The American Revolution was not merely a clash over taxation without representation, but a rejection of a deeply entrenched economic system that positioned Britain as the mother country, exploiting its colonies to amass wealth and power.
This system called “mercantilism” was a dominant economic theory in Europe from the 16th to the 18th century. It used state power in an attempt to accumulate wealth for the nation and its favored businesses.
One of the key principles of mercantilism was maintaining a positive balance of trade with more exports than imports. To this end, the government aggressively intervened in the economy by levying high tariffs, restricting trade with various countries, granting monopolies, and subsidizing favored industries.
Mercantilism reached its heyday in Europe during the 17th and 18th centuries. Economist Murray Rothbard described it as “a system of statism which employed economic fallacy to build up a structure of imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state.”
Mercantilism was similar to what people today call crony capitalism. As Rothbard pointed out, it was as much a political as an economic system.
“The mercantilist writers, indeed, did not consider themselves economic theorists, but practical men of affairs who argued and pamphleteered for specific economic policies, generally for policies which would subsidize activities or companies in which those writers were interested. … At the same time, the network of regulation and its enforcement built up the state bureaucracy as well as national and imperial power.”
Colonialism was a hallmark of British mercantilism. Colonies were often established to serve merely as a source of raw materials that could be shipped to the mother country where they were formed into finished manufactured goods.
That’s just how the British generally treated its American colonies for over a century. “Taxation without representation” was part of a much broader, and long-standing mercantilist economic policy the British imposed on the colonies.
EARLY NAVIGATION ACTS
Some of the first mercantilist acts imposed by the British were a series of navigation acts imposed between 1651 and 1696. These laws restricted colonial trade by generally requiring that goods imported to or exported from the colonies must be transported on British ships.
For instance, the Navigation Act of 1651 prohibited both the import and export of salted fish in foreign ships.
Other early Navigation Acts also mandated certain products including sugar, tobacco, cotton wool, indigo, ginger, and more could only be shipped to England or other British colonies.
In effect, they barred Americans from directly trading with other nations.
In his 1774 Summary View of the Rights of British America, Thomas Jefferson railed against the Navigation Acts as a violation of the natural rights of Americans.
“That the exercise of a free trade with all parts of the world, possessed by the American colonists, as of natural right, and which no law of their own had taken away or abridged, was next the object of unjust encroachment.”
WOOL, MOLASSES, IRON – and HATS
Parliament passed other acts that were mercantilist in nature. For instance, the Wool Act of 1698 prohibited the export of woolen products to any destination outside the colony in which they were produced, including other British colonies. It was intended to prevent the colonies from competing with domestic British wool production.
In 1733, Parliament passed the Molasses Act, levying a high tax on molasses, sugar, and rum imported into the colonies from non-British colonies. The tax was designed to make sugar and rum produced in the British West Indies cheaper compared with foreign products. In practice, it granted a de facto monopoly to British producers.
The Hat Act of 1732 placed limits on the manufacture, sale, and exportation of colonial-made hats. In effect, this caused as much as a four-times price increase for hats and cloth imported from Britain.
The act also restricted hiring practices by limiting the number of workers that hatmakers could employ and placing limits on apprenticeships by only allowing two apprentices.
Jefferson referred to this as an act of despotism.
“An American subject is forbidden to make a hat for himself of the fur which he has taken perhaps on his own soil; an instance of despotism to which no parallel can be produced in the most arbitrary ages of British history.”
The Iron Act of 1750 restricted the establishment of new iron mills and steel furnaces in the American colonies. This policy forced the colonies to export raw iron to Britain where it was forged into finished goods. Those goods were then shipped back to the colonies at a higher cost than if they had been produced domestically. This ensured the colonies would remain a resource provider and not a manufacturer in their own right.
Jefferson referred to these trade restrictions as both a – “nullity” and “void.”
