In the century after 1650, the colonies enjoyed extraordinary economic growth.

The gross national product (GNP) of British North America multiplied some 25 times between 1650 and 1770, and scholars estimate that American colonists may have enjoyed the highest standard of living in the world by the time of the Revolution.103 Overseas markets for colonial exports expanded as colonists increased their production levels and supplied valuable timber, tobacco, and rice to the Caribbean and the countries across the Atlantic. Imports also grew throughout the eighteenth century, as increasingly prosperousand numerouscolonists expanded their demand for food and manufactured goods. After 1750, inland trade among the colonies also expanded by leaps and bounds, fostering both economic interactions and increased intercommunication among colonists.104 This sort of prosperity is not usually an indication of a gathering revolution. But when colonists felt both financially and ideologically threatened by Parliamentary taxation policies, they proved willing to risk some economic well-being in the short term for the sake of ensuring their libertyboth economic and politicalin the long term. To empower their resistance to Parliamentary taxation, colonists sought to harness their economic clout as a unified body. The boycott was one of the first and most important methods they employed, starting in 1765 with merchants who pledged to refuse all British goods until the Stamp Act was repealed. That initial effort seemed to win success when Parliament repealed the Stamp Act in 1766. When the boycott was revived in reaction to the Townshend Duties of 1767, it soon spread from the merchants of Boston to the planters of the Chesapeake.

Tidewater Politics, Economy, and American

Independence
The Virginia elite may have opposed Parliamentary taxation on principle, but they also stood to benefit personally from boycotting payments. For years prior to the boycotts of the 1760s, the elite rank of Virginia society had become enmeshed in an immense web of debt to British creditors; the per capita debt in Virginia almost doubled between 1664 and 1776.105 Virginia planters bought expensive goods, like Thomas Jefferson's extensive wine collection and library,

and George Washington's made-to-order Moroccan leather slippers and fine household linens, all designed to maintain the appearance and lifestyle to which they were accustomed and which they were expected to uphold. This may sound trivial today, but a man's reputation was everything in eighteenth-century society; one Virginian, William Byrd III, became so overcome with debt that he had to mortgage his silver plate and 159 slaves, then committed suicide on New Year's Day in 1777.106 In only three years, Robert Bladen managed to squander his inherited plantation of 1,200 acres and 40 slaves.107 Wealthy landholders therefore became frustrated and alarmed by their own dependence on credit, as eighteenth-century society increasingly came to look upon luxury and frivolity as signs of weakness, corruption, and a lack of liberty. Landholders certainly recognized that a boycott would not only send an effective message to British authorities, it would also reduce their debts to the British merchants. When independence became a real possibility in early 1776, the gentry also had the incentive of free trade with all the world's nations if they split from England and its trade monopoly, as enforced by the Navigation Acts. Virginia's leaders also temporarily banned slave imports in 1769 and 1774, since those imports also benefited England. Like the boycotts on manufactured imports, the temporary slave trade moratorium was not much of a sacrifice for the tidewater elites (the tidewater was the coastal area with the most fertile land). These very wealthy landholders along the Atlantic shoreline already had plenty of slaves, and by the 1730s those slaves were increasing through natural reproduction rather than importation. Elite slaveowners were also becoming concerned that newly enslaved Africans were the ones most likely to foment rebellion. Meanwhile the smaller planters to the west, who still needed slaves, simply ignored the ban. Nonetheless, while the 1769 ban was considered a failure, the 1774 slave boycott was a success, in no small part because British traders wouldn't even approach the colonies, due to their unstable political situation. Thus Virginia's colonial gentry spearheaded early colonial protest movements that were part patriotic and part self-serving, or at least convenient for most wealthy landowners in their colony. This dual motivation enjoyed some successes but overall the results of the initial 1760s and early 1770s activism were mixed. As historian Woody Holton has explained, there were other "incentives" for Virginia's tidewater gentry to turn from protest to advocating outright independence

between 1774 and 1776. During that period, the boycott adopted by the First Continental Congress made life extremely hard for the small farmers of Virginia and elsewhere, and it gave Virginia's slaveswho composed 40% of the colony's population in 1775an opportunity to challenge their owners' power.108 Almost half of all white Virginians owned one or two slaves by the 1760s, but the gentry were on another levelthe wealthiest 10% of Virginians owned half of all property in the colony. They owned the largest concentrations of field slaves, almost all of the domestic slaves, the best lands, the finest imported goods, and the sturdiest brick houses. Perhaps another 10% of Virginians were traders, artisans, and slave overseers. That left the remaining 80% of white Virginiansmore than 200,000 peoplein the small farmer category known as the "yeomanry." With the Continental Congress boycott of late 1774 and 1775, these small farmers could not obtain income from exports and they suffered shortages because they could not import goods either. This situation threatened to divide Virginia's white population, a possibility that the gentry could ill afford if they wanted to maintain control over the slave population and avoid the specter of a class war among white colonists. In December 1775, Virginia farmers began a series of salt riots, brought on by the non-importation agreement that the colony initiated a year earlier. Non-importation was designed to put pressure on Parliament by causing unemployment and riots in Britain, but when the salt ran out in Virginia, the situation turned dire: salt was a necessary component of preserving meat, preparing food, and feeding livestock. Salt shortages would persist until either the boycott was broken or Virginia revived its foreign trade; the only way to revive trade was to declare independence, for no foreign power would risk dealing with a part of the British Empire. If the gentry did not push for independence soon, the specter of a mass uprising loomed before them. Independence had the potential to unite Virginians of all social ranks, but if it came too late, the social order might collapse. In some places, such as Loudoun County, Virginia in late 1775 and 1776, tenants rose up against overly demanding landlords and refused to pay their rent; gentry across the colony and beyond recognized the potential for widespread class warfare. Beside disgruntled farmers, soldiers were agitated over pay disparitiestop officers received eleven times what enlisted men made. And the masses were equally enraged by the gentry's slow prosecution of the war, which delayed the time when soldiers could return home to cultivate grain and

