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Our Founding War Profiteers

by MARK SCARAMELLA

In 1776 Revolutionary fever ran high in America, stoked by the famous apostle of independence, freedom and democracy, Tom Paine. England was making life increasingly difficult for American merchants and craftsmen and King George was imposing taxes and tariffs on the commercial classes in his American colonies to replenish the royal treasury which King George had depleted by waging terrible wars with various European monarchs.

At the same time, lots of Americans felt that breaking away from England would be a bad idea which would leave American commercial ships vulnerable to pirates without the protection of the English fleet. Those opposed to independence were known as loyalists. Fortunately, more Americans were convinced by Tom Paine that independence was not only essential, but worth fighting for.

But war costs a lot of money-money the loosely organized colonies didn’t have that much of, especially considering that King George could and did hire tens of thousands of ruthless German Hessian mercenaries to complement his own ships and highly regimented (and vengeful) soldiers. The Revolutionary war began when America boldly declared its independence, fielding a rag-tag bunch of farmers, tradesmen, and other patriots who were ill equipped, ill-led, ill-clothed, ill-fed and ill-funded. Although George Washington was the richest man in America, he couldn’t (or wouldn’t) fund the American revolution out of his own pocket, although he did volunteer to be commander in chief of the Continental Army if Congress would promise to cover his expenses-if he won.

In the spring of 1776 French playwright Pierre de Beaumarchais was a fan of the spirit of the American revolution-and was also a clever secret agent of the French Crown. While spying in England, Beaumarchais met an American named Arthur Lee, who at the time was Benjamin Franklin’s commercial representative in England. After discussing America’s situation with Lee, Beaumarchais reported to French King Louis XVI’s foreign minister that it would be in France’s interest to give England’s rebellious colony upwards of five million livre (perhaps half a billion dollars today) because France had just lost the Seven Years War to England and wanted to make Britain pay through the nose to hang on to the United States. Besides, Beaumarchais more or less agreed with the enlightened republican cause the United States represented-and he saw a way to make a nice nickel on the deal. The French also hoped that if the colonies could succeed in their fight for independence, France might end up with some of their former Northern American possessions, especially Canada.

So France secretly offered to provide the colonies with money and war material. In fact, the idea of helping the Americans against the British so excited the French that the French Crown gave Beaumarchais one million livre earmarked for colonial support before any US reps even arrived in France. Of course America was interested in any support they could get. So Congress secretly commissioned Arthur Lee, a man named Silas Deane, and Benjamin Franklin to make the arrangements. Lee never offered to repay the French Crown for their support. Instead, he promised most favorable trade status to France after the war and a promise not to contest France’s new world possessions, should the colonies somehow win. “We offer to France, in return for her secret assistance, a secret treaty of commerce by which she will secure for a certain number of years after peace is declared all the advantages with which we have enriched England for the past century, with, additionally, a guarantee of her possessions according to our forces.” There was nothing in Lee’s letter about payment for any of France’s support. Most of the Americans who were aware of the secret deal more or less assumed France was offering a gift. Lee certainly did.

Silas Deane was a Yale-educated lawyer and merchant who worked as a commercial agent for America’s second richest man, Robert Morris-“the financier of the revolution”-who while being one of George Washington’s best friends, famously used his position in the Continental Congress to steer war contracts to companies he secretly owned. France insisted that the support deal had to be kept secret-France didn’t want to provoke England into another war.

The war was proceeding badly in 1776 and 1777. Washington lost most of his battles with the English and some members of the Continental Congress were thinking about replacing him with someone with real military experience, perhaps Benedict Arnold. But French military representative to the colonies, the Marquis de Lafayette, told the disgruntled Congressmen that France was enamored of Washington and wouldn’t be inclined to continue providing support if Washington didn’t remain commander in chief. So Washington kept his job. America was in increasingly desperate need of the war material and cash France was offering. The patriots were running out of almost everything; they were especially short of essential gunpowder to conduct their insurgency.

Because of the large amounts of material and money involved, Beaumarchais proceeded to set up a secret front company, Rodriguez Hortalez, to quietly transfer the French assets to the United States. Rodriguez Hortalez was funded by both France and Spain (Louis XVI’s uncle was then King of Spain) as well as a few wealthy private French financiers. The supplies were absolutely critical to the Revolutionary war effort.

Lots of leading Americans got rich during the Revolutionary War by selling supplies and equipment to the Continental Army at inflated prices, many of them members of Congress, but Silas Deane had visions of grandeur that few others could imagine. When the French chose Beaumarchais to arrange their support, he was to get 10% of the value of all goods, gold and silver he shipped to the US as an incentive.

