Mercantilism

1. Mercantilism

2. The British perspective: • Mercantilism was explained by its proponents, as a "a philosophy of nation building, a series of economic controls intended to strengthen a country ... against other … empires. A major tenant of this view was self-sufficiency: sources of supply--raw materials, agriculture, and industry--should be developed domestically, or in colonies, to prevent interruptions by hostile foreigners”

3. Mercantilism: Main Goals Encourage growth of native merchant ships, this included the colonial ships. Protect English manufacturers from foreign competition. Protect English Agriculture, especially grain farmers. Increase the wealth of a nation (i.e. accumulate as much hard money as possible—colonial money was worthless in England; merchants wanted gold) and to become the wealthiest/most powerful nation. Become self-sufficient; aka: meet all the needs within the empire (not only necessitated colonies, but also a tightly regulated trade, since trade was perceived as a zero-sum game: A nation can gain in international trade only at the expense of other nations). Develop a favorable balance of trade.

4. The main goal of mercantilism: increase the money in a country’s treasury by creating a favorable balance of trade. A country had a favorable balance of trade if the value of its imports (what it sold) exceeded the value of its exports (what it purchased). Colonies helped a country produce/acquire the goods to maintain a favorable balance of trade. Say Spain sold $500 in sugar to France, and France sold $300 in cloth to Spain. France would also have to pay Spain $200 worth of precious metals to pay for all the sugar. Spain would then have a favorable balance of trade because the value of its exports (sugar) was greater than the value of its imports (cloth). Spain would become richer because of the precious metals it received from France.

5. Characteristics of Mercantilism • “Bullionism” the eco. health of a nation could be measured by the amount of precious metal [gold or silver] which it possessed. • ‘Hard’ money was the source of prosperity, prestige, and strength for a nation. • Bullionism dictated a “favorable balance of trade.” • Export more than you import [a trade surplus]. • High tariffs on imported manufactured good. • Low tariffs on imported raw materials. • Each nation must try to achieve economic self-sufficiency. • Those founding new industries should be rewarded by the state.

6. Characteristics of Mercantilism • Thriving agriculture should be carefully encouraged. • Less of need to import foods. • Prosperous farmers could provide a base for taxation. • Sea power was necessary to control foreign markets. • Less need to use the ships of other nations to carry your trade goods. • Your own fleet adds to the power and prestige of the nation. • Impose internal taxes of all kinds.

7. Characteristics of Mercantilism • A large population was needed to provide a domestic labor force to people the colonies. 9. State action was needed to regulate and enforce all of these economic policies. • State-sponsored trade monopolies.

8. Mercantilism in Effect • Build a formal empire • acquire/protect markets (both resource/product) • establish colonies • Develop strong military • to defend empire (Navy especially important) • Navigation Acts (political aspects of mercantilism 1660’s – 1700’s)

9. The circular flow model The colonists supplied raw materials to England for either manufacture or re-export and they provided additional markets for the finished products produced from those resources (England also sold them in European markets). The colonies played a large role in England’s becoming self-sufficient. For this system to succeed, the Parliament needed to pass laws and regulations to protect wealthy British merchants and industrialists, even at the expense of its colonists (i.e. those laws were intended to benefit the English economy exclusively). A mercantilist economy is a managed economy, managed by the larger and stronger power (i.e. the home/mother country).

10. Colonies Colonies helped nations grow rich in several ways. They provided various raw materials They provided mines that produced gold and silver. They served as markets for goods made in the home country. Trade expansion enabled English manufacturing base to grow and it necessitated an enlarged merchant fleet. Additional bases for the royal navy (i.e. outposts). As suppliers of raw materials only, the colonists could not compete with England in manufacturing (unless the goods could not be produced in England).

