Brief chronology of the initial economic developments of the colonies
Jamestown, Virginia colony was first to show signs of economic growth
Massachusetts Bay colonists buy corn from Indians
Literature generalizations and postulations on economy of colonies
Puritanism may have helped shape the capitalistic society to evolve
The strength of the British Navy altered colonial approach to economic growth
Colonial farmers' efforts were more towards self-sufficiency than wealth
Rate of Economic Growth in colonies
Colonial economy may have multiplied 25 times over a 120-year period of time
Average per capita annual income in 1650 was $572; in 1720 it was $826
Legislation was enacted requiring colonists to manufacture and use resources
In Virginia in 1661 a law passed ordering counties to establish tanneries
"bounties" were given to counties and cities to encourage production
E. Indentured Servitude was a big part of the colonial economy
1) An estimated 75% of all white European immigrants were indentured
2) Indentured Servitude opened the door to slavery in the colonies
3) Contracts for those indentured were bought, sold, and bartered as part of economy
F. Slave population grew dramatically between 1700 and 1770, and then it shrank
1) the need for domestic production of cotton kept slave trade strong in South
G. Taxation took many forms, but it was resisted
1) early colonists could pay taxes with cattle, beaver skins, and other commodities
2) Maritime taxes on vessels were avoided through fraud
3) The Sugar Act provided stimulus for the rebellion against the British
H. Coins and currency in general were hard to find, and caused confusion
1) John Hancock's uncle's situation is helpful in understanding currency chaos
Introduction to Term Paper - The Economy of Colonial America
Any thorough study of the economy of colonial America will necessarily take into account a vast amount of subjects and issues; this paper does not set out to cover all those topics, but it does attempt to examine many key economic aspects of that period.
Short Chronology of early / initial colonial economic development
In May, 1607, colonists land at Jamestown, Virginia, but starvation and disease reduce the original 105 settlers to only 32, according to The Almanac of American History (Schlesinger, 1983) (30). However, in 1608, new provisions arrive and a self-supporting project of raising corn is instituted - likely the first economic development in the colonies. Those same early Jamestown settlers brought skills at glassmaking with them and produce crafts, including beads, which are used in trade with Native Americans.
Also in 1608, the London Company sends glass experts to Jamestown to build glass furnaces for future production (32). Jamestown's Captain John Smith learns how to cultivate corn from the Indians; he plants 40 acres of corn, which helps avoid continuing starvation problems, and leads to an industry of agriculture.
Virginia isn't the only colony getting assistance from the Indians (Bidwell, 1925): in 1630, Massachusetts Bay colonists purchased "100 bushels [of corn] from Indians on Cape Cod and in 1634 they bought 500 bushels from the Narragansets (41). At Hartford on the Connecticut River in 1637 the supply of corn in the hands of the natives was considered so important that the trade was forbidden to individuals in the colony.")
In 1609, the English Crown (32) grants "joint stock company" status to the Virginia Company (formerly the London Company), offering much-needed capital.
The Literature on America's Colonial Economy
To gain an intelligent historical perspective on the myriad aspects of the economic development of America, zeroing in on the very important colonial period, it is extremely helpful if one first reads available scholarly literature - and authoritative texts - covering that period. With that in mind, a key question that needs addressing in these matters is, how viable was the American economy just prior to the War of Independence? There are conflicting answers to this question: Richard Buel's research indicates that the Colonial economy was weak and largely dependent upon the British (Chu, 2000), while Margaret Ellen Newell's view is that the Colonial economy of New England was "sufficiently strong to place it on a collision course with that of Britain" (Chu, 2000).
Chu's piece in The Journal of Interdisciplinary History (Summer, 2000) points out that, according to Newell's somewhat surprising research, Puritanism helped shape a culture that encouraged "material profit" through "specific incentives." Puritanism, which most casual readers of history identify with spiritual values, succeeded in this effort by establishing a "regulatory impulse" which in turn "produced a moral framework that gave rise to a dramatic commercial change."
These commercial changes, according to Chu's take on Newell, "redirected" the colonists' focus to the positive side of local economic expansion. And in time, as the British manipulated colonial currency - to adjust "the chronic imbalance of payments" - those acts spawned protests and boycotts by the colonists. These protestations, along with the adaptation of Puritan culture "to a pattern of consumption and economic development" which appeared less desirous of "luxurious lifestyles and moral corruption," Chu continues, led to the development of a political economy. In short, Newell writes that capitalism emerged in the colonies as an outgrowth of individualism, which was pushed forward by Puritanism, domestic manufacturing and the concurrent boycotting of British goods.
Buel's approach to explaining the emergence of a capitalistic system in the colonies is to link, according to Chu, the "culture of grain production, British naval activity," and the young nation's balance of trade with the enormous task of creating a national economy. The strength of the British navy put the colonial economy "in irons," to quote Buel's use of a naval phrase.
Further, because wheat has a longer shelf life than corn or rye, Chu goes on, paraphrasing Buel, the military preferred wheat, which stimulated a dramatic increase of its production - which in turn "encouraged the development of larger, more centralized flour mills." And as colonial shipbuilders produced vessels that were smaller and quicker (to avoid and evade the British blockade), yet carried smaller cargos, that dynamic raised the price of wheat at a time when colonists needed revenue to buy imports.
While Buel and Newell disagree on key events which led to the development of an independent and capitalistic economy in the new nation, "both authors" (Chu, 2000) observe that the drive for independence from England "rearranged legal and commercial relationships." Moreover, the separation from England "compelled the reconsideration of economic relationship."
Newell argues that the Revolution "was not so much an intellectual breakthrough" as it was "a refinement and extension of earlier ideas about material prosperity, diversification, manufactures, government oversight and commercial access."
Notwithstanding Buel's "culture of wheat" concept, and the presumption of many scholars that America's capitalistic economy sprang from agricultural productivity of early New England, an article in The Wilson Quarterly (Wood, 1999) asserts that a new genre of scholarship is pushing forward the idea that "colonial farmers, particularly New England Farmers, did not possess a capitalistic mentality after all." Indeed, Wood points out - while relating view of "social" or "moral economy" historians - that "capitalistic practices and values were not central" to the lives of North American colonists prior to 1750.
Most of the output from farmers, Wood continues, was "not for sale in the market," but rather, was for "family or local consumption." Family farmers were out to satisfy their children's needs, and they looked to obtain more land "not to increase their personal wealth" but to provide estates for their "lineal families." In this regard, farmers were "enmeshed in local webs of moral and social relationships" which by their nature, "inhibited capitalistic behavior," according to Wood's research piece.
To meet their needs, farmers produced their own goods, and traded goods and services within their community structures. The debits and credits which were part of the swapping of goods and services were handled in "book accounts" - which were networks based "largely on mutual trust." This trust, according to Wood, led New England farmers into a moral and communal culture, rather than a capitalistic one.
What was the rate of economic growth in the colonies?
In reviewing the actual growth of colonial economies it is useful to turn to a book which is rich in charts, facts, time-frame comparisons and data - a book such as The Economy of British America, 1607 -1789 (McCusker, et al., 1991). This text presents several strategies with which to observe economic growth during this period. If, on one hand, one assumes "that the colonists produced goods and services at the same level per person in 1770 as they had in 1650" (53), and hence increased output (gross national product) at the same rate as the population increased, then the colonial economy "multiplied about twenty-five times" over that 120-year window of time. That breaks down into an annual growth rate of 2.7% for "British America" and 3.2% for "British North America" (read that, the northern colonies).
Another formula for determining economic growth (59) is to use a "more conservative 0.3% per capita yearly growth…