Mises Daily Articles
Jefferson's Disastrous Embargo
Thomas Jefferson's second term was marked by the growing controversy with Great Britain over the latter's increasing restrictions on and seizures of American commerce and impressments of American seamen. These began and steadily increased after the resumption of war between Great Britain and France in 1803.
The two chief points of controversy were the right of the Americans to transport the products of the French and Spanish West Indies to ports on the continent controlled by these two powers (the neutral trade), and the status of ex-British seamen who were now serving on American merchant ships and even on American naval vessels. The neutral trade not only was profitable for American merchants, but it was swelling the federal customs revenue, thus helping Jefferson and Treasury Secretary Albert Gallatin pay off the federal debt.
The neutral trade was strongly supported by the New England commercial interests, the Federalist Party, and some Northern Republicans. After the resumption of war, the British Royal Navy had quickly swept the Atlantic Ocean of French and Spanish vessels. The British hoped to weaken Napoleon by depriving him of the rich exports from the French West Indies. Obviously, American neutral carriers frustrated their plans. Thus, in July 1805, a British judge rendered the infamous Essex decision, which declared that trade forbidden in peace could not be legal during war. In other words, since the peacetime navigation laws of France and Spain forbade American or British vessels from carrying French or Spanish colonial produce to the continent, then such laws could not be relaxed or disregarded in time of war.
The judicial decision was nakedly political and of doubtful legality. Nevertheless, it provided the British ministry the pretext it sought, and soon the Royal Navy was interdicting American commerce and seizing those ships that were carrying French or Spanish property. British naval vessels would take captured American ships to a British port where a British judge would rule that the cargo was now British property. Then a British merchant vessel or warship would transport it to London where it would be sold and often shipped to a European port. The Americans were right to suspect that British seizures had as much to do with driving American mercantile competition from the ocean and making money than it did with national security. (Throughout the war, Napoleon purchased the uniforms for his soldiers from British textile firms.)
By 1806, the British Navy had established a cordon around every American port on the Atlantic seaboard. No American ship could leave port without the likelihood of being stopped and searched for ex-British seamen or Caribbean goods. As for the ex-British seamen, some had actually deserted from the Royal Navy, either by jumping ship in an American port or simply walking away while on shore leave. Many had left British commercial vessels, and a few had simply migrated to America. Americans were quick to grant citizenship to the seamen, for they needed them to fill their growing merchant marine. The British were alarmed at the growing desertions of experienced sailors, for it was weakening both their navy and their merchant marine.
Not surprisingly, as Napoleon went from victory to victory on land, gradually gaining mastery of the whole continent, the Royal Navy stepped up its impressments of British-American sailors, whom they considered as still British subjects. In June 1807, the British escalated the conflict when the Royal Navy frigate Leopard fired on, boarded, and removed four British deserters from the American navy frigate Chesapeake a few miles off Norfolk, Virginia. Americans regarded this act as an insult to American honor and national independence. The British regarded American employment of their seamen as a threat to their national security and an insult to their national honor.
Jefferson had five foreign policy options. At one extreme, he could go to war with Great Britain. Jefferson knew that this would be a risky endeavor. New England was strongly opposed to a war with England and would give it little support. The country was vulnerable to British attack. The British could launch raids, shell cities, land an invasion force anywhere they wanted along the coast, launch a ground invasion from Canada, and blockade the Atlantic ports.
To defend the country, his administration would have to fortify the Atlantic cities, arm and train the militia, increase the size of the navy, and raise a larger standing army, all of which would be an expensive endeavor requiring taxes and borrowing. In short, war meant the overthrow of his fiscal program of economy, tax reduction, and debt reduction. Not surprisingly, Jefferson rejected this option out of hand.
At the other extreme was the option of a British alliance, whether formal or informal. The minimal terms of such an alliance would require the United States to cease trading directly with France or her allies on the Continent. Instead, all American vessels, whether their cargo were American exports or French and Spanish re-exports, would have to land in London and pay a duty before proceeding to a Continental port. The Americans would have to cease accepting British seamen for service on their ships. In return, the British would cease their seizures of American commerce. Apart from some New England Federalists, virtually no Americans favored such an alliance. Jefferson regarded this option as a dishonorable and disgraceful submission to the edicts of an imperious and predatory military commercial empire, as well as a compromise of the republic's independence.
Jefferson had three other options. First, he could continue his policy of strict neutrality and commercial engagement. It would avoid war, keep down military expenditures, and keep up the customs revenue. American shipping increasingly suffered from British seizures and some French seizures as well, but the New England and middle-state merchants decided that the profit to be made from completed voyages in the neutral trade and the regular export trade outweighed the losses they were sustaining. Jefferson followed this course until the end of 1807, right before the last year of his presidency.