11. TIMBER RESOURCES IRON FISH INDIGO RESOURCES COTTON RICE MERCANTILISM COLONIES $$$ MANUFACTURED GOODS ENGLAND

14. Mercantilist policies • As its colonies in North America became more successful and profitable, the home government began to increase its control over them. • Between 1651 and 1673, the Parliament passed four Navigation Acts intended to ensure a favorable balance of trade.

15. Regulations to Support Mercantilism • To encourage certain types of manufacturing, the British government subsidized producers of those products, thus making them more profitable to sell or more affordable to buy. • The British government also granted monopoly status to producers of certain commodities (e.g. British East India Co.)

16. Enforcement of Mercantilism • Navigation Acts • Keep colonies dependent on mother country -> maximize profit • Restrictions on buying • Buy only from Britain; duties on foreign goods • Restrictions on selling • Could only ship/sell to Britain (enumerated goods) • Restrictions on shipping • All trade only on British ships, all goods shipped through England, crews must be ¾ English • Restrictions on manufacturing • Prohibited in colonies: keep colonies dependent on Britain, prevent competition (monopoly)

17. The purpose of the various navigation acts was to protect the wealth that the colonies brought to England. By the late 17th century England had a trade policy for the colonies that went like this:1. Any ship carrying goods to and from America or England had to be English built with primarily English crews (Remember the colonies were still part of England)2. The colonists were required to buy certain manufactured goods (those enumerated) only from England. Exceptions were allowed with things England didn't produce. Non-English goods had to go to England first where a tax was assessed/levied before its shipment to the colonies (thus, the goods became either less profitable to sell or less affordable to buy).3. Certain raw materials coming from the colonies (those enumerated) could only be sold back in England (later this included grown farm products). 4. Americans were forbidden to manufacture certain goods from their own raw materials (those enumerated). For example, tobacco could only be processed back in England where the English manufactures would receive the majority of the profit from selling the cured tobacco.

18. Regulations To Support Mercantilism • NAVIGATION ACT OF 1651 • All imports or exports had to be carried on British ships (English ships and merchants were always favored, excluding other countries from sharing in the wealth produced/acquired by the British Empire). Targeted the Dutch control of world wide shipping—sought to eliminate Dutch competition from colonial trading routes. All crews must be at least 1/2 British or Colonists. NE economy - “carrying trade” - increased. http://williamsburghotel.com/triangle/Js_three_ships.gif

19. Regulations to Support Mercantilism • Act of 1660 • Required all exports from the colonies to go through British ports (English merchants would then sell or trade the materials around the world). • Long list of “enumerated goods (tobacco, sugar, indigo, cotton, molasses, rice) that could only be shipped to England or an English colony. • It also required all Colonial imports to go through British ports whereupon each product was taxed before its shipment to colonial ports. • Required all colonial trade to be on English ships (master and ¾ crew must be English).

20. Staple Act To benefit British merchants still more directly by making England the staple not only of plantation products but also of all commodities of all countries, the Act of 1663 was passed by Parliament. "No Commoditie of the Growth Production or Manufacture of Europe shall be imported into any Land Island Plantation Colony Territory or Place to His Majestie belonging . . . but what shall be bona fide and without fraude laden and shipped in England Wales [and] the Towne of Berwicke upon Tweede and in English built Shipping." The design of this act was to maintain "a greater correspondence and kindnesse" between the plantations and the mother country; to encourage shipping; to render navigation cheaper and safer; to make "this Kingdome a Staple not only of the Commodities of those Plantations but also of the Commodities of other Countries and places for the supplying of them -- " it "being the usage of other nations to keepe their [Plantations] Trade to themselves.“Keep in mind a mercantilist system is a closed market.