On the other end of the deal, Congress told Silas Deane that he’d get 5% of any aide he could get-plus his expenses. In an early shipment, three French ships full of gold and silver worth about one million livre each set sail for the United States. Unfortunately, British spies had penetrated Rodriguez Hortalez activities and intercepted and abducted two of the three ships. Only $1 million livre made it to the colonies. But the support continued anyway. Louis XVI, Arthur Lee and many leading Americans considered the support to be a gift. Lee specifically told Silas Deane it was a gift. But Beaumarchais, realizing that 10% of a gift was $0, told Deane there’d be a substantial price. Deane, of course, agreed with Beaumarchais for his 5%.

Over the course of the Revolutionary War, historians estimate that Beaumarchais delivered somewhere between 12 and 40 large shiploads of material to the fledgling United States. (The record keeping wasn’t that good.) In late 1777, Beaumarchais sent the first bill to the US for $4.5 million livre which was pre-signed by Silas Deane certifying to the bill’s accuracy.

It soon became clear to Arthur Lee and others in Congress that financial shenanigans were afoot. Gunpowder invoices were five times the price paid in France. Muskets from French armories which were obtained at no cost were being sold at half their commercial price with a mysterious note saying they were “not gifts.” Deane was recalled from France to explain the bill, but his explanations were slow and largely unconvincing. Deane didn’t even bother to bring his records with him. At the time that the bill was presented to Congress, Tom Paine was Secretary to the Foreign Affairs Committee and was intimately aware of the corrupt details. After additional investigation, Lee and Paine became convinced that Deane was a fraud and a war profiteer and began to make accusations to members of Congress, some of America’s richest men.

Robert Morris, by the way, was himself famous for simultaneously serving both the government and his own private gain (as were many others in Congress to varying degrees), often secretly purchasing government supplies from their own (disguised) companies or business partners at inflated prices and using their inside knowledge of governmental needs and plans as guides for profitable business speculation. The Deane incident went public when Silas Deane indignantly complained about Congress’s refusal to pay in the Philadelphia press. Paine was furious because he knew that Deane was just trying to enrich himself. Out of principle, Paine publicly responded to Deane’s complaints, including information that (indirectly) revealed the role that France was playing which Congress and France had hoped to keep secret.

Paine wrote, “Is it right that Mr. Deane, a servant of Congress, should sit as a member of that House when his own conduct was before the House of judgment? Certainly not. But the interest of Mr. Deane has sat there in the person of his partner, Mr. Robert Morris, who, at the same time that he represented this State (Pennsylvania), represented likewise the partnership in trade. This is corruption, pure and simple. Why not as well go halves with every Quartermaster and Commissary in the Army? It would be no wonder if our Congress should lose its vigor, or that the remains of public spirit [for independence] should struggle without effect.”

Paine’s attempts to justify his revelations-which he considered part of his patriotic duty against those in Congress including Deane who sought only to aggrandize themselves-were all in vain. The Continental Congress made no mention of them in its records. Paine was increasingly frustrated and annoyed.

A majority of Congress wasn’t bothered by the Deane’s and Morris’s corruption (many of whom engaged in similar practices themselves), but they were particularly annoyed that Paine had revealed the secret arrangements with the French. Paine was dismissed from his post as Secretary to the Committee for Foreign Affairs for this supposed indiscretion. (Even though England probably new about it anyway.) In the end, of course, an interim compromise was reached and America paid part of the bill. Congress took no action on the allegations against Deane. The affair was dropped form the public press and Deane went to Europe, never to return, dying in poverty.

Paine, back in private life, continued to attack Robert and his friend Geuvenor (his name) Morris who were continuing to profit from the Revolutionary War. Inflation was rampant, but the war profiteers were seemingly immune, further outraging Paine. The unpaid French debt demanded by Beaumarchais and Deane floated around in the back rooms of Congress for several decades, and in 1839 Congress mysteriously voted to give the heirs of Silas Deane $39,000. It wasn’t until the 1990s, however, that historians would uncover documents in British archives which showed that Deane had been an English loyalist all along-a war profiteer AND a traitor. Paine was finally vindicated, but the war profiteers had long since taken the money and run.

Unfortunately, we don’t have anyone around today of Tom Paine’s stature to get in the way of the modern day war profiteers who, while following in the footsteps of Robert Morris, Silas Deane, et al, make Silas Deane look like a piker.

MARK SCARAMELLA is the managing editor of the Anderson Valley Advertiser and a frequent contributor to CounterPunch. He can be reached at: themaj@pacific.net

 

MARK SCARAMELLA is the Managing Editor of the Anderson Valley Advertiser in Mendocino County, California. (www.theava.com). He can be reached at themaj@pacific.net.

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