The Continental Congress's choice of George Washington over Charles Lee set in motion fiscal and monetary consequences that shaped the American state. A lesson for traders on how war strategy drives institutional risk.
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The Continental Congress faced a decision on June 15, 1775 that would determine not only the outcome of the American Revolution but the fiscal and institutional structure of the United States. The appointment of George Washington as commander-in-chief over Charles Lee was a risk event that cascaded into decades of inflation, debt, and centralization. For a trader or risk manager, the episode is a textbook case of how a single strategic choice can predetermine the monetary and fiscal legacy of a conflict.
The immediate event was the vote to appoint Washington. The alternative, Charles Lee, was a British-born officer with extensive combat experience in the French and Indian War, the Seven Years' War, and as aide-de-camp to Poland's King Stanislaus. Lee was passed over largely because he lacked a political base in Congress. As Murray Rothbard wrote, "If the choice of commander-in-chief of the Continental Army had been made on the basis of ability, genius, military experience, erudition, ardor for the cause of liberty, or for a combination of these qualities, this crucial appointment would have gone not to Washington but to one Charles Lee."
The war strategy dictated the fiscal and administrative demands. Washington's approach required a professional standing army, centralized supply chains, and sustained financing. That meant borrowing, issuing paper currency, imposing price controls, and direct impressment of supplies. Lee's alternative would have relied on militia ambushes, harassment of supply lines, and making occupation too costly to sustain–a strategy that later became known as guerrilla warfare and that required far less centralized apparatus.
Jeffrey Rogers Hummel summarized the stakes: "Military conservatives, such as Washington, wanted to fight the Revolution according to the conventional principles of eighteenth-century warfare, with a sizeable and costly professional army. Some military radicals, such as Charles Lee, pointed toward a less orthodox military-oriented strategy along the lines of what today is called guerrilla warfare, which would have been more decentralized and less expensive."
Washington sought to replicate European military norms: a uniformed standing army, hierarchical command, pitched battles, and a professional officer corps. This required Congress to raise and sustain a large force. The Continental Army peaked at roughly 80,000 men, though only a fraction were in the field at any time. Financing came from Continental dollars–paper money not backed by specie–which led to rapid depreciation and price inflation. By 1780, the continentals were worth less than 2% of face value.
Lee argued that America's strengths lay in its armed citizenry, familiar with firearms and terrain. In his 1774 pamphlet "Friendly Address to All Reasonable Americans," Lee wrote: "The Yeomanry of America have, besides infinite advantages, over the peasantry of other countries; they are accustomed from their infancy to fire arms; they are experts in the use of them. … this continent may have formed for action, in three or four months, an hundred thousand infantry." Lee envisioned militia units operating independently, avoiding decisive engagements, and forcing the British to spread their forces over a vast territory.
The decision to fight conventionally exposed the entire American population to fiscal and monetary burdens. Price inflation eroded the value of wages and savings. Price controls led to black markets. Impressment of supplies and conscription created resentment and undermined the very liberties the Revolution claimed to defend. As Hummel wrote, "Those excesses naturally aroused resentment, and they played into the hands of the nationalists, who contended that only stronger central authority could alleviate them."
Congress printed Continental dollars to pay soldiers and suppliers. Without tax backing, the currency depreciated. By 1779, the price index had risen more than tenfold. This inflation functioned as a hidden tax on holders of cash and fixed-income assets. The price controls imposed by states further distorted markets, leading to hoarding and shortages. Lee's decentralized approach would have required far less currency issuance, potentially avoiding the inflationary spiral.
The primary "asset" at risk was the decentralized republic envisioned by the Anti-Federalists. The standing army, the national debt, the power to tax, and the central bank all emerged from the war's fiscal demands. As Rothbard noted, "any army under the Continental Congress would mean, in contrast to a guerilla army, the inevitable buildup of a central state apparatus, and of a high expensive and burdensome state army, which would inevitably saddle all Americans with heavy taxes, inflation, and debt."
A Lee-style guerrilla war might have avoided most of these excesses by keeping military demands small and decentralized. The cost of victory would have been measured in time and local effort rather than in institutional accretion.
If Lee's strategy had been adopted, the following mechanisms would have mitigated the fiscal and political risks:
The risk reduction comes from aligning the war strategy with the comparative advantage of a decentralized society: mobility, local knowledge, and a motivated citizenry.
Conversely, Lee's strategy had its own risks:
These are real trade-offs. The risk event of choosing Washington was a bet on conventional victory that came with centralization costs. Choosing Lee would have been a bet on decentralized resistance that came with coordination costs.
The lesson is not that Lee was the superior choice. The lesson is that the choice of war strategy is itself a risk factor for the post-war order. For market participants evaluating geopolitical risk today, the mechanism remains relevant: how a conflict is fought determines the fiscal and institutional legacy. Wars fought with large standing armies and deficit spending tend to produce centralization and inflation. Wars fought with local forces and minimal state apparatus tend to preserve decentralized power structures.
The American Revolution's outcome was not inevitable. It was a product of the risk event in 1775. Charles Lee's alternative strategy represents a lost path–one that might have delivered independence without the central state that followed. Whether that would have been preferable is a matter of values, not facts. The mechanism is worth understanding.
Prepared with AlphaScala editorial tooling from the source reporting linked above. Indexable analysis may include a cited Alpha Score value. Publishing checks screen each story before release. Educational coverage, not personalized advice.