Philadelphia Reflections

Who Paid for the Revolutionary War?

Poker Game

There's a saying in poker circles: never play against someone with lots more money than you have. The American Revolutionary War can be thought of as just that sort of poker game. The British could afford to lose what they lost, while somewhat smaller debts were quite enough to overwhelm the French. The cost of any war is a guess because it cannot account for death and destruction it provokes. But after a few years, it could be observed the British were holding the British Empire, while the French were left with the desolation of their own revolution. The Americans held most of a continent, free and clear, in return for their sacrifices, although their physical sacrifice was the greatest of the three main war participants.

Pierre Augustin Caron de Beaumarchais,

Leaving the British aside, much of the money paid for the war passed through the hands of Robert Morris and Pierre Beaumarchais, so in one sense they paid for at least the munitions part of the war. At the time, Beaumarchais was penniless from a lawsuit, so he was a judgment proof manager of a dummy corporation, Rodriguez Hortales et Cie. The real payors were the French Government of 1 million livres, the Spanish Government of 1 million, and 1 million from several adventurous individuals. On the American side, Robert Morris was often personally responsible for defaults, as a result of the Continental currency made worthless from printing-press inflation. In a dramatic moment, Morris stepped forward and announced he and a few friends would stand behind the debts. Not only was Morris a wealthy man, but he was largely running the United States government. Among other considerations, he had a fairly good chance of inducing the government to raise taxes to pay its own debts before he would have to assume them. Many people doubted that ability, however. Even Morris' wealth would have been insufficient to carry the whole burden, so the guarantee he made must be seen as a form of default insurance or credit default swap, containing a high degree of risk. Regardless of details, if Great Britain won the war, both Morris and Beaumarchais would have been impoverished, and probably imprisoned. The main difference was that Beaumarchais was already broke.

Morris never forgot the message, that the real security backing the loans was the wealth of the North American continent. That's what America gained by winning, and that's what it would have lost if England won. If you win a war, buy real estate.

Originally published: Wednesday, May 11, 2011; most-recently modified: Wednesday, June 05, 2019