From Dependency to Independence: Economic Revolution in Colonial New England

INTRODUCTION

THE PROBLEM OF ECONOMIC DEVELOPMENT IN COLONIAL NEW ENGLAND

For much of this century the United States has represented the global archetype of successful economic development. America’s prosperity appears all the more striking in comparison with the struggles of so-called developing nations to diversify their economies, industrialize, and secure greater economic autonomy. The challenges that countries such as India, Nigeria, and Brazil face in reducing their neocolonial dependence on shifting First World markets and meeting domestic demand for consumer goods without incurring crippling trade deficits or hyperinflation seem foreign to America’s experience. In much of the Third World, politicians and entrepreneurs face the difficult task of establishing new industries in the context of a competitive global economy in which more developed nations have a head start. They know that foreign investment capital often comes at a high price—the sacrifice of some local sovereignty. And even those nations that most eagerly embrace the market must cope with the mobility, diversity, and other challenges to traditional social order and ethics that often accompany capitalism. In advising such client nations, the World Bank and other international aid organizations treat America’s trajectory as the normative path to membership in the First World.

Yet for nearly two centuries mainland British America was an underdeveloped, dependent outpost of one of the most powerful commercial empires in Europe. England had a head start on commercial and industrial development, and it made the most of this advantage in its relationship with the colonies—a relationship predicated on colonial economic and political dependence. In the seventeenth century, most English men and women viewed the colonies (when they thought of them at all) as objects of exploitation. America was seen as a staging ground for economic experiments; a source of cheap land, raw materials, and staple crops, not to mention patronage positions; and an outlet for such surplus members of the populace as younger sons, underemployed workers, religious dissidents, and criminals. By the eighteenth century, the North American colonies had assumed prominence in a global British mercantile system that cast the southern colonies in the role of staple producers, the northern settlements in the role of provisioner to more valuable but less self-sufficient colonies in New-foundland and the Caribbean, and both regions as markets for British manufactures. Many economic actors in the colonies prospered from these arrangements. Still, even this more reciprocal vision of colonial­metropolitan relations presumed the subordination of colonial interests to the superior claims of the mother country. English regulatory policy between 1660 and 1774 explicitly aimed to limit colonial economic development in order to secure for the metropolis a monopoly of key industries, trades, and financial services.

Aside from this external imperial framework, English colonial societies grappled with other pressures familiar to modern developing societies. Even had the metropolis not attempted to restrict colonial manufacturing, would-be entrepreneurs faced almost insuperable obstacles, including low population density and correspondingly high prices for labor, lack of capital, lack of infrastructure, and lack of managerial know-how. The high material expectations of settlers who emigrated from the industrializing society of seventeenth-century England to a colonial periphery created another set of problems familiar to the Third World today. Consumer demand could be satisfied only by imports; yet as New England in particular discovered, the need to pay for foreign goods strained a nascent economy’s ability to produce sufficient output for exchange. Moreover, many colonists were committed to social and religious ideologies that led them to view some of the consequences of economic change—such as class and geographic mobility, competition, and the open pursuit of self-interest—as subversive of moral, political, and social order. Embedded as we are in capitalism’s twentieth­century incarnation, we have difficulty remembering that most people in the early modern world were not automatically hardworking, rational, utility maximizers.¹ Certainly the majority of Anglo-American religious, intellectual, and political leaders before 1750 did not think so; in fact, most thought the reverse was true.

Thinking about colonial America as an underdeveloped nation restores an appropriate sense of contingency to the story of its postindependence economic success, especially in respect to New England. There was nothing inevitable about the course of the region’s economic development. During the first decades of settlement, the English inhabitants of New England struggled to construct a viable economy. They depended on imports from England and Europe to supply their most basic necessities and on Indian trade and the specie carried by new arrivals to pay for their foreign exchange. Once the stream of immigration slowed around 1640, the region plunged into economic depression. New England lacked a readily marketable export crop to fill the role that sugar and tobacco played in the Chesapeake and Barbados; and its agricultural lands were inferior to those of the middle colonies. As a result, the four New England plantations had little to recommend them in the eyes of Restoration-era imperial planners. Indeed, William Petty suggested in 1691 that New England settlers be removed from their unprofitable plantations and relocated to more promising colonies in the Caribbean or Ireland.²

