The last few weeks we’ve talked about some of the economic crises that the states faced in the years following the end of the war. The big hope to end many of those crises was wrapped up in selling western lands to raise money. This made opening up the lands that came to be known as the Northwest Territory a critical event. This week we’ll take a look at the final major legal step needed to make that happen: the Northwest Ordinance of 1787.
That land that today makes up the states of Ohio, Michigan, Indiana, Illinois, and Wisconsin. For people at the time, this was the land that was northwest of the Ohio River, reaching as far west as the Mississippi River, and as far north as the border with British Canada.
The Continental Congress’ first two legislative efforts to establish a legal framework for this territory came in the form of the Land Ordinances of 1784 and 1785, which we discussed in Episodes 334 and 336.
Land Cessions
The first step in this process was for Congress to get various states to give up their personal claims to this land. France, Spain, and Britain had already ceded their claims to the land in the peace treaty that ended the war in 1783. But that treaty did not specify anything more than that those foreign powers would not assert claims on the land. It did not settle who was the undisputed owner of such lands within the US.
The first cession came back in 1783, when Virginia formally ceded its claims to this area. Virginia had agreed to do that in order to get Maryland to agree to the Articles of Confederation in 1781. Virginia’s cession was conditional in that it called for the territory to be formed into new states that would join the Union. Virginia did not want to give up its claims, just so some other eastern state could assert its claims to the land. This put further pressure on the other states to give up their claims.
New York had a more questionable claim to some of the land, which it gave up early as well. Several New England states also had claims based on their colonial charters. Massachusetts and Connecticut had claims that stretched all the way to the Pacific Ocean.
The original point of granting such broad charters was to encourage the colonies to challenge land claims by other European powers to those inland areas. At the time Britain wrote these charters, there was no Pennsylvania colony, and New York was under the control of the Dutch. Further to the west, France and Spain had made land claims.
The New England states had not made any effort to act on these claims to the far inland areas during the colonial era. Connecticut had tried to claim some lands that eventually became part of New York and Pennsylvania, but never moved further west during the colonial era. Similarly, Massachusetts agreed to a western border with New York early in the colonial era. Pennsylvania’s western border was set by its colonial charter.
Massachusetts ceded its claims to western lands in 1785 without much fuss. Connecticut was more reticent. The state had only recently given up on its claims to what is today northern Pennsylvania. Connecticut colonists and Pennsylvania colonists actually fought over these claims before and during the Revolutionary war, and I mean literally went to war and shot at each other. The most recent flare up of the Pennamite-Yankee War took place in July 1784, after the Revolutionary war had ended, when a group of Connecticut Yankees burned a Pennsylvania fort and attempted to occupy land around what is today Wilkes-Barre. Pennsylvania militia soon captured and arrested the trespassers, but the conflict would simmer for many more years.
Connecticut also still hoped to claim the land west of Pennsylvania. Finally, in 1786, Connecticut gave up on most of these claims, but still claimed what it called the “western reserve,” an area of land that makes up most of what is today northern Ohio, along the southern bank of Lake Erie. In total, the reserve made up nearly 3.3 million acres, nearly the size of Connecticut itself.
There was also the issue of the Indians who actually lived on this land. Many of these tribes had been pushed into this land after having been pushed out of Pennsylvania and Virginia. But given the relative power of the United States, the tribes were not in a position to put up an effective resistance. As we discussed back in Episode 336, representatives of these tribes ceded much of the land in the Treaties of Fort Stanwix, Fort McIntosh, and Fort Finney. While many Indians did not recognize the legality of those treaties, it settled the matter legally as far as Congress was concerned. Even so, those treaties reserved large swaths of land for the Indians to remain in central Ohio, as well as further west.
Finally, there was the issue of settlers who already had taken some of this land. Virginia had carved out a district in what is today southern Ohio, to make good on its promises of land to Revolutionary War veterans. Thousands of acres had already been settled under the guidance of George Rogers Clark. There were also several settlements along the Mississippi River that Virginia had taken during the war. French settlers moving south from Quebec had established most of these little villages, and had land claims to them. While this posed no threat to Congress’ sovereign control of the land, it did have to respect the private property ownership claims on some parts of the territory. Those areas, however, were rather small and could be handled.
