In 1803 the US paid France $15 million for the Louisiana Purchase and got a huge piece of land that covered almost all of the middle of the continent from Canada to the Gulf of Mexico. This was a great deal for the US and had made it possible to expand west to the Pacific Ocean.
If my calculations are correct, $15 M in 1803 is roughly equivalent to $270M in today’s dollars (I found somewhere that $500 back then was worth about $9,000 in today’s dollars).
How could a young country that only 20 years earlier had fought a long war with the British afford to pay $15 M for anything? And if the US government borrowed the money, who did they borrow it from?
Disclaimer : not a historic fact-based answer, but I think a good guess,
It couldn’t. But it would as soon as Louisiana’s land was apportioned into plots, then sold to wealthy private parties (or, quite possibly, to the very people who already lived there). France could have done the same, but Napoleon needed both large bags of cash and a possible American alliance right now.
As for whom the US government borrowed the money from, Wiki sez the Barings bank in England
Actually, France could not have done that, or at least not until the war with Britain was over. Napoleon had forced Spain to cede the territory to France a couple years earlier, but because Britain dominated the seaways, they couldn’t send any French officials to actually take over. So Louisiana wasn’t doing France any good in the war. Selling it was the best short term thing they could do.
In the somewhat longer term, it probably would have been “overrun” by Americans anyway. If France hadn’t sold it, there may have been a situation similar to what happened in Texas 30 years later (American settlers staging a war of independence).
Thanks dtilque. I’m reading a book that explains why France ended up selling, but it didn’t say anything about how the US paid for it. I find the details of the transaction fascinating. Ignorance fought!
France settled New Orleans and Louisiana in the 1600’s. At one time they claimed all of the Mississippi to connect with New France. According to Wikipedia, the lost the east side to the British and the west side (Loisiana Purchase) to Spain in the Seven Years War about 1765. They only got to keep the area around New Orleans. Of course, before then the west was sparsely settled if at all.
So it was a vast unsettled territory that they had lost 30 years before and only regained by conquering Spain - hard to hold; they could not easily send settlers, administration, or transfer money or trade goods back through the British blockade. Napoleon had other priorities. It was simpler to get a wad of money and be done with it. If they took New Orleans off his hands too, bonus. Overseas empire seems to have been the least of Napoleon’s interests.
Well yes, that’s what I meant : in the fullness of time, France could have made mad bank off of Louisiana. But Napoleon didn’t have the fullness of time, so there you go.
There was also the trifling matter of huge tracts of the region being Untamed Wilderness, which is dead white guy talk for “already well settled and cultivated by natives, thankyouverymuch”. But you know, details, and of course the locals didn’t have a flag.
Kobal2 touches on the reality, but it’s important to understand that France sold no land in the transaction. They sold their *claim *to the territory. Subtle but infinitely important detail.
:dubious:Weren’t New Orleans and St. Louis extant cities at the time of the Louisiana Purchase? Weren’t they governed by French officials from French-owned forts, courthouses, etc. so that the latter were ceded to the U.S. government and the former replaced by American officials? Most of the LP was “untamed wilderness”/native-occupied land, no doubt, but by no means all of it.
Wait a second, a British bank loaned the money to the US so it could pay financially tight France? With the transfer taking place just as the first Napoleonic war was starting?
Even worse!
[QUOTE=Wikipedia]
Despite issuing orders that the over 60 million francs were to be spent on the construction of five new canals in France, Bonaparte spent the whole amount on his planned invasion of the United Kingdom.
[/Quote]
:smack::smack::smack:
Except considering how Bony’s invasion plans went, he wasted his money on a rotten rope.
I’m not sure the Crown was informed.
I know, I know, a corporation disregarding national priorities or otherwise ducking regulations in pursuit a quick, selfish and possibly self-destructive buck. Shocking, positively shocking. Thankfully, that sort of thing is all in the past :p.
The legality of the sale was also shaky. When Spain agreed to turn over the territory to France in 1800, the treaty explicitly said that France could not transfer ownership to another country. So if Britain had been able to take control of Louisiana in 1815, it could have made a reasonably good case that Spain and not the United States was the legal owner of the territory. The situation was resolved when Spain formally recognized American ownership of Louisiana in 1819.
The first stage of the financing of the Louisian Purchase is stipulated in the treaty itself–France received $11.25 million in American bonds (called “stock” in the treaty, but we would call it bonds today), and $3.75 million in assumption of claims by US citizens against the French government.
The agreement on citizen claims was ridiculous; total claims amounted to far more than $3.75 million, and who would decide which were honored by the American government and which remained pending against France? This was a source of irritation for decades afterward. Nevertheless from an American perspective this did not require special financing; the claims were paid by the Treasury out of ordinary revenue as they were (gradually) presented.
The bonds, as per the treaty, paid 6% interest due semi-annually with the principle being redeemed after 15 years. Note that wikipedia is wrong in asserting an American down payment.
Napoleon needed cash right away, and would not have agreed to take the bonds without assurance from Barings and Hope that he could sell some of them immediately for gold. He got an advance in July 1803 and sold the bonds, after delivery, beginning in 1804; details here.
Yes, the British government objected; Prime Minister Henry Addington wrote this letter to Barings. Barings ignored him, and I am not aware that they faced any consequences.
The Louisiana Purchase raised the US national debt from $70 million to $81 million, at a time when government revenue ran about $10 million per year. However this was quite small in relation to a GDP of about $500 million, in a nation with a rapidly growing population (which the purchase itself helped to stimulate), so economically this was not a huge imposition.
Thanks Freddy. I’m flabbergasted that Barings got away with this. Even if the Crown didn’t go after them I would have thought public opinion would have crushed them. I guess England really is just a nation of shopkeepers.
Did the American government continue paying on the bonds to the restored Bourbon regime after the fall of Napoleon? Or had the advance covered all that, such that the US was simply paying Barings?
Well, it was ultimately in Britain’s long-term interest not to be known as a nation where bank accounts get seized by lawless government action. It was the PM acting quickly and self-destructively here by simply leaning on Barings, rather than trying to work through Parliament.
It would have been a lot more self-destructive on the bank’s part had Napoleon’s invasion plan successfully gone through, though. Or, less specifically, had the cash injection from the Louisiana purchase been the enabling cause for a trouncing victory on his part, throwing the British Empire’s entire economy down the tubes. Which Barings had no way of knowing in advance.
Given Napoleon’s chronic need for cash, I’d be shocked if France retained any of the bonds through the fall of the Empire. I doubt that Barings retained many either; most were probably resold in short order to retail investors.
:dubious:Weren’t New Orleans and St. Louis extant cities at the time of the Louisiana Purchase? Weren’t they governed by French officials from French-owned forts, courthouses, etc. so that the latter were ceded to the U.S. government and the former replaced by American officials? Most of the LP was “untamed wilderness”/native-occupied land, no doubt, but by no means all of it.