\n<\/p>\n
\u00a0This is the text of the prepared remarks I made at Villanova’s Ryan Center symposia over the weekend. I said many other words, alas unrecorded, during the extensive round table and Q&As.\u00a0<\/p>\n
Tax rebellion must loom large in Obviously, taxes have economic Parsing economic from ideological Today, I will argue that the real-world To quickly recap both events, in Fewer, though, will celebrate the The two crises certainly share some Their differences, though, are The main reason for those I would not go so far, of course, This point is probably most easily The size of the effect, though, was Moreover, after spiking to almost Garg and I also calculated the The macroeconomic situation in Although I discovered it in 2008, I The colonist responded at some Before the French and Indian War, The author also notes that land The French and Indian War, the At the same time, privateering The second cause of discontent Due to unexpected changes in The extent of the distress was no Britain, the author and many other \u201cAnother capital Greivance and The want of a final means to settle Other colonists turned their \u201cTo this miserable and discontented \u201cTho we object to unconstitutional The author implies that all those In short, the long-held belief that \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Many other formative events of \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 I could go on, but am out of my \u00a0This is the text of the prepared remarks I made at Villanova’s Ryan Center symposia over the weekend. I said many other words, alas unrecorded, during the extensive round table and Q&As.\u00a0 Tax rebellion must loom large in any examination of the economic undergirding of the American identity. Without Shays, the U.S. Constitution and federal […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12032],"tags":[204,11647,19128,11616,185803],"dealstore":[],"offerexpiration":[],"class_list":["post-364365","post","type-post","status-publish","format-standard","hentry","category-american-history","tag-american","tag-economic","tag-identity","tag-origins","tag-reconsidered"],"yoast_head":"\n
\nany examination of the economic undergirding of the American identity. Without
\nShays, the U.S. Constitution and federal government would likely look very
\ndifferent. The two Pennsylvania tax rebellions of the 1790s, over whiskey and
\nwindows, helped to limit direct federal taxation in peacetime. Moreover, by
\nencouraging federal government reliance on tariffs and discouraging the
\noffsetting excise taxes promoted by Alexander Hamilton, those rebellions steered
\neconomic development towards manufacturing. The so-called Tariff of
\nAbominations fomented the Nullification Crisis and tariffs constituted the
\nsecond most important cause of the War Between the States, which is how many of
\nus Texans refer to what you Yanks call the Civil War. Insert tongue into cheek.<\/span><\/p>\n
\nimplications but they often code for ideological positions as well. Calls for
\nlower taxes, for example, may stem from a desire to increase economic activity
\nor they may be rooted in a desire for smaller government and its obverse, more
\nfreedom. Calls to replace tariffs or sales taxes with income taxes might be
\nrooted in efficiency concerns but they can also indicate a desire to
\nredistribute resources from rich to poor.\u00a0<\/span><\/p>\n
\nmotivation remains fraught, especially because scholars have become so siloed
\nthat few seem capable of addressing both sides of the issue and
\ninterdisciplinary partnerships face high barriers. As a History Ph.D. who has spent
\ndecades teaching undergraduate and MBA courses in economics, and who has spent
\nas long trying to cultivate working relationships with both historians and
\neconomists, I am one of the few scholars who might be able to make a credible
\nargument for the primacy of economic or ideological motivations in particular
\nhistorical instances.<\/span><\/p>\n
\neconomic effects of Britain\u2019s Imperial fiscal, monetary, and trade policies
\nfomented the Stamp Act rebellion and eventually the American Revolution, but
\nthat ideology played the biggest part in the Nullification Crisis, the