The bigger issue for Congress was squatters. These were private citizens who simply moved onto land and claimed it as their own, without paying for it and without registering it. In some cases, they made private deals with neighboring Indians to acquire their claims. In other cases, they just moved into an empty area and began developing the land. This was rough country with rough people settling the land. Without any government, squatters could use brute force to retain possession of their land claim. If Congress settled the land too slowly, squatters would simply move in ahead of them and take the land for themselves.
Yet, Congress could not move too quickly. The vast area of land available would have to be populated over many years. It would take several years just to survey the area. After that, trying to sell the land all at once would simply create a land glut that no one would be able to purchase. The result would be unsettled land simply going into private hands.
Speculators
Under the 1785 land ordinance, tracts of land were supposed to be sold in parcels of 640 acres. The plan was to sell the land at auction, but with a $1 per acre minimum. Of course, most private citizens could not come up with that kind of money, $640 for a parcel. Congress wanted all sales in specie, that is gold or silver. It was not going to accept paper dollars at face value. It required payment in full at the time of the sale.
Also, all of the land had to be surveyed before land sales could begin. The time for the surveys meant that land auctions did not begin until 1787.
There were groups of speculators who formed to take advantage of buying in bulk and then selling to individual families at a profit. As early as 1785, Nathaniel Sackett offered to take all the land which currently makes up most of the state of Ohio off Congress’ hands for nothing. Sackett’s plan was to serve as an administrator of the land, making sure that the land would go to families who would actually settle on the land that they bought from him, and that the land could not be resold for several years.
Some of you may recall the name Nathaniel Sackett. He was the Continental Army’s head of intelligence under General Washington during an early part of the war. Benjamin Talmadge later took over his role. Sackett, like Talmadge, was a character on the TV show, Turn. After leaving intelligence, Sacket made a fortune as a sutler for the army. He hoped to spend his post-war years creating and settling a new western state.
Sackett’s request for an entire state to be handed over to him for free might seem a bit outrageous. But you have to remember that in the colonial era, governors often gave away very large tracts of land to men who they thought would be capable of settling the territory, thus preventing foreign claims to the land from taking hold and keeping settlements organized. That said, Congress needed money and was not prepared to give anything away.
A serious effort to make bulk purchase of land came from the newly-formed Ohio Company of Associates. You may remember some discussions in really early episodes of this podcast of an Ohio Company that formed in the 1760s, when Virginia was pushing British officials to open up this same territory. That company folded when the Revolutionary War began. This new Ohio Company is a completely different one.
This new organization was founded by a group of investors, all veteran Continental Officers from New England. Major General Samuel Holden Parsons had several key commands in New York and Connecticut during the war. General Rufus Putnam, who helped to build West Point, and other important engineering projects. He only became a brigadier general at the very end of the war. Benjamin Tupper served throughout the war, with notable service at Saratoga and Monmouth. He received a brevet to brigadier general at the end of the war. The fourth founder was Manasseh Cutler, a New England minister who had served as a chaplain for several years during the war.
These four former officers who had served together during the war, met at Bunch of Grapes Tavern in Boston in March of 1786. If they could create a company that could front a large amount of money and offer some services in helping individuals to settle the territory, they could make a fortune.
During its first year, the Ohio Company sold shares to 250 investors. Meanwhile, Cutler traveled to New York on behalf of the company to lobby the Congress to purchase a large portion of the new territory. Initially, the company hoped to purchase 600,000 acres along the Ohio River. Congress rejected this offer.
The Scioto Group
Cutler began working with William Duer, who briefly served as a Continental colonel, also had served in both Congress and the New York state legislature during the war, and had sat on several congressional boards involving government finances. He had also amassed a small fortune through government contracts and the purchase of loyalist properties during the war. Duer was serving as secretary of the Congressional Board of Treasury when Cutler arrived in the summer of 1786.
Duer advised Cutler that Congress might find the deal more attractive if there was a larger offer for more land. Duer formed his own land company called the Scioto Group, which would take a much larger land claim further north and west of the land sought by the Ohio Company. This land would go as far west as the Scioto River, in what is today Central Ohio. Duer promised to raise a much larger investment group, taking in large investors from across America and Europe.