By the late seventeenth century, however, New Englanders had discovered that a comparative advantage might be found in trade. The colonists willingly entered the market as producers to secure the consumer items they needed and wanted. They shipped, processed, and marketed the staples of their fellow North American and Caribbean colonists, supplied them with provisions, and participated in a complex transatlantic exchange network, becoming simultaneously both key customers and competitors of English merchants and producers. Ironically, since English policy focused on monopolizing the trade in plantation products such as tobacco and sugar, imperial economic regulation during this period largely helped rather than hindered the activities of New Englanders. They could trade most of the goods they produced—fish, timber, farm products—directly with customers in the West Indies and Europe free from onerous duties or prohibitions, even as English restrictions on foreign shipping helped New England captains enter the colonial carrying trade. Despite the pressure of rapid endogenous population growth and the (apparent) trade deficits and currency shortages that characterized this import-export economy, it delivered a high material standard of living to most inhabitants by English standards, periodic downturns in the eighteenth century notwithstanding. Per capita wealth in New England lagged behind the levels achieved in the Chesapeake and the Caribbean, but the distribution of wealth was far more equitable than in those slavery-based economies.

Although participation in the Atlantic trade powered much of this transformation, well before the Revolution New England merchants were exploiting a regional internal market as well. Enhanced distribution networks of peddlers and storekeepers carried an ever-widening range of consumer goods farther into the countryside and tied producers to customers at home and abroad, particularly in the three decades before 1776. Under pressure from population increases and shrinking farms, individuals, towns, and even entire regions specialized in certain agricultural commodities. These changes augmented productivity but forced the inhabitants to rely on regional networks of exchange to supply a diverse array of necessities. Moreover, provincial New England’s domestic economy consisted of much more than the exchange of agricultural commodities and resources for foreign finished goods. Along with consumer products, New England imported far more capital goods—the tools of manufacturing—from Europe than did the rest of British America. Following patterns set in England a century earlier, a wide range of processing industries, household manufactures, and even a few large-scale manufacturing projects emerged before 1770 to supply local and other colonial markets.

Overseeing and in some cases facilitating these various activities were New England’s town and provincial governments. Small and resource-poor, local political institutions still tried to create an environment conducive to economic activity on several fronts. Tax incentives, land grants, and monopolies aided petty industry; the construction of roads and bridges enabled farmers to transport their goods longer distances; inspection services benefited exporting merchants. Perhaps the most ambitious policy initiative took place in the realm of currency: beginning with Massachusetts in 1690, the New England colonies embarked on a six-decade experiment with fiat money, public loans, and even a short-lived private bank, all of which pumped enormous sums of cash and credit into the domestic economy.

The inhabitants pursued these integrated strategies so effectively that by 1750 lobbyists for British industries, merchants, and the bureaucrats at the Board of Trade who oversaw colonial administration openly expressed the fear that the direction and intensity of New England’s economic development put the region on a collision course with imperial interests. So far from being a present Advantage to Britain, concluded one writer, [New England] is already the Rival and Supplantress of her Mother. Unless England intervened, the Independency of New England . . . must be the Consequence: a fatal Consequence to this Kingdom!³ Parliament took action to ensure that the metropolis retained the benefits of empire. Between 1730 and 1751, scattered legislation restricted certain American industries—iron­and hatmaking—and radically curtailed the New England colonies’ ability to issue currency. Beginning in 1763, a new round of imperial regulations and tax levies affected New England’s European and coastal trade in unprecedented and, in the colonists’ eyes, damaging ways.

The dissonance between the New England economy in 1640 and what it became over the succeeding two centuries makes the region a particularly interesting case study in economic development. Accounts of colonial economic change too often portray the mere growth of a system that had been established by the 1650s. Development, with its associations of increased productivity, intensive improvement of land and resources, physical expansion, and diversification into manufactures and financial services, more accurately captures the material changes that New Englanders wrought between 1660 and 1770.⁴ The developmental patterns that emerged during the colonial period surely help explain why New England served as a staging ground for the industrial revolution of the nineteenth century. They also point to a possible link between economic issues and the other most significant revolution in American history: the war for political independence in 1776. How and why did this transformation occur?

