CURRENCY DIFFICULTIES 597 Africa and the West Indies; of these about 150 were bound for the West Indies and returned thence with about 14,000 hogsheads of molasses, of which not more than 2500 hogsheads came from the British islands. In fact, it was estimated that all the British islands taken together could not supply two-thirds of the quantity required by Rhode Island alone. There were upwards of thirty distilleries engaged in making rum. At the ruling price-about 12d. a gallonit was possible to export this rum at a profit, but if a duty was imposed it would greatly add to the price and seriously restrict the demand. The rum was largely exported to the coast of Africa-about 1800 hogsheads annually-where it was exchanged for slaves, gold dust and ivory. The slaves were disposed of in the British West Indies and the southern colonies in return for bills of exchange by means of which remittances were made to Great Britain in payment for the colony's imports. In view of these facts it was submitted that the renewal of the Act would be "highly injurious to the interest both of Great Britain and the northern colonies". The American Revenue Bill of 1764 is a measure of the greatest significance. The northern colonies wanted the free importation of foreign molasses, but might have acquiesced in a duty of a penny a gallon. The British West Indian planters wanted a prohibitive duty against molasses from foreign islands entering the continental colonies, or alternatively as high a duty as possible. The British Exchequer wanted a duty which would yield a substantial revenue. This last consideration was allowed to overrule the others and thereby the mercantilist point of view with regard to the vexed question of the trade in molasses was abandoned. The prohibitive rate of 6d. a gallon was reduced to 3d. with the avowed intention of making it remunerative. Mercantilism was certainly losing its hold. The complexities of the post-war situation exposed its weaknesses. In a sense the trade between the colonies and the mother country, which it set out to foster, had never been on a satisfactory basis. It had always been difficult, if not impossible, for the northern colonies to find means of paying for their purchases from Great Britain without infringing the Acts of Trade. This difficulty was the greater because the colonies had no proper currency system. Apart from the pine-tree shillings, minted by Massachusetts in the third quarter of the seventeenth century, the colonies had no coinage of their own. They were almost entirely dependent for a supply of specie on coins, mainly Spanish pieces of eight, secured in the course of trade with foreign Plantations. The rate at which these were to be current was fixed by proclamation in 1704, and confirmed by statute in 1708.1 It was laid down that the Spanish piece of eight, or dollar, was to be accepted as equivalent to six shillings, which was 333 more than the sterling rate (4s. 6d.). As a matter of fact the piece of eight was not, even when 1 6 Anne, cap. 10. minted, of the standard assumed by this legislation, for the coins in circulation had been sweated and clipped.1 Still it was an advantage to have some standard of reference even if it was defective. Prices were stated in pounds, shillings and pence (though the British coins for these amounts were not common), it being understood that when a colony observed proclamation rate six shillings were equivalent to a piece of eight. In practice the rate varied despite the law, ranging from eight shillings in New York, seven and sixpence in Pennsylvania and Maryland to six shillings-the proclamation rate— in New England.2 Business transactions in the colonies themselves were consequently complicated by these variations of rates, even when they were not rendered difficult by the actual shortage of coins. Payments to the mother country were made when possible by means of bills of exchange; the par of exchange being based on the relation of sterling and colonial currency to the piece of eight. Owing to the indebtedness of the colonists the rate of exchange was normally unfavourable to them. It often reached a point when payment in specie was desirable and this led the merchants to do their utmost to withdraw coins from circulation in order to ship them to Great Britain. This only accentuated the difficulties arising from the shortage of a circulating medium and consequently strengthened the demand for the issue of paper money. It was difficult for a colony to supply an adequate circulating medium in the form of paper money-apart from the attitude of the mother country on this subject-because of the attractions of inflation. During the Seven Years' War, Virginia, which had a good record in this respect, indulged in an over-issue of bills of credit which were declared legal tender for any amount. Under the existing law sterling debts could be discharged in Virginia if £125 current money was paid for every £100 due. It was possible for the courts to change this rate provided it could be shown that the