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Wall Street History
https://www.gofundme.com/s3h2w8
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03/25/2005
America's Economic Power, Part II
Continuing with our look at the origins of America’s Economic
Power, as told by historian John Steele Gordon in his book “An
Empire of Wealth,” we pick up the story in the mid-1600s.
Last time we concluded with the advent of tobacco in Virginia.
Unfortunately, tobacco couldn’t save the Virginia Company and
it was eventually taken over by King James in 1624 who then
labeled Virginia a crown colony.
Around this time development in the Lesser Antilles was surging
and by 1650 there were more English emigrants living here than
in New England and the Chesapeake combined. The attraction
was sugar and as the Islands adopted this as the prime industry,
the Chesapeake stayed with tobacco.
The Portuguese had introduced sugar to Brazil while the Spanish
brought it to the Greater Antilles. [I’m always confused with the
titles and assume I’m not alone. The Greater Antilles include
Cuba, Hispaniola, Jamaica, Puerto Rico and the Cayman Islands.
The Lesser Antilles are comprised of the British Virgin Islands,
the U.S. Virgin Islands, Antigua, Barbados, Martinique and
Grenada, among others.] The cultivation of sugar is labor
intensive and the Portuguese and Spanish introduced black
slavery to the Americas during this period.
With European consumption of sugar growing at 5% a year, the
big sugar planters rapidly became among the world’s super rich.
But one of the prime production areas, Barbados, was becoming
overcrowded and those who could no longer earn a living there
were recruited by the Carolinas, or more specifically, what would
become South Carolina. The first big settlement was Charles
Town (shortened to Charleston in 1783) and by 1700 the
population of this city was 6,600 including 2,800 black slaves.
Too far north to grow sugar, the economy of Charleston relied
heavily on trade with the Indians of the interior, with one of the
key items being deerskins, which the colonists shipped on to
Europe. Deerskins? Well, they certainly were plentiful enough,
as they are today, for crying out loud but I digress. The
deerskins were used for things such as bookbindings, belts and
gloves. Between 1699 and 1715, Carolina exported an average
53,000 deerskins a year to England, worth some 30,000 pounds;
a very considerable sum.
Other items that were big for export back then were lumber
(shipped exclusively to the West Indies at first) and livestock.
The Carolinas actually had a thriving cattle industry and many of
the techniques that became associated with the American West
were started here. John Steele Gordon notes the term “cowboy”
was first applied to black slaves who herded cattle in colonial
Carolina.
And then there was rice, first introduced in the 1690s. The tidal
marshes of Carolina were ideal for rice growing and there were
ample markets. Exports totaled 400,000 lbs. in 1700 and a
whopping 43 million by 1740. Carolina rice, in fact, added
substantially to the gross domestic product of the British Empire.
Between tobacco and rice, you can see how the plantation
economies of the Carolinas and the Chesapeake boomed, but at
the same time there was little in the way of manufacturing.
Up in New England, the early settlers had more of a deep
religious commitment than those of the Southern colonies, which
also meant the first New Englanders were more law abiding than
their Southern brethren. It helped that the ratio of men to women
in New England was 6 to 4, whereas in the South it was 4 to 1,
plus New England had a healthier climate and its population
grew at a more rapid pace than that of the South.
Cod was the initial mainstay of the early New England economy.
By 1670, six million pounds of it was being exported, but then
lumber took over and by 1705, there were 70 sawmills on the
Piscataqua River in New Hampshire alone.
With lumber, New England’s ship-building industry boomed and
manufacturers could build one at about half the cost of those in
England. In the 40 years between 1674 and 1714, Boston
averaged 40 ships a year and by 1700, only the ports of London
and Bristol outstripped Boston in this regard throughout the
entire British Empire. England, though, had little need for most
of New England’s products.
“But New England had an ever-expanding need for Britain’s
manufactured goods. In response, several ‘triangle trades’
developed. New England lumber, fish, and meat was taken to
the West Indies and traded for sugar and salt. Those went to
Britain, where they were traded for manufactured goods,
principally textiles and hardware, which were then sold in New
England. West Indian molasses was distilled in New England
into rum and then sent to Africa and traded for slaves. The
slaves were sold in the West Indies. New England fish was
traded in Spain and Portugal for wine and fruit, which was sold
in Britain and paid for manufactures.” [John Steele Gordon]
Iron was also extremely important to the development of the
colonies and it had to be imported at first; nails, horseshoes, pots
and pans, plows, and weapons to name a few examples. John
Winthrop’s son, also named John, recognized the problem,
particularly when shipments from across the pond took over two
months.
John Jr. needed capital from England to build an iron plant and
part of his sales pitch was that there was an abundant amount of
wood in New England from which you could produce charcoal, a
key in the process. Winthrop was successful in raising a very
significant sum but he made the mistake of building the first
ironworks in Braintree, south of Boston. The water supply was
inadequate to power the plant there so Richard Leader, an expert
in such matters, was brought over from England and he
established a new ironworks in Lynn, north of Boston in what is
today the town of Saugus. By 1646, just 16 years after John
Winthrop the elder had founded the Massachusetts Bay Colony,
the colonists had a thriving iron plant .remarkable. In fact, did
you ever stop to think that early America was the greatest
emerging markets story of all time? Just musing, but I suppose
the only rival to it would be ancient Rome.
But back to the Lynn ironworks, some of the English investors
weren’t happy that one year into the project it wasn’t profitable.
Gordon notes though, “by the end of the summer of 1648, the
five-hundred-pound hammer imported from England and
attached to the waterwheel powered by the Saugus River was
pounding steadily away, driving the impurities out of the smelted
iron, and John Winthrop the elder could write his son that ‘the
furnace runnes 8 tun per weeke, and their barre Iron is as good as
Spanish.’” [sic]
It was the start of heavy industry in America. Gordon:
“The Saugus Iron Works by that time was also displaying
another aspect of the aborning American economy. In 1646 a
blacksmith at the works, Joseph Jenks, received a patent for a
device described as ‘engines for mills to goe with water,’ for
manufacturing edged tools, such as scythes. This is perhaps the
very first instance of the ‘Yankee ingenuity’ that has so
characterized the American economy, and often astonished the
world, ever since.”
But by 1676, the Saugus Iron Works were in financial distress
and forced to shut down. Nonetheless, despite this failure, by
1776 America’s colonies were providing 1/7th the world supply
of pig iron.
Meanwhile, by the early 1640s the tip of Manhattan Island was
growing with about 1,000 inhabitants speaking some 18
languages, according to the account of a French priest at the
time. And all seemed to be in Manhattan to make money even
then. Gordon notes:
“Indeed, the Dutch purpose for being in the New World could
hardly have been clearer. The seal of New Netherlands was a
beaver encircled with wampum, the form of money used by the
Indians.”
Next week trade booms and the population explodes.
Source: “An Empire of Wealth: The Epic History of American
Economic Power,” John Steele Gordon
Wall Street History returns April 1. No foolin’.
Brian Trumbore
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