tobacco in order to make rent and help their families get by. When Parliament declared rebel colonies beyond the king's protection in late 1775, elites like Richard Henry Lee recognized that the Virginia gentry must form a new government immediately in order to prevent a social collapse into anarchy (or a possible upending of the social order).109 By early 1776, patriot leaders who sought independence tried to sway the Virginia gentry by intimating that only independence and a new form of government could thwart the mounting agrarian insurgency in Virginia. They pointed to New Hampshire and Massachusetts as examples of colonies steeped in disorder, but which were rescued by the establishment of independent government. Nowhere was social disorder more feared by the gentry than among the enslaved population. The poor white majority might be persuaded by the prospect of new liberties and freedoms in an independent republic, but blacks had little to gain from either independence or a return to British rule. In late 1774, the slaves of Virginia seized the moment and drew the colonial governor into an alliance that permanently estranged white Virginians from British rule. Lord Dunmore, Royal Governor of Virginia, first threatened to free the slaves of his colony in April 1775, then carried out that threat in November 1775. The slaves themselves did not need to await an official proclamation, and many fled their masters before it was even issued. Blacks mounted a resistance in the pivotal years of 1774 and 1775. On 21 April 1775, after the first shots were fired at Lexington and Concord, Massachusetts, Dunmore seized the Virginia gunpowder supply in Williamsburg (as Governor Gates had recently done in Massachusetts). Many white Virginians believed that the governor had left them defenseless against their slaves, and in the midst of swirling insurrection rumors as slaves took advantage of the increasing chaos of the period. The following day, the Governor threatened to emancipate the slaves and burn Williamsburg down if any one of the senior British officials was harmed. He also reminded white Virginians of their vulnerability not only to slave insurrection but to Indian attacks, especially if they were without his support. Virginians naturally interpreted such statements as a powerful threat, and the white reaction was, in historian Woody Holton's words, "intensely hostile."110 The reports of Dunmore's scheme to liberate the slaves in exchange for their military support and his threat to leave colonists exposed to Indian raids soon spread across the South, inflaming white colonial opinion. Rumors abounded

that Parliament was considering an emancipation bill, or that a new British official would soon arrive to free the slaves and encourage an insurrection. Dunmore actually followed through on his threat in November 1775, but he did not make general emancipation a goal of the war, only offering freedom to those slaves who signed up with the British army. Dunmore's decision resulted in the financial devastation of many slaveowners in Virginia, and the specter of armed slaves fighting their old masters was terrifyingbut the institution of slavery survived intact. And Dunmore's gambit failed to secure Virginia for the crown. By the summer of 1776, Dunmore's forces were outnumbered and he had to retreat to New York City, while his actions had turned Loyalists ambivalent and even many loyalist colonists into Patriots by endangering all of them. Native Virginian Thomas Jefferson saw to it that Dunmore's proclamation became what historian Woody Holton characterized as "the largest and angriest complaint in the Declaration of Independence," the last of the 27 enumerated complaints against the tyranny of the British monarchy that were offered to justify American independence.111 Indians also factored into the gentry's decision to lead the way for independence in more than one respect. After mid-century, it seemed that every planter's favorite investment scheme was real estate: specifically, the lands west of the Appalachian Mountains. Land speculators began staking claims in the Ohio River Valley and Kentucky. These claims brought the gentry into direct conflict with a number of parties: the western settlers who were already living out there and working the land as their own; tribes such as the Mingos, Shawnees, Delawares, and Cherokees, who lived and hunted throughout those regions; and the British government, which often disputed such claims and then shut them down entirely with the Proclamation of 1763 that forbade any settlement west of the Appalachians. While they may have resented the gentry for laying claim to the lands they were already working, western settlers had one major commonality with the colonial elites: both groups wanted free reign to expand westward beyond the Proclamation Line of 1763. Independence offered a means of obtaining the coveted land. In this respect, as in the others previously discussed, elites sometimes opted for independence out of personal interest, as did the poorer farmers and settlers.

Treason and Risk

Yet elites, whether slaveowners from Virginia or wealthy merchants from New England, also had plenty to lose once they sided with the cause for independence. If the Americans lost the war, these elites could expect to lose their property, their livelihoods, their slaves and other assets, and even their lives. In hindsight, however, they made out much better than most would have expected. The names of those who signed the Declaration of Independence were publicly announced with the publication of the formal and complete draft in January 1777. In the Declaration, the 56 delegates to the Constitutional Congress "mutually pledge[d] to each other our Lives, our Fortunes, and our sacred Honor."112 From a British perspective, the signers would have been America's most visible and welldocumented traitors. If captured, they potentially risked death. According to legend, on 2 August 1776the day that 54 of the signers inscribed their names on the DeclarationJohn Hancock employed some gallows humor by declaring, "Gentlemen, we must be unanimous; there must be no pulling different ways; we must all hang together." True to form (but again, according to legend), Ben Franklin is said to have responded: "Yes, we must indeed all hang together or most assuredly we shall all hang separately."113 These signers were overwhelmingly youngtheir average age was 43and privileged. Although a handful, such as Bostonian radical Sam Adams, were of modest means, most were well off: nine were large landowners, eleven were prosperous merchantsand John Hancock was easily the richest man in New England, if not the richest merchant in all of Americaand 24 were lawyers or jurists who would never be able to practice again if the British prevailed. They had quite a bit to lose.114 Although five signers were ultimately caught by the British, none of them, in fact, died in custody. Four of the five were captured in the course of military operations, not for their status as Declaration signers. Nine of the signers died from wounds or other causes during the war, but there is no evidence that the signers were tortured or treated any worse than other prisoners. Richard Stockton of New Jersey, the lone Patriot taken prisoner by Tories solely because he signed the Declaration, violated the mutual pledge of the signershe was the only Patriot to do soby recanting his participation in the revolutionary cause. He may have done so under

