economic history of the us - napa valley college 120... · 2014. 8. 6. · lecture #2 peter allen...
TRANSCRIPT
Economic History of the US
The Colonial Era, 1607-1776Lecture #2
Peter AllenEcon 120
The Colonial Era, 1607-1776
Founding
Economic Structure/Activities
Trade
Sources of Econ. Development
Economic sources of Rebellion
Chapters 2-6
European Voyages
1500-1525 Commercialization of European economies,
1400s Rule of law and investment Population growth Technology in transportation/weapons
Capacity for long-distance sailing, late 1400s
Portugal was first: 1415 captures Cuenta (North Africa)
…then Spain, then Holland, France, England
Key Voyages, Americas
Colombus (Spain), 1492
Amerigo Vespucci (Spain), 1499-1502
Vasco Nuňez de Balboa (Spain), 1510-12
Ferdinand Magellan (Spain), 1520-22
Hernando Cortez (Spain), 1521
Initial Voyages, Why?
To make money
1. Trade
Get to Asia
Asian goods, esp. spices
African goods, e.g. sugar
Circumvent Turk-Venetian lock on Eastern Mediterranean
2. Exploitation of local resources
Colonization v. conquest
Competition of World Powers
Colonization: Spain v. England
Spain1. Extract resources esp. silver
2. Conquest to spread Christianity Occupying rulers
Didn’t establish permanent colonies
Outposts populated by soldiers
First European colony, Balboa: Santa Maria de la Antigua del Darien, 1511
Hernán Cortéz, Mexico 1521
1521, Conquest of the Aztec Empire
Colonization: Spain v. England
England had a different way to make money from its NA colonies
Parliament and investors established permanent colonies
a. Purpose of colonies…
market for English manufactured goods, and
source of raw material, inc. farm products
b. No other option…
few riches in North America
Domestication, cash crops
“business” model
British had to stay in large numbers
First British Colonies
Latecomers, compared to Spain, Portugal
Sir Walter Raleigh, Virginia and North Carolina, 1580s, Lost Colony
1607, monarchy granted two charters (right to settle, self-govern)
London Company, south part of English territory
Plymouth Company, north
1607, London (later Virginia) Company settlement in Jamestown, Virginia
Plymouth Company settlement in Sagadohoc, Maine, New England (1620), Boston (1630)
Lessons of Early Industrial Organization
British colonies started out as economic collectives…
a. Virginia Company, directed from London
b. “planters share;” profit sharing
c. Expenses covered by colony
d. Few “free-market” incentives
Tensions arose between…
a. Those who wanted to improve lands and production, and
b. “Free-riders”
c. Pressures for reform, privatization
Jamestown Privatization, 1614-1625
1614 (1607+7) private landholding first allowed (3 acres)
1619: Headright system 50 acres granted to settler who paid their voyage
Voyage cost ₤9-10 per person = 1.5x average worker’s yearly income
1623 (1607+16) all land privately-owned
1625 Crown Colony status
All colonies had problems with free-riders and converted to private holding of land
1650: privately-owned family farms predominant
Factor Endowment of British Colonies
1. Land
Extremely plentiful
Supply vastly higher than demand
Low price (relative to Europe)
2. Labor
Severe labor shortage
Demand vastly higher than supply (D>S)
High price, i.e. wage (compared to Europe)
3. Capital
Anything that cost money was scarce
No private investment (“I”)
Carrot and stick
Immigrants drawn to the colonies by:
1. Cheap land Even though most did not have means to buy initially
Most paid for transport with Indenture Contract
Zero hope of acquiring land in England
2. High wages Most jobs were in agriculture
Competitive market, treatment mostly fair for
Europeans
…access to cheap land (contrast with Europe)
Dominance of Agriculture
90%+ of population worked in Agriculture
Regional specialization emerged immediately Southern colonies
Maryland, Virginia, Carolinas, Georgia (n=5)
Model of large plantations dominated for 250 years
Big business, lucrative
Slavery
Middle Pennsylvania, New York, New Jersey (n=3)
Commercial along coast, Grain (wheat, oats, barley)
Smaller scale, family farms
Indentured workers, slaveholding rare
Northern/New England Rhode Island, Mass., Vermont, NH, Maine (n=5)
Subsistence at first
Not viable commercially
People moved into commerce, extraction, homecraft industries
Southern Colonies were
Dominant Economically
Agriculture was a lucrative business from the start
Climate, soil conditions suited to cash crops, rice, tobacco, indigo, cotton (later)
Slavery
Monopolistic competition
Business model…large-scale farm production
Economies of scale requires low marginal cost
Slavery = Zero marginal cost of labor
Comparative advantage
Sold products to England that the English wanted, for profit, i.e. gold
Fit Parliament’s economic model
Slavery became an important economic
institution in southern colonies
Governments of Southern colonies encouraged big landholdings1. Tried to attract wealthy immigrants:
Headright system
2. Encouraged slave holding
Headright to 50 acres of land for purchase of a slave
Slave cost ≈ 10-15X annual per capita income
Primogeniture kept wealth concentrated
Slaveholding spread rapidly bet. 1650 & 1700
Generated rapid growth of wealth… …but no economic development…
i.e., greater distribution of income higher Y per capita…
Average Total Cost in the Short and Long Run
Tons of Rice 0
AverageTotalCost
1,200
$12,000
1,000
10,000
Economies
of
scale
ATC in short
run with
small factory
ATC in short
run with
medium factory
ATC in short
run with
large factory ATC in long run
Diseconomies
of
scale
Constant
returns to
scale
Slavery
Moral v. economic imperatives
African slaves were not British subjects, no legal rights…
…unlike indentured servants
Colonies made their own laws governing slaves
“Settlement Approach” Helped Britain
extend control of North America
England and France were chief competitors in North America
France Quebec 1608
expanded east and southward, didn’t colonize
Louisiana
England” steady and persistent growth of settlements
Enabled British to prevail in frequent wars over colonies French and Indian War (1756-63)
2 million British subjects in NA v. 60K French
