1776 and America’s anti-Mercantilist Revolution
Beyond taxation, the Declaration's economic grievance ran deeper — American colonists were chafing under Britain's mercantilist restrictions on free trade, and independence was as much about the freedom to trade with the world as it was about political self-governance.
Economic questions are not typically associated with the Second Continental Congress’s decision on July 4, 1776, to declare their states to be free and independent, and therefore no longer subject to the authority of Britain’s King-in-Parliament. There is, however, one line in the Declaration of Independence which indicates that there was indeed an economic dimension to this momentous choice: one that went far beyond taxation questions and the issue of who had the authority to levy them.
The relevant line appears in the list of grievances that the Declaration levels against London: specifically, that King George III should be condemned for “cutting off our Trade with all parts of the world.” On one level, this was an indictment of the Royal Navy’s attempts, with mixed success, to impose a blockade on the rebellious American colonies. But it also hints at long-standing British efforts to restrict American colonists’ ability to trade with whomever they wished, throughout the British Empire and, more generally, the world.
Herein lies a deeper reason for the colonies’ decision to break their formal links with Britain: they desired to shake off the bonds of what Adam Smith called “the mercantile system” in The Wealth of Nations, published in March 1776, just four months before Congress asserted the thirteen colonies’ sovereignty. Though more a set of practices and scattered ideas than a formal body of economic doctrine, mercantilism dominated how European governments and statesmen thought about economic questions. Mercantilism was certainly all about commerce and trade, but it also concerned how governments sought to direct trade between nations as well as their respective colonial possessions in ways that they believed would enhance their nation’s strength and standing in the world.
By the time of the Declaration, mercantilist ideas were coming under assault, most notably in Smith’s Wealth of Nations. It is unlikely that any of the Declaration’s signers had read Smith’s magnum opus prior to July 1776. Books, like everything else in this period, took a long time to travel from ports like Glasgow and London to Boston and New York. There is, however, little question that mercantilism’s restrictions on economic liberty played a significant role in the American colonies’ decision to declare their independence.
Mercantilist Chains
Both as a formal approach to understanding economic life and as a set of economic policies, Sir James Steuart’s Inquiry into the Principles of Political Economy (1767) gave mercantilism its most systematic exposition. Up until then, mercantilist ideas were primarily articulated in formal papers penned by senior government officials such as Jean-Baptiste Colbert, Louis XIV’s controller-general of state finances. This underscores how the mercantilist way of understanding economic questions was heavily shaped by government efforts to realize specific domestic and foreign policy goals in a world dominated by sovereign states.
One theme characterizing most mercantilist thinking was that wealth is essentially static. This meant that wealth had to be acquired rather than grown. Such an outlook led European nations to engage in territorial acquisitions, whether through wars with one another or by establishing colonies and trading posts throughout the Americas, Africa, and Asia. That, in turn, led major trading powers with colonies around the world, such as Britain, France, Spain, Portugal, and the Dutch Republic, to build and maintain navies to police trade routes and protect them in wartime.
In Britain, one expression of mercantilism would prove critical for London’s future relations with its North American colonies. Like many European countries at the time, the British government granted charters to joint-stock companies, which gave them a monopoly on British trade with specific regions of the world. The most important of these was the British East India Company. Created in 1600, it was given a monopoly of the South-East Asian spice trade by Queen Elizabeth I. Over time, this extended to other goods such as cotton, textiles, silk, Chinese porcelain, and many other luxury goods. By the mid-eighteenth century, the East Indian Company dominated British trade throughout modern-day India and Bangladesh as well as the trade routes between India, China, and Britain.
A sizable number of British merchants, members of parliament, and government ministers and officials were major shareholders in the East India Company. Hence, when the Company encountered significant financial difficulties in the 1760s, such individuals were able to pressure the British government to secure new markets for the Company to sell the accumulated reserves of goods (most notably, tea) that were sitting in its London warehouses. This produced the Tea Act of 1773, which gave the Company a monopoly on tea sales in North America.
The Tea Act thus effectively forbade American merchants from purchasing tea from any other supplier than the East India Company. The colonists’ anger at this fait accompli was expressed in the Boston Tea Party, during which hundreds of chests of imported East India Company tea were dumped into Boston Harbor. The colonists recognized that more was at stake than just tea imports. They understood that mercantilist policies were directly restricting the economic liberty of American colonists — some of whom were already trading extensively beyond North America — to engage in exchanges with whomever they wanted. For a people already noticeably commercial in their character, such a restriction was intolerable.
Geopolitics and Ships
The thirteen colonies’ inhabitants were furious with the impositions the Tea Act placed on them, but they had been living with another expression of mercantilism for a long time. This concerned the restrictions the Navigation Acts placed on American colonists — indeed, anyone in the British Empire —wanting to engage in overseas trade.
