The Navigation Acts • The Navigation Acts: Mercantilist policy designed to promote British industry. • This policy was designed to encourage the colonies to only trade with England, thus promoting the British economy. • Specific purpose: • Promote imperial self-sufficiency. i.e. cheap imports. (vertical integration) • Generating export earnings by the production and sale of a product of a good in demand outside the empire. • Providing a market for England’s exports.
The Cost of the Navigation Acts Robert Thomas (1965) • Should one investigate the cost of being a colony prior to 1763? Not if one considers the available choices, which were none. • Navigation acts forced the colonies to earn less and sell fewer exports. Furthermore, these acts forced the colonies to pay more and consume fewer imports. Thomas estimated the total cost in 1770 to be $3.1 million. • This total was offset by $440,000 by the benefits of being in the British empire (protection from foreign competition, subsidies).
The Cost of the Navigation Acts Robert Thomas (1965), cont. • The net burden per-capita was $1.24, or about 2% of per-capita GDP. • Considering the net benefit of British military protection, the final per-capita cost was $0.41, or less than 1% of per-capita GDP.
Problems with the Thomas Calculations • Does the burden fall on every member of the colonies equally? • The South should have suffered more, although the New England states had the strongest opposition to these Acts. • Thomas used data from Philadelphia and Amsterdam to measure American -European price differences. It is doubtful that these are representative prices.
The Cost of the Navigation Acts:Peter McClelland • Peter McClelland offers a different perspective, based upon variables for which more is known. • Z < S * P * TRADE • Z = the burden of the acts as a fraction of GNP • S = fraction of increase in shipping cost (40%) • P = proportion of trade bearing the extra shipping costs. (50%) • TRADE = (X + M) / GNP • X = value of colonial exports • M = value of colonial imports • GNP= GNP of the colonies
The Cost of the Navigation Acts:Peter McClelland, Cont. • Using this method, McClelland estimates the impact of the Navigation Acts was 3% of GNP. The authors of the text consider this small. • Question: How small is small?
The Colonial Money Supply Questions • Was There a Money Shortage in Colonial America? • What forms of money were used in Colonial America? • With respect to colonial America, what is a bill of credit and how did it function? • Who benefits from declaring a bill of credit legal tender and who is harmed? • What methods are available to a nation to finance a war. • How did the Continental Congress choose to finance the Revolutionary War? • How did the “Continental” experience impact the writing of the Constitution?
British Land Policy • Review British land policy both prior to and after the Seven Year war. How did this policy impact colonial-empire relations? • The Seven Year War and the Proclamation of 1763 • The Quebec Act of 1774
The British and the American Revolution • Proclamation of 1763 - Limits western expansion. British reason: Moved control of Native American affairs from the colonies to the crown. • Currency Act of 1764 - Restricts the declaration of Bills of Credit legal tender. Also colonial paper money, by this act, would be self-limiting by establishing reserves to back the issue of currency. British reason: Creation of a more stable money supply. 3. Sugar Act of 1764 - Designed to protect West Indian interests by placing taxes on foreign sugar and molasses. 4. Stamp Act of 1765 - Designed to increase tax revenue from colonies.
The British and the American Revolution • 1767: Additional taxes are placed on tea, glass, and paper. • Tea Act of 1773 - reduced the price of tea by granting the East India Company the right to sell tea directly to the colonies. • Port of Boston Act of 1774: Response to the Boston Tea Party • Massachusetts Government Act of 1774 - makes Massachusetts a crown colony. • Quebec Act of 1774 - granted territory to Quebec that colonies had laid claim to.
Why the Revolution? • Land settlement • Control over money supply • Control over local government • Restraints of trade • Taxation without representation
Support for the Revolution • Population: 2.5 million of which 800,000 were men of fighting age. • Revolutionary army: 20,000 on land 10,000 at sea • Less than 5% of the population fought for independence from Britain.
Who wanted the revolution? • Pro-independence - middle class merchants and lawyers in the North, plantation owners in the South who were opposed to the evils of aristocratic privilege. • Pro-British - landed gentry in the North, civil servants and clergymen in all the colonies • Neutral - scholars claim this was the majority of the population. • In sum, the majority of the population in the colonies did not support independence.
Economic Consequences of the Revolution • Inflation (Review Figure 3.3) • Blockading of U.S. ports severely hampered the fishing, whaling, and trading fleets. • Manufacturing, that was not allowed to compete with British goods before, was able to produce for the domestic U.S. market.
Agricultural Impact of Revolution • The benefit or cost to agriculture depended upon • The ability to take advantage of higher demand by • Sufficient size of operation • Proximity to troops • Ability to avoid damage from actual combat and confiscation • Ability to grow crops that did not require an international market
Transition to Independence • Economic Hard Times • Total factor in Pennsylvania agriculture show a small decline from 1775 to 1790. • Real wages of Maryland agriculture workers fell as much as 40%. • Estimates of per-capita income show a decline of almost 10% between 1774 and 1805.
Articles of Confederation problems • Trade treaties with Spain and Britain could not be negotiated. • Congress had no power to tax. • States could set tariffs, even in trade between states. • States squabbled over land claims in the west. • RESULT: No national economy.
The Writing of the Constitution • Fundamental changes from constitution. Congress and the executive branch could now • tax and spend • regulate internal and external trade • power over foreign policy • Results • U.S. was kept out of Napoleonic Wars and could profit from the conflict. • Alexander Hamilton was able to put U.S. public finances in order. • Argument: the constitution created a positive economic environment.
Early research on Constitution • Charles Beard (1913) argued that economic self-interest played a role in the writing of the Constitution. • Bankers and capitalists were in favor • Debtors and farmers were opposed • Forrest McDonald (1958): “anyone wishing to rewrite the history of these proceedings largely or exclusively in terms of the economic interests represented there would find the facts to be insurmountable obstacles.”
McGuire and Ohsfeldt • Using McDonald’s data McGuire and Ohsfeldt found that, in general, Beard is correct. • Review Methodology (p. 76) • Findings • Slave owners generally opposed increasing federal power. • Those with merchant interests, ownership of western lands, or banking interest were more likely to vote for the Constitution. • Those in debt generally opposed.