In The Sacred Fire of Liberty: James Madison & the Founding of the Federal Republic, Lance Banning argues that, at the conclusion of his tenure with the Continental and Confederation Congresses (1780-1783), there were "few signs, as yet, that [James Madison] would favor, much less author, any plan for sweeping constitutional reform."
What pushed Madison in that direction was his growing realization during his service in the Virginia legislature beginning in 1784 that the States were unable, under the Articles of Confederation, to force the British and other European powers to dismantle the mercantilist barriers that prevented Americans from exporting their agricultural produce. Citing and applying the arguments of Drew McCoy (discussed in this recent post), Prof. Banning argues that Madison believed that the failure to obtain adequate export markets threatened the republican experiment, and that the failure of the States to cooperate with each other to achieve this goal by confronting the British and others eventually led Madison to the conclusion that a stronger federal government with authority over commerce was necessary (emphasis added):
A healthy public life had economic preconditions, and a sound political economy for the United States demanded demolition of the mercantilist barriers that all of the European powers - and Britain most injuriously of all - had placed around themselves and their possessions. When Madison reentered the Virginia House of Delegates [in 1784] . . . he was hopeful that this goal, along with other changes, could be gained within the framework of the current federal system. The failure to achieve it, together with the implications that this failure seemed to hold for both Virginia and the Union, would become the single strongest impetus for his conclusion that a strictly federal government was not just self-destructive, but a peril to the revolutionary order. From this thought, in turn, would come his dedication to a thoroughgoing structural reform.
Among other things, Prof. Banning cites this August 7, 1885 letter to James Monroe, which he characterizes as "the earliest in all of [Madison's] surviving papers to suggest that mutual hostilities resulting from the separate regulations of the states and from repeated failures to achieve unanimous agreement to amendments of the present system [the Articles of Confederation] might require complete reconstitution of the current federal Congress or replacement of that Congress altogether by a 'medium' that would elicit greater trust" (emphasis added; paragraph breaks added):
I received the day before yesterday your favour of the 26th July. I had previously recd. the Report on the proposed change of the 9th. art: of the Confederation, transmitted by Col: Grayson, and in my answer to him offered such ideas on the subject as then occurred. I still think the probability of success or failure ought to weigh much with Congress in every recommendation to the States; of which probability Congress, in whom information from every State centers, can alone properly judge.
Viewing in the abstract the question whether the power of regulating trade, to a certain degree at least, ought to be vested in Congress, it appears to me not to admit of a doubt, but that it should be decided in the affirmative. If it be necessary to regulate trade at all, it surely is necessary to lodge the power, where trade can be regulated with effect, and experience has confirmed what reason foresaw, that it can never be so regulated by the States acting in their separate capacities. They can no more exercise this power separately, than they could separately carry on war, or separately form treaties of alliance or Commerce. The nature of the thing therefore proves the former power, no less than the latter, to be within the reason of the fœderal Constitution.
Much indeed is it to be wished, as I conceive, that no regulations of trade, that is to say, no restrictions or imposts whatever, were necessary. A perfect freedom is the System which would be my choice. But before such a system will be eligible perhaps for the U. S. they must be out of debt; before it will be attainable, all other nations must concur in it. Whilst any one of these imposes on our Vessels seamen &c in their ports, clogs from which they exempt their own, we must either retort the distinction, or renounce not merely a just profit, but our only defence against the danger which may most easily beset us.
Are we not at this moment under this very alternative? The policy of G. B. [Great Britain] (to say nothing of other nations) has shut against us the channels without which our trade with her must be a losing one; and she has consequently the triumph, as we have the chagrin, of seeing accomplished her prophetic threats, that our independence, should forfeit commercial advantages for which it would not recompence us with any new channels of trade.
What is to be done? Must we remain passive victims to foreign politics; or shall we exert the lawful means which our independence has put into our hands, of extorting redress? The very question would be an affront to every Citizen who loves his Country.
What then are those means? Retaliating regulations of trade only. How are these to be effectuated? only by harmony in the measures of the States. How is this harmony to be obtained? only by an acquiescence of all the States in the opinion of a reasonable majority.
If Congress as they are now constituted, can not be trusted with the power of digesting and enforcing this opinion, let them be otherwise constituted: let their numbers be encreased, let them be chosen oftener, and let their period of service be shortened; or if any better medium than Congress can be proposed, by which the wills of the States may be concentered, let it be substituted; or lastly let no regulation of trade adopted by Congress be in force untill it shall have been ratified by a certain proportion of the States. But let us not sacrifice the end to the means: let us not rush on certain ruin [collapse of the Confederation] in order to avoid a possible danger [consolidation]. I conceive it to be of great importance that the defects of the fœderal system should be amended, not only because such amendments will make it better answer the purpose for which it was instituted, but because I apprehend danger to its very existence from a continuance of defects which expose a part if not the whole of the empire to severe distress.
The suffering part, even when the minor part, can not long respect a Government which is too feeble to protect their interest; But when the suffering part come to be the major part, and they despair of seeing a protecting energy given to the General Government, from what motives is their allegiance to be any longer expected. Should G. B. persist in the machinations which distress us; and seven or eight of the States be hindered by the others from obtaining relief by fœderal means, I own, I tremble at the anti-fœderal expedients into which the former may be tempted.
As to the objection against intrusting Congress with a power over trade, drawn from the diversity of interests in the States, it may be answered, 1. that if this objection had been listened to, no confederation could have ever taken place among the States, 2. that if it ought now to be listened to, the power held by Congress of forming Commercial treaties by which 9 States may indirectly dispose of the Commerce of the residue, ought to be immediately revoked. 3 that the fact is that a case can scarcely be imagined in which it would be the interest of any 2/3ds of the States to oppress the remaining 1/3d. 4. that the true question is whether the commercial interests of the States do not meet in more points than they differ.
To me it is clear that they do: and if they do there are so many more reasons for, than against, submitting the commercial interest of each State to the direction and care of the Majority. Put the West India trade alone, in which the interest of every State is involved, into the scale against all the inequalities which may result from any probable regulation by nine States, and who will say that the latter ought to preponderate?
I have heard the different interest which the Eastern States have as Carriers pointed out as a ground of caution to the Southern States who have no bottoms of their own agst their concurring hastily in retaliations on G. B. But will the present system of G. B. ever give the Southern States bottoms: and if they are not their own Carriers I shod, suppose it no mark either of folly or incivility to give our custom to our brethren [fellow states] rather than to those who have not yet entitled themselves to the name of friends [Great Britain].
In detailing these sentiments I have nothing more in view than to prove the readiness with which I obey your requests. As far as they are just they must have been often suggested in the discussions of Congress on the subject. I can not even give them weight by saying that I have reason to believe they would be relished in the public Councils of this State. From the trials of which I have been a witness I augur that great difficulties will be encountered in every attempt to prevail on the Legislature to part with power. The thing itself is not only unpalatable, but the arguments which plead for it have not their full force on minds unaccustomed to consider the interests of the State as they are interwoven with those of the Confederacy much less as they may be affected by foreign politics whilst those wch. plead agst. it, are not only specious, but in their nature popular: and for that reason, sure of finding patrons.
Add to all this that the mercantile interest which has taken the lead in rousing the public attention of other States, is in this so exclusively occupied in British Commerce that what little weight they have will be most likely to fall into the opposite scale. The only circumstance which promises a favorable hearing to the meditated proposition of Congs. is that the power which it asks is to be exerted agst. G. B, and the proposition will consequently be seconded by the animosities which still prevail in a strong degree agst. her.
I am My dear Sir very sincerely Yr friend & servt.