21. A “complicated piece of legislation” is how historian David S. Lovejoy describes the duty on plantations. The Plantation Duty Act limited American trade; it attempted to force planters to trade exclusively with England and her colonies and to redirect revenue to Great Britain.  There were numerous objections to the duty.  In the end, the Albemarle governor, John Jenkins, ignored enforcing the act, and the tax contributed greatly to a later rebellion (the Culpeper Rebellion).The Plantation Duty Act had several provisions.  One, it placed a penny tax on each pound of tobacco.  Two, it required a five-shilling tax for every hundred weight of sugar.  Three, collectors were appointed in the colonies.  The latter meant that, for the first time in history, writes Lovejoy, the British government placed a “revenue-collecting administration in British North America.”Across the British Empire, people protested the duty.  London merchants worried that it might have a negative effect on the sugar trade and thereby disrupt trade between the Indies and New England.  In New England, merchants erroneously believed that once a duty had been paid, the ship’s cargo could then be transported to any port; but that was not the case.  Confusion abounded among American merchants. Even the Irish argued that the duty targeted them.   Although the Lord Proprietors supported the Act’s passage, many North Carolinians protested (or ignored) the new law. The Albemarle region of North Carolina offered the stiffest resistance.  As required by law, the Albemarle governor, John Jenkins, appointed tax collectors, but the agents performed their duties with a noticeable lack of enthusiasm.  Yet Jenkins did not pressure the agents to enforce the law.   In Albemarle, citizens believed they should be able to deal directly with England rather than having to first go through New England traders.  The Plantation Duty Act angered an independent-thinking region that had already showed its dislike for government regulation and that did so later during the Culpeper Rebellion.  

22. 1696-1725: England worked toward more efficient royal control over colonies. After 1725, policy changed – Robert Walpole began policy of “salutary neglect” Prior to the conclusion of the French and Indian War (1763), England followed a policy of salutary neglect toward the colonies, which meant the trade laws that most hurt the colonial economy were not enforced. Prior to the looming war against the French, the British employed salutary neglect to maintain colonial loyalty. Salutary neglect Non-enforcement of laws; colonies became accustomed to “breaking the rules” w/o consequences – future source of conflict when Eng. gov’t tries to enforce rules and punish violations (after French and Indian War) Distance Difficulty enforcing What would be required to strictly enforce rules?

23. Changes initiated by the British as of 1763 under new Chancellor of the Exchequer, George Grenville: • Upon becoming Chancellor of the Exchequer (1763), Grenville discovered from the treasury books that the American Customs Service was costing more to operate than it was bringing in and he was determined to tighten up the service to prevent smuggling. • Meant enforcing the Molasses Act(purpose to collect $; a novel idea) • Americans at once pointed out that the sixpence duty on foreign molasses • Was prohibitive and would ruin those industries. • Though Grenville, didn’t intend to destroy those industries, he did intend to make it furnish a revenue; so he kept the duty but cut it in half. • Customs system was overhauled (attempt to begin to collect taxes) • Elaborate series of papers were to be filled out by shippers for every cargo. • Violations were to be tried in Admiralty Courts • (colonial juries notoriously easy on smugglers) • Admiralty Courts were independent and had jurisdiction over offenses • Committed at sea and in regard to maritime laws (Navigation Acts) • (no trial by jury; colonists felt Parliament could not curtail the right of trial by • Jury; it was a check on executive power)

24. Amiralty Court at Halifax Nova Scotia used to try navigation violations. (extension/enforcement of its jurisdiction to new laws of Parliament in addition to all laws of trade and navigation as well as over ordinary maritime matters) • Prerogative courts composed not of juries but of single judges whose posts were “political offices in the hands of the royal governors, to be bestowed upon deserving friends and supporters” • Colonists stripped of invaluable privilege of trial by jury; a crucial protection and check on executive power under the British Constitution British navy instructed to enforce the Navigation Acts

25. The Usual method for tax collection • These collectors were susceptible to a more lucrative kind of graft: Violations of the Sugar Act were punishable by seizure of the offending vessel and cargo Both would be sold and the proceeds divided into thirds: 1/3 to English treasury 1/3 to colonial governor 1/3 to customs officer responsible for seizure To an enterprising officer bent on amassing a fortune, the prospect of making as many seizures as possible was inviting Perceived as a racket to colonists

26. Usual method used by tax collectors contd. • (3.) seize all vessels that were following hitherto the policy allowed. (1.) Follow lax procedure for a period. (2.) shift suddenly to a strict procedure.

