Economic History of the US

Transcription

1 Economic History of the US The Colonial Era, Lecture #4 Peter Allen Econ 120 1

2 Mercantilism: Gold flows only to London Economic subordination Parliament did not allow colonies to bop surplus Kept colonies from solving capital shortage Specie money, Money supply can increase if gold comes in Severely limited 1. economic growth 2. Economic development 2

3 Monetary system limited Colonial Economies Persistent shortage All currency based on specie limited ability to earn net. cash from trade under mercantilism Parliament forbade export of English coin Refused a royal mint in colonies. No mines No banks, but Liquidity, unit of account, store of value Early types of money used: Barter wampum Inspection notes on tobacco 3

4 Tobacco Inspection Note 4

5 Colonial Money Specie that did appear came from trade with other European colonies in Americas especially Spain 8 Reales Silver Coin, called a Dollar or piece of 8 1 dollar, units of 8 Reales or bits, 1 bit = 12 ½ Equivalent to (4s2d) Minted usu. in Mexico City or Lima, Peru Colonies experimented with paper currency Most colonial govs. issued Bills of credit Only paper currency in the world at the time Widely used, backed by gold or silver English merchants accepted, but complained Parliament, Currency Acts of 1751 & 1764 limits on colonies ability to issue fiat currency 5

6 6

7 7

8 New Jersey Bill of Credit 8

9 Virginia Bill of Credit 9

10 Modern Economic Theory Supply of money need to grow for economy to grow Quantity Theory, MV = PY Specie systems means bop surplus, i.e. gold in Economic growth requires Money set aside, i.e. capital To build new businesses 10

11 New Order, 1763 British wins French and Indian War, Parliament adopts new NA policy Tightened Mercantilism rules 1. Increase colonies rate of Tax, including payment for defense 2. Blocked western settlement 3. Clamp down on colonial manufacturing 11

12 12

13 Financial Crisis of the Seven Years War Seven Years War 13

14 New Order, 1763 English residents had one of highest rates of tax in the world NA colonists one of lowest, 20-25% of avg. Brit. Parliament said: fair to ask colonists to help pay for garrisons on the frontier (cost 350K annually) Sugar Act, 1764 designed to cover 10% of cost Stamp Act, 1765 of frontier garrison 14

15 Proclamation of 1763 Parliament flips on westward settlement by colonies Prevent trouble with locals Sell land for cash Crown takes control of western land.. Royal Proclamation of 1793 Reserve for Indians and for landsales to wealthy English settlers Quebec Act, 1774 Containment of original colonies on the seaboard Withdrawal of cheap, unsettled western land 15

16 Map 6.1 Colonial Land Claims 16

17 Map 6.2 Reassignment of Claims 17

18 18

19 First Crisis, Franklin made 2 arguments 1. Parliament levying an internal-type, rather than external-type, of tax 2. Taxes levied without colonists having a vote in Parliament Colonists boycott of English/West Indian exports was successful Parliament repealed the Stamp Act in

20 Second Crisis, Economic sanctions of colonies worked to pressure British exporters, but Political pressure did not Parliament re-asserted its supremacy Declaratory Act, 1766 Quartering Act, 1765 Townshend Duties, 1767 (tea, glass, paper, pigment for paint) (form of tax switched from tax to tariff, or external-type ) Colonists again boycott British exports 1769, colony imports dropped by approx. 2/3 English exporters lost money, pressured Parliament Townshend Duties repealed, 1770 (ex. Tea) 20

21 Third, Final, Crisis, Tea Act, 1773: English East India Company allowed to ship tea straight to NA, eliminating colonial importers Boston Tea Party, Intolerable Acts, 1774 Closed Boston Port Accused British officials to be tried elsewhere Charter of Mass. Revised to extend power of local British governor Troops to be quartered in Boston First Continental Congress, 1774 Demand, Parliament repeal all post-1763 laws Too late Quarrel over economic relations, taxes and trade became moral and political 21

22 New Order, French and Indian War, English gov. preoccupied internally English revolution Deposition of last Catholic King, victory of Parliament, Prior to 1763 English gov. lax on colonial affairs Colonies governed themselves, esp. in economic matters Encouraged westward expansion of colonies Parliament allowed colonies to free ride on defense 22