1775 (21 page)

The angry comments of merchants, land investors, and ordinary consumers recorded at the time seem more revealing. To be sure, many early-twentieth-century “Progressive” historians overemphasized—and frequently also oversimplified—economic causations of the Revolution. Their subsequent critics, the Neo-Whig or Consensus school, erred by all but omitting economics. Fortunately, the late twentieth century developed an explanation that yes, paper money was sometimes inflationary, but British currency policy did indeed favor British creditors while frequently disadvantaging the colonies.
²²

The serious politics that surrounded currency matters, however, is generally recognized. Bernhard Knollenberg, in
Growth of the American Revolution: 1766–1775,
ranked the Currency Act of 1764 in second place, behind only the Stamp Act, as a reason for “continuing discontent” in the mid-1760s.
²³
Others cited 1765 testimony before a committee of the House of Commons in which Benjamin Franklin had listed the Currency Act, along with the Stamp Act and restrictions on trade, as the principal reasons for the colonies’ rising dissatisfaction with Parliament. Then in 1774, the Statement of Rights and Grievances issued by the First Continental Congress named the Currency Act of 1764 as one of the thirteen specific acts of Parliament that delegates to the Congress found “intolerable.”
²⁴

This bespeaks a deeper popular economic discontent than could ever have arisen from an abstract focus on imperial relations. John McCusker and Russell Menard, in what remains the principal text on colonial economic history, rebutted the lingering emphasis on ideology as all-explaining.
Although “the dispute took a constitutional form, it is clear that economic issues played a central role…The Currency Act of 1764 portended a limitation of the colonial money supply as well as the disruption of domestic commerce.”
²⁵

Back in 1961, colonial historian Jack P. Greene and colleague Richard M. Jellison, discussing inadequate scholarly exploration of the Currency Act’s “impact on the Revolutionary crisis,” summarized: “Certainly, the Currency Act was not one of the more explosive issues in the debate between Britain and the American colonies. Still, with the single exception of Delaware, each of the colonies affected considered it a major grievance. Coming during a period when a growing population and an expanding trade were aggravating a chronic shortage of specie, it could scarcely have been more untimely.”
²⁶
In
The Currency of the American Colonies, 1700–1764,
the principal survey of colony-by-colony issuance, economic historian Leslie Brock described the Currency Act of 1764 as the British Board of Trade’s “crowning blunder.”
²⁷

If too many historians are quoted here, it is to help overturn prior misjudgments. Late-twentieth-century scholars developed more serious assessments, and interpretation of the pre-Revolutionary political economy must catch up. Without these citations, I would feel less free to place the emphasis this chapter does on the role of currency.

As might be expected, the four vanguard colonies were conspicuous in opposing British curbs. Indeed, their currency issuance arose from their disproportionate role in eighteenth-century North American military expeditions and the defense of the empire’s southern, western, and northern frontiers, many of which Britain never reimbursed. Overactivity in Massachusetts, Connecticut, Rhode Island, and New Hampshire during the French and Spanish wars of the 1740s prompted the 1751 act, which applied only to New England. British officials had also disliked Massachusetts’s land bank, popular among farmers, which Parliament had disallowed in 1741. John Adams later recalled that “the act to destroy the Land bank scheme raised a greater ferment in this province than the Stamp Act did.”
²⁸

Some argue that as the imperial crisis intensified, New Englanders’ pioneering role in paper money helped to stimulate the local growth of alternative economic ideology.
²⁹
As we will see, the New England provinces didn’t even wait for independence before they turned to paper currency again in 1775.

To the south, Virginia and the Carolinas were the main targets of the
1764 act, although its terms also applied to the middle colonies. Virginia had offended the ministry in London by its large-scale 1755–1762 paper issuance, predicated partly on wartime financial needs that ranged from supporting Braddock’s expedition to the Forks of the Ohio in 1755 to raising troops after Spain declared war in 1762. However, the greater offense lay in declaring this grand emission legal tender to satisfy private debts, which made British merchants and creditors howl.
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North Carolina, the poorest of the southern colonies, was also blamed for issuing paper that rapidly lost value. Even so, by 1768 it had only £60,000 of provincial currency in circulation for a population over 150,000.
³¹