27. Usual method used by tax collectors contd. This practice involved little risk for the collection officers for example, the Sugar Act (a Navigation Act) provided that they were to be free from any damage suits for mistaken seizure as long as they could show “probable cause” Since these cases would be tried in Admiralty courts w/o juries, civil suits brought by colonial merchants were usually thrown out; besides, such suits were often very costly to the one bringing them Furthermore, these officials were afforded protection by British troops stationed in America These racketeers were hated by the colonists, merchants, traders

28. Writs of assistance • Similar to John Doe search warrants: • Writs of assistance: “our houses, and even our bedchambers, are exposed to be ransacked, our boxes, trunks, and chests broke open, ravaged and plundered by wretches whom no prudent man would venture to employ even as menial servants”.

29. These racketeers were hated by the colonists, merchants, traders. These customs officers also posed a political/constitutional danger. James Wilson: “the crown will take advantage of every opportunity of extending its prerogative in opposition to the privileges of the people, [and] that it is the interest of those who have pensions or offices at will from the crown to concur in all its measures”. These “baneful harpies” were instruments of power/prerogative who would/could upset the balance of the constitution by extending “ministerial influence as much beyond its former bounds as the late war did the British dominions”. In the end, this extension of executive patronage, based on a limitless support of government through colonial taxation, was viewed as very dangerous. Resentment and fear of the extension of patronage offices (i.e. plural office holding) in the colonies.

30. Stamp Act (1764) • Bill proposed by new Chancellor of the Exchequer (English version of the U.S. Secretary of the Treasury), George Grenville and approved by Parliament (March, 1765); • law went into effect November, 1765 • Law designed to defray cost of maintaining troops • Almost anything formally written on or printed (lawsuits, diplomas, deeds and wills, almanacs, advertisements, bills and bonds, customs papers, newspapers, marriage certificates) would have to be on special “stamped” paper shipped from British Central Stamp Office in London to agents in colonies who would dispense it only after tax was paid as proof it was paid. • Stamp Act aroused 2 particular groups: lawyers and printers

31. Stamp Act • Even though official aim of the act to raise $, the sums it brought in were quite small • To colonists, herein was the danger: • Because the sums involved were quite small, “some persons…may be inclined to acquiesce under it.” (i.e. the smaller the taxes, the more dangerous they were b/c they would the more easily be found acceptable by the incautious) • This would establish a precedent by the tacit submission of the colonies; thus, if this attempt was successful (more likely if the tax was small), Parliament would pass other laws which would impose further taxes

32. Requested with all due humility that Parliament repeal the tax Boycott (non-importation agreements)—attempt to get British merchants/manufacturers, a powerful voting bloc in a country of shopkeepers and traders, to feel the pinch from the lack of business with the colonies in the hope they would bear pressure on their representatives to rescind the tax. Intimidate stamp distributors by vandalizing their property or threatening them with mob violence (e.g. “tarring and feathering”), thus they would do nothing to execute the act (next slide). Civil disobedience (principle of nullification and non-compliance); do nothing that required the stamps Proceed without using required stamps Based on the principle that the law was unjust b/c it taxed the colonists w/o their consent—remember, the law and ethics are not always in agreement. Radical response: Some saw it as an attempt to suppress knowledge of what was happening by replacing duties and restraints on the press Some imagined that Grenville designed by this act to force the colonies into rebellion so he can use it as a pretext to crack down on them with severity and reduce them to servitude and dependency Sons of Liberty: “fight/resist” Colonial response(s) to Stamp Act

33. “The Bostonians paying the exciseman, or tarring and feathering”(1774 British political cartoon) • Note: It wasn’t the humiliating/degrading/undignified manner with which the colonists tarred and feathered tax collectors; rather, imagine the possibility of suffocation if/when hot tar is poured over you—or better yet, imagine trying to remove the tar from your skin once it cooled (hardened), especially, given that it bonds to the skin.