“We do not point out to his majesty the injustice of these acts, with intent to rest on that principle the cause of their nullity; but to shew that experience confirms the propriety of those political principles which exempt us from the jurisdiction of the British parliament. The true ground on which we declare these acts void is, that the British parliament has no right to exercise authority over us.” [emphasis added]
UNCONSTITUTIONAL?
In his Report of 1800, Madison argued, as Jefferson did more than two decades earlier, that these external regulations on trade were unconstitutional from the beginning. “This was however mere practice without right, and contrary to the true theory of the constitution.”
He noted that despite this, they were tolerated, rather than fully accepted.
Madison argued that even though these unconstitutional trade regulations “obtained a degree of acquiescence,” it was mostly because they weren’t considered terribly burdensome in the early colonial period, and many perceived the regulations as economically beneficial.
“As long as this regulating power was confined to the two objects of conveniency and equity, it was not complained of, nor much enquired into.”
Over time, however, Parliament expanded these mercantilist regulations and taxes. As Madison put it, these powers over trade that were supposed to benefit the British Empire as a whole were “perverted to the selfish views of the party assuming [the power.]
“The moment the claim to a direct and indefinite power was ingrafted on the precedent of the regulating power, the whole charm was dissolved, and every eye opened to the usurpation.”
In Madison’s view, mercantilism was a big part of the foundation of the dispute between England and her colonies, but it didn’t become clear to many until the legislative power behind the economic system expanded to its logical conclusion.
SMUGGLING AND ENFORCEMENT
All of these trade restrictions to support mercantilism led to another problem – they needed to be enforced.
Whether Jefferson and Madison’s opinions on the constitutionality of the trade restrictions were widely accepted or not, in practice, the level of smuggling shows that many people were opposed to them. They were even willing to take significant risks to defy them.
The Molasses Act was largely defied by colonists, smuggling to avoid it was prominent, and as a result, the tax was not often paid. This resistance effectively nullified the law in practice, as noted by John C. Miller in “Origins of the American Revolution.”
“Against the Molasses Act, Americans had only their smugglers to depend upon—but these redoubtable gentry proved more than a match for the British. After a brief effort to enforce the act in Massachusetts in the 1740s, the English government tacitly accepted defeat and foreign molasses was smuggled into the Northern colonies in an ever-increasing quantity. Thus the New England merchants survived—but only by nullifying an act of Parliament.” [emphasis added]
As noted by James A. Northington, the Iron Act faced the same kind of resistance:
“Fed up with the unfair treatment from England, America openly defied this Iron Act, and invented many industrial processes that have become the basis for mass manufacturing today.”
Northington noted that a lack of enforcement action by local officials helped the colonists nullify the Iron Act in practice and effect.
“The law was widely ignored due to loose enforcement from local governing and British officials. After sheriffs completed their searches to identify primary iron manufacturing plants, little was done to keep their production in check. Thus, the Iron Act of 1750 was generally ignored by the colonists.”
By 1763, the British government estimated the value of commodities smuggled into the colonies at 700,000 pounds
To try to stem the flow, the British sent customs agents to the colonies armed with “writs of assistance.”
These were essentially open-ended search warrants authorizing the holder to search businesses and private homes for smuggled goods.
Writs of assistance did not require any specifications about the place to be searched or what types of goods the agents were looking for. Writs of assistance never expired unless a King died – and were considered a valid substitute for specific search warrants. They were also transferable.
The Navigation Act of 1696 opened the door for writs of assistance to be used in the colonies.
According to the Massachusetts Historical Society, under the act, “colonial customs control was generally strengthened and reorganized, and colonial customs officials were given the powers of their English counterparts, whatever those might be.”
Between 1755 and 1760, courts in the colonies began issuing writs of assistance on a regular basis.
This led to one of the first legal battles with the colonists.
In 1761, James Otis Jr. took up a case against the writs, arguing they violated the unwritten British constitution and the rights of the colonists. In his nearly five-hour oration, Otis proclaimed, “A man is accountable to no person for his doings …one of the most essential branches of English liberty is the freedom of one’s house.”