South Carolina, active in issuing paper during the first half of the eighteenth century to fund expeditions against Spanish St. Augustine and the Tuscarora and Yamasee Indians, was the other major regional offender. Economic historian Joseph Ernst, in his
Money and Politics in America, 1755-1775,
described the province as “the
bete noire
of the early critics of American paper money.”
³²
By 1766, Carolinians were again concerned with the impact of currency shrinkage on prosperity. As noted, Virginia, the Carolinas, and Georgia petitioned for the 1764 act’s repeal, and the southern colonies reportedly led the push to have the First Continental Congress name the Currency Act as one of Britain’s “intolerable” actions.
³³

Twenty-first-century Americans who have seen the U.S. Federal Reserve flood the financial system with money may have trouble appreciating the opposite extreme. However, the citizenry of 1892 or 1932 would have empathized with eighteenth-century sufferers. In Virginia, for example, the total currency outstanding dropped from £230,000 in 1764 to £105,000 in 1771 and £55,000 in 1773.
³⁴
Monetary shrinkage in the early 1930s could have been no worse.

For a fuller overview, it is essential to pair the frequent inadequacy of provincial money supplies with a second, interlocking circumstance: high and disruptive colonial levels of debt. The two fed each other.

At peaks of local indebtedness, Virginians and Marylanders went so far as to torch jails or break prisoners out. The North Carolina Piedmont broke into armed revolt in 1771. Court systems circa 1772–1773 were clogged with recovery actions. Provincial assemblies, for their part, faced a parade of debt-related controversies—legislation regarding debtor recovery, bankruptcy laws, and appropriate judicial venues. Inadequate money supplies, besides intensifying demand for credit, expanded the ranks of debtors.

In situations where currency was scarce or almost nonexistent, creditor
lawsuits exposed debtors to unusual peril. As we have seen, in
real
values, two or three times the amount at stake would be taken. Court and attorneys’ fees added to the blow. Thus the plea among farmers and planters at such times:
Close the courts.

The attempts by Charles Beard and other Progressive historians to posit economic explanations of the Revolution had some legitimacy. By the mid-twentieth century, though, their case had lost credibility because of a perceived bias toward economic determinism, as well as an apparent contention that debt evasion rather than patriotism had motivated Virginia planters—not just national icons Washington and Jefferson but hundreds of smallholders. Debt psychologies among the Founding Fathers were considerably more complex.

Nevertheless, the interaction of Chesapeake currency and debt trauma with regional sensitivity to British tobacco policy helped make for explosive politics. Because American producers had to send their crop to British merchants, the latter extended most of the credit necessary to keep the wheels of planter commerce turning. What became intense competition between London and Scottish tobacco merchants during the 1760s and up to the crisis of 1772 worsened matters. It encouraged the overextension of credit that gave way to such a painful bust—in its way, a small preview of Anglo-American bank and credit card company excesses in the 1990s and early 2000s. Chesapeake borrowers, like those centuries later, had let themselves be drawn into a reckless overreliance.

The thirteen-colony total of indebtedness was extraordinary. From a few hundred thousand pounds sterling in 1740, debts owed to Britain by North Americans soared to £4.5 million in the mid-1760s. At the peak in 1772, before the heavy and profitable tobacco sales of 1774–1775 allowed considerable planter debt repayment, the total might have reached £5–6 million, a staggering sum in that era, although nobody really knows. Merchants alone claimed £3 million owed in 1775. By way of context, £4–5 million equaled about half of Britain’s annual peacetime budget in the 1760s. There was little likelihood such an amount could be repaid.