One reason for New England’s unique trajectory of development was the specific physical environment the New England settlers encountered, which closed off some options, opened others, and forced the inhabitants to adopt innovative solutions to the problem presented by the paucity of obvious exports. But the colonists’ material circumstances were only one factor in this equation. We take for granted the fact that Third World nations’ political, educational, and legal institutions, as well as popular attitudes toward production and consumption, affect their economic performance—sometimes even more profoundly than the presence or absence of natural resources. Development consists of more than a physical process; it is also, in Thomas Doenflinger’s words, a cultural expression and a social process, a distinctive manifestation of the values of a people.⁵ The emergence of market­oriented behavior and institutions cannot be assumed; both must be treated as contingencies to be explained. Capitalism is as much a cultural, political, and ideological system as it is an economic one, and as such it is the product of particular historical forces. Trade has been part of the human experience for millennia, but as Max Weber noted in The Protestant Ethic and the Spirit of Capitalism, the emergence of a market economy required qualitative social and psychological changes; specifically, it depended on many independent decisions on the part of individual men and women to participate in the market.⁶ Thus an analysis of economic development in New England must include an assessment of the relationship between culture and economy. A full description of the inhabitants’ complex worldview in all its intricacies is beyond the scope of this book; here I focus on those aspects of culture in New England—beliefs, behaviors, decisions, social relations, and institutions—that framed the colonists’ economic activities and in turn were transformed by the century and a half of economic change that resulted.

Approaching the problem of New England’s economic development from the perspective of culture offers an alternative to increasingly arid debates over whether early American economic relations and political culture were essentially liberal and capitalist or precapitalist.⁷ The gap between these positions is partly semantic. The contending sides employ distinct definitions of capitalism (is it price convergence between local and international markets or the alienation of labor from the means of production?), and their inquiries vary widely in scope. Clearly, elements of nineteenth-century capitalism as Karl Marx defined it, such as a large pool of alienated labor, a class system based on the proletarianization of producers, and extensive industrialization, were absent or embryonic in seventeenth- and eighteenth­century New England. The household largely remained the unit of production well into the nineteenth century. The timing of economic change and the degree of the inhabitants’ embeddedness in the market varied throughout the region. Despite these caveats, however, New England demonstrated many qualities associated with a market-oriented economic order by the mid-eighteenth century, which Edwin Perkins summarizes as private ownership, the use of markets to allocate goods and investments, a legal tradition to enforce contracts, the use of sophisticated credit instruments and accounting, a pro-development public policy, and a preference for investment in capital improvements.⁸

In this book I explore the development of an underdeveloped economy by examining the New England colonists’ changing economic attitudes—as reflected in their discourse—in the context of their actions. In the century and a half between settlement and independence, the inhabitants’ economic thinking and behavior reflected a broad range of sources and influences. One of the most important in the seventeenth century was Puritanism. Numerous historians have explored Calvinism’s role in promoting the disciplined work and investment habits characteristic of capitalism.⁹ The notion of work as a calling endowed labor with moral, social, and religious meaning beyond its economic value; the doctrines of stewardship and frugality encouraged reinvestment of surpluses in capital improvements; covenant theology reinforced the contractual nature of New England’s legal system, which facilitated development on many fronts, from the allocation of land to provisions for rights-of-way.¹⁰ The commitment to the common good, a doctrine that led New England governments to enact checks on economic individualism, also justified a variety of public and private ventures and investments. Well into the eighteenth century (indeed, through the Revolution) Puritanism supplied one language of economic discourse—terms such as industry, frugality, and commonwealth—that the inhabitants could draw on in conducting their public discussion of economic life.

Still, Puritanism alone fails to explain New England’s economic development through the colonial era. After all, many contemporary societies in Europe and the Americas, regardless of religious affiliation, included hardworking entrepreneurs attuned to new markets and commercial change.¹¹ Other influences, especially the shared Anglo-American experience, also framed the colonists’ discussions and behavior. Many of the emigrants who arrived in the seventeenth century had participated in England’s own dramatic economic transformation. Once in America, they applied lessons learned from the commercialization of agriculture, the expansion of overseas trading companies, new industrial ventures, and experiments with private and public finance. The English navigation system provided yet another context for New Englanders’ economic activities, because imperial policy encouraged some trades while inhibiting others.

