From Independence in 1776 to 1781, United States existed without any formal constitution. The Second Continental Congress continued to serve as an extralegal body from the Revolution. In 1781, however, the needs for a new government took a form of a plan called the Articles of Confederation, drafted by John Dickinson. Although the Articles of Confederation gave the United States a first formal constitution, it did not provided an effective form of government with respect to Economic conditions. In contrast, however, the Articles of Confederation did provided an effective form of government with respect to Western lands.
The confederation had been purposely constructed to be weak and secondary to the state governments. The lack of centralized authority of the confederation government provided a troublesome solution with respect to the economic conditions of the government. After the war in 1776, the confederation and the individual states had run up a huge war debt. To finance, the confederation printed paper money and borrowed from private sources. Millions of dollar in paper currency had ejected into the nation's economy, causing prices and wages to rise and fall. By 1781, the Continental dollars had lost almost all of its values. Some state legislatures such as Rhode Island continued to print their own currency. In 1786, Rhode Island's state legislature passed laws requiring paper currency to be accepted at full value, causing inflation in the economy. Because the Articles on Confederation reserved most economic powers to the states, congress was powerless to control inflation and curb the flow of state issued paper money. Another ineffectiveness of the Articles of Confederation was the power of taxation. According to the Articles, most of the power to tax was given to states to preserve the principle of taxation only by direct representation. Through voluntary taxation, each state was to contribute to the common treasury in proportion to the property value of the state's land.