Tobacco, Debt, and Land Speculation

The colony-by-colony breakdown of the amount Americans owed to British creditors in 1776 reflects crop geography as much as anything. Virginia’s debt was by far the highest, a figure some estimates put as high as £2–3
million sterling.
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T. H. Breen, a leading scholar of the colonial Chesapeake, noted the political dimension: “An examination of post-revolutionary [British] debt claims reveals that in 1776 at least ten of Virginia’s great planters owed £5,000 or more. This was a huge sum. In the £1,000 to £4,999 range appear such familiar names as Jefferson and Washington. According to one historian who has analyzed British Treasury records, ‘at least fifty-five of the individuals from whom £500 or more was claimed were members of the House of Burgesses from 1769 to 1774.’”
³⁶

Serious planter indebtedness to Britain extended to South Carolina (£350,000) and Maryland (£289,000).
³⁷
In 1771, a boom year, imports to the Chesapeake colonies (Virginia and Maryland) from Britain totaled £920,000, while the two colonies’ exports reached only £577,000—an unprecedented deficit reflecting commercial exuberance.
³⁸

As war began, most of the indebtedness to British lenders did indeed concentrate in the plantation provinces. Except for British-oriented merchants in Massachusetts, New Englanders had borrowed relatively little overseas. The substantial amounts of debt run up prior to the Revolution by Connecticut residents were mostly owed to creditors in Boston or New York.
³⁹

Compared to tobacco-ensnared Virginia, South Carolinian debt to Britons was much less burdensome. Local planters owed more to in-province creditors, and as of 1775, few were clearly overextended.
⁴⁰
Consider one measurement of comparative affluence: in North Carolina, the annual value in sterling of exports for each white resident was a low £1.17; in Virginia, £2.82; and in South Carolina, a striking £9.13. Tobacco-dependent Virginia was closer to poor North Carolina than to rice-and-indigo-rich South Carolina.
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Debt bingeing in the Chesapeake flattered neither side, British or American. Colonists complained that British commercial practice sucked them dry. Their tobacco could be sold nowhere but in Britain, where it brought prices that planters called inadequate relative to the markups London and Glasgow merchants enjoyed when reselling the leaf in France, Holland, and elsewhere. George Washington and Thomas Jefferson both saw insidious enticements and relationships at work. In Washington’s words, “Our whole substance does already in a manner flow to Great Britain.” To Jefferson, British merchants at first offered good prices and easy credit, but once the client was in their clutches, they cut prices, so that the planters became “a species of property annexed to certain mercantile houses in London.”
⁴²

Beyond this entrapment, planters argued, many of the British merchants were unethical, sending back poor-quality or overpriced goods in payment. This is plausible. The British historian J. H. Plumb, for one, described the crippling debt as “created very largely through the cupidity and dishonesty of the London factors.”
⁴³
Fierce competition in the British tobacco industry presumably made corner cutting commonplace. As for the quality and price of goods sent back to American sellers, to cynics it reflected how the colonies were a captive market.
⁴⁴

Samuel Adams was especially caustic about colonists’ willingness to accept what in 1771 he called “the Baubles of Britain”—laces, fans, ribbons, decorated teapots, and the like.
⁴⁵
One historian recalled the charges by Virginians and Marylanders that British merchants made the colonies a “dumping ground for shopworn, unsalable merchandise; cheating on weights and measures.”
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The larger problem lay with planters’ tastes for British-manufactured luxuries. In Virginia, Thomas Jefferson’s father-in-law John Wayles observed that “within these 25 Years £1000 due to a Merchant was looked upon as a sum imense [
sic
] and never to be got over. Ten times that sum is now spoke of with Indifference and thought no great burthen on some Estates…In 1740, I don’t remember to have seen such a thing as a turkey Carpet except a small thing in a bed chamber. Now nothing are so common as Turkey or Wilton Carpetts, the whole Furniture of the Roomes Elegant and every appearance of Opulence.” In South Carolina, where newspapers advertised every luxury, eighteenth-century historian David Ramsey later recalled that “it was in the interest of Great Britain to encourage our dissipation and extravagance for the twofold purpose of increasing the sale of her manufactures and of perpetuating our subordination.”
⁴⁷

The first American boycott in 1765–1766, and even more the follow-up between 1767 and 1770, combined colonial neo-Puritanism and debt frustration into a powerful discontent. Nonimportation became a moral cause, not just a tactic in helping to force Parliament’s 1770 repeal of the Townshend duties. Frugality became patriotism, as did eschewing fripperies, gewgaws, and trinkets, lavish funerals and expensive British fashions. The most vehement advocates began counter- “enumerating” British goods—listing what imports would not be accepted. Hundreds of committees and voluntary associations prepared lists of items not to be purchased—and some newspapers then published lists of “enemies of America” who bought them.