Moreover, however formative Puritanism was, the colonists also had access to secular modes of analyzing economic life. By the eighteenth century, public discussion of economic affairs in New England had shifted from the realm of sin and salvation to that of political economy. In 1620, English policymakers and pamphleteers commenced a debate on the nature of trade, markets, human economic behavior, and the role of government in commerce that lasted for over a century and a half. New Englanders appropriated two models in particular from this discourse and applied them to the colonial context: the balance of trade, which emphasized the importance of a positive balance of international payments as a measure of national economic health, and mercantilism, a loose group of policies that aimed to increase the nation’s exports and to replace imports with the produce of domestic industry.

The particularity of New England’s developmental trajectory lay in the relationship between ideology and institutions. What distinguished New England from Spanish America and even other regions in British America, and what made its economic discourse so lively, was the inhabitants’ ability to translate their developmental ideas into public policy at the local and provincial levels. Indeed, most of the public discourse about the economy took place within the political realm of legislation, assembly debates, town meetings, petitions, instructions to representatives, and election contests. Capitalist development required new political arrangements, and the New England colonies boasted such arrangements in the form of relatively autonomous town and provincial institutions of representative government. Like England, the New England colonies responded to economic change and, indeed, tried to shape economic change through an ongoing debate on political economy.

Although the term political economy formally entered the Anglo­American lexicon in 1767 with the publication of Sir James Steuart’s Principles of Political Oeconomy, the concept had its roots in the previous century. Contemporaries generally used the word economy to signify household management; in a sense, the concept of political economy extended the principles of prudence, productivity, and oversight that worked in the household context to the state’s administration of the entire community’s resources. Adam Smith defined it in his Wealth of Nations as both a theoretical science and a form of statecraft with two distinct objects: to provide a plentiful revenue or subsistence for the people . . . and to supply the state . . . with a revenue sufficient for public service.¹² The purview of political economy extended beyond material considerations to incorporate issues of general moral and social well-being. Government policies not only had to enhance the people’s prosperity; they had to do so in a manner conducive to equity, social amity, and order. Regardless of their ideological differences, New Englanders carried out economic discussions in the context of a shared assumption that government indeed had an important role to play in economic life; their conceptualization of their economic goals and the policies best designed to implement those goals, however, changed dramatically over the colonial period.

Although all the inhabitants participated in the creation of this discourse, I necessarily focus on the ideas of the people who generated most of the recorded public (and private) discussion of economic issues: elite and middling officials, Atlantic merchants, inland traders, farmers, and ministers. Yet, by drawing on statutory law, private correspondence, account books, government proceedings, sermons, newspapers, and pamphlets, I show how both the character of the debate and its participants changed over time. Initially quite exclusive, the circle of New Englanders who argued about the economy and made policy expanded after 1710 as changes in political culture and the growing output of the region’s printing presses brought increasing numbers of inhabitants into the public sphere. Even those New Englanders who left few written records of their thoughts influenced the debate in countless ways: as producers and consumers of goods; as petitioners or protesters; as participants in town meetings that made or implemented economic policy; and as voters whom elites espousing different visions of the region’s economic future actively courted in speeches and published writings.

This book charts key turning points in the evolution of the colonists’ political economy while providing a narrative of how economic development occurred. Part I explores the synergy between the emigrants’ Puritanism, their contact with commercial change in England, and the realities of the New England environment—all forces that shaped their economic expectations. In addition to creating a viable economy, the leaders of the Great Migration expected to regulate the economy in accordance with their distinctive social vision. In the wake of a depression in 1640, however, the pressures of establishing a functional economy forced authorities to discard some of these plans, particularly wage and price controls. Instead of restrictions, colonial governments adopted promotional legislation aimed at stimulating domestic manufacture of import substitutes and encouraging new export trades.

Although the industrial program largely proved a failure, the drive to enter the Atlantic trade succeeded dramatically. By 1700 New England merchants managed networks of exchange that linked producers of agricultural goods and would-be consumers of finished goods to European markets. At the local level, men and women in farm households combined reciprocal, neighborly exchanges with market-oriented behavior that ranged from the sale of labor and commodities to household industry conducted in partnership with local traders. These activities paid for a widening array of consumer goods—clothing, specialty foods, household furnishings—available through the offices of port merchants. This developmental trend, however, created a new set of social and political challenges. Consumption and mobility violated the economic wisdom of the balance of trade as well as early modern notions of social order, and New England’s commercial emulation of the mother country began to attract unwanted attention in England.

