In 1779, with inflation totally out of control (in one month, prices in Philadelphia jumped 45 percent), Congress urged states to adopt measures to fix wages and prices. The policy embodied the belief that the task of republican government was to promote the public good, not individuals’ self-interest. Bitter comments appeared in the Philadelphia press about the city’s elite expending huge sums on “public dinners and other extravaganzas” while many in the city were “destitute of the necessities of life.” But when a Committee of Safety tried to enforce price controls, it met spirited opposition from merchants and other advocates of a free market.
A broadside printed by the extralegal Philadelphia price-control committee, setting the retail prices of various goods such as coffee, sugar, and rum. Advocates of a free market strongly opposed the committee’s efforts.
In opposition to the traditional view that men should sacrifice for the public good, believers in freedom of trade argued that economic development arose from economic self-interest. Just as Newton had revealed the inner workings of the natural universe, so the social world also followed unchanging natural laws, among them that supply and demand regulated the prices of goods. Adam Smith’s great treatise on economics, The Wealth of Nations, published in England in 1776, was beginning to become known in the United States. Smith’s argument that the “invisible hand” of the free market directed economic life more effectively and fairly than governmental intervention offered intellectual justification for those who believed that the economy should be left to regulate itself.
Advocates of independence had envisioned America, released from the British Navigation Acts, trading freely with all the world. Opponents of price controls advocated free trade at home as well. “Let trade be as free as air,” wrote one merchant. “Natural liberty” would regulate prices. Here were two competing conceptions of economic freedom—one based on the traditional view that the interests of the community took precedence over the property rights of individuals, the other that unregulated economic freedom would produce social harmony and public gain. After 1779, the latter view gained ascendancy. In 1780, Robert Morris, a Philadelphia merchant and banker, became director of congressional fiscal policy. State and federal efforts to regulate prices ceased. But the clash between these two visions of economic freedom would continue long after independence had been achieved.
“Yield to the mighty current of American freedom.” So a member of the South Carolina legislature implored his colleagues in 1777. The current of freedom swept away not only British authority but also the principle of hereditary rule, the privileges of established churches, long-standing habits of deference and hierarchy, and old limits on the political nation. Yet in other areas, the tide of freedom encountered obstacles that did not yield as easily to its powerful flow.