Economic Instability

Definition

Economic instability refers to a state of unpredictability in economic conditions, characterized by fluctuations in growth, inflation, and employment rates. During the time of the Articles of Confederation, economic instability manifested as severe financial distress, leading to discontent among citizens and challenges in governance. The inability to collect taxes or regulate trade further exacerbated the economic challenges, causing states to act independently, which disrupted national unity.

5 Must Know Facts For Your Next Test

1. The lack of a strong central government under the Articles made it difficult to implement cohesive economic policies or respond effectively to financial crises.
2. States began printing their own currency to pay debts, which led to inflation and further complicated trade between states.
3. Economic instability resulted in widespread unrest, exemplified by events such as Shays' Rebellion, where farmers protested against high taxes and debt enforcement.
4. The inability to regulate interstate commerce meant that states could impose tariffs on one another, disrupting trade and contributing to economic fragmentation.
5. Without the power to levy taxes or create a unified monetary policy, the national government struggled to maintain stability and confidence among citizens.

Review Questions

• How did economic instability affect the relationship between the states during the period of the Articles of Confederation?
  • Economic instability led to a breakdown in relationships among states as each pursued its own economic interests. States often imposed tariffs on goods from neighboring states, causing trade conflicts and contributing to further economic fragmentation. This lack of cooperation hindered efforts for a unified response to economic crises, fostering resentment and competition rather than collaboration.
• Analyze the impact of Shays' Rebellion on perceptions of economic instability during the Articles of Confederation.
  • Shays' Rebellion highlighted the severe economic distress faced by many citizens, particularly farmers burdened by debt and high taxes. The uprising demonstrated the weaknesses of the Articles of Confederation in addressing economic grievances and maintaining order. This event intensified calls for reform, ultimately influencing the drafting of the Constitution as leaders recognized that a stronger central authority was necessary to handle such crises.
• Evaluate how the challenges of economic instability under the Articles contributed to the eventual formation of the U.S. Constitution.
  • The economic turmoil experienced under the Articles of Confederation revealed significant flaws in its governance structure, particularly in its inability to manage financial policies and regulate commerce. As states faced inflation, rising debts, and civil unrest, it became increasingly clear that a new framework was needed. The Constitutional Convention was largely driven by the need for a more robust federal government capable of addressing these economic issues effectively and ensuring stability, which ultimately led to the creation of a new governing document that aimed to rectify past shortcomings.

Related terms

Inflation: A sustained increase in the general price level of goods and services in an economy over a period of time, leading to a decrease in purchasing power.

Debt Crisis: A situation where an individual, organization, or government cannot meet its debt obligations, often leading to defaults and significant financial turmoil.

Interstate Commerce:

The economic activity involving the trade of goods and services across state lines, which was poorly regulated under the Articles of Confederation.