duress, in order to gain his freedom, and his health never fully recovered from the detrimental effects of his imprisonment. Many of the other signers went on to hold important offices after the Revolution, and a few negotiated the postwar treaties between the United States and the Cherokee and Iroquois peoples. In recent years, a series of widely circulated emails (oftentimes entitled "The Price They Paid") have recounted the extraordinary hardships faced by the signers of the Declaration of Independence. In fact, this revisionist history-by-email-forward is misleading at best, and outright wrong at worst.115 Most signers of the Declaration were not targeted for special harassment or retribution by the British, but suffered the travails of the Revolutionary War on about an equal plane with the rest of their countrymen. A small minority were captured or killed during the conflict, and most enjoyed long lives, especially given the shorter life expectancies of the colonial period. One historical study found that when Thomas Jefferson was elected in president in 1800, over half of the original Founding Fathers were still alive, and that their mean age at death was 66.5 years.116 These men certainly risked all for their country, and many made sacrifices or fought bravely in the war; but so did the thousands of nameless Patriots on the front lines of the battlefields.

Ben Baack, Ohio State University

By the time of the onset of the American Revolution, Britain had attained the status of a military and economic superpower. The thirteen American colonies were one part of a global empire generated by the British in a series of colonial wars beginning in the late seventeenth century and continuing on to the mid eighteenth century. The British military establishment increased relentlessly in size during this period as it engaged in the Nine Years War (1688-97), the War of Spanish Succession (1702-13), the War of Austrian Succession (1739-48), and the Seven Years War (1756-63). These wars brought considerable additions to the British Empire. In North America alone the British victory in the Seven Years War resulted in France ceding to Britain all of its territory east of the Mississippi River as well as all of Canada and Spain surrendering its claim to Florida (Nester, 2000). Given the sheer magnitude of the British military and its empire, the actions taken by the American colonists for independence have long fascinated scholars. Why did the colonists want independence? How were they able to achieve a victory over what was at the time the world's preeminent military power? What were the consequences of achieving independence? These and many other questions have engaged the attention of economic, legal, military, political, and social historians. In this brief essay we will focus only on the economics of the Revolutionary War.

Economic Causes of the Revolutionary War

Prior to the conclusion of the Seven Years War there was little, if any, reason to believe that one day the American colonies would undertake a revolution in an effort to create an independent nation-state. As apart of the empire the colonies were protected from foreign invasion by the British military. In return, the colonists paid relatively few taxes and could engage in domestic economic activity without much interference from the British government. For the most part the colonists were only asked to adhere to regulations concerning foreign trade. In a series of acts passed by Parliament during the seventeenth century the Navigation Acts required that all trade within the empire be conducted on ships which were constructed, owned and largely manned by British citizens. Certain enumerated goods whether exported or imported by the colonies had to be shipped through England regardless of the final port of destination.

Western Land Policies

Economic incentives for independence significantly increased in the colonies as a result of a series of critical land policy decisions made by the British government. The Seven Years' War had originated in a contest between Britain and France over control of the land from the Appalachian Mountains to the Mississippi River. During the 1740s the British government pursued a policy of promoting colonial land claims to as well as settlement in this area, which was at the time French territory. With the ensuing conflict of land claims both nations resorted to the use of military force which ultimately led to the onset

of the war. At the conclusion of the war as a result of one of many concessions made by France in the 1763 Treaty of Paris, Britain acquired all the contested land west of its colonies to the Mississippi River. It was at this point that the British government began to implement a fundamental change in its western land policy. Britain now reversed its long-time position of encouraging colonial claims to land and settlement in the west. The essence of the new policy was to establish British control of the former French fur trade in the west by excluding any settlement there by the Americans. Implementation led to the development of three new areas of policy. 1. Construction of the new rules of exclusion. 2. Enforcement of the new exclusion rules. 3. Financing the cost of the enforcement of the new rules. First, the rules of exclusion were set out under the terms of the Proclamation of 1763 whereby colonists were not allowed to settle in the west. This action legally nullified the claims to land in the area by a host of individual colonists, land companies, as well as colonies. Second, enforcement of the new rules was delegated to the standing army of about 7,500 regulars newly stationed in the west. This army for the most part occupied former French forts although some new ones were built. Among other things, this army was charged with keeping Americans out of the west as well as returning to the colonies any Americans who were already there. Third, financing of the cost of the enforcement was to be accomplished by levying taxes on the Americans. Thus, Americans were being asked to finance a British army which was charged with keeping Americans out of the west (Baack, 2004).

