Celebrating America's Capitalist Revolution

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The Revolution of 1776 was America’s first War of Secession. Secession was "the" principle of the Revolution, said Massachusetts Senator Timothy Pickering, who also served as President George Washington’s secretary of war and secretary of state. The colonists seceded from the British Empire because, as Jefferson wrote in the Declaration of Independence, "The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States." (Note that the tyranny was over the free, independent, and sovereign States, plural, not "the United States" in the singular).

Economic issues were a major concern for the colonists. Jefferson also condemned the King’s tax collectors: "He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our People, and eat out their substance." The Declaration also criticized the King’s protectionist trade policy: "For cutting off our Trade with all parts of the world." And of course for "imposing taxes on us without our Consent."

Even more fundamentally, one of the reasons the colonists believed they were being tyrannized by the King of England was that the King increasingly viewed the colonies as an economic resource to be exploited by his mercantilist policies, especially trade restrictions in the form of tariffs. Mercantilism was the policy of the British government in the eighteenth century, and one of the first mercantilist laws imposed on the American colonists was the Molasses Act of 1773, which placed a high tariff on imports of molasses from the French West Indies. The Act was not very effective, however, because of good old American ingenuity in the smuggling business. Indeed, the most famous signatory of the Declaration of Independence, John Hancock, was a renowned smuggler.

To protect British ship builders from competition — another patently mercantilist policy — England passed the Navigation Acts which prohibited any ships built outside the British Empire from engaging in trade with the colonies; ships involved in colonial trade were also required to employ a crew consisting of at least three-fourths British subjects, an early form of labor union "featherbedding."

The Navigation Acts also entailed a long and constantly-changing list of "enumerated goods" produced in the colonies (sugar, tobacco, indigo, furs, etc.) that could be shipped only to England. Even if the goods were eventually sold elsewhere in Europe, they had to go to England first and then be reshipped. This made shipping more costly to the colonists, and less profitable as well. On the other hand, it was an indirect subsidy to the British shipbuilding, shipping, and port industries.

The Navigation Acts also included a Byzantine bureaucratic system of regulations and subsidies. For example, the colonies were prohibited from exporting such things as textiles and fur hats from one colony to another. Constant bureaucratic meddling to enforce all these tax collection laws caused resentment among the colonists to build and build.

At the end of the Seven Year’s War in 1763, England was left with a huge war debt and so it began enforcing the Navigation Acts and other mercantilist trade restrictions with renewed vigor while imposing onerous new taxes on the colonists. There was the 1764 Sugar Act, which increased taxes on sugar imports. The Stamp Act of 1765 required a government stamp to be placed on every paper transaction — marriage licenses, property titles, etc. The tax was not very onerous, but it spawned the first American tax revolt: If the King of England could impose such a tax, where will it all end?

The first continental congress was formed to protest the Stamp Act and coined the phrase "no taxation without representation." These tax protesters were so successful that King George repealed the Stamp Tax in 1766. But at about the same time came the Townshend Acts of 1767 which imposed myriad new tariffs on imported goods.

Americans responded by boycotting British goods; the boycott was so successful that, like the Stamp Tax, King George was forced to repeal the Townshend Acts. But the King was not about to give up his attempts to plunder the colonists for all they were worth. In 1773 came the Tea Act, which increased the tariffs on tea, some750,000 pounds of which was imported per year at the time. American tea merchants understood that this could ruin them, so they organized the Boston Tea Party on December 16, 1773, where merchants dressed like Indians and dumped tons of tea into Boston Harbor. They were eventually joined by Virginia planters, Pennsylvania farmers, Connecticut woodsmen, and New England seafarers, writes historian Larry Schweikart in The Entrepreneurial Adventure: A History of Business in the United States.

Thus it was that in 1776, the year that Jefferson wrote the Declaration of Independence, so many of the acts of tyranny that King George III was accused of had as their objective the implementation of British mercantilism in the colonies. The American Revolution was at least partly a capitalist, or anti-mercantilist revolution. In the same year that the Declaration of Independence was written Adam Smith published his famous treatise, An Inquiry into the Nature and Causes of the Wealth of Nations. The "Wealth of Nations" is a prolonged attack on the policy of British mercantilism and a defense of its opposite: free trade and the institutions of capitalism (even though the term "capitalism" had not yet been coined).

After the Revolution the Hamiltonian faction of American politics would battle mightily to bring British mercantilism to America by advocating protectionism, corporate welfare, and central banking. Like the British government, they understood that, as harmful to the country as this mercantilism is, it is nevertheless a powerful tool for the accumulation of political power. They believed that doling out special benefits to the wealthy, privileged, and politically connected through protectionism and government subsidies financed through money creation was the key to perpetual political success.

They sought, in other words, to repudiate America’s capitalist revolution. With the demise of Hamilton’s Federalist Party the Whigs picked up the mercantilist mantle, and then the Republicans in the 1850s, after the demise of the Whig Party. America’s mercantilist cabal achieved very little success in the political arena until their entire agenda was put into place — literally at gunpoint — during the first year of the Lincoln administration. Thus, the Lincoln administration’s adoption of mercantilism, with its tripling of the average tariff rate, its massive subsidies for railroad-building corporations, and its National Currency Acts, was an embrace of the very kind of policies against which the American revolutionaries of 1776 fought.

Thomas J. DiLorenzo [send him mail] is the author of The Real Lincoln: A New Look at Abraham Lincoln, His Agenda, and an Unnecessary War, (Three Rivers Press/Random House). His latest book is How Capitalism Saved America: The Untold Story of Our Country’s History, from the Pilgrims to the Present (Crown Forum/Random House, August 2004).

Thomas DiLorenzo Archives at LRC

Thomas DiLorenzo Archives at Mises.org

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