America's Economic Power, Part II
Brian Trumbore
President/Editor, StocksandNews.com

Continuing with our look at the origins of America's Economic Power, as told by historian John Steele Gordon in his book "An Empire of Wealth," we pick up the story in the mid-1600s.

Last time we concluded with the advent of tobacco in Virginia. Unfortunately, tobacco couldn't save the Virginia Company and it was eventually taken over by King James in 1624 who then labeled Virginia a crown colony.

Around this time development in the Lesser Antilles was surging and by 1650 there were more English emigrants living here than in New England and the Chesapeake combined. The attraction was sugar and as the Islands adopted this as the prime industry, the Chesapeake stayed with tobacco.

The Portuguese had introduced sugar to Brazil while the Spanish brought it to the Greater Antilles. [I'm always confused with the titles and assume I'm not alone. The Greater Antilles include Cuba, Hispaniola, Jamaica, Puerto Rico and the Cayman Islands. The Lesser Antilles are comprised of the British Virgin Islands, the U.S. Virgin Islands, Antigua, Barbados, Martinique and Grenada, among others.] The cultivation of sugar is labor intensive and the Portuguese and Spanish introduced black slavery to the Americas during this period.

With European consumption of sugar growing at 5% a year, the big sugar planters rapidly became among the world's super rich. But one of the prime production areas, Barbados, was becoming overcrowded and those who could no longer earn a living there were recruited by the Carolinas, or more specifically, what would become South Carolina. The first big settlement was Charles Town (shortened to Charleston in 1783) and by 1700 the population of this city was 6,600?including 2,800 black slaves.

Too far north to grow sugar, the economy of Charleston relied heavily on trade with the Indians of the interior, with one of the key items being deerskins, which the colonists shipped on to Europe. Deerskins? Well, they certainly were plentiful enough, as they are today, for crying out loud?but I digress. The deerskins were used for things such as bookbindings, belts and gloves. Between 1699 and 1715, Carolina exported an average 53,000 deerskins a year to England, worth some 30,000 pounds; a very considerable sum.

Other items that were big for export back then were lumber (shipped exclusively to the West Indies at first) and livestock. The Carolinas actually had a thriving cattle industry and many of the techniques that became associated with the American West were started here. John Steele Gordon notes the term "cowboy" was first applied to black slaves who herded cattle in colonial Carolina.

And then there was rice, first introduced in the 1690s. The tidal marshes of Carolina were ideal for rice growing and there were ample markets. Exports totaled 400,000 lbs. in 1700 and a whopping 43 million by 1740. Carolina rice, in fact, added substantially to the gross domestic product of the British Empire.

Between tobacco and rice, you can see how the plantation economies of the Carolinas and the Chesapeake boomed, but at the same time there was little in the way of manufacturing.

Up in New England, the early settlers had more of a deep religious commitment than those of the Southern colonies, which also meant the first New Englanders were more law abiding than their Southern brethren. It helped that the ratio of men to women in New England was 6 to 4, whereas in the South it was 4 to 1, plus New England had a healthier climate and its population grew at a more rapid pace than that of the South.

Cod was the initial mainstay of the early New England economy. By 1670, six million pounds of it was being exported, but then lumber took over and by 1705, there were 70 sawmills on the Piscataqua River in New Hampshire alone.

With lumber, New England's ship-building industry boomed and manufacturers could build one at about half the cost of those in England. In the 40 years between 1674 and 1714, Boston averaged 40 ships a year and by 1700, only the ports of London and Bristol outstripped Boston in this regard throughout the entire British Empire. England, though, had little need for most of New England's products.

"But New England had an ever-expanding need for Britain's manufactured goods. In response, several 'triangle trades' developed. New England lumber, fish, and meat was taken to the West Indies and traded for sugar and salt. Those went to Britain, where they were traded for manufactured goods, principally textiles and hardware, which were then sold in New England. West Indian molasses was distilled in New England into rum and then sent to Africa and traded for slaves. The slaves were sold in the West Indies. New England fish was traded in Spain and Portugal for wine and fruit, which was sold in Britain and paid for manufactures." [John Steele Gordon]

Iron was also extremely important to the development of the colonies and it had to be imported at first; nails, horseshoes, pots and pans, plows, and weapons to name a few examples. John Winthrop's son, also named John, recognized the problem, particularly when shipments from across the pond took over two months.

John Jr. needed capital from England to build an iron plant and part of his sales pitch was that there was an abundant amount of wood in New England from which you could produce charcoal, a key in the process. Winthrop was successful in raising a very significant sum but he made the mistake of building the first ironworks in Braintree, south of Boston. The water supply was inadequate to power the plant there so Richard Leader, an expert in such matters, was brought over from England and he established a new ironworks in Lynn, north of Boston in what is today the town of Saugus. By 1646, just 16 years after John Winthrop the elder had founded the Massachusetts Bay Colony, the colonists had a thriving iron plant?.remarkable. In fact, did you ever stop to think that early America was the greatest emerging markets story of all time? Just musing, but I suppose the only rival to it would be ancient Rome.

But back to the Lynn ironworks, some of the English investors weren't happy that one year into the project it wasn't profitable. Gordon notes though, "by the end of the summer of 1648, the five-hundred-pound hammer imported from England and attached to the waterwheel powered by the Saugus River was pounding steadily away, driving the impurities out of the smelted iron, and John Winthrop the elder could write his son that 'the furnace runnes 8 tun per weeke, and their barre Iron is as good as Spanish.'" [sic]

It was the start of heavy industry in America. Gordon:

"The Saugus Iron Works by that time was also displaying another aspect of the aborning American economy. In 1646 a blacksmith at the works, Joseph Jenks, received a patent for a device described as 'engines for mills to goe with water,' for manufacturing edged tools, such as scythes. This is perhaps the very first instance of the 'Yankee ingenuity' that has so characterized the American economy, and often astonished the world, ever since."

But by 1676, the Saugus Iron Works were in financial distress and forced to shut down. Nonetheless, despite this failure, by 1776 America's colonies were providing 1/7th the world supply of pig iron.

Meanwhile, by the early 1640s the tip of Manhattan Island was growing with about 1,000 inhabitants speaking some 18 languages, according to the account of a French priest at the time. And all seemed to be in Manhattan to make money even then. Gordon notes:

"Indeed, the Dutch purpose for being in the New World could hardly have been clearer. The seal of New Netherlands was a beaver encircled with wampum, the form of money used by the Indians."

Next week?trade booms and the population explodes.

Source: "An Empire of Wealth: The Epic History of American Economic Power," John Steele Gordon

Brian Trumbore