Tax Policies
Of all the potential options available for funding the new standing army in the west, why did the British decide to tax their American colonies? The answer is fairly straightforward. First of all, the victory over the French in the Seven Years' War had come at a high price. Domestic taxes had been raised substantially during the war and total government debt had increased nearly twofold (Brewer, 1989). In addition, taxes were significantly higher in Britain than in the colonies. One estimate suggests the per capita tax burden in the colonies ranged from two to four percent of that in Britain (Palmer, 1959). And finally, the voting constituencies of the members of parliament were in Britain not the colonies. All things considered, Parliament viewed taxing the colonies as the obvious choice. Accordingly, a series of tax acts were passed by Parliament the revenue from which was to be used to help pay for the standing army in America. The first was the Sugar Act of 1764. Proposed by England's Prime Minister the act lowered tariff rates on non-British products from the West Indies as well as strengthened their collection. It was hoped this would reduce the incentive for smuggling and thereby increase tariff revenue (Bullion, 1982). The following year Parliament passed the Stamp Act that imposed a tax commonly used in England. It required stamps for a broad range of legal documents as well as

newspapers and pamphlets. While the colonial stamp duties were less than those in England they were expected to generate enough revenue to finance a substantial portion of the cost the new standing army. The same year passage of the Quartering Act imposed essentially a tax in kind by requiring the colonists to provide British military units with housing, provisions, and transportation. In 1767 the Townshend Acts imposed tariffs upon a variety of imported goods and established a Board of Customs Commissioners in the colonies to collect the revenue.

Boycotts
While the Americans could do little about the British army stationed in the west, they could do somthing about the new British taxes. American opposition to these acts was expressed initially in a variety of peaceful forms. While they did not have representation in Parliament, the colonists did attempt to exert some influence in it through petition and lobbying. However, it was the economic boycott that became by far the most effective means of altering the new British economic policies. In 1765 representatives from nine colonies met at the Stamp Act Congress in New York and organized a boycott of imported English goods. The boycott was so successful in reducing trade that English merchants lobbied Parliament for the repeal of the new taxes. Parliament soon responded to the political pressure. During 1766 it repealed both the Stamp and Sugar Acts (Johnson, 1997). In response to the Townshend Acts of 1767 a second major boycott started in 1768 in Boston and New York and subsequently spread to other cities leading Parliament in 1770 to repeal all of the Townshend duties except the one on tea. In addition, Parliament decided at the same time not to renew the Quartering Act. With these actions taken by Parliament the Americans appeared to have successfully overturned the new British post war tax agenda. However, Parliament had not given up what it believed to be its right to tax the colonies. On the same day it repealed the Stamp Act, Parliament passed the Declaratory Act stating the British government had the full power and authority to make laws governing the colonies in all cases whatsoever including taxation. Legislation not principles had been overturned.

The Tea Act

Three years after the repeal of the Townshend duties British policy was once again to emerge as an issue in the colonies. This time the American reaction was not peaceful. It all started when Parliament for the first time granted an exemption from the Navigation Acts. In an effort to assist the financially troubled British East India Company Parliament passed the Tea Act of 1773, which allowed the company to ship tea directly to America. The grant of a major trading advantage to an already powerful competitor meant a potential financial loss for American importers and smugglers of tea. In December a small group of colonists responded by boarding three British ships in the Boston harbor and throwing overboard several hundred chests of tea owned by the East India Company (Labaree, 1964). Stunned by the events in Boston,

Parliament decided not to cave in to the colonists as it had before. In rapid order it passed the Boston Port Act, the Massachusetts Government Act, the Justice Act, and the Quartering Act. Among other things these so-called Coercive or Intolerable Acts closed the port of Boston, altered the charter of Massachusetts, and reintroduced the demand for colonial quartering of British troops. Once done Parliament then went on to pass the Quebec Act as a continuation of its policy of restricting the settlement of the West.

The First Continental Congress

Many Americans viewed all of this as a blatant abuse of power by the British government. Once again a call went out for a colonial congress to sort out a response. On September 5, 1774 delegates appointed by the colonies met in Philadelphia for the First Continental Congress. Drawing upon the successful manner in which previous acts had been overturned the first thing Congress did was to organize a comprehensive embargo of trade with Britain. It then conveyed to the British government a list of grievances that demanded the repeal of thirteen acts of Parliament. All of the acts listed had been passed after 1763 as the delegates had agreed not to question British policies made prior to the conclusion of the Seven Years War. Despite all the problems it had created, the Tea Act was not on the list. The reason for this was that Congress decided not to protest British regulation of colonial trade under the Navigation Acts. In short, the delegates were saying to Parliament take us back to 1763 and all will be well.

The Second Continental Congress

What happened then was a sequence of events that led to a significant increase in the degree of American resistance to British polices. Before the Congress adjourned in October the delegates voted to meet again in May of 1775 if Parliament did not meet their demands. Confronted by the extent of the American demands the British government decided it was time to impose a military solution to the crisis. Boston was occupied by British troops. In April a military confrontation occurred at Lexington and Concord. Within a month the Second Continental Congress was convened. Here the delegates decided to fundamentally change the nature of their resistance to British policies. Congress authorized a continental army and undertook the purchase of arms and munitions. To pay for all of this it established a continental currency. With previous political efforts by the First Continental Congress to form an alliance with Canada having failed, the Second Continental Congress took the extraordinary step of instructing its new army to invade Canada. In effect, these actions taken were those of an emerging nation-state. In October as American forces closed in on Quebec the King of England in a speech to Parliament declared that the colonists having formed their own government were now fighting for their independence. It was to be only a matter of months before Congress formally declared it.

