Productivity Gains in Transportation and Distribution

Although productivity advances in agriculture were slow and gradual, substantially higher gains were registered in the handling and transportation of goods. Such gains were extremely important because transportation and other distribution costs made up a large portion of the final market price of products. This was especially true of the bulky colonial products, which were normally low in value relative to their weight or volume (displaced cargo space). For example, transportation and handling costs would double the value of a barrel of pitch between Maryland and London. Even the distribution costs of expensive lightwares represented a significant fraction of their value.

During the eighteenth century, the differential between English and colonial prices for manufactured goods shipped to the colonies was declining at a fairly steady rate. In the early decades of the century, it was not uncommon for English goods to sell for 80-140 percent more in the colonies than in England. By midcentury, prices on British wares were 45-75 percent higher in the colonies. Finally, just before the Revolution, this price spread had been reduced to a range of only 15-25 percent. As late as the 1770s, however, colonial staples such as pitch, tar, lumber, rice, and other spaceconsuming exports were still commanding more than double their domestic price in normal English and European markets.

TABLE 5.1 TOBACCO PRICE RATIOS

PRICE IN EUROPE-PRICE IN AMERICA PRICE IN EUROPE

Source: Shepherd and Walton 1972, 60.

Table 5.1 shows evidence of improvements in the marketing and distribution of transatlantic tobacco shipments. The average differential between the Amsterdam and the colonial price of tobacco (given as a percentage of the Amsterdam price) declined (Shepherd and Walton 1972).

A series of advances in transatlantic tobacco distribution stemmed from improvements in packaging and merchandising, from declining costs of information on prices and markets, and from reductions of risk in trade. By far, however, the most important improvements were in shipping. Although freight rates fluctuated and varied according to route, and between periods of war and peace, the long-run trend was persistently downward. During the 100 years preceding the Revolution, the real costs of shipping were almost halved. Expressed in terms of productivity gains, shipping advanced at a rate of approximately 0.8 percent per year. For that period—and specifically compared with changes in agriculture—these increases suggest that shipping was a strategic factor in the overall economic advance of the colonies.

Sources of Productivity Change in Shipping What caused these productivity gains? In cases in which trades were well organized and markets reasonably large and safe, economies of scale in shipping were usually realized. In the Baltic timber trades, for instance, the use of larger vessels generated labor savings per ton shipped. Although larger ships necessitated larger crews, the increased cargo capacity more than compensated for the additional labor costs. As vessels increased in size, their carrying capacity per unit of labor also increased. In other words, on larger ships, fewer men were needed to transport a given volume of goods.

Despite these possibilities, the average size of vessels employed in the western Atlantic and in the Caribbean failed to increase significantly over the 100-year period. The potential labor savings of the larger ships were offset by greater occurrences of low utilization in these waters. In fact, in those numerous small and scattered markets, the port times of large vessels were usually as much as twice as long as those for small vessels. Therefore, in colonial waters, schooners and sloops normally traveled a larger number of miles per ton than did large ships or brigs. Nevertheless, because crew sizes decreased as vessels remained unchanged in size, the number of tons per man increased. For example, a Boston vessel of 50 tons employed an average of seven men early in the eighteenth century, but by the late colonial period, the same ship required only five crew members. Over this same time span, the crew size of a typical New York vessel of 50 tons decreased from 11 to 7 members. Paralleling this reduction in labor was the reduction or elimination of armaments on vessels that traded in colonial waters. Guns had been commonplace on seventeenth-century vessels trading in the western Atlantic, but cannons had all but disappeared on ships there by the end of the colonial period.

Although the average useful life of vessels changed little over the period, insurance rates decreased due to the declining risks in ocean travel. In contrast to earlier times, by 1720, insurance rates for most one-way transatlantic passages had reached the rock-bottom common peacetime level of 2 percent. Of course, rates for voyages into pirate-infested waters were quite another matter. Between New York and Jamaica, for example, the prevailing rate of 5 percent in 1720 had dropped to 4 percent by the 1770s. On routes from New England to various other islands in the West Indies, peacetime insurance rates were halved between 1700 and 1775.