\nrebellion that wasn\u2019t. That reverses the consensus, which has long held that
\nthe colonists were lightly taxed and hence rebelled over ideas rather than
\nreality, and that the tariffs dug so deeply into Southern pockets that South
\nCarolinians had to saber rattle to obtain relief.<\/span><\/p>\n
\nMarch 1765 Parliament imposed on the colonists of mainland British North
\nAmerica a tax on the sale of newspapers, legal documents, and sundry then
\nluxury items, including playing cards and dice. American colonists resisted by
\nphysically intimidating stamp distributors and boycotting British goods. A
\nso-called Stamp Act Congress composed of representatives from nine colonies met
\nand formally requested repeal. Parliament granted their request in March 1766
\nbut also passed a Declaratory Act that asserted Parliament\u2019s right to tax the
\ncolonists as it saw fit. This tax rebellion kicked off a decade of crises that
\nculminated in a long war and a declaration of independence, the 250th
\nanniversary of which we this year celebrate.<\/span><\/p>\n
\n200th anniversary of the Nullification Crisis a few years hence. In November
\n1832, a convention of South Carolinians called for the nullification of federal
\ntariffs effective 1 February 1833. They protested the so-called Tariff of
\nAbominations passed in 1828 and its 1832 revision, which kept tariff rates at
\nunprecedentedly high levels. President Andrew Jackson responded to
\nnullification by saying that he would die in the last ditch before allowing a
\nstate to nullify a federal tariff, a credible threat to use military force
\ngiven the source, known to Americans as Old Hickory and the Hero of New
\nOrleans. Kentucky Senator Henry Clay soon brokered a compromise that slowly
\nreduced federal tariffs to 20 percent over a decade. South Carolina backed off
\nNullification and Congress passed the Force Bill, which empowered Jackson to
\nuse the military to enforce the tariff if need be.<\/span><\/p>\n
\nkey characteristics: both reacted to the taxes of a central authority and led
\nto a special convention. Both times, the central authority reversed policys but
\nreasserted its authority with additional legislation.<\/span><\/p>\n
\ntelling. Resistance to the Stamp taxes was widespread and entailed a degree of
\nphysical violence and threats of more by spontaneous rabble action. Resistance
\nto federal tariffs was largely limited to South Carolina and entailed political
\nposturing by polities rather than physical protestation by the populace.<\/span><\/p>\n
\ndifferences, I\u2019ll argue, is that, as abominable as it was, the tariff had
\nlittle negative effect on the overall U.S. economy while the stamp tax posed an
\nexistential threat to colonial economies given the dire macroeconomic situation
\nwhen imposed.\u00a0<\/span><\/p>\n
\nas to deny that ideology played some role in the stamp tax rebellion or to
\nargue that real economic factors played no role in the Nullification Crisis. I
\nam simply saying that they were not central to what transpired.<\/span><\/p>\n
\nunderstood by examining the economic effects of the tariffs of 1828 and 1832.
\nNullifiers correctly noted that by increasing the price of tariffed goods,
\ntariffs helped domestic producers, mostly located in the North, while hurting
\nconsumers of tariffed goods throughout the country, especially in the
\nSouth.\u00a0<\/span><\/p>\n
\nquite small. Economist Sonali Garg and I have spent the last year looking for
\nmajor economic effects of the Tariff of Abominations and its 1832 revision and
\nwe have found none. Real per capita output continued to climb over the 1828 to
\n1833 period, long-term interest rates were almost unchanged, and only Clay\u2019s
\ncompromise tariff sent bank and insurance stock prices uniformly and strongly
\nupward as the threat of armed insurrection dissipated.<\/span><\/p>\n
\n62 percent in 1830, the average effective tariff, which is to say total duties
\npaid divided by the total value of imports, dropped below its 1827 level in
\n1831 and fell further to 43 percent in 1832, the year that South Carolinians
\nthreatened nullification. In other words, the economy quickly adapted to the