Economic Incentives for Pursuing Independence: Taxation

Given the nature of British colonial policies, scholars have long sought to evaluate the economic incentives the Americans had in pursuing independence. In this effort economic historians initially focused on the period following the Seven Years War up to the Revolution. It turned out that making a case for the avoidance of British taxes as a major incentive for independence proved difficult. The reason was that many of the taxes imposed were later repealed. The actual level of taxation appeared to be relatively modest. After all, the Americans soon after adopting the Constitution taxed themselves at far higher rates than the British had prior to the Revolution (Perkins, 1988). Rather it seemed the incentive for independence might have been the avoidance of the British regulation of colonial trade. Unlike some of the new British taxes, the Navigation Acts had remained intact throughout this period.

The Burden of the Navigation Acts

One early attempt to quantify the economic effects of the Navigation Acts was by Thomas (1965). Building upon the previous work of Harper (1942), Thomas employed a counterfactual analysis to assess what would have happened to the American economy in the absence of the Navigation Acts. To do this he compared American trade under the Acts with that which would have occurred had America been independent following the Seven Years War. Thomas then estimated the loss of both consumer and produce surplus to the colonies as a result of shipping enumerated goods indirectly through England. These burdens were partially offset by his estimated value of the benefits of British protection and various bounties paid to the colonies. The outcome of his analysis was that the Navigation Acts imposed a net burden of less than one percent of colonial per capita income. From this he concluded the Acts were an unlikely cause of the Revolution. A long series of subsequent works questioned various parts of his analysis but not his general conclusion (Walton, 1971). The work of Thomas also appeared to be consistent with the observation that the First Continental Congress had not demanded in its list of grievances the repeal of either the Navigation Acts or the Sugar Act.

American Expectations about Future British Policy

Did this mean then that the Americans had few if any economic incentives for independence? Upon further consideration economic historians realized that perhaps more important to the colonists were not the past and present burdens but rather the expected future burdens of continued membership in the British Empire. The Declaratory Act made it clear the British government had not given up what it viewed as its right to tax the colonists. This was despite the fact that up to 1775 the Americans had employed a variety of protest measures including lobbying, petitions, boycotts, and violence. The confluence of not having representation in Parliament while confronting an aggressive new British tax policy designed to raise their relatively low taxes may have made it reasonable for the Americans to expect a substantial increase in the level of taxation in the future (Gunderson, 1976, Reid, 1978). Furthermore a recent study has argued that in 1776 not only did the future burdens of the Navigation

Acts clearly exceed those of the past, but a substantial portion would have borne by those who played a major role in the Revolution (Sawers, 1992). Seen in this light the economic incentive for independence would have been avoiding the potential future costs of remaining in the British Empire.

The Americans Undertake a Revolution

1776-77 British Military Advantages
The American colonies had both strengths and weaknesses in terms of undertaking a revolution. The colonial population of well over two million was nearly one third of that in Britain (McCusker and Menard, 1985). The growth in the colonial economy had generated a remarkably high level of per capita wealth and income (Jones, 1980). Yet the hurdles confronting the Americans in achieving independence were indeed formidable. The British military had an array of advantages. With virtual control of the Atlantic its navy could attack anywhere along the American coast at will and would have borne logistical support for the army without much interference. A large core of experienced officers commanded a highly disciplined and well-drilled army in the large-unit tactics of eighteenth century European warfare. By these measures the American military would have great difficulty in defeating the British. Its navy was small. The Continental Army had relatively few officers proficient in largeunit military tactics. Lacking both the numbers and the discipline of its adversary the American army was unlikely to be able to meet the British army on equal terms on the battlefield (Higginbotham, 1977).

British Financial Advantages

In addition, the British were in a better position than the Americans to finance a war. A tax system was in place that had provided substantial revenue during previous colonial wars. Also for a variety of reasons the government had acquired an exceptional capacity to generate debt to fund wartime expenses (North and Weingast, 1989). For the Continental Congress the situation was much different. After declaring independence Congress had set about defining the institutional relationship between it and the former colonies. The powers granted to Congress were established under the Articles of Confederation. Reflecting the political environment neither the power to tax nor the power to regulate commerce was given to Congress. Having no tax system to generate revenue also made it very difficult to borrow money. According to the Articles the states were to make voluntary payments to Congress for its war efforts. This precarious revenue system was to hamper funding by Congress throughout the war (Baack, 2001).

Military and Financial Factors Determine Strategy

It was within these military and financial constraints that the war strategies by the British and the Americans were developed. In terms of military strategies both of the contestants realized that America was simply too large for the British army to occupy all of the cities and countryside. This being the case the

British decided initially that they would try to impose a naval blockade and capture major American seaports. Having already occupied Boston, the British during 1776 and 1777 took New York, Newport, and Philadelphia. With plenty of room to maneuver his forces and unable to match those of the British, George Washington chose to engage in a war of attrition. The purpose was twofold. First, by not engaging in an all out offensive Washington reduced the probability of losing his army. Second, over time the British might tire of the war.

Saratoga
Frustrated without a conclusive victory, the British altered their strategy. During 1777 a plan was devised to cut off New England from the rest of the colonies, contain the Continental Army, and then defeat it. An army was assembled in Canada under the command of General Burgoyne and then sent to and down along the Hudson River. It was to link up with an army sent from New York City. Unfortunately for the British the plan totally unraveled as in October Burgoyne's army was defeated at the battle of Saratoga and forced to surrender (Ketchum, 1997).