First legislated in 1650 during Oliver Cromwell’s protectorate and subsequently expanded and modified over the following century, the Navigation Acts required all of Britain’s trade with its colonies to be carried on British ships. This gave British shipping companies a monopoly over trade between Britain and much of the rest of the world. The Acts also mandated that European goods be shipped to Britain initially before being carried on to the colonies, and that particular colonial goods — what were called “enumerated” products — like sugar and tobacco had to be sent first to Britain and other British colonies before being exported to other markets.
These measures effectively sealed off key European markets from direct American exports. The British merchants who consequently re-exported the American goods to Europe reaped the subsequent profits from Continental markets rather than Americans. Making matters worse was that the Navigation Acts required Americans to pay import duties on the goods that they exported to Britain.
One of the Navigation Acts’ objectives was to limit Dutch, French, Spanish, and Portuguese trade with Britain and its colonies and instead favor British merchants. This reflected the mercantilist understanding of trade as a system in which some people “won” while others “lost.” But as Smith pointed out in The Wealth of Nations, when individuals and businesses enter free exchanges within or between countries, they both “win” to varying degrees. Otherwise, neither would have agreed to the exchange in the first place.
The Navigation Acts also reflected successive British governments’ acute awareness that, as an island-kingdom, Britain needed a large, strong, and experienced navy if it were to stave off blockages and prevent foreign interdiction of its trade routes with its increasingly global empire. This complemented the Acts’ specification that certain goods deemed strategic or essential — naval stores, copper, pig-iron, etc. — produced in the colonies could only be exported to the mother country.
In other words, the Acts served what we would call a national security purpose. They reflected the geopolitical reality that, for prolonged periods in the late-seventeenth and eighteenth centuries, Britain was at war with one or more of Europe’s three leading powers: Spain, the Dutch Republic, and above all, France. All three nations had large and powerful navies, which they were not averse to using aggressively.
Navies, however, were expensive to maintain, especially on the scale that Britain believed necessary to meet its needs. And equally necessary was a steady and large supply of skilled sailors who could man ships in wartime. Hence, the Acts’ insistence that 75 percent of British ships’ crews be British or colonials. The Navigation Acts thus helped enlarge the pool of experienced sailors available for the Royal Navy when wars broke out.
The Navigation Acts did come with significant economic costs. In the first place, they limited competition in shipping throughout Britain and its wider empire by severely restricting foreigners’ ability to compete with British shipping companies. Second, the Navigation Acts forced American colonists to pay higher prices for imported goods because their products initially had to be shipped to England, thereby making the colonists pay for a second shipping-and-handling process that, economically speaking, was completely unnecessary. Likewise, forcing the colonists to send enumerated goods first to Britain and British colonies prevented them from shipping these products directly to other countries to buyers who might be willing to pay more than British customers. Some colonists responded to these conditions by engaging in smuggling, a practice that the British authorities found difficult to stop.
A Coming Separation
Despite the Navigation Acts’ restrictions on trade, most American colonists were willing to put up with its impositions. For one thing, the Acts did help Britain maintain a powerful navy, which provided security for trade routes extensively used by American merchants trading in the Caribbean, across the Atlantic, and throughout the British Empire more generally.
The colonists had also witnessed how British naval power had cut off France from its own large empire in North America and India during the Seven Years’ War, most of which France was obliged to cede to Britain under the 1763 Treaty of Paris. By contrast, British naval supremacy meant that the American colonies would never be isolated from what they still regarded as the mother country, which was also their largest export market. The Navigation Acts, they believed, were a crucial security element.
It was no less than Adam Smith, however, who forecast that there would come a time when American colonists would weary of the costs the Navigation Acts imposed on them. In The Wealth of Nations, Smith noted that the North American colonies’ economic and population growth was steadily outstripping Britain’s. As the colonies’ economic growth continued, American colonists would begin to resent the limitations the Acts imposed on their ability to trade. The trade restrictions associated with the Navigation Acts, Smith held, would eventually become economically “oppressive and insupportable” for the American colonies as their economic development continued to accelerate.
But economic issues, Smith added, would not be the limit to the colonists’ resentment. Gradually, Smith wrote in The Wealth of Nations, they would come to regard the Acts as the “principal badge of their dependency” on Britain as well as a “manifest violation of one of the most sacred rights of mankind:” that being people’s natural right to own property and to trade with others in a manner free of unreasonable government restrictions.
Certainly, there is no direct evidence that the Declaration of Independence’s reference to the injustice of Britain’s restrictions on American trade was written with the Navigation Acts in mind. Smith’s point was that American colonists would gradually come to view the Acts as an infringement on key rights associated with property — something about which they cared a great deal. When combined with the fact that the Acts’ economic costs would start to outweigh the security benefits, the growing American ambition to trade free of mercantilist bonds would, Smith believed, eventually drive the colonists towards fundamentally rethinking their relationship with the mother country.
The country that emerged seven years after the Declaration of Independence was one that, for all its desire to remain free of foreign entanglements, was full of merchants anxious to trade with the rest of the world. That included Britain, which would remain America’s biggest trading partner for decades to come. It also began an unravelling of mercantilist restrictions upon much of the world that continued throughout the nineteenth century. In that sense, the Declaration of Independence proved to be liberating for more than one nation.
