The American Economy Prior to the Revolutionary War

By the eighteenth century, North Americans had established an economy in which a wide range of productive activities took place. Native Americans had adjusted their economic activities to accommodate the European colonists, sometimes against their will or better judgment. With the help of their Native American neighbors and through trial and error, the European settlers had identified the potential for production in the resources available in their regions, and were actively exploiting those resources. Americans were making contact with people in other parts of the continent and the world through trade. Industrialization was beginning, expanding cottage industries to larger scales. The colonial economy was flourishing, especially while Britain was too busy with its European wars to pay attention to enforcing colonial duties and trade restrictions. Britain's salutary neglect created an environment in which the independent economic activity of the colonists was able to flourish.
All over the continent, Native American tribes had conducted self-sufficient economic activity, producing food, clothing, shelter, and other goods and services in family and clan groupings. Although Native Americans traded with each other, few sought a standard of living that exceeded moderate comfort. Many of the European settlers, predominantly from England, arrived in their New World with dreams of wealth and economic advancement. While Native Americans tended to take an attitude of respect toward their environment, many of the European colonists felt that they needed to "conquer" the land and "tame" their environments to bring them in line with a more Europeanized ideal of living and civilization. Nevertheless, survival was an issue for everyone.
When the English colonists settled in North America, they found a land very different from their home country in several ways that were important in shaping the early American economy. Land was plentiful and, thus, cheap. Labor, especially of the skilled variety, was scarce. This was the opposite of the situation in England, where land was difficult to acquire, but the labor market was oversupplied. In England, land-intensive farming was not as lucrative as labor-intensive industry such as textile production. In the British colonies, farming was much more viable, especially once indentured servanthood and slavery were instituted to swell the ranks of cheap and free labor. Thus, most production in the 13 colonies was agricultural, and at least 90% of eighteenth-century Americans made their living on the land. Although cities grew rapidly, they did not produce a large part of the pre-Revolutionary colonial output.
Each region presented different challenges to the English economic men and women. In New England, colonists faced rocky soil and often rotten weather. Large-scale farming was not a viable option, but there was a plentiful supply of forests, so lumbering and shipbuilding flourished. Streams and harbors allowed for fishing (cod, mackerel), whaling. There were also many natural harbors, such as Portsmouth, Boston, and Providence, so trade was able to develop. Although they faced the dangers of the sea, including bad weather, sickness, and pirates, New England merchants were able to earn substantial profits. Many of their overseas trade routes involved triangular trade, often involving New England, the West Indies, and England. In one trade route, fish, grain, and lumber were exported to the West Indies. These goods were traded for sugar and molasses, which was shipped to Britain and used to purchase manufactured goods, which were then shipped to the American colonies. One notorious triangular trade route involved the American colonies, West Africa, and the West Indies. Sugar and molasses were shipped to North America, where they were made into rum and shipped to West Africa. In West Africa, the rum was traded for slaves, who were shipped to the West Indies. The slave trade stimulated investment, which helped European merchant marines grow and provided profits to jump start capitalistic entreprises in France, England, and New England.
In the Middle Colonies, Agriculture was much more prevalent than in New England, because of the favorable climate and fertile, level land. Family-size farms became prevalent, producing surplus grain (wheat, corn, and oats) to be exported to other colonies and to England. Soon, the Middle Colonies were known as the "bread colonies." The long, easily navigable rivers, such as the Hudson, Susquehanna, and Delaware, made trade with Native Americans possible, so fur trade went on. The excellent harbors, at New York and Philadelphia, for example, made trade possible with other colonies, England, and the rest of Europe.
The Southern colonies produced naval stores (pitch and tar from the forests), which were vital for shipbuilding in England and the colonies. The fertile soil and warm climate contributed to the creation of a plantation economy, in which indigo, rice, and tobacco. Most of these goods were exported to England in return for manufactured goods. Plantations grew in size, partly because tobacco exhausted the soil and new land needed to be acquired, so plantation owners became an entire class, wealthy and dominant in southern society.
In all regions of the colonies, merchants' attempts to promote economic growth were stifled by British policies of mercantilism. Long before capitalism, socialism, or communism were articulated as economic systems, Europe's economies had functioned under this system. The goal of mercantilism was to accumulate large stores of gold, silver, or other precious metals. Since money was viewed primarily as a store of value, the accumulation of money, in the reliable form of precious metals, was the wealth of the nation. Increasing the store of gold and silver was possible only through trade. A country would try to maximize its exports and minimize its imports, thus accumulating as much inflowing capital in the form of reliable precious metals as possible. Mercantilism could not be called a friendly, neighborly sort of system, since one country could only gain at the expense of another. In addition, the mercantile system promoted the acquisition of colonies for the purpose of exploitation for raw materials and development of markets for the exports of the mother country.
With such a mindset, English merchants were hardly inclined to support freedoms for the Americans which would interfere with their established system. One of the most fundamental causes of the war was the British attitude toward the American colonies. To British merchants and most of the Parliament, the American colonies were subject to the crown and Parliament, and their raison d'�tre was to serve the crown. As Englishmen and equal subjects of the royal crown, the English-Americans felt that they deserved the rights of other Englishmen, including the right to be represented before the body which levied its taxies. In addition, the English-Americans felt that, due to the taxes and trade restrictions imposed by the distant Britain, the mother country was doing more harm than good for the colonists.
Trade restrictions imposed by Britain prevented American colonies from trading with anyone but Britain and British West Indies. The Molasses Act of 1733, one of the Navigation Acts, required high duties on sugar and molasses purchased from anywhere but the British West Indies. The act was widely violated, since the British did not put much effort into enforcing it, and colonial demand for sugar and molasses exceeded British West Indies' production capacity.
In addition to trade, mercantilist laws hurt colonial industrialization. The largest industry in the colonies was New England shipbuilding. Cloth-weaving, clothing sewing, leather tanning, shoe-making, furniture-making, and tool-making were other small-scale industries that grew in the colonies until they expanded beyond cottage industries and out of local markets. Unfortunately, budding industrialists faced a number of stumbling blocks to success. In addition to the dearth of skilled labor, capital, and inland transportation for distribution, English mercantilist laws hampered colonial exports and, thus, industrialization.