\nTariff of Abominations through some combination of the increased smuggling, substitution,
\nor domestic production of tariffed goods. The worst was over before Nullification,
\nwhich was more rooted in fears that a national government powerful enough to
\naid one section of the country at the expense of another might meddle with a
\nparticular peculiar institution.<\/span><\/p>\n
\nHarberger triangles or deadweight losses produced by the tariff on pig iron.\u00a0With
\nthe tariff at 62 and a half cents per 112 pounds, they were hardly the stuff of
\nrebellion, even when considered along with the litany of other tariffed goods. Many
\nplanters in South Carolina faced economic hardships in the late 1820s and early
\n1830s, to be sure, but their challenges were more due to declining yields and
\nlower world prices for cotton and rice than to tariffs. The largely localized
\neconomic pain helps to explain why South Carolina acted alone and why
\nnullification advocates were quick to compromise rather than itching for a
\nfight, as they would be in 1861 when they faced an existential threat.<\/span><\/p>\n
\n1765, by contrast, was starkly darker and much more widespread than the
\ndeadweight loss from high tariffs. Economist Ron Michener and I worked on the
\npost French and Indian war macroeconomic mess, him pretty much full time and me
\non and off, for almost a quarter of a century. Our argument is not easily
\nunderstood in a short compass and appeared to some as figments of our
\ntheoretical imagination until I stumbled upon a miscatalogued primary source
\nthat encapsulated the same argument that we had been making on the basis of
\nhundreds of primary sources that each told only a small part of the overall
\nstory.<\/span><\/p>\n
\npublished this overlooked overview source only recently, as an appendix to a
\nchapter in an edited collection about the Bubble Act, so you have not likely
\nseen it. I want to explain here what key excerpts mean for our interpretation
\nof the Stamp Act rebellion. Interleaved with another source about the monetary
\nsituation in New Jersey in 1786, it was unsigned and undated but I was able to
\ndate it to 1768 based on the exchange rates it quoted. Other internal evidence
\nreveals the author to be a resident of the middle colonies, most likely New
\nJersey, and that the document was intended as a private letter to an unnamed
\ncorrespondent, likely in Britain, who hoped \u201cto restore that happy flourishing
\nand tranquil State the Colonies formerly enjoyed, so beneficial and glorious to
\nG. Britain.\u201d<\/span><\/p>\n
\nlength, beginning his analysis with the key observation that it was not \u201cthe
\nStamp Act or New Duty Act alone that had put the Colonies so much out of humour
\ntho the principal Clamour has been on that Head but their distressed Situation
\nhad prepared them so generally to lay hold of these Occasions, and how they
\ncame to be so I must trace back to commencement of the late War. There was then
\nlittle paper Money in the Colonies, but all Ranks lived frugally within what
\nthey got and there transactions and Dealings did not exceed the Currency among
\nthem, there Trade to England was small and they made Remittances by their West
\nIndia Trade for the Country People in general were contented with their own
\nProduce and Manufactures, the Price of Land was so low that they could soon pay
\nfor it out of what they raised.\u201d\u00a0<\/span><\/p>\n
\nin other words, the colonists used paper bills of credit to settle debts with
\neach other and specie, full bodied gold or silver coins in other words, to
\nsettle debts with Great Britain. They exchanged their produce for the coins in
\nthe West Indies mostly, the author fails to mention, with French and Spanish
\ncounterparties. Sales to British planters in the West Indies were most often
\nsettled in bills of exchange, a type of international check, drawn on specie
\ndeposits in Britain.\u00a0<\/span><\/p>\n
\nprices were low, which means that interest rates were high. It was well
\nunderstood, even then, that asset prices moved inversely to interest rates.<\/span><\/p>\n
\nauthor continued, brought a \u201cgreat Change [in] a short Time.\u201d The war
