ECONOMICHISTORY Free to Speculate BY KARL RHODES s Britain’s secretary of state land grants, so he reasoned that a much British frontier for the Colonies, Wills Hill, bigger proposal would have a much policy threatened Athe Earl of Hillsborough, vehe- smaller chance of winning approval. mently opposed American settlement But Franklin and his partners turned Colonial land west of the Appalachian Mountains. As Hillsborough’s tactic against him. They the Pennsylvania Provincial Assembly’s increased their request to 20 million speculation agent in London, Benjamin Franklin acres only after expanding their partner- on the eve of enthusiastically advocated trans-Appa- ship to include well-connected British lachian expansion. The two bitter ene- bankers and aristocrats, many of them the American mies disagreed about many things, and Hillsborough’s enemies. This Anglo- British land policy in the Colonies was American alliance proposed a new colo- Revolution at or near the top of the list. ny called Vandalia, a name that Franklin In the late 1760s, Franklin joined recommended to honor the queen’s pur- forces with Colonial land speculators ported Vandal ancestry. The new colony who were asking King George’s Privy would have included nearly all of what Council to validate their claim on more is now West Virginia, most of eastern than 2 million acres along the Ohio Kentucky, and a portion of southwest River. It was a large western land grab — Virginia, according to a map in Voyagers even by Colonial American standards to the West by Harvard historian Bernard — and the speculators fully expected Bailyn. Hillsborough to object. But instead Vandalia is perhaps the most import- of opposing the deal, Hillsborough ant and intriguing tale of Colonial land encouraged the speculators to “ask for speculation in the years leading up to more land,” Franklin reported, “enough the American Revolution. It dramat- to make a Province.” ically highlights the growing tension It was a trick. Hillsborough knew between expanding American ambition the Privy Council frowned upon large and constricting British control. “Hillsborough on the one side and The Proposed Province the Vandalia speculators on the other correctly understood the immensity • FORT PITT PA of the stakes involved,” Bailyn wrote. “The problems of emigration (popula- OH tion drain from the British Isles) and expansion into the American west had become dangerously inflamed, and the connection between them was begin- WV ning to be widely understood.” Among the motivating factors for the American Revolution, the con- • VANDALIA flict between Colonial land speculation BOONESBOROUGH VA and British frontier policy typically is KY overshadowed by the “taxation with- out representation” mantra. But in the 1760s and 1770s, Britain’s attempts to curb settlement in the trans-Appala- NC chian region became a major threat to TN Proclamation Line the political rights and economic inter- ests of colonists, including most of SOURCES: The boundaries of Vandalia are from Voyagers to the West by Bernard Bailyn. The position of the Proclamation Line is from the Historical Atlas of West Virginia by Frank Riddel. the men who would become America’s Founding Fathers. 24 E CON F OCUS | T HIRD Q UARTER | 2014 Vandalia also illustrates the chaotic struggle to obtain and The British government, however, was reluctant to con- retain land in the trans-Appalachian region. Everyone from done settlement of the land it gained from the French and wealthy speculators and royal governors to poor settlers and Indian War. Heavily in debt from many years of global con- squatters — not to mention the indigenous people who lived flict, the British had no desire to continue fighting Indian there — prized the fertile fields and navigable rivers between nations on America’s western frontier. So the Privy Council the Appalachian Mountains and the Mississippi River. issued the Royal Proclamation of 1763, which prohibited For the white settlers, there also was a fundamental con- settlers from moving beyond the Appalachian Mountains. nection between land and independence, explains François Colonial land speculators, including Washington, viewed Furstenberg, associate professor of history at Johns Hopkins the proclamation as a temporary measure to appease the University. “One of the requirements for independence — as Indians. Speculators continued to acquire western land it was understood in the 18th century — was to be a land rights from Colonial governments and Indian representa- holder. If you did not hold land, you were not independent.” tives. And in some prominent cases — such as Vandalia — they continued to lobby the British imperial government to Colonial Land Claims validate those claims. It may seem unpatriotic to portray the Founding Fathers as “People assume that the colonists woke up every morning land speculators. The term carries a negative connotation in the 1760s and 1770s and asked, ‘When are we going to be because land transactions — particularly large, sight-unseen free?’ And that wasn’t the case at all,” says Alan Taylor, pro- deals — are hotbeds for fraud. But land speculation is not fessor of history at the University of Virginia. “The leaders necessarily a bad thing. of the Colonies, in particular, were deeply enmeshed in the “Land speculators are basically taking risks that other institutions of the empire, and they were doing their best to people don’t want to take,” explains Farley Grubb, professor exploit those institutions for their own benefit. They rather of economics at the University of Delaware and an expert belatedly discovered in 1774 and 1775 that those institutions on early American land policy. “People may hate speculators were no longer working in their favor.” when they appear to make a lot of money without working for it. But they are taking risks that allow people to liquidate The Vandalia Deal land claims into something of more immediate value.” The origins of the proposed Vandalia colony go back to In Colonial America, this risk-reward trade-off was highly a group of merchants called “the suffering traders,” who favorable to land speculators who had the right political demanded restitution for supplies lost to indigenous com- connections. “Their basic business model was to acquire batants during the French and Indian War. A group of land from a public entity (initially the crown) at low cost Philadelphia speculators, led by Samuel Wharton, bought and gradually sell the land to smaller investors,” wrote out most of the suffering traders’ claims and swapped them Harvard economist Edward Glaeser in a National Bureau of for a claim on more than 2 million acres along the Ohio River Economic Research working paper, “A Nation of Gamblers: southwest of Fort Pitt (present day Pittsburgh). Real Estate Speculation and American History.” The profit Representatives of the Six Nations of the Iroquois ceded potential could be staggering. this land to Wharton’s group via the Treaty of Fort Stanwix, “America has always been a nation of real estate specula- which was negotiated by Sir William Johnson, one of two tors,” Glaeser noted. “Real estate is a particularly democratic superintendents of Indian affairs in the Colonies. Johnson, asset that attracts the mighty, like George Washington and who was in cahoots with Wharton’s group, exceeded his Benjamin Franklin, and the modest, like the small farmers in authority by extending the Royal Proclamation Line far- Kent, Connecticut, who were buying and selling land parcels ther than his instructions from Hillsborough allowed. The rapidly in 1755.” Iroquois representatives also exceeded their authority by The French and Indian War — the North American selling land that did not belong to them. They lived mostly theater of the Seven Years’ War — dammed up land specu- in what is now New York, while the land they were ceding lation at the Appalachian Mountains, but the eviction of the was in the Ohio Valley, which was populated primarily by French from the trans-Appalachian frontier in 1760 opened the Shawnee and the Delaware. the flood gates. Many Indian nations continued to resist In addition to questions of authorization and outright Colonial incursion, but the population of the 13 Colonies was fraud, many such treaties were indeterminate in other increasing rapidly, and westward expansion quickly escalated ways, Furstenberg says. “When Native Americans sell land, into major land rushes across the mountains. they might be selling certain rights to the land — the right “The population movement into uncultivated and legally to hunt or farm on the land — but they don’t fundamentally unclaimed land excited feverish ambitions in land specula- sell the land. It’s a nonsensical concept to them, but a land tors in every corner of the Anglo-American world,” Bailyn speculator might bribe somebody to sign a piece of paper wrote. “Among them were most of the officials of colonial and then go back to his Colonial government and say, ‘I America, a large phalanx of British politicians and mer- now have the rights.’ ” chants, and planters and merchants everywhere in America, That approach was not an option for Wharton’s group, who were determined to get a substantial piece of the pie.” however, because Hillsborough quickly challenged the Treaty E CON F OCUS | T HIRD Q UARTER | 2014 25 of Fort Stanwix. So Wharton set sail for London, where he Taylor views taxes and frontier policy as “two faces of the and Franklin asked the Privy Council to confirm the deal. same problem, which was Parliament trying to exert itself as Hillsborough fended them off for three years, but then the sovereign legislature for the entire empire. The colonists his “ask-for-more-land” trick backfired. The Privy Council were thinking to themselves, ‘We don’t want to be taxed by approved Vandalia, and Hillsborough resigned rather than Parliament, and we don’t want this money coming out of our implement the council’s decision.