Otis also emphatically asserted that these “general warrants” were a constitutional issue, proclaiming, “An act against the constitution is void,” and he went on to insist that “special warrants only are legal.”
Otis lost the case, but it was a spark that eventually grew into the flames of independence.
John Adams later wrote, “American independence was then and there born. The seeds of patriots and heroes, to defend the vigorous youth, were then and there sown. Every man of an immense crowded audience appeared to me to go away as I did, ready to take arms against writs of assistance…Mr. Otis’s oration against Writs of Assistance, breathed into this nation the breath of life.”
SUGAR AND STAMPS
Undeterred, Parliament continued to pass laws supporting its mercantilist aims.
In 1764, it imposed the Sugar Act, reducing the tax on molasses but ratcheting up enforcement measures to prevent smuggling. It also expanded the list of taxable items to include wine, silk, indigo, coffee, and other products. The stricter enforcement directly undermined the profitability of colonial merchants.
Because colonies primarily serve as a source of raw materials in a mercantilist system, it is easy for government officials to begin to view colonists as tax cattle as well as resource producers. Buried under a heavy load of debt after a long war with France, the king and Parliament began to view the American colonies as a source of income as well as materials.
This led to the passage of the Stamp Act in 1765, the first internal tax levied directly on the American colonies.
The act required all official documents in the colonies to be printed on special stamped paper. This included all commercial and legal documents, newspapers, pamphlets, and even playing cards.
With the passage of the Stamp Act, the colonists began to view British tax and trade policies not as exceptions to the constitutional rule to be tolerated because they would benefit the Empire but as a wholesale violation of their constitutional rights as Englishmen.
The American colonists argued that the Stamp Act violated the bounds of the British constitutional system. Objecting to the notion that Parliament could impose whatever binding legislation it wished upon the colonies, the Americans adopted a rigid stance asserting that colonists could only be taxed internally by their local assemblies. They claimed this principle stretched back to 1215 and the Magna Carta.
TOWNSHEND AND TEA
Protests and mass non-compliance forced the British to repeal the Stamp Act, but Parliament doubled down with the passage of the Declaratory Act asserting that it had the authority to legislate “in all cases whatsoever.”
This combination of the internal Stamp Act tax, along with the unlimited power of the Declaratory Act was the tipping point Madison mentioned in his Report of 1800.
Parliament then put this power into practice when it levied new taxes on the colonies with the passage of the Townshend Acts in 1767, imposing duties on imported goods including glass, paper, paint, and tea. It also further expanded British powers to prevent smuggling. These taxes were not only a revenue source for the British, but they also served to protect domestic manufacturing and trade.
But for the colonists, it meant higher prices and shortages.
The Townshend Acts also included the New York Restraining Act, giving the royal governor the authority to suspend the Assembly of New York because it refused to authorize funding to provide housing, food, and other necessities for British troops as required under the 1765 “Quartering Act.”
The assembly’s refusal to cooperate was an example of passive resistance that the colonists would turn to with increasing frequency as the British attempted to assert more and more power over the colonies.
In 1773, Parliament passed the Tea Act granting the British East India Company the exclusive right to sell its surplus tea directly to the colonies, bypassing colonial tea merchants. It also authorized this state-supported monopoly to sell tea at a reduced price.
As the Boston Tea Party Museum explains, it was essentially a government bailout for the East India Company.
“The British East India Company was suffering from massive amounts of debts incurred primarily from annual contractual payments due to the British government totaling £400,000 per year. Additionally, the British East India Company was suffering financially as a result of unstable political and economic issues in India, and European markets were weak due to debts from the French and Indian War among other things.”
This resulted in what we call the Boston Tea Party today.
It was the culmination of a long series of mercantilist policies that the colonists perceived as exploitative and unjust. They fueled colonial resentment and a sense of economic and political oppression, setting the stage for the War for Independence.
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