These issues framed the debates over currency which dominated discourse on political economy between 1660 and 1750, the subject of Part II. Although initially a temporary expedient to cover wartime expenditures, paper money quickly became the cornerstone of economic policy in all the New England colonies. By the 1720s provincial governments emitted two forms of paper currency—short-term treasury notes and public loans administered through the towns; both were legal tender and neither was backed by specie. Paper served as a much-needed medium of exchange, especially in the chronically coin-short interior; and public loans promised liquidity and credit to aspiring entrepreneurs. By stimulating the domestic sector of the economy, each emission of paper money tended to increase support for the policy among inland farmers, traders, and consumers.

Paper currency was not without its detractors. Some officials, merchants, and ministers attacked the policy of issuing paper money for purposes other than wartime finance on the grounds of both political economy and morality. Paper money, they contended, encouraged people to consume imports and borrow irresponsibly, to the detriment of New England’s balance of trade and social order. Supporters of paper money rejected traditional balance-of-trade thinking and formulated a liberal political economy premised on the importance of internal development. Instead of resigning themselves to the role of commodity-producing outpost in England’s commercial empire, pro-currency writers articulated a compelling vision of New England’s future that included a place for a diversified domestic economy wedded to a strong foreign sector.

The currency debates did more than usher in new economic ideologies; they also transformed political culture in New England. Paper money issues dominated the business of colonial government more than any other single policy problem during the provincial period. As both sides printed pamphlets and newspaper articles defining their positions, a contest within the assemblies and urban merchant communities quickly broadened into a public discussion. Nor did all the impetus for mobilization and politicization trickle down from the top. Once town meetings assumed responsibility for managing public loans, people in the towns began to act more aggressively to shape economic policy at the local and provincial levels by petitioning the assemblies, investing profits in local projects, instructing their representatives, and pressing for new emissions of paper. Thus paper money precipitated the emergence of a more popular, partisan style of politics in New England.

The Currency Act of 1751 offered a graphic reminder that the colonists did not have complete control over economic policy; the empire still functioned as an unavoidable framework for colonial development. But British regulations, although they put a temporary end to the New England colonies’ experiments with paper money, failed to retire the pro-paper faction’s liberal economic ideas along with their currency. Moreover, some predictions about the positive impact of paper on colonial development were borne out in the following two decades. Imports increased, but so did import-substitution industries and agricultural productivity; and the outbound cargoes from New England ports destined for other colonial markets included an ever-larger proportion of goods manufactured or processed in the region.

Both the political economy of paper money and the political culture it helped create influenced New Englanders’ response to the tightening of British economic regulations during the imperial crisis, the subject of Part III. After 1750, Parliament’s reformed regulatory policies clashed repeatedly with the ideas about free trade, internal growth, and economic diversification articulated during the currency debates. In pamphlets, newspapers, and resolutions between 1763 and 1770, opponents of English taxation identified a conflict of interest between the metropolis and the colonies and charged that New England’s dependence on the mother country threatened to undermine the colonies’ future development. As transatlantic tensions escalated, anti-English agitators turned to economic weapons—particularly the nonimportation boycotts—to express their displeasure. Nonimportation of English goods was more than an effort to restore lost virtue through material self-denial; rather, advocates saw the boycott as an opportunity to stimulate domestic manufactures. By the 1770s, New Englanders involved in resistance had forged an ideology that reinforced constitutional grievances against England with ideas of development; continued prosperity, they claimed, was contingent on independence. Thus they laid the groundwork not only for revolution but for a vital postindependence economy.

1. Joyce Appleby makes this point in several works. See her Economic Thought and Ideology in Seventeenth-Century England (Princeton, 1978), 13; and Value and Society, in Jack P. Greene and J. R. Pole, eds., Colonial British America (Baltimore, 1984).

2. William Petty, Political Arithmetic (London, 1691), 75–84, 94; Charles M. Andrews, The Colonial Period of American History, 4 vols. (1934–38; New Haven, 1964), 4:338–39.