The two companies worked together to create an acceptable offer to Congress. Many investors put money into both companies, so they tended to work together in getting Congress to go along with a deal. Essentially the offer to Congress was an agreement for the Ohio Company to purchase 1.5 million acres, with an option to buy an additional 3.5 million acres. The Ohio Company turned over that option to the Scioto group. The buyers also insisted that the government assume the cost of governing these newly settled lands, offering military protection from Indians, as well as courts and law enforcement.
The Ordinance
The main problem with this offer is that Congress had no legal authority to accept it. The Land Ordinance of 1785 said that all land was supposed to be sold at auction, meaning one group could not just buy a really large chunk of land without giving anyone else a chance. The law also required minimum purchases at $1 per acre. The offer from the Ohio Company came to 67¢ per acre. They wanted to buy 1.5 million acres for $1 million dollars.
On top of that, the company was only offering paper money, Continental dollars and certificates from veterans that were currently trading at about 12¢ on dollar. So really, the company was offering the equivalent of about $120,000 in specie for the 1.5 million acres, or about 8¢ per acre. The company also was not willing to pay all of this up front, as was required under the law. They would pay half up front and half when the surveys were completed. The larger option for 3.5 million more acres would not require a purchase for several years, after which time that land would become much more valuable. This all meant that government insiders were getting a massive sweetheart deal on land that would enrich themselves as they sold off all the land at retail.
Since the offer did not comply with the current law, Congress had to vote on whether to create a new law to allow this deal to go forward. Over a period of more than a year, in late 1786 and early 1787 Congress debated the terms of a new ordinance for the territories.
One of the biggest changes was that Congress would initially assume governance of the new territories directly. Earlier laws had been written with the assumption that those who moved to the territories would govern themselves. Investors did not like the idea that they might have to go before locally elected judges and juries to assert their legal claims. Juries made up of locals would likely support the interests of locals.
Instead, the new ordinance established that the territory governed in three separate stages. In the first stage, a secretary, and three judges, all appointed by Congress, would govern. The second state would kick in once the population exceeded 5000 adult males. At that point, locals could vote for a lower house, but Congress would still appoint the governor and the rest of the executive and judicial branches, as well as an upper house in the legislature. Once the population reached 60,000, the people’s representatives could write a state constitution and petition Congress for statehood. Only when Congress agreed to the constitution would statehood be granted and the local population would have the full rights as states on an equal footing with the original 13 states.
The ordinance also guaranteed certain basic rights for all inhabitants. This included the freedom of religion, habeas corpus, trial by jury, due process of law, a prohibition on cruel and unusual punishments, protection of private contracts, and the free use of the waterways. There was an assurance that the government could not take private property without compensation, other than normal taxes that were similar to those paid by people in the original states. The law also provided for free public education, banned slavery and involuntary servitude, and guaranteed that the new states would have a republican form of government.
The new law retained the grid system that had been set up in 1785, where each township would be divided into 36 grids of 640 acres each. However, it did not attempt to set up territorial or state borders within the territory. Instead, it simply decreed that the whole territory eventually would be divided into at least three, but no more than five states. Until it was large enough to be subdivided, it would be governed as a single territory.
After considerable debate, Congress finally passed the Northwest Ordinance on July 13, 1787. Only one member of Congress voted against it. Abraham Yates was concerned that the movement into this territory would set off a series of wars with the Indians.
Congress further authorized the Board of Treasury to negotiate with the Ohio Company to come up with acceptable terms. This eventually led to the sale of 1.5 million acres for $1 million in depreciated currency, with only half paid up front, along with the 3.5 million acre option, just as the Company wanted.
Even with the deal in place, Congress did not receive the Ohio Company’s first payment until October, 1787. The Ohio Company began selling preferred lots of land, at first to insiders, for $10 per acre.
Settlement of the land would begin in 1788 when Rufus Putnam led a group of 48 New England settlers to establish what would become Marietta, Ohio. This settlement, on the north side of the Ohio River, directly across from a military outpost built on the southern bank.
Arthur St. Clair, who had been president of Congress when the ordinance passed, received appointment as the first governor of the Northwest Territory in October, 1787. He made his way to Marietta to assume governance of the new territory. The initial settlers arrived in April 1788. St. Clair arrived in July. The following month, the town of Cincinnati was established. That was where St. Clair made his home.
Next week, the nation’s leaders begin the Constitutional Convention in Philadelphia.
