The Institutions of American

Economic Growth

Prof. Wojciech Bieńkowski

Warsaw University - OSA
Spring, 2016
1. Colonization of North America by England in 17th ad
18th century; special features
- political dimension of English colonization
2. Institutional foundations (system) of English provinces
in North America as formal by mid 18th century
3. Economic foundations of English colonies in North
America in 17th and 18th century
- territorial and economic dimensions of English territories in North
America and its dynamics
- love and hate in economic relationship between England and its
North American territories
- growing economics conflicts between North America and England
and its political consequences in the second half of 18th century,
the beginning of the independence war
Explorers/Discoverers
• Vikings
– Vinland /985 or 986/
 Explorers/Discoverers
• Christopher Columbus /1492/

travel to.. the Indies...

Nina, Pinta, Santa Maria

 Colonizers
• Main reasons for colonization in America:
– Early state-sponsored colonist – f.e. Christopher Columbus sponsored by Spain,
whose original attempt was to find a new route to India and China, known as "the
Indies."
– Religious immigrations:
• Anglicans,
• Calvinists,
• Puritans,
• Catholics,
• Presbyterians,
• Huguenots,
• Lutherans,
• Quakers,
• Mennonites,
• Amish,
• Moravians,
• Jews.
 Colonizers
– Economic immigrations
– Forced immigrations
• slaves
Colonizers
 Spanish exploration and settlement
• Caribbean /Antigua and Barbuda, Cuba, Hispaniola, the modern Dominican
Republic and Haiti, Jamaica, Puerto Rico/
• South America /Argentina - Buenos Aires, Bolivia - La Paz, Chile, Colombia,
Ecuador, Paraguay, Peru, Uruguay, Venezuela – Caracas/
• Central America /Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua,
Panama/
• North America /New Spain: all or parts of today's Mexico, Texas, California
(Alta California and Baja California), Arizona, Utah, Colorado, Oklahoma
and New Mexico; Spanish Florida: Modern-day Florida including parts of
modern-day Alabama and Mississippi; Louisiana, consisting of all or parts of
the present-day U.S. States of Louisiana, Arkansas, Oklahoma, Missouri,
Kansas, Iowa, Nebraska, Minnesota, North Dakota, South Dakota, Wyoming,
Montana, Colorado, Idaho/
Characteristics of the Spanish colonies
Characteristics of the Spanish colonies
British exploration and settlement
List of thirteen british colonists which
were established between year 1607
/Virginia/ and 1733 /Georgia/:
– Province of Massachusetts Bay
– Province of New Hampshire
– Colony of Rhode Island and
Providence Plantations
– Connecticut Colony
– Province of New York
– Province of New Jersey
– Province of Pennsylvania
– Delaware Colony
– Province of Maryland
– Colony and Dominion of Virginia
– Province of North Carolina
– Province of South Carolina
– Province of Georgia
Characteristics of the British
colonies
Characteristics of the British colonies
Native Americans – potential treat
 Economic situation of the colonies
• The thirteen British colonies could be divided into three
geographic areas:
– New England /nothern colonies/: Massachusetts, Connecticut,
Rhode Island and New Hampshire
– Middle Colonies: New York, New Jersey, Pennsylvania and
Delaware
– Southern Colonies: Maryland, Virginia, North Carolina, South
Carolina and Georgia
• Each of these had specific economic, social, and
political developments that were unique to the
regions.
 Motivations of colonists
• The people who settled in the New England Colonies wanted to
keep their family unit together and practice their own religion. They
were used to doing many things themselves and not depending on
other people for much. Some of these people came to New England
to make money, but they were not the majority.
• The people who founded the Middle Colonies were looking to
practice their own religion (Pennsylvania mainly) or to make
money. Many of these people didn't bring their families with them
from England and were the perfect workers for the hard work
required in ironworks and shipyards.
• The founders of the Southern Colonies were, for the most part, out
to make money. They brought their families, as did the New
England colonists, and they kept their families together on the
plantations. But their main motivation was to make the good money
that was available in the new American market.
 Economic situation of New England
• The New England Colonies were largely farming and fishing communities. The
people made their own clothes and shoes. They grew much of their own food. Crops
like corn and wheat grew in large numbers, and much was shipped to England.
• Although some New England farmers exported grain and livestock, many could
barely feed themselves and their families. The climate was harsh: poor soil,
mountains, cold winters and the growing season short. Many New England farmers,
in order to make enough money to support their families during the non-growing
season: had to find jobs in fishing, logging or trapping for fur
• New Englanders therefore turned to alternative occupations, trading with the West
Indies and developing vigorous fishing, small manufacturing, and shipbuilding
industries and foods that didn't grow in America were simply shipped from England.
• The New England trade was known as a triangular trade. During the 18c, merchants
of Salem, Boston /which was known as "The Mart (or market town) of the West
Indies/ and Newport Massachusetts sent fish and lumber to the Iberian Peninsula, and
carried Central American logwood to Great Britain.  This "trade triangle" between the
