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During the American Revolution, a cash-strapped Continental Congress accepted loans from France. Paying off these and other debts incurred during the Revolution proved one of the major challenges of the post-independence period. The new U.S. Government attempted to pay off these debts in a timely manner, but the debts were at times a source of diplomatic tension.
The Continental Congress
In order to pay for its significant expenditures during the Revolution, Congress had two options: print more money or obtain loans to meet the budget deficit. In practice it did both, but relied more on the printing of money, which led to hyperinflation. At that time, Congress lacked the authority to levy taxes, and to do so would have risked alienating an American public that had gone to war with the British over the issue of unjust taxation.
The French Government began to secretly ship war materiel to the American revolutionaries in late 1775. This was accomplished by establishing dummy corporations to receive French funds and military supplies. It was unclear whether this aid was a loan or a gift, and disputes over the status of this early assistance caused strong disagreement between American diplomats in Europe. Arthur Lee, one of the American commissioners in France, accused another, Silas Deane, of financial misdealings, while the third member of the commission, Benjamin Franklin, remained aloof. Lee eventually succeeded in convincing Congress to recall Deane. The early French aid would later resurface as one of the disputes behind the 1797 XYZ Affair that led to the Quasi-War with France.
During the Revolution, the French Government also provided the Americans with loans, eventually totaling over two million dollars, most of which were negotiated by Benjamin Franklin. John Adams also secured a loan from Dutch bankers in 1782. After fighting between the Americans and the British ended in 1783, the new U.S. Government established under the Articles of Confederation needed to pay off its debt, but lacked sufficient tax authority to secure any revenue. The government struggled to pay off the loans, stopping payments of interest to France in 1785 and defaulting on further installments that were due in 1787. The United States also owed money to the Spanish Government and private Dutch investors, but focused on paying off the Dutch because Amsterdam remained the most likely source of future loans, which the United States successfully obtained in 1787 and 1788, despite its precarious financial state.
Under the U.S. Constitution of 1789, the new federal government enjoyed increased authority to manage U.S. finances and to raise revenues through taxation. Responsibility for managing debts fell to Secretary of the Treasury Alexander Hamilton. Hamilton placed U.S. finances on firmer ground, allowing for the U.S. Government to negotiate new loans at lower interest rates. In addition, the United States began to make regular payments on in its French debts starting in 1790, and also provided an emergency advance to assist the French in addressing the 1791 slave revolt that began the Haitian Revolution.
Although the federal government was able to resume debt payments, total federal expenditures exceeded revenues during many years in the 1790s. Hamilton therefore sought additional loans on Dutch capital markets, although the improved U.S. financial situation made these loans easier to obtain. These private loans from Dutch bankers also helped pay off loans owed to the Spanish Government, back pay owed to foreign officers, and U.S. diplomatic expenses in Europe.
In 1795, the United States was finally able to settle its debts with the French Government with the help of James Swan, an American banker who privately assumed French debts at a slightly higher interest rate. Swan then resold these debts at a profit on domestic U.S. markets. The United States no longer owed money to foreign governments, although it continued to owe money to private investors both in the United States and in Europe.
Although U.S. finances had been shaky under the Articles of Confederation, the United States was able to place itself on a sound financial footing during the 1790s. This enabled it to preempt diplomatic embarrassment and dependence on foreign powers during that period, and also improved U.S. credit on European capital markets, which enabled the U.S. Government to obtain low-interest loans for the Louisiana Purchase in 1803.
FAQs
“Milestones in the History of U.S. Foreign Relations” has been retired and is no longer maintained.
When has the US gotten involved in foreign affairs? ›
Historical overview. The main trend regarding the history of U.S. foreign policy since the American Revolution is the shift from non-interventionism before and after World War I, to its growth as a world power and global hegemon during World War II and throughout the Cold War in the 20th century.
What are three key events and historical developments during the 20th century that have shaped international relations? ›
The 20th century was dominated by significant geopolitical events that reshaped the political and social structure of the globe: World War I, the Spanish flu pandemic, World War II and the Cold War.