Second, he could authorize the arming of merchant vessels and issue letters of marque, authorizing private vessels to attack and seize foreign commercial vessels.
Third, he could adopt a policy of commercial coercion by either restricting or banning all trade with European powers on the theory that they so needed the American market, American foodstuffs, and American neutral carriers that they would be forced to revoke their restrictions and depredations on American commerce. Jefferson believed that peaceful coercion was the perfect republican solution to the worsening commercial crisis. It would avoid war and entangling alliances, keep down military expenditures along with debt and taxes, vindicate the national honor, defend vital interests, and preserve the country's independence.
Jefferson felt his hand being forced by the British in 1807. First, in January, there was an order-in-council issued which prohibited neutral — that is, American — shipping from the North American coasting trade.1 (American ships could make only one stop and then had to return.) Next, in June, there was the Chesapeake incident, an act of war that had infuriated the American public and created the strongest anti-British sentiment since the Revolution. Finally, in December, news reached Washington of a new orders-in-council (November 11) which prohibited all neutral, or American, trade with any European port from which the British flag was excluded (which was most of them). It also prohibited the export of cotton to France. Only ships that first landed in a British port, paid a customs duty, and bought a license could proceed to ports on the French-controlled Continent.
Jefferson decided it was time to try the experiment of "peaceable coercion." His Republican allies promptly reinvoked the Non-Importation Act that had passed in April 1806 and had been suspended in December 1806, which prohibited the importation of English manufactures which could be produced in the United States, and passed the Embargo Act (December 22, 1807), which forbade any US vessels from leaving for a foreign port or for any foreign vessel to depart from a US port carrying American merchandise. The act required all registered sea-letter vessels to post bonds of double the value of the ship and cargo before embarking on voyages to other American ports. All ships were required to obtain clearance papers and show a manifest of the cargo before departing and to produce a certificate proving that they had landed in a foreign port.
Just one week after the embargo went into operation, Congress passed a supplementary measure, the Second Embargo Act (January 8, 1808), in order to prevent vessels licensed only for the coasting trade from secretly sailing to a Canadian or West Indian port. The act required all coasting vessels, as well as whalers and fishing boats, to post bonds. Although it was ostensibly designed for their benefit, the embargo was not a popular measure among the American mercantile class, and they soon found loopholes and ways of evading the provisions of the law. For instance, American merchants began a brisk trade with Canada across the northern border and to a lesser extent with the Spanish Floridas.
As a result, Congress passed the Third Embargo Act (March 12, 1808) forbidding trade by land or inland waterway between the United States, Canada, and Florida. But massive evasions of the law continued. Smuggling along the northern border continued, and American ships and vessels began to engage in an illicit trade with British ships off the Atlantic coast, often with the active assistance and participation of the British navy. One of the most notorious smuggling routes was Lake Champlain. New Yorkers and Vermonters openly transported products on large rafts and boats across to Canada.
On April 19, 1808, Jefferson proclaimed the existence of an "insurrection" along the northern border "too powerful to be suppressed by the ordinary course of judicial proceedings."2 He called on the governors of Vermont and New York to call out their militia to suppress the illicit traffic. Jefferson and Gallatin soon realized that if the embargo were to be successful, a strict enforcement act was going to be necessary. Congress passed the Fourth Embargo Act, also known as the Enforcement Act, in late April 1808.
Under its terms, no ship or coasting vessel could depart for a port or district adjacent to foreign territory without the express permission of the president; collectors in districts adjacent to foreign territory could seize merchandise on shore they suspected was intended for eventual export and detain it until the owner would pay a bond guaranteeing that it would be transported to a domestic port; federal revenue cutters and naval vessels could stop, search, and bring back to port any American ship on mere suspicion that it might be carrying goods for export; and collectors could detain suspicious vessels in harbor until the president personally sanctioned their release. In authorizing searches, seizures, and detentions of ships and merchandise, the law made no mention of such constitutional requirements as search warrants and judicial due process. Yet despite this new measure, smuggling and illicit trading continued.
To enforce the embargo against a recalcitrant public, Jefferson early on resorted to regular army and navy forces to assist the customs service. The First Embargo Act authorized the navy to interdict oceangoing vessels headed for foreign ports. Without legislative authority, Jefferson, in February 1808, directed Secretary of the Navy Robert Smith to send naval gunboats to intercept American merchantmen trading with the British off the Delaware coast. The Enforcement Act authorized naval vessels to stop, search, and detain any ship or boat suspected of engaging in unlawful commerce, whether at sea, along the coast, sailing an inland waterway, or still in harbor. In July, Jefferson directed Smith to place his ships at the disposal of Secretary of Treasury Gallatin, whom Jefferson had made the chief enforcement officer for the embargo.