Old World, New World and West Indies became a profitable venture for all parties
involved.
 Economic situation of the Middle Colonies
• The Middle Colonies were part agriculture, part industrial:
– Wheat and other grains grew on farms in Pennsylvania and New York.
– Factories in Maryland produced iron, and factories in Pennsylvania
produced paper and textiles.
• The climate in the Middle Colonies was relatively hot. This allowed
for a longer growing season. It was warmer than its northern
counterpart New England but cooler than the Southern colonies,
helping stop the spread of disease. The climate in the Middle
Colonies was much better and milder as to the cold adversity that
New England experienced in the winter. Compared to New
England, the soil was much more fertile and less rocky.
• Thanks to the climate the Middle Colonies were known as the
"bread basket" of the thirteen colonies because of their large grain
export.
• The Middle Colonies also practiced trade like New England, but
typically they were trading raw materials for manufactured items.
 Economic situation of the Southern Colonies
• The Southern Colonies were almost entirely agricultural. The main
feature was the plantation, a large plot of land that contained a great
many acres of farmland and buildings in which lived the people who
owned the land and the people who worked the land. (A large part of
the workforce was African slaves, who first arrived in 1619.)
• The Southern plantations grew tobacco, rice, and indigo, which they
sold to buyers in England and elsewhere in America.
• The Southern Colonies were mainly dominated by the wealthy slave-
owning planters. These planters owned massive estates that were
worked by African slaves /of the 650,000 inhabitants of the South in
1750, about 250,000 or 40%, were slaves/. Planters used their wealth to
dominate the local tenants and yeoman farmers. At election time, they
gave these farmers gifts of rum and promised to lower taxes to take
control of colonial legislatures.
 Institutional foundations (system) of English
provinces in North America
• Types of colonies under different political regime:
– previously:
• the Proprietary – were created when large grants of land and authority
were made to one or a small group of men, known as the proprietors
• the Royal – were created by a grant of authority under the kings patent
to a group
• the Charter – were creatures of both Parliament and the king, and their
authority came through a charter
– nowadays:
• the Corporation /≈Charter/
– Massachusetts, Rhode Island i Connecticut
• the Provincial
– proprietary colonies: Maryland, Pennsylvania i Delaware,
– royal colonies: Virginia, the Carolinas, New Hampshire, New York, New
Jersey, i Georgia
 Institutional foundations (system) of English
provinces in North America
• the colonial governments were uniform, each
consisted of three organs:
– the governor, appointed by the Crown or by the
proprietor, or proprietors,
– the council, also appointed by the governor and by the
Crown
– the assembly or house of representatives, elected by the
people.
– these three, corresponding to the king and the two houses
of Parliament, resembled the British government.
 Institutional foundations (system) of English
provinces in North America
• the governor:
– directly represented the Crown or the proprietor.
– His position was a most difficult one to fill. Representing a higher power,
by which he was appointed and from which he had explicit instructions, he
nevertheless owed a duty to the people over whom he was placed, and the
interests of the two were so conflicting as to keep the governor in a
constant turmoil.
– the powers of the governor were extensive /he could convene, prorogue, or
dissolve the legislature, or veto any of its laws, he had command of the
militia, and he appointed many officials, such as judges, justices of the
peace, sheriffs, and the like, and, especially in the early period, he had
industrial, commercial, and ecclesiastical as well as political duties; but in
one respect he was ever held in check -- he had no power over the public
purse/
– the role of the Governor and the use of the office evolved throughout the
colonial period, just as the form of the government had:
• In the earliest days, the governor was the leader of the colonizing expedition.
• Then, there was a period where an absentee governor became normal. The position
was almost a sinecure, viewed as a source of revenue.
• But towards the end of the colonial era, governors tended to be resident civil
servants, and their relation to the colony became more standard.
 Institutional foundations (system) of English
provinces in North America
• the council:
– consisted usually of twelve men, /though in Massachusetts there were
twenty-eight, and in early Maryland but three/
– they had to be residents of the colony in which they served, and they
were usually men of station and wealth.
– many members of the council were ex-officio members who served by
virtue of being named to another office, others would be appointed by
the governor to get an effective cross section to represent various
interests in the colony;council members were theoretically subject to
approval by the British government, either the Secretary of State for the
Southern Department, or after 1768 the Secretary of State for the
Colonies /in practice, the distance and delay in communications meant
that a veto over a member occurred only in rare cases/
– the functions of the council were threefold:
• it was a board of advisers to the governor,
• it constituted the upper house of the legislature,