\nnecessitated equipping and paying many troops, which the colonial governments
\nfinanced by issuing paper bills of credit akin to today\u2019s Federal Reserve Notes
\nbecause \u201cto raise the Sum wanted within the year, or by Loan as in England, was
\nequally impossible, but being secured by the Legislature to be sunk by future
\nTaxes they never depreciated but,\u201d through what economists call the liquidity
\neffect, the new money decreased interest rates and thus raised the price of
\nreal estate.\u00a0<\/span><\/p>\n
\nprofits and wartime trade, much of it illicit, brought in large quantities of
\nspecie from the West Indies, which the colonists used to pay for British
\nimports. \u201cThus not withstanding the vast Importation of British Manufactures,\u201d
\nthe author explained, \u201cour Trade supplied us with ample Remittances.\u201d After
\n1760, however, \u201cthis advantageous Business received a violent check by a most
\ninjudicious and ill advised circular Letter to the Governours on the Continent,
\nand by orders to the Kings Ships to seize all Vessels employed in\u201d trading with
\nthe enemy. British naval ships \u201crigorously performed this Order, [while]
\ncarry[ing] on the Trade themselves. This was equally a Loss to G. Britain and
\nher Colonies, reduced many Merchants to a low State and gave the first Cause of
\nDiscontent.\u201d<\/span><\/p>\n
\narose from the fact that when the war, privateering, and trade were winding
\ndown, money remained \u201cplenty, both in Specie and Bills of Credit.\u201d As a result,
\nthe colonists \u201cwere not afraid of entering into deep Engagements equivalent to
\nour Circulation.\u201d In other words, colonists borrowed large sums at low interest
\nrates to buy real estate in the hopes that its price would go higher still.<\/span><\/p>\n
\nBritish policy, it was not to be. The supply of money shrank \u201cbeing \u2026 called in
\nby Taxes or remitted for Goods.\u201d That \u201coccasioned a sudden Stagnation,\u201d a big
\njump in interest rates, and a big fall in real estate prices. Most land
\nspeculators had borrowed with the full principal due in a year or two, as was
\ncustomary. Unable to sell due to the collapse in land prices, or to refinance
\ndue to the spike in interest rates, they defaulted. A rash of lawsuits,
\nbankruptcies, and sheriff\u2019s sales resulted. \u201cBy calling upon and suing one
\nanother brought many to ruin,\u201d including incarceration in debtors\u2019 prisons
\ndescribed by other contemporaries as \u201cloathsome cages.\u201d<\/span><\/p>\n
\nexaggeration. As with other parts of the letter, Michener and I had already
\nfound numerous corroborating sources including, in this instance, an index of
\nsheriff sales that we created from notices in the Pennsylvania Gazette<\/i>,
\nwhich has been full-text searchable since the 1990s.<\/span><\/p>\n
\nsources indicate, then enacted several policies that prevented colonists from
\nrefreshing colonial money supplies. British naval ships \u201coften cramp Trade by
\nstoping and detaining Merchants ships and pressing their Men.\u201d British customs
\nofficials became so strict that for a time they even stopped row boats crossing
\nfreshwater rivers, the traditional way of supplying Manhattan and Philadelphia
\nwith wood and victuals.<\/span><\/p>\n
\nInconvenience to these middle Colonies,\u201d the author continued, \u201cis being
\nrestrained from issuing Notes or Bills of Credit \u2026 to recount our Distress for
\nwant of this Medium were Endless or by what unaccountable Policy G. Britain
\nacts in the Restriction.\u201d He referred, of course, to the well-known 1764 Currency
\nAct that effectively banned colonies from issuing new bills of credit or
\nextending the time in circulation of existing ones. Too often pooh-poohed by
\nscholars, the restriction stripped the ability of colonial legislatures to
\naugment their colonial money supplies, all of which shrank dramatically.<\/span><\/p>\n
\ndebts was so severe that epistolary squirrel scalp bounties circulated from
\nhand-to-hand as money in Bucks County, north of Philadelphia, in 1765. At a