The American Financial Situation Deteriorates

With the victory at Saratoga the military side of the war had improved considerably for the Americans. However, the financial situation was seriously deteriorating. The states to this point had made no voluntary payments to Congress. At the same time the continental currency had to compete with a variety of other currencies for resources. The states were issuing their own individual currencies to help finance expenditures. Moreover the British in an effort to destroy the funding system of the Continental Congress had undertaken a covert program of counterfeiting the Continental dollar. These dollars were printed and then distributed throughout the former colonies by the British army and agents loyal to the Crown (Newman, 1957). Altogether this expansion of the nominal money supply in the colonies led to a rapid depreciation of the Continental dollar (Calomiris, 1988, Michener, 1988). Furthermore, inflation may have been enhanced by any negative impact upon output resulting from the disruption of markets along with the destruction of property and loss of able-bodied men (Buel, 1998). By the end of 1777 inflation had reduced the specie value of the Continental to about twenty percent of what it had been when originally issued. This rapid decline in value was becoming a serious problem for Congress in that up to this point almost ninety percent of its revenue had been generated from currency emissions.

1778-83 British Invasion of the South

The British defeat at Saratoga had a profound impact upon the nature of the war. The French government still upset by their defeat by the British in the Seven Years War and encouraged by the American victory signed a treaty of alliance with the Continental Congress in early 1778. Fearing a new war with

France the British government sent a commission to negotiate a peace treaty with the Americans. The commission offered to repeal all of the legislation applying to the colonies passed since 1763. Congress rejected the offer. The British response was to give up its efforts to suppress the rebellion in the North and in turn organize an invasion of the South. The new southern campaign began with the taking of the port of Savannah in December. Pursuing their southern strategy the British won major victories at Charleston and Camden during the spring and summer of 1780.

Worsening Inflation and Financial Problems

As the American military situation deteriorated in the South so did the financial circumstances of the Continental Congress. Inflation continued as Congress and the states dramatically increased the rate of issuance of their currencies. At the same time the British continued to pursue their policy of counterfeiting the Continental dollar. In order to deal with inflation some states organized conventions for the purpose of establishing wage and price controls (Rockoff, 1984). With few contributions coming from the states and a currency rapidly losing its value, Congress resorted to authorizing the army to confiscate whatever it needed to continue the war effort (Baack, 2001, 2008).

Yorktown
Fortunately for the Americans the British military effort collapsed before the funding system of Congress. In a combined effort during the fall of 1781 French and American forces trapped the British southern army under the command of Cornwallis at Yorktown, Virginia. Under siege by superior forces the British army surrendered on October 19. The British government had now suffered not only the defeat of its northern strategy at Saratoga but also the defeat of its southern campaign at Yorktown. Following Yorktown, Britain suspended its offensive military operations against the Americans. The war was over. All that remained was the political maneuvering over the terms for peace.

The Treaty of Paris

The Revolutionary War officially concluded with the signing of the Treaty of Paris in 1783. Under the terms of the treaty the United States was granted independence and British troops were to evacuate all American territory. While commonly viewed by historians through the lens of political science, the Treaty of Paris was indeed a momentous economic achievement by the United States. The British ceded to the Americans all of the land east of the Mississippi River which they had taken from the French during the Seven Years War. The West was now available for settlement. To the extent the Revolutionary War had been undertaken by the Americans to avoid the costs of continued membership in the British Empire, the goal had been achieved. As an independent nation the United States was no longer subject to the regulations of the Navigation Acts. There was no longer to be any economic burden from British taxation.

THE FORMATION OF A NATIONAL GOVERNMENT

When you start a revolution you have to be prepared for the possibility you might win. This means being prepared to form a new government. When the Americans declared independence their experience of governing at a national level was indeed limited. In 1765 delegates from various colonies had met for about eighteen days at the Stamp Act Congress in New York to sort out a colonial response to the new stamp duties. Nearly a decade passed before delegates from colonies once again got together to discuss a colonial response to British policies. This time the discussions lasted seven weeks at the First Continental Congress in Philadelphia during the fall of 1774. The primary action taken at both meetings was an agreement to boycott trade with England. After having been in session only a month, delegates at the Second Continental Congress for the first time began to undertake actions usually associated with a national government. However, when the colonies were declared to be free and independent states Congress had yet to define its institutional relationship with the states.

The Articles of Confederation

Following the Declaration of Independence, Congress turned to deciding the political and economic powers it would be given as well as those granted to the states. After more than a year of debate among the delegates the allocation of powers was articulated in the Articles of Confederation. Only Congress would have the authority to declare war and conduct foreign affairs. It was not given the power to tax or regulate commerce. The expenses of Congress were to be made from a common treasury with funds supplied by the states. This revenue was to be generated from exercising the power granted to the states to determine their own internal taxes. It was not until November of 1777 that Congress approved the final draft of the Articles. It took over three years for the states to ratify the Articles. The primary reason for the delay was a dispute over control of land in the West as some states had claims while others did not. Those states with claims eventually agreed to cede them to Congress. The Articles were then ratified and put into effect on March 1, 1781. This was just a few months before the American victory at Yorktown. The process of institutional development had proved so difficult that the Americans fought almost the entire Revolutionary War with a government not sanctioned by the states.

