The Economic History of the United States

2. Exploration: The Finding, Founding, and Discovery of the New World

Mark Thornton — Fri, 08 Jan 2010 00:00:00 -0600

Why did people move to the new world? The benefits outweighed the costs. The explorers were driven by the economic philosophy of mercantilism. Government and business partnered to build a nation state. Money was thought to be wealth, but it is not. Government ships, soldiers, and subsidies gave the power of kings behind businesses.

Private explorers (57) and public explorers (35) between 1818 and 1909 tried to find a Northwest passage to Asia, and the magnetic North Pole. These expeditions were more hazardous to the public sector than to the private sector in terms of diseases like scurvy, lives lost, or tonnage lost. Private expeditions were safer and less costly.

Lecture 2 of 9 from Mark Thornton's The Economic History of the United States.

1. Why Should We Study History, In the First Place?

Mark Thornton — Fri, 08 Jan 2010 00:00:00 -0600

The study of U.S. history seen through the lens of economic theory teaches us lessons like: (1) Why did America do so well economically?, (2) Why do we have the problems of war, terrorism, and immigration?, (3) What results from the growth of government?, (4) What is the hidden role of money and banking?, (5) How have monetary institutions changed?, and (6) What myths about American history need to be debunked?

Colonialism was the period from 1600 to 1776. Why did Americans want to get out of it? Three schools of economic policy during colonialism are socialism, capitalism or mercantilism. Mercantilism is the most important of these to understand. Its philosophy made the state powerful and supportive of business.

Lecture 1 of 9 from Mark Thornton's The Economic History of the United States.

3. Immigration

Mark Thornton — Fri, 08 Jan 2010 00:00:00 -0600

The Spanish and Portuguese were not very effective about colonizing the New World, despite finding gold and silver and claiming land. The London Company arrived about 1611 with indentured servants. Life expectancy was as young as twenty-one, although food supplies were better in the New World. Land was cheap and available to most immigrants.

The Plymouth Colony in 1623 turned itself into a private property group which flourished as a settlement. Many colonies were run by proprietors appointed by kings. Opportunities in the New World were much greater than in the Old. Many male immigrants had had neither homes nor fathers in Europe. Thus, being an indentured servant was more likely than being an apprentice.

Lecture 3 of 9 from Mark Thornton's The Economic History of the United States.

7. The American Revolution: Part 1

Mark Thornton — Thu, 14 Jan 2010 00:00:00 -0600

Salutary neglect of the colonies spurred innovation and abundance in a spirit of freedom. Bitterness crept into the relationship after the French and Indian War when the British kept colonialists out of certain territories and began taxing them internally and increased tariffs.

The Stamp Acts were internal taxes. No taxation without representation. Americans began boycotting English goods.The Stamp Act and the Sugar Act were repealed. The Quartering Act produced a second crisis which included the Boston Massacre.

Lecture 7 of 9 from Mark Thornton's The Economic History of the United States.

9. The American Revolution: Part 3

Mark Thornton — Thu, 14 Jan 2010 00:00:00 -0600

The Americans successfully used the different tactic guerilla warfare against the staid and rigid British soldiers. War caused a large increase in the paper money supply - the Continental - triggering hyperinflation and loss of purchasing power. The phrase was that something was not worth a Continental.

The French were helpful to the Americans because they were against the world power of Britain. Privateering allowed Americans to transform their ships into private Navy vessels encouraged to steal ships from the other side.

The Articles of Confederation was our first form of government. Falsely considered inadequate, the Articles were overthrown in a coup d'etat. Why did we go from the Articles to the U.S. Constitution? The main justification given by proponents was that the economy could not return to normalcy without a new constitution, but it could have.

The economy after the Revolutionary War, as expected, sank into a depression. There was a pent up demand for British goods. Americans had been hoarding gold and silver. The currency had hyper inflated. The war industries were out of business. Manufacturers now had to compete against British goods. Americans were no longer part of the British empire.

Lecture 9 of 9 from Mark Thornton's The Economic History of the United States.

4. The Colonial Economy

Mark Thornton — Thu, 14 Jan 2010 00:00:00 -0600

The discovery of the new world was a mercantilist process. The private property method was more successful than the public method. But, moving people to the new world was difficult while life in Europe was better. Thus, indentured servants were a large group second only to religious refugees.

Agricultural products like fish, whale oil, grain, tobacco, naval stores, rice, and indigo (and later cotton) were key exports back to Britain. A triangular trading pattern emerged: Africa shipped slaves to the West Indies to work sugar cane fields. Sugar was transported to New England to make rum. Rum was exported back to England.

The British often directly intervened in Colonial trade. The Navigation Acts from 1651 up to the American Revolution forced trade on only English ships, enriching the English.

Philadelphia was the largest Colonial city.

Lecture 4 of 9 from Mark Thornton's The Economic History of the United States.

6. Inflation in Colonial America

Mark Thornton — Thu, 14 Jan 2010 00:00:00 -0600

Colonial governments tried to manipulate the Spanish peso when they couldn't control the commodity monies. They increased the supply of pesos (inflation) and encouraged exports. Prices increased until the process was banned. Fiat paper money created by Massachusetts was an additional inflationary act. A legal tender law forced the use of the paper money.

Debtors like inflation. Creditors, consumers, savers and lenders do not. Inflationary policies cause boom-bust cycles.

Lecture 6 of 9 from Mark Thornton's The Economic History of the United States.

8. The American Revolution: Part 2

Mark Thornton — Thu, 14 Jan 2010 00:00:00 -0600

The Virginia Resolves said Virginia citizens should not obey the Stamp Acts. Intimidation of the tax collectors effectively nullified the Act. Colonialists felt that the Crown had violated their relationship. The Intolerable Acts were the final straw. They stated their grievances in the Declaration of Independence on July 4, 1776.

Parliament had many opportunities to rectify their exploitive acts, but they did not.

Lecture 8 of 9 from Mark Thornton's The Economic History of the United States.

5. International Trade

Mark Thornton — Thu, 14 Jan 2010 00:00:00 -0600

International trade routes revealed comparative advantages of the different shippers, whether New England or British. Merchants dealt with shippers with whom they had a history. Knowing market conditions was easier for local merchants. Crews were paid less in their home ports.

The Colonial monetary situation included wampum which was used by the Dutch in the purchase of Manhattan. The British bimetallism system of a 15:1 ratio of silver to gold was in force, but gold was little used. Gresham's Law played out and the undervalued silver disappeared. Paper warehouse receipts for tobacco served as money as did alcohol and musket balls. Silver pieces of eight equaled one dollar. There was not really a shortage of money in Colonial times.

Lecture 5 of 9 from Mark Thornton's The Economic History of the United States.