\npence apiece, however, there were not enough squirrels or shot to make up for
\nthe dearth of specie or bills of credit. The author claimed that as a result
\nmany colonists fearful of winding up in debtors\u2019 prison retreated \u201cto the
\nWilderness. They acquire Land but give up every other Convenience, contract
\nsavage and brutal Dispositions, are too far Distant to carry their Produce to
\nmarket, in exchange for European manufactures.\u201d<\/span><\/p>\n
\nattention to \u201cManufactories,\u201d including farm families \u201cwhat make sufficient for
\ntheir own Families both of Woollen and Linnen many of them keep Looms in their
\nHouses, and make two or three Hundred Yards of different Cloths a year. I am
\nwell acquainted with one Family who makes 500 Yards at least yearly, and I am
\ntold that two others exceed 1000, all in Jersey. They likewise make great
\nProgress in the Iron Manufactory, and tho their Edge Tools come higher, they
\nare far superior to those imported. We have plenty of Hides for Shoe Upper
\nLeather and Saddler Leather \u2026 Shoemakers we have in plenty, as well as Saddlers
\nand chaisemakers. Many other Articles are made among us, but why should this
\ngive any Jealousy to Britain. \u2026 For it must not be forgot that our Trade to the
\nSpanish and French West Indies was laid under the severest Restrictions, and
\nthe Spanish Ships were even prevented laying out their Money in our Ports. O
\nwise Grenville!\u201d<\/span><\/p>\n
\nSituation,\u201d the author continued, \u201cwere we reduced about the year 1765 and in
\nNovember the ever odious and memorable Stamp Act was to take Place, which we
\nlook\u2019d upon as equally inexpedient and illegal and which never could have been
\ncarried into Execution\u201d for want of the money to pay for the stamps, especially
\ngiven the number of lawsuits then in progress. Only near the end of his missive
\ndoes the author mention \u201cthe Arguments in the Farmers Letters, which we deduced
\nfrom sound Whig Principles,\u201d before railing against British customs officers
\nagain, especially the way that they \u201criot in Pomp amidst our Distress.\u201d<\/span><\/p>\n
\nTaxes,\u201d the author continued, \u201cwe have always willingly submitted to those
\nlevied by our own Assemblies and it is well known how cheerfully in fact we
\nmortgaged both our real and personal Estates during the late War, and to this
\nDay a heavy annual Tax continues on our Lands, live Stocks, personal Estates,
\nServants, Negroes, Batchelors & Mills, Forges &c. ~~ All these Taxes
\nare raised, managed and applied at a most triffling Expence. how different is
\nthe practice in Britain?\u201d In other words, the colonists rebelled not at the
\nlevel of Stamp tax but at the inefficient mode employed.\u00a0<\/span><\/p>\n
\ndifficulties \u2013 little money, low land prices, high interest rates, numerous
\nsheriff sales, and little interest in trade but much in manufacturing or moving
\nto the frontier — remained at the time of writing, a fact that Michener and I
\ncan also document from numerous other primary sources.\u00a0Conditions improved
\na little when southern Europe needed American grain but sank again due to
\nimproved harvests there and the 1773 credit crunch.<\/span><\/p>\n
\ncolonial resistance was more ideological than economic in nature must be
\nreversed. The Stamp Act was the straw that broke the camel\u2019s back, a bridge too
\nfar, a marginal shock that threatened the colonists\u2019 existence.<\/span><\/p>\n
\nAmerican Identity beg for reconsideration given the findings of economic
\nhistorians over the last few decades. A very promising avenue is to examine the
\ngeographical and socioeconomic dispersion of federal bondholders. I found in my
\n2008 book One Nation Under Debt<\/i> that Hamilton\u2019s claim that the national
\ndebt would cement the Union was quite credible for the 1790s but the role of federal
\nbond ownership, or rather the lack thereof, in the Hartford Convention, the
\nNullification Crisis, and Civil War remain unexamined, though the requisite
\nprimary sources exist.<\/span><\/p>\n
\nallotted time. Thank you!<\/span><\/p>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":"