It is sometimes alleged that the American Revolution was the result of the inevitable clash of competing capitalisms and of England’s exploitation of the colonies. In the long run, such conjectures defy empirical testing. After all, how can one judge whether independence or British rule offered more promise for economic progress in North America?
Of course, the short-term consequences of independence can be assessed—a task that awaits us in chapter 7. But at this point, it is important to reconsider the question of colonial exploitation as a motive for revolt. Did British trade restrictions drain the colonial economy?
First, manufacturing restrictions had been placed on woolens, hats, and finished iron products. Woolen production in the colonies was limited to personal use or local trade, so this imposed no significant hardship. The colonists were quite satisfied to purchase manufactures from England at the lower costs made possible by the large-scale production methods employed there. This situation continued even after independence was achieved, and American woolens provided no competition for imported English fabrics until the nineteenth century.
A small portion of colonial manufacturing activity (predominantly New York producers) was hurt by the passage of the Hat Act in 1732. This one-sided legislation benefited London hatters by prohibiting the colonial export of beaver hats. For the overall American economy, however, the effects of the Hat Act were negligible. Similarly, parliamentary restrictions on iron proved moderately harmless. Actually, the colonial production of raw pig and bar iron was encouraged, but the finishing of iron and steel and the use of certain types of equipment were forbidden after 1750. Nevertheless, like the Molasses Act of 1733, restrictions on the manufacture of colonial iron were ignored with impunity: 25 iron mills were established between 1750 and 1775 in Pennsylvania and Delaware alone. Furthermore, the legislative freedom enjoyed by the colonists was amply displayed when the Pennsylvania assembly, in open defiance of the law, appropriated financial aid for a new slitting mill (nail factory). No matter how distasteful these British regulations were to the colonists, they were superfluous (woolen restrictions), ignored (the slitting mill), or inconsequential (hat production).
The generally liberal British land policy was designed to encourage rapid settlement. Only after the war with Chief Pontiac and the resulting Royal Proclamation of 1763 did land policy suddenly become less flexible. When land controls were tightened again by the Quebec Act of 1774, important political issues emerged. Western lands claimed by Massachusetts, Connecticut, and Virginia were redistributed to the Province of Quebec, and land was made less accessible. Territorial governments were placed entirely in the hands of British officials, and trials there were conducted without juries.
We have already assessed the economic implications of these land policies. Some people gained; others lost. But clearly, the climate of freedom changed swiftly, and the political implications of these new policies were hard for the colonists to accept. The major issue appears to have been who was to determine the policy rather than what the policy itself was to be. In fact, the British land policies proved to be largely necessary, and the same basic restraints were prescribed and adopted by the federal government after American independence was achieved. It seems unlikely that the new government would have adopted these restraints had they been economically burdensome (Economic Reasoning Proposition 2, choices impose costs).
The same thing was true of currency restrictions. After independence, the new government adopted measures similar to those England had imposed earlier. For instance, in 1751, Parliament passed the Currency Act, which prohibited New England from establishing new public banks and from issuing paper money for private transactions. A similar and supplemental Restraining Act appeared in 1764, in the wake of events in the Chesapeake area. Planters there were heavily in debt because they had continued to import goods during the Seven Years’ War even though their own exports had declined. When Virginia issued ?250,000 in bills of credit, to be used as legal tender in private transactions as well as for public sector payments (mainly taxes), British creditors stood to lose. To avoid uncertainties and avoid financial conflicts, Britain countered by extending the original Currency Act to all the colonies. This extension certainly hurt the hard-pressed Chesapeake region and stimulated its unusual support for the boycott of English imports in 1765. But the adoption of similar controls after independence indicates that the economic burden of currency restriction could not have been oppressive overall. The real point at issue was simply whether England or the colonists themselves should hold the reins of monetary control.
It appears that only with respect to the Navigation Acts was there any significant exploitation in a strict economic sense, as illustrated in Economic Insight 6.1. In the words of Lawrence A. Harper,
The enumeration of key colonial exports in various Acts from 1660 to 1766 and the Staple Act of 1663 hit at colonial trade both coming and going. The Acts required the colonies to allow English middlemen to distribute such crops as tobacco and rice and stipulated that if the colonies would not buy English manufactures, at least they should purchase their European goods in England. The greatest element in the burden laid upon the colonies was not the taxes assessed. It consisted in the increased costs of shipment, transshipment, and middleman’s profits arising out of the requirement that England be used as an entrepot. (Harper 1939)
While these burdens of more costly imports and less remunerative colonial exports amounted to nearly 1 percent of total colonial income, there were also benefits to the colonies: They were provided with bounties and other benefits such as naval protection and military defense at British expense.