Faster ship speed was not a positive force in raising productivity. Vessels from New England and the Middle colonies that sailed to the West Indies and back showed no gains in speed on either leg of the journey during this period, as shown in Figure 5.2. Nevertheless, round-trip voyage times declined from 1700 to 1775. As Figure 5.3 shows, with the single exception of Boston, layover times fell markedly in many key ports in the New World. Because a very large portion of a sailing ship’s life was spent in port, such declines contributed greatly to higher productivity. For example, in the Chesapeake trade, vessels were in port more than twice as long at the end of the seventeenth century as they were in the 1760s. An important contributor to this change was the introduction of Scottish factors (representatives of Scottish merchant firms) into the Chesapeake Bay area after 1707. Undoubtedly, their methods of gathering and inventorying the tobacco crop in barns and warehouses for quick loading significantly shortened port times in the Chesapeake Bay.

Similarly, port times in Barbados were halved during this period. In the early colonial days, port times were extraordinarily long because exchanges were costly to transact. The many scattered markets were small and remote, and prices varied widely among islands and even within the same island. The shipmaster, acting on behalf of a merchant, might have to visit several islands on one trip to find the best market for his cargo. Difficulties

FIGURE 5.2 Average Ship Speeds (knots)

FIGURE 5.3 Average Port Times

Source: Walton 1967, 75.

In negotiating prices and determining the medium of exchange, as well as possibly settling past debts, all tended to lengthen the transaction period. Often, bartering was practiced, but even when money was used, prices were not easy to determine because different currencies and bills of exchange (with varying degrees of risk) were afforded no set value. Finally, the problem of collecting cargoes extended port times, especially when harvests were poor.23 As a more systematic market economy and other institutional changes evolved, long layovers in the Caribbean became less common.

Decreasing port times produced savings not only in capital but also in labor costs, because crews were customarily fed and paid while they were in foreign ports. Such savings more than offset other sources of cost increases. Although wages and ship repair costs remained fairly constant over the period, the costs of shipbuilding and victualing (obtaining food for the crew) increased. Overall, however, the productivity gains countervailed, and freight costs were cut in half between 1675 and 1775.

THE HORSE AND INSTITUTIONAL CHANGE IN INDIAN CULTURE

Like an invention, the northward diffusion of the horse, 1601-1740, first introduced in the New World by the Spanish in the sixteenth century, imposed dramatic changes on the daily lives of North American Indians. This was especially true of Indians living on the Great Plains. Before the horse, they were seminomadic, living much of the year in communal earthen lodges and cultivating gardens of beans, squash, and corn. Summers and falls found them on the move, on foot with dogs dragging teepees, following and hunting buffalo, thereby adding meat to their diet.

On foot and with dogs, a good day’s journey was about 5 miles. In winter a few hunters could succeed in stalking a few bison; in good weather, larger bands of hunters used tactics of surrounding small herds and killing them with arrows. Given appropriate terrain, the “pedestrian drive” was used where herds were driven into traps or over cliffs.

The most immediate impact of the horse was to reduce the amount of agricultural work plains Indians had done. This changed the balance of their diet. It also led to more extensive killing and less intensive use of the meat on the carcass—“light butchering,” as it was called.

From 5 miles a day, the hunting groups on horses could cover 20 miles. Instead of a 50-mile hunting area in a season, they were soon able to extend their range to 500 miles. Hunting groups became smaller and more independent since communal schemes (a type of insurance) were less needed: less time was spent in

Fixed locations in communal earthen lodges, and horse power enabled the movement of larger teepees that dogs could pull on travois (wheelless carts).

Pasturage and water sources took on greater importance, intensifying the problem of campsite selection. Before the horse, intertribal warfare was rare; afterward, intertribal alliances were few and warfare was frequent.

The horse also changed the balance of power and military technology in dramatic ways. Indeed, S. C. Gwynne’s (2010) subtitle promotes the Comanches as the most powerful Indian tribe in American history. From a small impoverished people in eastern Wyoming in the early 1700s, they developed horseman skills and bow and arrow shooting skills that made them completely dominant over other tribes, Mexican settlements and white settlers throughout the Great Plains, even south of the Mexican border. These extraordinary warriors were not subdued until the late 1800s, in large part because of the colt revolver and Springfield repeating rifle, and the Texas Rangers who developed Comanche fighting strategies and tactics.

Finally, like land to the Europeans, the horse became the symbol of wealth and prestige for Native Americans. It was a form of personal property (including right to inheritance, trade, use, and exclusion of use). Especially on the plains, the institutional changes brought about by the horse were so great that the number of horses owned often meant the difference between survival, starvation, and conquest (see Anderson and LaCombe 1999 for elaboration).