34. Stamp Act Congress • Stamp Act Congress represented another type of colonial response to the Stamp Act. • Originated in VA House of Burgesses, sparked by Patrick Henry, who adopted a set of resolutions (formal statements of opinion or official positions taken on an issue) denouncing Parliamentary taxation (other colonial assemblies followed) • At invitation of Massachusetts, 9 colonies sent delegates to a Congress in New York (October, 1765) • Delegates joined together in a set of resolutions and petitions denying the Authority of Parliament to tax them. • Though beyond Parliament’s power to tax; resolutions acknowledged colonists were not beyond Parliament’s power to legislate (colonists made the distinction) • Even though theoretically, the colonists’ arguments implied they were wholly beyond Parliamentary control (i.e. the only thing binding Englishmen and colonists together was the fact they were subjects of the same king., few colonists were willing to raise this issue yet.

35. Stamp Act Congress • Stamp Act Congress represented another type of colonial response to the Stamp Act. • Originated in VA House of Burgesses, sparked by Patrick Henry, who adopted a set of resolutions (formal statements of opinion or official positions taken on an issue) denouncing Parliamentary taxation (other colonial assemblies followed) • At invitation of Massachusetts, 9 colonies sent delegates to a Congress in New York (October, 1765) • Delegates joined together in a set of resolutions and petitions denying the Authority of Parliament to tax them. • Though beyond Parliament’s power to tax; resolutions acknowledged colonists were not beyond Parliament’s power to legislate (colonists made the distinction) • Even though theoretically, the colonists’ arguments implied they were wholly beyond Parliamentary control (i.e. the only thing binding Englishmen and colonists together was the fact they were subjects of the same king., few colonists were willing to raise this issue yet.

36. Patrick Henry opposes Stamp Act before VA House of Burgesses (May 29, 1765)

37. British response to colonial reaction(s) to Stamp Act • anti-stamp act faction within Parliament: Merchants/manufacturers (under pressure by boycott) pressured their representatives to rescind the act; these individuals petitioned Parliament for relief from the negative affects of the act. Other members in Parliament favored repeal because they believed the act was based on erroneous principle to begin with (that Parliament had the authority to tax the colonists: agreed with colonial view that taxation was not part of the Governing/legislative power) Anti-Stamp Act factions led by William Pitt and the Marquis of Rockingham In an attempt to win votes, Rockingham subjected members of Parliament to a speech delivered by Ben Franklin (02-13-1766)

38. Franklin’s speech • Franklin, as a matter of political expediency (to win votes/repeal the act) • Succeeded in conveying the false impression that Americans were objecting to merely to internal taxes, taxes on trade (he made American demands seem moderate) • Indirect—external tax: imports coming into colonies are taxed, but tax is part of purchase price (it’s added to the price of the good and is paid outside the colonies (purpose: to regulate commerce) • Direct—internal tax: imports coming into colonies are taxed and the tax isn’t added to the price of the good; it’s added after the purchase, specifically as a tax (i.e. to raise $) • In reality, the cololnists were opposed to all impositions/taxes equally b/c all taxes equally diminish the estates upon which they are charged (they didn’t differentiate between or among taxes) • He also conveyed to the members the impression that Americans were: • Oppressed by Stamp Act • Most members of Parliament, having never bothered to have read colonial declarations/petitions, believed him.