THE SUPPLY AND DEMAND EFFECTS OF THE NAVIGATION ACTS
Supply-and-demand analysis is useful to illustrate explicitly the burdens on the colonists caused by the Navigation Acts. The requirement that England be used as an “entrepot” burdened the colonists with extra handling and shipping costs—costs over and above those that would have occurred had commodities been shipped directly from continental Europe. A graph using supply-and-demand curves illustrates the case for imports:
Commodities Imported from Europe via England
Let T represent these extra indirect routing costs on colonial imports from continental Europe. These extra costs may be viewed as a shift in the supply curve from S1 to S. The effect of the higher transport costs is to cause prices of the affected imports to be higher in the colonies, at P rather than P1, and quantities to be less, Q rather than Q1.
The change in price (P — P1) times the quantities traded (Q) gives a lower bound to the burden on colonial imports from Europe. (P — P1) (Q1) gives an upper-bound measure. A similar approach can illustrate the burdens of the laws on colonial exports to continental Europe. In this case, the export price in the colonies is lower because of the law. As the work of Roger Ransom (1968) has shown, these burdens were disproportionately large on southerners. Overall, however, the burdens on imports and exports from indirect routing were less than 1 percent of colonial income.31
In any case, the colonists had lived with these restrictions for more than a century. Even those hardest hit—the producers of tobacco and other enumerated products— almost never mentioned the restrictions in their lists of grievances against England. It is especially noteworthy that the acts of trade are not even mentioned in the Declaration of Independence.
Rather than exploitation, it was the rapidly changing and severely administered new colonial policies that precipitated the American Revolution. Before 1763, the colonists had been free to do pretty much as they pleased. An occasional new enactment or a veto of colonial legislation by Britain had caused little or no discord. After the Seven Years’ War, however, conditions suddenly changed. A host of new taxes and regulations were effected and strictly enforced by Britain. The new taxes were light, but their methods of collection borne heavily.
Collectively, the acts after 1763 gave almost every colonist a grievance: Debtors objected to the Currency Act; shippers and merchants to the Sugar Act; pioneers to the Quebec Act; politicians, printers, and gamblers to the Stamp Act; retailers and smugglers to the Tea Act. As colonial resentments flared, Committees of Correspondence pressed forward to formally claim the rights they had long held de facto before 1763 (Economic Reasoning Proposition 4, laws and rules matter).
In many ways, it appears that the growing economic maturity of the colonies would soon have made American independence inevitable. Indeed, the gross product of the colonies was nearly ?25 million at the time, or nearly one-third of England’s gross national product, as compared with only about one-fourth at the beginning of the eighteenth century. Clearly, the colonies had matured economically to a point at which an independent course was feasible.
But was revolution necessary to break away from the Empire? After all, other English colonies subsequently gained independence without resorting to armed warfare. By 1775, according to Charles Andrews, the colonies had reached a point where they were
Qualified to cooperate with the mother country on terms similar to those of a brotherhood of free nations, such as the British world is becoming today (1926). But England was unable to see this fact, or to recognize it, and consequently America became the scene of a political unrest which might have been controlled by a compromise, but was turned to revolt by coercion. The situation is a very interesting one, for England is famous for her ability to compromise at critical times in her history. For once, at least, she failed. (Andrews 1926, 232)
The nature of that “failure” is nicely summarized by Lawrence Harper:
As a mother country, Britain had much to learn. Any modern parents’ magazine could have told George III’s ministers that the one mistake not to make is to take a stand and then to yield to howls of anguish. It was a mistake which the British government made repeatedly. It placed a duty of 3d. per gallon on molasses, and when it encountered opposition, reduced it to 1d. It provided for a Stamp Act and withdrew it in the face of temper tantrums. It provided for external taxes to meet the colonial objections and then yielded again by removing all except one. When finally it attempted to enforce discipline, it was too late. Under the circumstances, no self-respecting child—or colonist— would be willing to yield. (Harper 1942, 14)
It would appear that the lessons the English learned from their failures with the American colonies served them well in later periods because other English colonies subsequently won their independence without wide-scale bloodshed. This colonial legacy was of paramount importance in the centuries to follow.
World History
