britain replaced its U.S. markets by developing new ones in South America, and its shipowners were delighted that their American competition was largely eliminated by the American government.
If neither war nor embargo was a good foreign policy option in 1807, what about the third option I mentioned above, namely, advising American ships to sail at their own risk? Avoiding both war and embargo, the U.S. government could simply have issued “letters of marque and reprisal” to private merchant ships, authorizing them to use force legally, thereby defending themselves, against the vessels of any hostile entity. Some shipowners would certainly have done that, while others might have chosen a safer path by developing new markets where neither the French nor British were threats. At least they wouldn’t have taken fire from their own government, as with the Embargo.
Such “privateering” has a long and noble history dating back to the 13th century. Even during the War of 1812, President Madison issued about 500 letters of marque and reprisal, and private merchants were further incentivized by the “prizes” they could keep if they seized a hostile power’s ships and cargo. Forcing American ships to stay in port under the Embargo did nothing to teach the French and British a lesson.
Did anybody in 1807, within the Jefferson administration or elsewhere, consider this privateering alternative? I am baffled by the lack of evidence that it was ever seriously discussed.
The abysmal catastrophe of Jefferson’s Embargo was obvious even to Jefferson, who signed into law its repeal just days before leaving office in March 1809. Gallatin stayed on as Treasury Secretary for the new president, James Madison, and was happy he no longer had to enforce it.
War with Britain, over largely the same issues that prompted the Embargo, would break out in 1812. Days after the Congress committed the country to a second conflict with the mother country, Britain sent word that it was prepared to relent on all the issues raised by America, but the warhorse had already left the barn. The British would burn the White House and most federal buildings in Washington before Albert Gallatin negotiated the Treaty of Ghent to put an end to the mess.
All in all, this was not America’s finest hour, nor was it Jefferson’s or Gallatin’s.