39. To some colonists, passage of the Stamp Act reinforced idea that there was a conspiracy; what the highest officials professed was not what they in fact intended and their words masked a malevolent design. Passage of the Stamp Act was not merely an impolitic and unjust law that threatened the priceless right of the individual to retain possession of his property until he or his chosen representative voluntarily gave it up to another; it was to many also a danger signal indicating that a more general threat existed. Though it could be argued, given the swift repeal of the act, that nothing more was involved than ignorance or confusion on the part of the people in power who really knew better and who, once warned by the reactions of the colonists, would not repeat the mistake—there nevertheless appeared to be good reason tosuspect that more was involved. From whom had the false information and evil advice come that had so misled the English government?Some (Adams, Oxenbridge Thacher, James Otis, Stephen Hopkins) thought from officials bent on overthrowing the constituted forms government in order to satisfy their own lust for power, and not likely to relent in their passion. To some (John Adams, Josiah Quincy) the key figures were easily identifiable: Mass. Governor, Thomas Hutchinson.

40. Joseph Warren (1766): “If the real and only motive of the minister was to raise money from the colonies, that method should undoubtedly have been adopted which was least grievous to the people…”The choice of so blatantly obnoxious a measure as the Stamp Act, consequently, “has induced some to imagine that the minister designed by this act to force the colonies into a rebellion, and from thence to take occasion to treat them with severity, and, by military power, to reduce them to servitude…such a supposition was perhaps excessive: ‘charity forbids us to conclude [the ministry] guilty of so black a villainy. But…it is known that tyrannical ministers have, at some time, embraced even this hellish measure to accomplish their cursed designs,’ and speculation based on “admitting this to have been his aim” seemed well worth pursuing (an extreme view).John Adams:it seemed “very manifest” that the ultimate design behind the Stamp Act was an effort to forge the fatal link between ecclesiastical and civil despotism, the first by stripping the colonists “in a great measure of the means of knowledge, by loading the press, the colleges, and even an almanac and a news paper with restraints and duties’ the second by recreating the inequalities and dependencies of feudalism ‘ by taking from the poorer sort of people all their little subsistence and conferring it on a set stamp officers, distributors, and their deputies”Arthur Lee: “[A]s the influence of money and places generally procures to the minister a majority in Parliament, so an income from unchecked taxation would lead to a total corruption of free government in America….” (result: slavery)

43. Rockingham could not bring about repeal until at first he arranged for a Declaratory Act:The Declaratory Act reasserted Parliament’s power to make laws/statutes binding the colonies in all cases whatever (it didn’t specify taxation even though it was implied).

44. Did mercantilism help the Colonies? • Protectionism: • Protection from foreign competition helped New England's ship building industry. • Individual colonies benefited by specializing. • Various colonial exporters benefited when they exported to Britain because competing goods from foreign nations were subject to tariffs theirs were not. • The colonies were easily made into “international traders” because of the British Empire. • Bounties: incentive payments to encourage production of highly desired goods (tobacco) • Steady market for raw materials & cash crops • Defense -> protect colonies • Shipbuilding industry developed in colonies

45. But, • The Navigation Act severely restricted colonial trade to the benefit of England. • On the other hand, colonists paid more than they otherwise would have for imports from foreign countries (Tariffs) • Southern planters, particularly rice and tobacco planters, bore much of the burden, because most Southern exports went there, while smaller shares of the other two regions' exports went there. • New Englanders often evaded this cost through trading with foreign countries illegally (this situation wasn’t helped by the fact that customs officers were often bribed to look the other way).

46. Tension Develops • Limited profits of colonists (threatened prosperity) • Foreign goods more expensive (taxes) • Colonists resentful of restrictions • Colonists treated as inferiors – “colonials”

47. Mercantilism and the triangular trade proved quite profitable for New England tradesmen and ship builders. But in the Southern colonies , where the Navigation Acts vastly lowered tobacco prices, economies suffered. The triangular trade also spurred a steady and significant rise in the slave population and increased the merchant population, forming a class of wealthy elites that dominated trade and politics throughout the colonies. Along with the voluntary immigration of Europeans to the Americas, Africans were forced to move to the New World as slaves. African slavery began in the New World as early as the 1600s.