3. Anonymous, A Comparison between the British Sugar Colonies and New England (London, 1732), 8–9, 7, 3–4.

4. The colonists themselves rarely used the term development to describe the process of economic change; the word entered contemporary discourse toward the end of the colonial period more in the context of social processes—the evolution of entire societies through progressive stages. Yet even this early modern concept of development had a strong economic component. See Michael Lienesch, New Order of the Ages: Time, the Constitution, and the Making of Modern American Political Thought (Princeton, 1988), 82–84.

5. Thomas M. Doerflinger, A Vigorous Spirit of Enterprise: Merchants and Economic Development in Revolutionary Philadelphia (New York, 1986), 4.

6. Max Weber, The Protestant Ethic and the Spirit of Capitalism (New York, 1958), 55, 60.

7. For a summary of this debate, including a review of the literature, see Allan Kulikoff, The Transition to Capitalism in Rural America, William and Mary Quarterly 46 (1989): 120–44.

8. See Edwin Perkins, The Entrepreneurial Spirit in Colonial America: The Foundations of Modern Business History, Business History Review 63 (1989): 160–86, assessing Winifred Rothenberg’s definition of capitalism in The Market and Massachusetts Farmers, 1750–1855, Journal of Economic History 41 (1981): 283–314.

9. See, for example, Michael Walzer, Puritanism as a Revolutionary Ideology, in Francis Bremer and Alden Vaughan, eds., Puritan New England (New York, 1977); Charles Cohen, God’s Caress: The Psychology of Puritan Religious Experience (New York, 1986); Perry Miller, The New England Mind: From Colony to Province (1953; Cambridge, Mass., 1983); and Simon Schama, The Embarrassment of Riches: An Interpretation of Dutch Culture in the Golden Age (New York, 1987).

10. Stephen Innes, Creating the Commonwealth: The Economic Culture of Puritan New England (New York, 1995), 9.

11. For example, Peter Bakewell, in Silver and Entrepreneurship (Albuquerque, 1987), 176, has proposed the existence of a Catholic capitalist ethic among the miners of colonial Peru. For a comparative perspective on economic culture in Europe and the Americas, see Margaret E. Newell, Merchants and Miners: Economic Culture in Seventeenth Century Massachusetts and Peru, Revista de Indias 54 (1994): 299–311.

12. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, ed. R. H. Campbell and A. S. Skinner, 2 vols. (Oxford, 1976), 1:428.

PART I

Political Economy, Culture, and Development in the Seventeenth Century

Numerous scholars have characterized the first decades of settlement in New England as a working-out period during which the colonists debated the proper structure of their religious, social, and political institutions. Economic life was no exception; like other aspects of New England culture, the Puritans’ political economy—their conceptualization of their economic goals and of the policies best designed to implement them—underwent key changes that set patterns for the next two centuries of the region’s development. As Edward Winslow noted in his 1624 promotional tract, Good News from New England, the merchants, ministers, and gentry who planned the settlement of New England appreciated the necessity of economic enterprise, "hoping that where religion and profit jump together, which is rare . . . it will encourage every honest man, either in person or purse, to set forward the same.¹ Whether New Englanders sought to escape religious persecution and find pure ordinances, to establish a model Bible commonwealth for the reformation of England, to secure personal economic advancement, or all three, such goals required that they establish outward means—an economy sufficiently promising to attract settlers and to maintain them in a way that at least approximated the material conditions they had enjoyed in England. John Winthrop, Theophilus Eaton, and other leaders explicitly stated their desire to emulate and even improve on the diverse ventures then transforming the economy of the mother country. They brought with them from England secular assumptions concerning trade, manufactures, and the proper role of government in economic affairs that their Puritan convictions regarding labor and productivity only reinforced.

The physical realities of the New England environment and the constraints of their colonial status quickly forced the settlers to reject some aspects of their English commercial experience and ideology, however, and to recast others. One of the most important adjustments occurred in the area of public policy and regulation. By the late 1640s, the colonists all but abandoned most traditional forms of socioeconomic regulation that circumscribed market behavior in favor of policies that facilitated it. First in response to a serious economic depression, but then as a matter of course, provincial and local governments assumed the responsibility for promoting economic development and diversification and aiding entrepreneurial projects, joining private entrepreneurs in mixed enterprise. Yet those New Englanders who favored these policies were careful to subsume this political economy within a Puritan discourse of commonweal; they justified an activist state on the grounds that commercial expansion enhanced the common good by ensuring collective prosperity.

