Privately funded and built U.S. warships in the Quasi-War of 1797-1801.

AuthorSechrest, Larry J.

Public goods are conventionally defined as both nonexcludable and nonrivalrous. These attributes create an incentive for consumers to act as "free riders," and therefore, according to mainstream neoclassical economics, production of such goods will prove unprofitable and their supply will be suboptimal, evincing a "market failure." The usual conclusion of this line of reasoning is that in order to ensure that a sufficient quantity of this good will be provided, the government must take responsibility for supplying it, using tax revenues to cover the expenses of doing so.

National defense has long served as the paradigmatic example of a public good. As I have suggested in my research on privateering (Sechrest 2003), however, government need not monopolize the provision of defense services, at least in regard to naval warfare. For seven centuries, privateers--private warships---constituted an effective, reliable, and highly profitable means of crippling the maritime trade of an enemy nation. So effective were the privateers' techniques that they appear to have been emulated during both world wars by the commerce raiders--both surface ships and submarines--that the Germans sent to sea (Garitee 1977, xv-xvii; Hough 1983, 172-74).

Skeptics might accept the overwhelming evidence of the privateers' effectiveness yet still question their overall value on two grounds. First, they might insist that privateers would have little value unless the enemy depends to a significant extent on maritime transportation of goods because privateers profit mainly by selling the enemy ships and cargoes they capture. (1) Of course, if the issue is naval warfare, then damage to commercial shipping will indeed be important. The principal motive for having a navy is to protect the nation's commercial shipping. Indeed, as long as a war is truly defensive, such protection would seem to be its only motive. Naval powers are always nations with significant maritime trade.

Second, skeptics might claim that the deciding factor in a naval war is always the defeat of the enemy's warships in battle, not the destruction or capture of commercial ships. Privateers were seldom designed to engage in combat with naval vessels. They were usually small, fast, highly maneuverable craft that could readily capture merchant ships, but were usually too lightly armed with cannon to engage powerful ships of war. Therefore, the skeptics might conclude that privateering does not obviate the need for a public navy.

Granting, for the sake of argument, the need for a public navy, must such an organization necessarily be funded by taxation? (2) Public-goods theory certainly indicates that it must be, especially for the largest expense of all, that of the ships themselves. But what if there were historical precedent for voluntary funding of such capital projects? Surely that evidence would call into question the applicability of publicgoods theory. I show in this article that such a precedent may exist.

The Initiatives of 1798

In April 1796, the United States ratified a treaty with England, negotiated by John Jay, which aligned the new nation with England against its former ally France. French privateers and naval vessels soon began to seize any U.S. merchant ships sailing to British ports or carrying British-owned cargoes. In addition, at least one French vessel violated American territoriality: the privateer Fortitude attacked and burned an English ship in the harbor of Charleston, South Carolina, on October 17, 1797. (3) In belated response to the accelerating French depredations, President Adams signed a law on June 13, 1798, ordering U.S. vessels not to sail toward any port under French control, which included a number of lucrative destinations in the West Indies. The penalty for doing so would be confiscation and sale of the ship and its cargo by the U.S. government, with half the value going to the government and half to the informant. (4)

Early in the Quasi-War with France (1797-1801), citizens in a number of American cities reacted in a fashion radically different from that of Congress and Adams. Instead of banning intercourse with France and its territories, they decided to retaliate. They initiated subscriptions for private funding to construct warships that would protect American property at sea. Their motivation was simultaneously patriotic and self-serving. Many of the subscribers were merchants, shippers, or shipowners whose incomes were being adversely affected by the French attacks.

A review of the situation reveals why these individuals decided to take action. From October 1796 to June 1797, the French captured 316 U.S. vessels--more than 6 percent of the nation's merchant ships--causing their owners losses of $12 million to $15 million. Newburyport, Massachusetts, alone claimed to have lost 77 ships and their cargoes worth $682,000 from 1797 to 1799. Philadelphia merchants claimed to have lost $2 million because of the French actions. Moreover, during 1797, general marine insurance rates rose from 6 percent to 30 percent of the value of the cargo being transported; insurance rates on cargoes going to the West Indies increased to seven times their previous level (all data here from Swan 2000, 2-3, 5). In the face of such conditions, fewer voyages were being attempted. One of the more damaging effects experienced during 1797 and 1798 was a reversal of the previously rapid growth in both exports and imports, as the data in table 1 show. This diminution of international trade affected all Americans, not only those in the maritime industries.

To provide protection from enemies such as the French had become was obviously the U.S. Navy's mission, but the navy at that time scarcely existed as a real fighting force. In June 1785, the last surviving Continental Navy vessel, the frigate Alliance, was sold (Sweetman 1984, 15). No new ships were authorized to be built or purchased until 1794, when Congress authorized the construction of six large frigates. By the fall of 1797, three of them had been launched, United States, Constellation, and Constitution. However, none of these ships was ready for active service until the summer of 1798--Constellation on June 26, United States on July 11, and Constitution on July 22 (Canney 2001, 29, 35, 42). In other words, when the subscription drives began, during May and June 1798, the U.S. Navy had exactly zero operational warships. Swan aptly concludes that "America's merchant vessels suffered terribly from French attacks and urgently needed greater naval protection than the national government could provide" (2000, 3).

The private subscribers sought to build the vessels so desperately needed and then give them to the U.S. Navy. Some commentators have suggested that the ships were merely lent to the navy (Swan 2000, 7), but Leiner disputes that contention and insists that the ships, once completed, "became government property" (2000, 27). If the vessels were merely lent to the government, then surely the ones that survived the rigors of war would have been returned eventually to the local groups that financed their construction. Yet, in an exhaustive ship-by-ship history of this era, Donald L. Canney never mentions such action by the U.S. Navy with regard to any of the subscription-built vessels (2001, 50-57, 115-17).

Moreover, these projects seem to have been true private initiatives: "The private American citizens who conceived of these ships put up the money, arranged for the designs, selected the timber and materials, laid the keels and planked up the hulls, selected the officers, and sent the ships off to war. Into each ship they put their experience, belief in their country, and their confidence in the future. The...

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