What were the major foreign policy events of the 1900s? ›
Final answer: The major foreign policy events of the 1900s include World War I and II, the Cold War with the Soviet Union, and fighting the Barbary pirates.
What are the milestone documents in world history? ›
Among the documents included in the set are iconic legal and constitutional documents such as the Code of Hammurabi, Magna Carta, Meiji Constitution, and the Constitutive Act of the African Union; famous treatises such as the Plato's "Allegory of the Cave," the Communist Manifesto, and Osama bin Laden's Declaration of ...
How did the Cold War change US foreign policy? ›
As the tensions between the Soviet Union and the United States grew, the country moved towards the foreign policy approach of containment during the Cold War, which mostly involved the attempt to slow the spread of Communism.
How many foreign conflicts has the US been involved in? ›
This is a list of wars and rebellions involving the United States of America. Currently, there are 108 wars on this list, 4 of which are ongoing.
How involved was the US with Foreign Affairs after WWI? ›
During the 1930s, the combination of the Great Depression and the memory of tragic losses in World War I contributed to pushing American public opinion and policy toward isolationism. Isolationists advocated non-involvement in European and Asian conflicts and non-entanglement in international politics.
Was the United States involved in international affairs at the beginning of the 1900's? ›
In just over a decade, the United States had redefined its national and international interests to include a large overseas military presence, overseas possessions, and direct engagement in setting priorities in international affairs.
What are the most important historical events in history? ›
Historical Events, World-Changing Moments: Top 10 Turning Points in History
- The Invention of the Printing Press (circa 1440) ...
- The Discovery of the Americas by Christopher Columbus (1492) ...
- The French Revolution (1789-1799) ...
- The Industrial Revolution (1760-1840) ...
- World War II (1939-1945)
The evolution of International Relations has a long history, dating back to ancient times when philosophers like Thucydides and Aristotle wrote about the nature of war and peace. However, the modern discipline of IR emerged in the post-World War II era, particularly in the United States.
How has US foreign policy changed since WWII? ›
Following its victory in World War II, the United States led the effort to create not only new security institutions, such as the United Nations and NATO, but also new regimes to promote economic recovery, development, and prosperity, such as the Marshall Plan, the Bretton Woods monetary system, and the General ...
What was the U.S. foreign policy in 1914? ›
When WWI began in Europe in 1914, many Americans wanted the United States to stay out of the conflict, supporting President Woodrow Wilson's policy of strict and impartial neutrality. “The United States must be neutral in fact as well as in name during these days that are to try men's souls.
What was the main foreign policy of the U.S. in the past? ›
During the first 50 years of the nation, diplomats were guided by the idea that the United States should observe political isolation from European powers during peacetime and maintain strict neutrality during periods of war.
What was the U.S. foreign policy in the 1920s? ›
Thus, U.S. foreign policy during the 1920s was characterized by the enactment of isolationist policies; for instance, the U.S. opted not to join the burgeoning League of Nations, even though it had been the nation to first propose such international cooperation.
What were the key changes in American foreign policy from the 1890s to the 1950s? ›
There were three key changes in US foreign policy from the 1890s to the 1950s. Firstly, the US became more involved in world affairs. Secondly, the US changed from a policy of isolationism to one of containment. Lastly, the US became a world leader.
How did US foreign policy change after WW1? ›
During the 1930s, the combination of the Great Depression and the memory of tragic losses in World War I contributed to pushing American public opinion and policy toward isolationism. Isolationists advocated non-involvement in European and Asian conflicts and non-entanglement in international politics.
What happened in the United States in the decades after World War II responses? ›
By 1948, a new form of international tension had emerged--Cold War--between the United States and its allies and the Soviet Union and its allies. In the next 20 years, the Cold War spawned many tensions between the two superpowers abroad and fears of Communist subversion gripped domestic politics at home.
How did the foreign policy change after ww2? ›
After World War II, American policy sought to limit communism through containment. Between 1970 and 1989, the United States shifted to a view of the world as multipolar. The collapse of European communism in 1989 spurred national self-determination and the fear of balkanization.