The second crucial transformation initiated during the seventeenth century was material. By the 1650s, most New England leaders realized that their grandiose initial plans for development were impractical in the short term; aside from food and shelter, the inhabitants depended on imports for their basic material needs. Farmers and merchants eventually found ways to compensate for the region’s lack of a staple crop and constructed a viable economy based on the exportation of provisions, fish, and commercial services to a variety of markets in return for English manufactures.

The general contours of this diverse economy persisted throughout the colonial period, and indeed, some historians end the story here with the statement that the New England economy merely grew along the same lines rather than developing.² But in fact, these patterns of import-export commerce wrought crucial structural and ideological changes in New England society. Merchants turned inward as well as outward in search of commodities for export, and their efforts stimulated processing industries and integrated a growing number of inhabitants into the larger international economy as both producers and consumers. Participation in the Atlantic trade invited closer political and economic contacts with the mother country but simultaneously put pressure on colonial credit and currency systems as well as on their ideals of autonomy. Although many of these changes could be contained within existing social and cultural patterns, they did force New Englanders to rethink their pejorative views of some of the shifts that accompanied commercial expansion: usury, social mobility, consumption, and diversity. In addition, New England’s very success at emulating—even competing with—the mother country forced observers on both sides of the Atlantic to reexamine aspects of their political economy and set the stage for the transformation of New England economic thought and policy in the eighteenth century.

1. Edward Winslow, Good News from New England; or, A True Relation of Things Very Remarkable at the Plantation of Plymouth in New England (London, 1624).

2. Bernard Bailyn, for example, has commented that despite acts of navigation, large increases in population, and changes in both the quantity and types of supply and demand, the character of the economic system as it emerged . . . remained essentially the same until just before the American Revolution: The New England Merchants in the Seventeenth Century 1955; (Cambridge, Mass., 1979), 45. See also John J. McCusker and Russell R. Menard, The Economy of British America, 1607–1789 (Chapel Hill, 1985), 32. Two exceptions are James Henretta, The Evolution of American Society, 1700–1815 (Lexington, Mass., 1973), and Stephen Innes, Creating the Commonwealth: The Economic Culture of Puritan New England (New York, 1995).

CHAPTER ONE

A SECOND ENGLAND: ENGLISH BACKGROUND AND PLANS FOR SETTLEMENT

Any assessment of New England’s early economic development must begin by acknowledging the enormous importance of the first immigrants’ ideas and experiences. The exploration and colonization of North America occurred against a backdrop of dramatic social, political, and economic change that transformed the face of England over the course of the seventeenth century. This market revolution, its opportunities, and its concomitant dislocations influenced the colonists’ plans for settlement and the institutions they adopted in the New World. Indeed, the English model continued to affect the course of development in New England throughout the colonial period, just as the colonies had an enormous impact on economic ideas and infrastructure in the mother country.

England’s Market Revolution

Perhaps the most important precipitant of England’s commercial transformation was intense demographic expansion: England’s population more than doubled between 1520 and 1696. This unprecedented growth temporarily upended the balance between population and resources and placed extreme pressure on England’s capacity to house, employ, and sustain its citizens.¹ The resulting increased demand for land, food, and other necessities drove up rents and prices. In the short term this inflation threatened already marginal inhabitants in two ways: it made subsistence a challenge, and it encouraged landlords to enclose common pasturage and estates and to take over expired leases so they could exploit newly lucrative agricultural markets. The enclosure of commons, woodlands, and fens by ambitious landlords displaced cottagers and laborers, further aggravating already endemic problems of vagrancy.² Added to the effects of periodic depression in the English cloth industry, these woes produced widespread misery—and generated concern among elites—in the late sixteenth and early seventeenth centuries.