Thus, by late summer of 1808, revenue cutters, naval gunboats, brigs, and frigates were patrolling the Atlantic coastline as well as every harbor, bay, inlet, inland waterway, and, bordering Canada, lakes Ontario and Champlain. In July, Jefferson ordered Secretary of War Henry Dearborn to send regular army units to the Lake Champlain area to assist the local militia in interdicting smuggling. In August, after Governor Daniel Tompkins of New York ordered 500 state militia to his northern border, Jefferson ordered Dearborn to station regulars in upper New York at key points along Lake Ontario and the St. Lawrence River. Thus, by the late summer of 1808, Jefferson had deployed a military and naval cordon around the United States from Lake Ontario in the north to New Orleans in the south.
However, widespread and systematic evasions of the law continued into the fall, and Jefferson and Gallatin decided that an even more rigorous enforcement measure was needed. In early January 1809, Congress passed the Second Enforcement Act. It gave the president and anyone under his authority (collectors, federal marshals) the authority to employ the army and naval forces of the United States to assist them in their duties whenever and wherever they thought it necessary. It also granted collectors and marshals even greater latitude in their searches, seizures, and detentions.
Federal officers were now authorized to search any vehicles of transportation or warehouses and to seize and hold specie or other articles of domestic growth, produce, or manufacture which they suspected were intended for export at any port or location in the Union, not just at ports or locations adjacent to foreign territory. To obtain their release, owners had to give bonds to the full value of the articles. Coasting vessels now had to give bonds amounting to six times the value of the vessel and cargo. Once again, Jefferson, his administration, and the Republican-controlled Congress ignored the protections afforded by the Fourth, Fifth, and Sixth Amendments to the Constitution.
In deciding for an embargo, Jefferson made the biggest mistake of his presidency. Commercial coercion failed utterly to achieve its object of forcing Great Britain and France to respect neutral rights. Despite 15 months of embargo, the Royal Navy continued to impress American seamen, and the British ministry did not revoke their orders-in-council.3
Jefferson overestimated the effect an embargo would have on the British economy. While British manufacturing suffered, farmers benefited from a higher price for their crops, British shipping filled the vacuum created by the removal of American competition, and British merchants turned to South America as a new export market and source of imports. In addition, with the active cooperation of the Royal Navy at sea and the British army in Canada, British merchants engaged in a brisk smuggling trade with Americans who were determined to keep on trading in defiance of the law.
In pursuing an embargo policy, Jefferson did serious damage to the Republican cause for which he was the recognized national leader, and he violated many of the Republican principles for which he had contended in the 1790s. First of all, the enforcement provisions of the embargo acts were in clear violation of the Fourth and Fifth Amendments, for they authorized revenue officers, custom collectors, federal marshals, and naval officers to conduct searches and seizures without judicial warrants or any kind of due process. Furthermore, Jefferson and his Republican allies assumed a power of doubtful constitutional legitimacy. As John Randolph contended in the House, the Constitution granted the federal government the power to "regulate" commerce with foreign nations, but it did not grant it the power to prohibit it altogether. To concede that the power of prohibition is implied in that of regulation could only add legitimacy to the Federalist doctrine of implied powers.
There was great irony in the fact that the major judicial decision upholding the constitutionality of the embargo was rendered by a New England Federalist, Judge John Davis of the federal district court for Massachusetts.4 Judge Davis's opinion (September 1808) drew on all the expansive constitutional doctrines first advanced by Alexander Hamilton in the early 1790s. He spoke of the "discretion of the national government" with regard to locating the proper bounds of the commerce power; he cited the "necessary and proper clause" as authorization for the power to lay an embargo; he invoked the doctrine of "inherent sovereignty," which was simply the doctrine of implied powers by another name; and he even denied the federated and limited nature of the American confederation. In a sentence that should have sent Jefferson rushing to repeal his experiment in peaceable coercion, Davis wrote that "in our national system, as in all modern sovereignties, it [the commerce power] is also to be considered as an instrument for other purposes of general policy and interest."5
Judge Davis clearly knew what he was about. Instead of bowing to the shortsighted wishes of his mercantile friends and fellow Federalists in striking down the hated embargo, he saw an opportunity to lay a foundation stone for the nationalist-centralist theory of the Constitution which was favored by the neomercantilists and empire-builders in the Federalist party. Even better, in defending the constitutionality of a Republican measure, he could make the nationalist theory appear nonpartisan and render his centralizing opinion unassailable by the Republicans. For if the latter attacked his reasoning, they would be all but admitting that Jefferson had transgressed the bounds of the Constitution.