Difficulties in the 1780s

The new national government that emerged from the Revolution confronted a host of issues during the 1780s. The first major one to be addressed by Congress was what to do with all of the land acquired in the West. Starting in 1784 Congress passed a series of land ordinances that provided for land surveys, sales of land to individuals, and the institutional foundation for the creation of new states. These ordinances opened the West for settlement. While this was a major accomplishment by Congress, other issues remained unresolved. Having repudiated its own currency and no power of taxation, Congress did not have an independent source of revenue to pay off its domestic

and foreign debts incurred during the war. Since the Continental Army had been demobilized no protection was being provided for settlers in the West or against foreign invasion. Domestic trade was being increasingly disrupted during the 1780s as more states began to impose tariffs on goods from other states. Unable to resolve these and other issues Congress endorsed a proposed plan to hold a convention to meet in Philadelphia in May of 1787 to revise the Articles of Confederation. Rather than amend the Articles, the delegates to the convention voted to replace them entirely with a new form of national government under the Constitution. There are of course many ways to assess the significance of this truly remarkable achievement. One is to view the Constitution as an economic document. Among other things the Constitution specifically addressed many of the economic problems that confronted Congress during and after the Revolutionary War. Drawing upon lessons learned in financing the war, no state under the Constitution would be allowed to coin money or issue bills of credit. Only the national government could coin money and regulate its value. Punishment was to be provided for counterfeiting. The problems associated with the states contributing to a common treasury under the Articles were overcome by giving the national government the coercive power of taxation. Part of the revenue was to be used to pay for the common defense of the United States. No longer would states be allowed to impose tariffs as they had done during the 1780s. The national government was now given the power to regulate both foreign and interstate commerce. As a result the nation was to become a common market. There is a general consensus among economic historians today that the economic significance of the ratification of the Constitution was to lay the institutional foundation for long run growth. From the point of view of the former colonists, however, it meant they had succeeded in transferring the power to tax and regulate commerce from Parliament to the new national government of the United States.

TABLES Table 1 Continental Dollar Emissions (1775-1779) Year of Nominal Dollars Annual Emission As Share of Total Specie Value of Annual E Emissio Emitted (000) Nominal Stock Emitted Annual Emission (000) Specie V n 1775 $6,000 3% $6,000 15% 1776 19,000 8 15,330 37 1777 13,000 5 4,040 10 1778 63,000 26 10,380 25 1779 140,500 58 5,270 13 Total $241,500 100% $41,020 100% Source: Bullock (1895), 135.Table 2 Currency Emissions by the States (17751781) Year of Emission Nominal Dollars Emitted (000) Year of Emission

Nominal Doll

1775 1776 1777

$4,740 13,328 9,573

Total $27,641 Source: Robinson (1969), 327-28.

1778 1779 1780 1781 Total

$9,118 17,613 66,813 123.376 $216,376

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Awal Perkembangan Amerika Pembentukan koloni di Amerika Serikat dimulai dengan merapatnya kapal Mayflower dari Inggris. Pada masa itu terjadi migrasi kaum Puritan dari Inggris ke Eropa dan Amerika. Pencetus ide migrasi ke Amerika adalah William Laud. Kaum Puritan tersebut mendirikan koloni di New England yang disebut dengan the holy commonwealth, dan koloni tersebut berkembang pesat. Pada tahun 1640 kaum Puritan di New England telah mendirikan 35 gereja.

The Cambridge Platform (1648) menandai dominasi kaum Puritan dalam segi kehidupan di New England. Perkembangan Puritanism diperlambat dengan ekspansi oleh New England (pembukaan beberapa koloni baru di New England). Masyarakat koloni baru tersebut makin beragam dan memiliki corak yang resourceful, secular (sekuler), dan mampu bertahan dalam lingkungan yang sulit. Pada tahun 1692, sebuah piagam di Massachusetts menyatakan tentang perubahan dari theocratic menjadi political, secular state dan hak pilih dikeluarkan dari kualifikasi keagamaan. Beberapa tokoh Puritanism di New England antara lain Thomas Hooker, John Cotton, Roger Williams, Increase Mather, dan Cotton Mather.

Pada abad ke-17, pengaruh politik Puritanism mulai menghilang. Akan tetapi, karakteristik dan kemampuan masyarakat Puritan tetap melekat dan berpengaruh dalam masyarakat Amerika. Beberapa karaskteristik kaum Puritan yang mampu mendorong kesuksesan ekonomi adalah, antara lain, kepercayaan diri (self reliance), hemat (frugality),

industri dan energi. Karakteristik tersebut nantinya akan berpengaruh pada kehidupan sosial-ekonomi modern. Minat tinggi kaum Puritan terhadap masalah pendidikan merupakan hal yang penting dalam perkembangan Amerika Serikat, serta ide kaum Puritan tentang perkumpulan demokrasi gereja menjadi cikal bakal perkembangan demokrasi modern.

Pemikiran Ekonomi Amerika Latar Belakang Pengaruh pemikiran ekonomi Inggris di Amerika yang kental telah memberi corak kapitalis pada perekonomian Amerika. Selain itu, berbagai peristiwa yang telah dilalui Amerika Serikat memberi warna tersendiri dalam perkembangan perekonomiannya. Peristiwa itu antara lain perekonomian yang terjadi saat Amerika Serikat masih berupa daerahdaerah koloni (colonial economy), awal dari kapitalisme modern, perjuangan kemerdekaan, Civil War (Perang Sipil), pertumbuhan pesat pasar domestik, dan ekspansi ke wilayah-wilayah baru.