current money had suffered a greater degree of depreciation, but the British merchants pointed out that before a judgment in their favour could be executed further depreciation might have occurred. Opportunities existed therefore for the debtors to discharge their obligations by paying less than they had contracted to pay. Memorials on the subject were sent to the Board of Trade by the merchants of London, Liverpool and Bristol in 1764, and they were sympathetically received. The Board declared that "the practice of making paper bills of credit a legal tender is absurd, unjust and impolitic". The application of the principle of the Act of 1751 to all the colonies was recommended and legislation to this effect was at once promoted. This meant that debtors in Virginia had to discharge their debts at standard rates. 1 Sumner, W. G., "The Spanish Dollar and the Colonial Shilling" in Am. H.R, m, 607-19. Am. H.R. x, 666. A.P.C., Col. IV, 628. 3 INDEBTEDNESS OF THE COLONISTS 599 The planters were seriously embarrassed in 1764 owing to bad harvests and the burden of the war debt. Rapid depreciation of the currency would have relieved the situation. The alternative of going through the bankruptcy courts was subject to formidable restrictions, as a Virginia act for the relief of insolvent debtors had been disallowed by the mother country. The principal merchants of London, Bristol, Liverpool and Glasgow had convinced the Board of Trade that a debtor's voluntary surrender of his assets in order that they might be realised and distributed among his creditors would inevitably involve injustices since nine-tenths of the creditors lived in Great Britain.1 The extent of the indebtedness of the colonists and the difficulties in the way of reducing it now became issues of first-class importance. In the northern colonies the trade depression forced the question upon the attention of the merchants. They were already so indebted to their correspondents in Great Britain and the purchasing power in the colonies was so restricted that they had to curtail their orders. A number of merchants in Boston entered into an agreement in August 1764 to reduce their importation of English cloth, and the idea of resorting to non-consumption as a palliative led to the adoption of non-importation as a weapon in the conflict with the mother country on the question of taxation. To lessen the dependence on Great Britain it was also suggested that home industries should be fostered. A Society for the Promotion of Arts, Agriculture and Economy was launched in New York and it offered premiums for excellence in local manufactures. Statistics show that during the operation of the non-importation agreements the volume of trade between Great Britain and the chief ports-Boston, New York and Philadelphia-fell heavily. Colonial merchants were able to dispose of their old stocks and to call in their outstanding debts while they were strictly limiting their future orders. Many of them were thus in a position to take advantage of a considerable fall in the exchange rates and remit payments to their correspondents in Great Britain. But these were temporary expedients. The question was whether the northern colonies could develop their industrial resources on a permanent basis. When the Board of Trade called for a report on colonial manufactures in 1766 the accounts sent by the respective governors probably belittled what had been effected. If allowance is made for this, however, subsequent events proved that little progress had been made. What capital there was found its way into foreign trade and the fisheries, and the appeal of the frontier maintained the scarcity of labour for manufactures. The economic structure of the southern colonies was different. No relief could be found in industry, for the existence of slavery meant concentration 1 A.P.C., Col. IV, 641-2. * See Clark, Victor S., History of Manufactures in the United States, 1607-1860, pp. 207- 10. on the staple crops of tobacco and rice. The planters had mortgaged their estates to the full, and much of the land was so exhausted that it seemed that some form of debt repudiation accompanied by resort to the new lands to the west was the only remedy. In Virginia there was an insistent cry for paper money to ease the pressure of debt and also a demand that the boundaries of the colony should be extended on the west; but to these two claims the policy of the mother country was strongly opposed. It was difficult to restrict imports, for the greater part of the commerce in the south was in the hands of English and Scottish merchants. These were said to number some two thousand and the planters were heavily indebted to them. Nonimportation, as George Washington pointed out, could only be effected by going over the heads of the merchants and persuading the people not to buy imported goods.1 As a matter of fact importations were heavy in the south during the years of resistance to the Stamp Act and the Townshend duties. The merchants seem to have remained fairly confident that