| |
|
Wall Street History
https://www.gofundme.com/s3h2w8
|
04/01/2005
America's Economic Power, Part III
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,” the new nation is growing.
By 1700 Pennsylvania’s population was more than 18,000 and
by 1776 Philadelphia was second only to London among cities in
the British Empire with a population of about 40,000 (including
nearby towns).
Wheat was a big product by the early 1700s and was grown in
Pennsylvania, New York and New England, but the market
internally was limited so the surplus was turned into flour and
sold to British and French West Indies in exchange for sugar and
molasses.
As for Britain itself, by 1700 it had overtaken the Netherlands as
Europe’s greatest trading nation and trade with Asia and America
now accounted for 40% of the British merchant marine traffic.
America was becoming increasingly productive during the
Colonial era, but the economy still wasn’t a complete one since it
relied on Britain for goods and services Americans couldn’t yet
provide for themselves; like banking. Britain prohibited the
establishment of banks in the colonies and wouldn’t export
British coinage as it sought to preserve its own money supply.
So America had no money. Sure, like every other place it started
out with a barter economy and progressed to wampum, Indian
beads, until someone figured out how to make more beads more
efficiently, flooded the market, and presto!...the value of
wampum plummeted.
It turns out that Massachusetts was the first to start minting its
own coins despite the prohibition against it the pine tree
shilling. Then in 1690, the colony issued ‘bills of credit’ –
promises to pay in the future – and these came in 5, 10, and 20
shilling denominations. It was legal tender and circulated as
money, the first paper money in the Western World.
Pennsylvania was the second to issue a form of paper money in
1723 and a young lad by the name of Benjamin Franklin ended
up with the contract to print Pennsylvania’s bills of credit.
Franklin, boy genius, was already devising ways to foil
counterfeiters, with some of his methods still in use today.
But the bottom line with both Massachusetts’ and Pennsylvania’s
attempts at paper money, they weren’t backed by anything, and
thus doomed to fail.
Nonetheless, the economy was continuing to diversify and in
1774 Philadelphia had 300 carriage makers as well as craftsmen
turning out superb works of furniture, while artists like John
Trumbull were doing a brisk business in portraits.
From 1750 to 1770 the population of the 13 colonies rose from
1,176,000 to 2,131,000; thanks both to immigration and very
large families (with a majority of children now living to
maturity).
John Steele Gordon makes an interesting point regarding the
demographics of the time that I frankly had never contemplated.
In the 1770s the top 20% of the population owned 2/3s of the
wealth, with the bottom 20% owning only 1%. But Gordon says
this is deceptive because the population was so very young and
children obviously possess no wealth. Another offered that of
those in their 40s only about 8% would have been considered
poor by the standards of the day. Gordon:
“The reason was, simply enough, that colonial America before
the Revolution was a land of opportunity such as the world had
not yet seen.”
The key was land, lots of it, as opposed to the West Indies and
Europe where little was undeveloped. If the family farm wasn’t
big enough, American families just up and moved to find bigger
tracts. And then you had the steady flow of immigrants,
especially after 1750.
In 1767 Sir Henry Moore, royal governor of New York,
explained that “as soon as the time stipulated in their indentures
is expired, they immediately quit their masters and get a small
tract of land, in settling which for the first three or four years
they lead miserable lives, and in the most abject poverty. But all
this is patiently borne and submitted to with the greatest
cheerfulness, the satisfaction of being land holders smooths
every difficulty and makes them prefer this manner of living to
that comfortable subsistence which they could procure for
themselves and their families by working at the trades in which
they were brought up.”
John Steele Gordon:
“This willingness to accept present discomfort and risk for the
hope of future riches that so characterized these immigrants, and
the millions who would follow over the next two centuries, has
had a profound, if unmeasurable, effect on the history of the
American economy.”
And then there is the evolving issue of slavery, which I’m not
spending time on in this space except to note Gordon uses the
life of Ben Franklin as an example of the changing attitudes of
society at large.
“In his youth he regularly ran advertisements in the Pennsylvania
Gazette for slaves he was selling. And he owned two, George
and King, who worked in his household. By 1750 he regarded
slavery as injurious to the welfare of a country because it bred a
contempt for labor, and he thought that slavery was economically
inefficient at best. By the last decades of his life, however, he
was an abolitionist. The first abolitionist society was founded in
Philadelphia in 1775, and Franklin accepted its presidency in
1787. By that time even major slaveholders such as George
Washington and Thomas Jefferson thought that slavery was
immoral, but neither knew how to rid the country, or even their
own plantations, of it.”
Finally, a word or two about taxes. The British government
during much of the 17th and 18th centuries ignored the colonies,
“other than to use them as a convenient dumping ground for
convicts and other undesirables,” [Gordon] and to protect its
economic interests such as in the West Indies.
But as Britain emerged as a Great Power it built up huge debts.
By 1748 and the end of the War of the Austrian Succession,
Britain’s national debt stood at 76 million pounds. Fifteen years
later at the end of the Seven Years’ War (called the French and
Indian War in North America), it was 131 million pounds. This
was at a time when a family could live in comfort on 100 pounds
a year.
So picture this. The British government spent 60% of its budget
on just servicing the debt, while at the same time still having to
maintain its vast armies. It only made sense that Britain then
looked to North America for support, and it’s not as if the
colonists were being heavily taxed. The average British subject
living in England paid 26 shillings a year in taxes while the
average American paid just one.
Sounds like a good deal to me, sitting here in colonial New
Jersey, but the rest of the colonists resisted paying more taxes
with every fiber of their being, arguing that Parliament had no
say in how they were treated, only their colonial assemblies did.
John Steele Gordon observes:
“As so often happens in a family quarrel, as the arguments
deepened, neither side made much of an attempt to understand
the other’s point of view, while more and more grievances were
aired. The colonists frequently stated that knuckling under to
British demands would reduce them from free men to slaves, a
condition of servitude with which they were all too familiar.
And, realizing that they no longer needed British military power
for their own defense, they could not see its necessity for the
empire as a whole.”
The British back home made fun of the “children” across the
pond, convinced their superb army could squash the colonists if
necessary. But one, William Pitt, Earl of Chatham, knew better.
“You cannot conquer America,” he told Parliament. His voice
fell on deaf ears.
Source: “An Empire of Wealth: The Epic History of American
Economic Power,” John Steele Gordon.
Next “Wall Street History” April 8 Eli Whitney and the cotton
gin.
Brian Trumbore
|
|
|