• and it frequently formed the highest court of the colony.
– most Council positions were unpaid
 Institutional foundations (system) of English
provinces in North America
• the assembly or house of representatives:
– represented the people and was elected by them
– the functions of the assembly were as follows:
• it had the chief legislative power /but its acts could be vetoed by the governor, or be
set aside by the Crown within a certain time after their passage/
• its sole power of taxation /through the exercise of this right the colonles may be said
to have been self-governing, and their liberties were secure so long as they could
retain this sole right of taxing themselves. For many years the British government
wrestled in vain with the problem of how to get an American revenue at the disposal
of the Crown/
• The governor, representing the Crown, and the assembly, representing the people,
were in frequent conflict during the whole colonial period; and the assembly usually
won through its one all-powerful weapon -- a withholding of supplies. On many
occasions the assembly would refuse to grant the governor his salary until he had
approved certain laws it had passed, though often his act was in direct violation of
his instructions.
– most Assembly positions were unpaid
 Institutional foundations (system) of
English provinces in North America
• exceptions:
– In the beginning the house of representatives was
not needed but over time this institutional platform
has been envisaged and installed
– the Corporation – before 1684, the people elected
the governor, and, aside from the Navigation and a
few other restrictive laws, were practically
independent of the Crown
 Institutional foundations (system) of English
provinces in North America
• in methods of local government the colonies were less
uniform than in the general government.
• generally:
– a town - the people, owing to the necessity of guarding
against the Indians and wild animals, and to their desire to
attend the same church, settled in small, compact
communities, or townships, which they called towns.
– a county – was the administrative unit which could
encompass several towns but it had not necessarily possessed
more enforcement power.
 Institutional foundations (system) of English
provinces in North America
• Massachusetts /as an example of a province where towns were
the dominant administrative units/
– The town was a legal corporation, the political unit, and was represented
in the General Court.
– Several times a year the adult males met in town meeting to discuss
public questions, to lay taxes, to make local laws, and to elect officers.
– The chief officers were the "selectmen," from three to nine in number,
who should have the general management of the public business; the
town clerk, treasurer, constables, assessors, and overseers of the poor.
– The county in New England was of much less importance than the town.
Its business was chiefly the holding of courts of law, the keeping of
court records, and the care of prisoners.
 Institutional foundations (system) of
English provinces in North America
• Virginia /as an example of a province in which county was
dominant administrative unit/:
– the large plantations rendered the compact settlement impossible, at
first the parish was the local unit, but it soon gave way to the county.
– the chief county officer was the sheriff, appointed by the governor,
next to the sheriff stood the "colonel," whose duties were largely
military.
– the counties were divided into parishes which were governed by
vestries, whose duties were largely ecclesiastical.
– local government, judicial and administrative, was chiefly in the hands
of a county court, whose members, usually prominent planters
unlearned in the law, were appointed by the governor,this court
gradually came to do the business formerly done by the parish.
– instead of the town meeting, as in New England, the Virginians had
their "court days," on which the people of every rank would gather on
the green about the courthouse to transact private business, to engage
in sports, and to listen to stump speeches.
 Institutional foundations (system) of English
provinces in North America
• In South Carolina there were parishes, but neither counties
nor townships. The middle colonies borrowed from both New
England and the South; they adopted a mixed system of
county and township government.
• New York, as an example:
– at the beginning, the township was the local unit, and not till after the
English conquest was the county organized,
– then, under English rule the town meeting was instituted, but with less
power than in New England. They chose "overseers," instead of
"selectmen," and other officers,
– and finally, after 1703 they chose a "supervisor" to manage the affairs
of the township and he was also a county officer as a member of the
county board of supervisors, which met once a year.
 Institutional foundations (system) of English
provinces in North America
• the judicial system in colonies:
– the justice of the peace stood at the bottom - he was appointed by the
governor, and he tried petty civil cases only.
– the county courts - before which were tried civil cases involving sums
to a certain amount and criminal cases not involving capital punishment.
– the highest colonial court was usually composed of the governor and
the council, in some colonies the governor appointed a body of judges
for this function, while he and the council acted as a court of appeals.
– in certain cases, also, a further appeal could be made to the Privy
Council in England
 Institutional relations with England