the debts would be ultimately paid, for they did not discourage their customers from purchasing imported goods. They had so long gone on the principle that debtors cannot drive hard bargains in selling their crops that they were not prepared to abandon it. The British merchants, however, made great play with the extent of colonial indebtedness in the agitation for the repeal of the Stamp Act. It was alleged that the outstanding debts amounted to between four and five millions.2 Witnesses examined by the House of Commons obviously attempted to set the figure as high as possible and Grenville did what he could to discredit their evidence. The main purpose of the committee of merchants, of which Barlow Trecothick was the leader, was to restore the old relations with the colonies. They did not like the recent innovations, partly because they caused disturbance in America, and partly because the collection of taxes in specie would make it more difficult for their customers to make remittances in that form. They regarded the debt itself with complacency and were co-operating with colonial merchants in trying to convict the Government of placing obstacles in the way of its liquidation. The merchants also brought manufacturers into line by withholding orders, to induce them to send up petitions to the House of Commons in which the extent of unemployment was emphasised. It is interesting to find that in this campaign the West Indian merchants made common cause with the merchants who traded with the northern 1 The Writings of George Washington, ed. by W. C. Ford, ¤, 263–7. The figure of £4,000,000 is usually quoted from the Annual Register. The Newcastle Papers give details of the estimate and a higher total. The amount of the debt was undoubtedly exaggerated. Henry Cruger, jr., to his Father, Bristol, 14 Feb. 1766, Commerce of Rhode Island, 1, Henry Cruger, jr., to Aaron Lopez, Bristol, 1 March 1766, ibid. 1, 145. WEAK POINTS OF TRADE WITH THE COLONIES 601 colonies. Together they drew up a programme which was virtually put into operation by the Rockingham administration.1 For the moment mercantile opinion reasserted itself against the new imperial In the face of the danger to trade the West Indies joined policy. hands with the continental colonies. The duties levied on the export of sugar, pimento and coffee from the West Indies were repealed and an inroad was made on the Navigation Laws by declaring the chief ports of Jamaica and Dominica free to foreign vessels. The colonial merchants expressed their thanks to the committee of merchants in London for their good services in securing the repeal of the Stamp Act and "for strenuous efforts and unremitted application in favour of the liberties and trade of America".2 Subsequent events proved that the success of the merchants' agitation in 1766 was due to the special circumstances of the moment. The settlement which they had commended to the Rockingham administration was short-lived. The continued trade depression in the northern colonies enabled the more radical elements to keep the opposition to the mother country alive. In Virginia and Maryland the twofold problem of land hunger and indebtedness was becoming more urgent. The struggle was renewed when the Boston town meeting initiated a campaign against the Townshend duties in the form of non-consumption pledges in October 1767; the merchants of the port adopting the principle of non-importation in the following spring. The Quaker merchants of Philadelphia, however, refused to come in until opportunity had been afforded the British merchants to exert pressure on the Government. But the London merchants did not think it prudent to move in the matter. Their attitude is to be explained by the fact that they did not consider that the success of 1766 could be repeated. The economic situation at home was much easier. There had been a good harvest; the demand for English cloth on the continent was firm; there was no extensive unemployment which could be exploited. Barlow Trecothick himself acknowledged, when pleading for the total repeal of the Townshend duties in the House of Commons, that British trade had not seriously suffered from the renewal of the non-importation movement. 3 The British merchants were also aware that the Americans had raised wide constitutional issues which prejudiced their case. It was obviously no longer a quarrel to be settled by commercial adjustments. Probably they were also coming to see that the colonial trade was not all it had been assumed to be. The years of dislocation caused by the adoption of non-importation agreements in America must have revealed to British trading-houses some of the long-standing Adams, J. T., Revolutionary New England, p. 340, note 1, prints part of the agreement arrived at by the Committees of the West Indian and North American Merchants on 10 March 1766, from Brit. Mus., Add. MSS, 8133 C. 2 Letter in Massachusetts Historical Society Transactions, Feb. 1924. 3 Schlesinger, A. M., Colonial Merchants and the American Revolution, p. 238. |