Pemikiran ekonomi awal di Amerika tidak menunjukkan suatu kekhasan dari suatu pemikiran. Beberapa pemikiran tersebut mengulas tentang masalah-masalah umum atau perdebatan ekonomi yang ada di Inggris dan Perancis. Tetapi tidak seluruhnya demikian, Roger Williams mengemukakan prinsip corporate freedom yang memadukan antara keinginan pemilik (divine commands) dengan kepentingan perdagangan (needs of commerce). William Penn, salah satu relasi Sir William Petty,

menganalisis hubungan antara ekonomi koloni dan kota (metropole). Pada masa ini, Penn dengan beberapa pemikir lainnya mencetuskan pemikiran yang disebut sebagai recurrent leitmotiv: reformasi moneter, kepercayaan pada kredit dan uang kertas.

Benjamin Franklin (1706-1790) merupakan salah satu pemikir politik ekonomi meskipun tidak dapat disebut sebagai ekonom murni. Franklin lebih terkenal dengan pandangan dan pemikirannya dalam masalah politik. Buku pertamanya yang diterbitkan ketika dia berusia 23 tahun, A Modest Inquiry into the Nature and Nacessity of Paper Currency, memuat pernyataannnya tentang value (nilai) yang hampir mirip dengan pernyataan Petty dalam Treatise.

Buku lainnya, Observations Concerning the Increase of Mankind (1751), Franklin bergabung dengan penulis-penulis lain yang mencoba mengantisipasi pandangan atau teori Malthus tentang pertumbuhan. Franklin menulis beberapa tulisan ekonomi dalam beragam topik. Keseluruhan tulisannya menggambarkan bahwa Franklin adalah orang yang cerdas dan pragmatis.

Pada masa Post-Revolutionary terjadi kesulitan fiskal dan moneter yang membuat Confederation (Konfederasi) melakukan berbagi diskusi dan pencetakan sumber-sumber bacaan tentang masalah ini. Alexander Hamilton dan Albert Gallatin adalah dua penulis yang terkenal pada masa itu. Mereka berdua adalah sekretaris keuangan Thomas Jefferson. Sedangkan Thomas Jefferson sebagai ahli sosial-

politik hanya sedikit mengulas tentang masalah ekonomi.

Diperlukan waktu tiga dekade untuk memunculkan masalah ekonomi sebagai salah satu isu utama. Revolusi industri di Inggris yang mengacu pada perekonomian Klasik Smith, Say dan Ricardo pada awalnya tidak begitu diminati. Hingga pada tahun 1830 negara bagian Atlantik mulai mengembangkan sektor industri dan pembukaan daerah Barat, studi tentang politik ekonomi mulai diperkenalkan dan diajarkan di tingkat menengah umum dan universitas.

Pemikir ekonomi Amerika antara lain: John Rae, melalui bukunya, Statesment of Some New Principles on the Subject of Political Economy, etc. (1834), dia menolak doktrin free trade perdagangan bebas dalam Wealth of Nations Negara-Negara Persemakmuran dan aspek sosiologi dari teori kapital.

Henry C. Carey (1793-1879) seorang penganut paham Klasik dan free trader pada akhirnya nanti seperti Fitche dan List, akan mengubah pandangannya tentang perekonomian. Dalam Principles of Political Economy dan beberapa tulisannya menyatakan tentang labor theory of value dan kepercayaannya tentang kemungkinan terjadi penambahan posisi dalam kelas pekerja. Carey dapat juga disebut sebagai salah satu penemu nationalist school yang mengenalkan tentang proteksi, dengan proteksi akan menjadi bagian penting dalam perkembangan Amerika.

Akhir Civil War Perang Sipil sangat berpengaruh terhadap perkembangan pemikiran ekonomi Amerika Serikat. Minat untuk mempelajari ilmu ekonomi makin tinggi, berbagai bacaan tentang ekonomi diterbitkan dan peningkatan ahliahli di bidang ekonomi semakin ditingkatkan. Revolusi Amerika yang kedua yaitu makin meluasnya industri manufaktur dan perkembangan kapitalisme modern.

Dua hal tersebut menciptakan kelas buruh, peningkatan pasar dalam negeri, dan percepatan pembangunan di wilayah Barat (West). Masa yang pernah juga melanda Eropa pada beberapa periode. Seluruh keadaan itu makin mendorong aktivitas perekonomian pemerintah dan masalah pengambilan kebijakan ekonomi.

Marginalist School Tokoh yang terkenal dari aliran ini adalah John Bates Clark (1847-1938). Clark menjelaskan tentang prinsip marginal utility utilitas marginal dan aplikasinya dalam masalah produksi dan distribusi. Clark menghabiskan waktu dua tahun di Jerman dan menjadi murid dari Roscher dan Knies, yang kemudian teologi dan etika mewarnai tulisan-tulisan Clark selanjutnya.

Tahun 1877 dan 1882 Clark menulis artikel berseri untuk New Englander, tulisan tersebut kemudian direvisi dan diterbitkan menjadi sebuah buku berjudul The Philosophy of Wealth. Buku ini mencantumkan formulasi tentang prinsip marginal utility utilitas marginal dan ketidaksetujuannya

terhadap politik ekonomi klasik. Hal yang ditentang Clark dalam politik ekonomi klasik yaitu dengan mengenalkan tentang social value nilai sosial dalam suatu prinsip ekonomi, jadi bukan hanya prinsip kemakmuran yang dicapai dalam ekonomi.