The Economic Roots of the American Revolution

In 1763, Great Britain passed the Sugar Act, which imposed new duties on sugar imported into the thirteen colonies. This act sparked outrage among the colonists because it taxed them directly, rather than taxing the producers of the product (the planters). It was seen as an attempt by the British government to increase revenue at the expense of the colonists. The Sugar Act was followed up by the Currency Act, which required all paper money issued within the colonies to be backed by specie, or gold and silver coins. These laws were unpopular amongst the colonists, especially those living in New England, where there was already significant resentment towards the Crown due to the heavy taxation levied upon them during the French and Indian Wars. Many merchants refused to accept payment in either currency, leading to widespread shortages of both commodities and services throughout the colonies. Merchants began hoarding cash and precious metals, causing prices to rise dramatically. To make matters worse, the Royal Navy seized ships carrying cargoes of molasses, rum, fish, lumber, and other products produced in the colonies. Because of the shortage of hard currency, the cost of imports skyrocketed, making life even more difficult for the average colonist.

These economic problems led many colonial leaders to call for a boycott of English goods. In response, Parliament repealed the Currency Act but replaced it with the Stamp Act, which placed a duty on virtually every piece of printed material used in the colonies: newspapers, pamphlets, playing cards, dice, advertisements, almanacs, licenses, deeds, wills, bills of lading, commercial contracts, stock certificates, marriage licenses, and so forth. Colonists who failed to pay this tax faced imprisonment. Although most Americans opposed the Stamp Act, they did not have much choice in the matter; without access to credit, few could afford to purchase these items from London. As a result, the Stamp Act became one of the major catalysts that ignited the American Revolution. This essay examines how the Stamp Act affected the economy of Massachusetts Bay Colony. Specifically, it examines the impact of the Stamp Act on three groups of people: consumers, merchants, and artisans. I begin my analysis by examining the effect of the Stamp Act on consumer spending patterns. Next, I discuss the effects of the Stamp Act on merchant behavior. Finally, I analyze the impact of the Stamp Act on the production activities of artisans.

Prior to the passage of the Stamp Act, the typical American spent about $1 per year on books, maps, music, and clothing. After the Stamp Act went into effect, however, the price of such luxury items increased significantly. For example, Benjamin Franklin estimated that the price of a book rose from approximately 3 shillings to 10 shillings after the Stamp Act took effect. Similarly, John Adams noted that "a quarter sheet of letter-paper" now sold for 2 pounds instead of 1 pound prior to the Stamp Act. He also observed that the price of a gallon of wine had risen from 4 pence to 8 pence. Other common luxuries like tea, coffee, spices, and tobacco also saw dramatic increases in price. Prior to the Stamp Act, a person could buy a half pint of good quality brandy for 5 shillings. However, following the enactment of the Stamp Act, the same amount of liquor would set him back 15 shillings. A similar pattern emerged when it came to foodstuffs. Before the Stamp Act, a family of four might spend between 20 and 30 shillings each week on groceries. Following the passage of the Stamp Act, families found themselves forced to cut down on grocery expenses. They often purchased cheaper cuts of meat, ate less expensive varieties of bread, and drank less milk. Families also reduced the size of their meals, eating fewer vegetables and fruits. Some families even resorted to growing their own produce, while others turned to alternative sources of nutrition.

Although some historians argue that the Stamp Act caused little disruption to the lives of ordinary colonists, evidence suggests otherwise. One reason why the Stamp Act may have been particularly disruptive is that it hit hardest at the lower end of the socioeconomic scale. According to historian Robert Gross, the wealthiest colonists owned roughly 40 percent of the total value of property in the colony. By contrast, the poorest colonists owned only 0.5 percent of the total value of property. Thus, if the wealthy elite wanted to avoid paying the stamp tax, they could simply sell off some of their land and move to another part of the country. Those who lacked sufficient resources to do so, however, were left with no option except to reduce their consumption expenditures.

As mentioned earlier, the Stamp Act created a severe financial crisis for many merchants. Prior to the Stamp Act, merchants typically borrowed funds against the security of their merchandise. Under normal circumstances, merchants paid interest rates ranging from 6 to 12 percent annually. With the arrival of the Stamp Act, however, the rate of interest charged by lenders jumped to 25 percent. Unable to meet their debt obligations, many merchants defaulted on loans, forcing banks to seize their inventory. When merchants tried to borrow additional funds, bankers demanded collateral equal to twice the face value of the loan. If merchants could not come up with enough assets to satisfy the lender's demands, then they lost everything.

Because of the high costs associated with importing foreign manufactured goods, the colonists quickly realized that they needed to find ways to manufacture goods domestically. Unfortunately, the colonists possessed neither the capital nor the technical expertise necessary to build factories capable of producing large quantities of textiles, shoes, glassware, iron tools, and firearms. Consequently, the colonists decided to import raw materials from Europe and export finished goods to England. At first glance, this strategy appeared to work well. Between 1760 and 1775, exports grew steadily, increasing nearly tenfold. But once the war broke out, the situation changed drastically. During the Revolutionary War, the British navy blockaded the coastline, preventing shipments of goods from reaching America. Without adequate supplies of essential goods, the colonists soon experienced serious difficulties meeting their basic needs, rendering them yet more likely to foment revolution.