• A practice of the colonies was to keep an agent in England to

look after their interests. This practice originated in Virginia
about 1670, and was soon followed by other colonies.
Sometimes the same agent represented two or more colonies.
• The duties of these men were similar to those of modern
diplomatic representatives.
• To the English Board of Trade nearly all colonial questions
were referred, and the board reported them to the king, or to a
committee of the Privy Council.
 Institutional relations with England
• English parliament could have impact on:
– Trade policy of the colonies,
– Foreign policy,
– Criminal law,
 Reasons of the growing tension between
England and the colonies
• The Navigation Acts – the twofold object of these acts was to
protect English shipping, and to secure a profit to the home
country from the colonies:
– the first of the famous Navigation Acts was passed in 1651 - The chief
provisions were, that no goods grown or manufactured in Asia, Africa, or
America should be transported to England except in English vessels, and
that the goods of any European country imported into England must be
brought in British vessels, or in vessels of the country producing them. /The
law was directed against the Dutch maritime trade, which was very great at
that time. But it was nowhere strictly enforced, and in New England
scarcely at all./
– the second of these memorable acts was passed in 1660 -This act forbade
the importing into or the exporting from the British colonies of any goods
except in English or colonial ships and it forbade certain enumerated
articles /such as: tobacco, sugar, cotton, wool, dyeing woods, etc./ to he
shipped to any country, except to England or some English plantation.
Other goods were added at a later date.
 Reasons of the growing tension between
England and the colonies
– the Staple Act 1663 (also called the Act for the Encouragement of Trade)
required all European goods bound for America (or other colonies) to be
shipped through England or Wales first. In England, the goods would be
unloaded, inspected, paid duties, and reloaded. The trade had to be carried in
English bottoms (i.e. vessels), which included those of its colonies.
Furthermore, imports of 'enumerated commodities' (such as sugar, rice, and
tobacco) had to be landed and pay tax before going on to other countries. This
increased the cost to the colonies, and increased the shipping time.
– The British were benefit from this act by imposing custom duties on goods,
which cost was passed to the american consumer. The english merchants were
profit from handling, insurance, and shipping fees. This Act also provided for
a naval officer in all colonial ports to insure the upholding of the mercantile
law.
– From the American stand point, the Staple Act meant higher prices and a
blatant attempt of the British to exploit America for the benefit of the english
merchants. The Act served no other purpose other than the enrichment of the
British people and strengthening of the central government / f.e. in the 1660s,
the duties on tobacco from the Virginia and Maryland colonies amounted to
25 percent of English customs revenues and 5 percent of the Crown’s entire
income./
– Generally, restrictions led to smuggling and trade reduction
 Reasons of the growing tension between
England and the colonies
• the corn laws in the interest of the British farnier,
beginning about 1666, practically shut out from
England grain raised in the colonies. This drove
colonies such as New England and New York to
manufacturing, and this again led England to forbid
manufacturing in the colonies.
• These laws /the corn laws and the staple laws/ were
far more effective than the Navigation Acts.
 Reasons of the growing tension between
England and the colonies
French and Indian War
1754-1763
• Main causes of the confict:
– Both the British and the French claimed the vast territory
between the Appalachian Mountains and the Mississippi River,
from the Great Lakes to the Gulf of Mexico, known as the Ohio
Country
– The English colonists feared papal influence in North America.
For the predominantly Protestant British settlers, French control
over North America could have represented a threat to their
religious and other freedoms provided by English law.
• Outcome/ result:
– war officially ended with the signing of the Treaty of Paris on
February 10, 1763 - British Victory
– France's loss of all its North American possessions east of the
Mississippi except Saint Pierre and Miquelon
 Reasons of the growing tension between
England and the colonies
• Outcome of the French-British war for the colonies:
– The war made the colonist skillful soldiers able to defend
their land without British army assistance
– After the war the skills acquired by the colonist made them
willing to settle in a more distant places in the west
– But the British Parliament decided to install solders
permanently in the colonies /to defend the territories
against French and the Indians/
 Reasons of the growing tension between
England and the colonies
• Outcome of the French-British war for the colonies :
– the Sugar Act /1764/
• reduced the rate of tax on molasses /under the Molasses Act colonial merchants had been
required to pay a tax of six pence per gallon on the importation of foreign molasses however
because of corruption, they mostly evaded the taxes and undercut the intention of the tax/ from
six pence to three pence per gallon, while the duty was strictly enforced.
• the act also listed more foreign goods to be taxed including sugar, certain wines, coffee,
pimiento, cambric and printed calico, and further, regulated the export of lumber and iron.
• The enforced tax on molasses caused the almost immediate decline in the rum industry in the
colonies.
• The combined effect of the new duties was to sharply reduce the trade with Madeira, the
Azores, the Canary Islands, and the French West Indies (Guadelupe, Martinique and Santo
Domingo (now Haiti)), all important destination ports for lumber, flour, cheese, and assorted
farm products.
• The situation disrupted the colonial economy by reducing the markets to which the colonies
could sell, and the amount of currency available to them for the purchase of British
manufactured goods.
• This act was passed to find funds to cover British expenses related to war with France.
 Reasons of the growing tension
between England and the colonies
• Outcome of the French-British war for the colonies:
– the Stamp Act /1765/ was the first direct tax levied on the colonies,
the act required all legal documents, permits, commercial contracts,
newspapers, wills, pamphlets, and playing cards in the American
colonies to carry a tax stamp. It was part of an economic program
directly effecting colonial policy that was necessitated by Britain’s
greatly increased national debt incurred during the British victory in
the Seven Years War
– the Quartering Act - the act forced American colonist to house and
feed British forces who were serving in North America
 Reasons of the growing tension between
England and the colonies
• Creation of the „Sons of Liberty” which
protest against British government practices
• Sons of Liberty existed in almost every
colony, among others in Boston with Samuel
Adams who was the organizer and in New
York, New Jersey, Maryland, Norfolk,
Virginia, in North Carolina ect.
• First argued against the imposition of the
Stamp Act
 Reasons of the growing tension between
England and the colonies
• the Currency Act - the act prohibited the issue of any
new bills and the reissue of existing currency which
could let to destabilization of the economy of the
colonies
• the Townshend Act /1767/ this act placed a tax on
common products imported into the American Colonies,
such as lead, paper, paint, glass and tea
 Reasons of the growing tension between
England and the colonies

• Boston Massacre - On March 5,

1770, a crowd of sixty towns
people surrounded British sentries
guarding the customs house. They
began pelting snowballs at the
guards. Suddenly, a shot rang out,
followed by several others.
Ultimately, 11 colonists were hit.
Five were dead.
 Direct causes of the growing tension between
England and the colonies

• the Tea Act /1773/

– this act in fact imposed no new taxes,
– the East India Company had been losing money from a
lack of sales of tea to the colonies, the English government
took measures to help the East India Company to increase
its sales by passing the Tea Act.
• Direct sale of tea to local customers by the British
could ruin the local Boston middleman group
merchants
Boston „tea party” – December 16, 1773