The embargo also violated the classical-liberal principles that Jefferson had defended in the 1790s and had consistently respected as president. In a letter written to a Massachusetts supporter in 1800, Jefferson promised to limit "the general government … to foreign concerns only" and to leave "commerce, which the merchants will manage the better, the more they are left free to manage for themselves," alone.6
Seven years later, Gallatin wrote to Jefferson warning him that the embargo would have many negative consequences, including "privations, sufferings, [loss of] revenue," and a strengthening of the Federalists, and would be of doubtful effect in swaying the British to change their hostile policy. Gallatin described hopes for the latter as altogether "groundless." He urged that the embargo should be of short duration, that it should not be pressed too hard upon their countrymen, and that they should be prepared to retract it at the first signs that it was doing more harm than good. Gallatin concluded his argument with a beautiful statement of laissez-faire principles:
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.7
Jefferson should have heeded Gallatin's advice, for the latter's warnings and predictions were vindicated by events. Yet Jefferson pressed on despite mounting evidence that the embargo was proving a disaster. It is difficult to defend the embargo as a policy of national defense or honor, for those who were chiefly suffering at the hands of the British navy (the Northern mercantile classes) were the embargo's most vigorous opponents. No one was forcing them to continue trading in the Atlantic market in face of mounting British and French restrictions, seizures, and confiscations. In fact, despite the steady loss of cargo, sailors, and ships, they were still making a sizeable profit, still finding a market for American produce, and still bringing in record sums for the federal treasury through customs.
Years later, Condy Raguet of Philadelphia, perhaps the most influential classical-liberal political economist of the 1830s, dated the republic's first and fateful departure from its original free-trade policies to Jefferson's 1807 embargo. As Raguet pointed out, the embargo was followed by the non-intercourse acts, the War of 1812, and the protective tariffs of 1816, 1820, 1824, and 1828.8
The economic effects of the embargo were calamitous for the commercial and navigating interests of New England and the middle states. Despite smuggling, trade was crippled: sailors and mechanics could not find work; ships languished in dock; many merchants and shipbuilders were ruined, all suffering diminished business. Nor was the distress limited to the Eastern states. The South suffered grievously by losing the market for their tobacco, cotton, rice, indigo, wheat, and corn.
John Randolph would lament years later that the embargo and the economic restrictions were the beginning of ruin for many planters in Virginia. That Jefferson would cause such misfortune through a policy which was intended to vindicate the cause of free trade is the supreme irony and is yet more proof that an activist government invariably does more harm than good to its intended beneficiaries.
Other unintended consequences of the embargo were an increase in sectional animosity and distrust between the Eastern and Southern states, a revival of Federalist political strength in New England, and the sanction lent by the Jeffersonians to the precedent of using the army and navy to enforce an unpopular law on American citizens.
There was a bitter irony for Federalists and dissident Republicans in that the chief use of Jefferson's gunboat flotilla and additional army regiments turned out not to defend the country against British invasion but to enforce the terms of an unpopular federal law upon the citizens of the states. The political party that rose in opposition to a standing army and navy on the grounds that they posed a threat to the liberties of the citizens was now using those very forces to deprive Americans of their right to trade with foreign countries. The historian Henry Adams summed up well the damage done by Jefferson to his own cause by his policy of "peaceful" coercion:
The embargo and the Louisiana purchase taken together were more destructive to the theory and practice of a Virginia republic than any foreign war was likely to be. Personal liberties and rights of property were more directly curtailed in the United States by embargo than in Great Britain by centuries of almost continuous foreign war.9
[This article was excerpted from chapter 3 of Reassessing the Presidency, edited by John V. Denson.]
- 1. An order-in-council is an order of the British monarch made on the advice of the Privy Council.
- 2. Thomas Jefferson, Proclamation of April 19, 1808, Annals of Congress, 10th Cong., 1st sess., pp. 369–70.
- 3. This was the second ministry of the Duke of Portland, William Cavendish-Bentick (1807–1809), although Spencer Perceval, the chancellor of the exchequer, was primarily responsible for the orders-in-council discussed here. Ironically, Perceval was assassinated in 1812 while on his way to attend a parliamentary inquiry about the negative effects of the orders-in-council on the British economy.
- 4. Henry Adams, History of the United States of America During the Administrations of Thomas Jefferson and James Madison, 2 vols. (New York: Library of America, 1986), vol. 2, pp. 1111–1113.
- 5. Ibid., pp. 1112–1113.
- 6. Jefferson to Gideon Granger, Aug. 13, 1800, Thomas Jefferson: Writings (New York: Library of America, 1984), p. 1079.
- 7.  Gallatin to Jefferson, Dec. 18, 1807, quoted in Adams, History of Jefferson's Second Administration, vol. 2, pp. 1043–1044.
- 8. Condy Raguet, "On the Principles of Free Trade," Free Trade Advocate (Jan. 1829), p. 2.
- 9. Adams, History of the United States, vol. 2, p. 1116.