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Next Episode 345 Constitutional Convention Begins (coming soon)
Previous Episode 343 Shays' Rebellion
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Further Reading
Websites
Northwest Ordinance https://www.mountvernon.org/library/digitalhistory/digital-encyclopedia/article/northwest-ordinance
Northwest Ordinance (1787) [full text of ordinance]: https://www.archives.gov/milestone-documents/northwest-ordinance
Berkhofer, Robert F. “Americans versus Indians: The Northwest Ordinance, Territory Making, and Native Americans.” Indiana Magazine of History, vol. 84, no. 1, 1988, pp. 90–108. JSTOR, http://www.jstor.org/stable/27791142
HEGRENESS, MATTHEW J. “An Organic Law Theory of the Fourteenth Amendment: The Northwest Ordinance as the Source of Rights, Privileges, and Immunities.” The Yale Law Journal, vol. 120, no. 7, 2011, pp. 1820–84. JSTOR, http://www.jstor.org/stable/41149580
Hill, Robert S. “Federalism, Republicanism, and the Northwest Ordinance.” Publius, vol. 18, no. 4, 1988, pp. 41–52. JSTOR, http://www.jstor.org/stable/3330332
Hulbert, Archer Butler. “The Methods and Operations of the Scioto Group of Speculators.” The Mississippi Valley Historical Review, vol. 2, no. 1, 1915, pp. 56–73. JSTOR, https://doi.org/10.2307/1889105
Witgen, Michael. “A Nation of Settlers: The Early American Republic and the Colonization of the Northwest Territory.” The William and Mary Quarterly, vol. 76, no. 3, 2019, pp. 391–98. JSTOR, https://doi.org/10.5309/willmaryquar.76.3.0391
Background Information: Historical Information: Ohio Company of Associates https://library.marietta.edu/c.php?g=693159&p=4910822
Free eBooks
(from archive.org unless noted)
The records of the original proceedings of the Ohio company, Marietta Historical Commission, 1917.
Laws of the territory of the United States northwest of the river Ohio: adopted and published at a session of the legislature begun in the town of Cincinnati, Edmund Freeman, 1798.
Cutler, Julia P. The founders of Ohio: brief sketches of the forty-eight pioneers, Cincinnati: Robert Clarke & Co. 1888.
Cutler, William P. Life, Journals and Correspondence of Rev. Manasseh Cutler, LL. D, Vol. 1, Cincinnati: Robert Clarke & Co. 1888.
Dawes, E.C. The beginning of the Ohio Company, Cincinnati: Peter G. Thompson, 1882.
Hulbert, Archer B. “The Methods and Operations of the Scioto Group of Speculators” The Mississippi Valley Historical Review. Part 1 and Part 2, 1915.
Jarrold, Rachel Marian Arthur St. Clair: Governor of the Northwest Territory 1787-1802, Univ. of Illinois (Master’s Thesis) 1909.
Phillips, Philip Lee The first map and description of Ohio, 1787 by Manasseh Cutler, Washington: W.H. Lowdermilk & Co. 1918.
Taylor, Robert M. (ed) The Northwest Ordinance, 1787: A Bicentennial Handbook, Indiana Historical Society, 1987.
Books Worth Buying
(links to Amazon.com unless otherwise noted)*
Alexander, Robert The Northwest Ordinance: Constitutional Politics and the Theft of Native Land, Mcfarland, 2017.
Lindley, Harlow (ed) History of the Ordinance of 1787 and the Old Northwest Territory, Kesseinger Publishing, 1937 (borrow on archive.org).
Onuf, Peter S. Statehood and Union: A History of the Northwest Ordinance, Univ. of Notre Dame Press, 1987 (borrow on archive.org)
Sakolski, Aaron Land Tenure and Land Taxation in America, Robert Schalkenbach Foundation, 1957 (available on cooperative-individualism.org).
Taylor, Robert M. The Northwest Ordinance, 1787: A Bicentennial Handbook, Indiana Historical Society, 1987 (borrow on archive.org).
Williams, Frederick D. (ed) The Northwest Ordinance: Essays on its Formulation, Provisions, and Legacy, Michigan State Univ. Press, 1989 (borrow on Archive.org).
* As an Amazon Associate I earn from qualifying purchases.