Yet the changes in population and land tenure that swelled the ranks of England’s masterless men and women also hastened the transition from manor to marketplace. Responding to market incentives, landowners deployed their estates in entrepreneurial ways, introducing new crops and methods of cultivation and posting gains in productivity.³ Yeomen and gentry profitably exploited growing urban and rural markets in England, even exporting food by the latter half of the seventeenth century.⁴ Gains in agricultural productivity assuaged fears of famine in the face of population growth and also freed more of the labor force for nonagricultural work. Many of the gains in productivity came as a result of specialization. As specialization increased and household production of necessaries declined, a growing number of English citizens of all classes and occupations came to depend on the market to satisfy their basic needs.⁵

As a result of the activities of improving landlords and yeomen, agricultural productivity increased so dramatically between 1540 and 1640 that despite the population boom, the price of grain began to fall in relation to other commodities by the mid-seventeenth century. Many enterprising gentlemen then invested in other sectors of the economy—particularly industries that processed agricultural products such as hemp and flax and small manufacturing enterprises such as makers of pins and starch—that were well placed to take advantage of the cheap labor of displaced agricultural workers and the growing domestic market.⁶ By the late seventeenth century, the English had joined the Dutch as leading suppliers of inexpensive, mass-produced consumer goods, including linen, metalware, stockings, pins, and ribbons, all marketed through expanding networks of domestic and international trade. These projects had a dramatic effect on labor organization and standards of living. By employing former agricultural workers of both sexes and by pricing their goods within the limited means of lower- and middle-class buyers, the new industries set the stage for a consumer revolution.⁷

Would-be entrepreneurs found other attractive investments aside from land and manufactures. Financial innovations such as the joint-stock company permitted the accumulation of capital under government charter and opened up entirely new realms of extensive overseas mercantile activity to investors—including the planting of colonies. The Levant Company, the Muscovy Company, and the East India Company joined established merchant monopolies such as the Merchant Adventurers in the aggressive pursuit of markets and commodities abroad. The appearance of new products such as silks, cottons, spices, and currants stimulated tremendous consumer demand, which in turn attracted new commercial players.⁸

Elizabethan and Stuart administrators responded to these changes with a variety of regulations, some of them contradictory. Increasingly, European nation-states extended their contests for power and wealth beyond the battlefield to the arena of international trade. As England vied with Spain, the Netherlands, and France over markets and resources, many contemporaries viewed exchange as a zero-sum game in which nations competed for fixed amounts of wealth in the form of specie. A country that exported more than it imported and reduced its dependence on other nations by manufacturing domestic substitutes for foreign goods scored a strategic victory in this contest. Seeing an opportunity to enhance England’s competitive advantage and to enrich the royal treasury through fees and loans, the crown put its imprimatur on commercial expansion, chartering enterprises and occasionally providing entrepreneurs with bounties, monopolies, patents, and other forms of assistance.

Although the trade-conscious commonwealthmen who sponsored these activities set a precedent for government involvement in development, their actions constituted something less than a centralized, farsighted economic plan. As numerous historians have noted, the term mercantilism confers a misleading degree of organization, effectiveness, and ideological consistency on a scattered group of sixteenth- and seventeenth-century policies.⁹ Several social and political factors inhibited the creation of the coherent commercial system that Adam Smith had in mind when he first defined mercantilism in The Wealth of Nations. First, because policymakers focused their attention almost exclusively on international exchange, many of the more innovative and lucrative new domestic trades and industries flourished beyond the reach of either the government’s aid or its restrictions. Second, all sorts of noneconomic factors shaped policy decisions. Often, official privileges and protections rewarded entrepreneurs not for the efficiency and quality of their proposed enterprises but for their influence or for dynastic and financial services rendered to the crown. Royal grants of exclusive rights and monopolies to groups such as the cloth-trading Merchant Adventurers made on the latter grounds aroused considerable protest—particularly from Puritans in Parliament—who viewed them as abuses of the prerogative and unfair restraints on trade.¹⁰ The political crises of the Civil War era postponed the development of a full-blown navigation system until mid-century; and even after 1660, considerations of public revenue and military strategy (the sinews of power)—and not merely the desire to stimulate commercial enterprise per se—shaped commercial policy decisions that sometimes ran counter to private economic interests and efficiency.¹¹

In addition, English policymakers sometimes used regulation to respond to social concerns in ways that restricted economic activity. Classical economic theory has so penetrated our own culture that we assume the naturalness of economic man: rational, active, striving, improving, best left to his own devices by a limited state. But market-induced passions seemed highly unnatural—and sometimes threatening—to many seventeenth- and eighteenth-century Europeans. In the eyes of some contemporaries, the unfettered pursuit of wealth threatened to unleash a cornucopia