What Could the United States Have Been? How England Hindered American Manufacturing by an anonymous, but awesome (Andrea Awesnymonous??) student ECON 40413: John Lovett 5 December 2018 Abstract: Mercantilism was the dominant economic system throughout the colonial era. These policies lauded acquisition of raw materials and export-driven economies that would bring glory to the motherland. England exercised these policies heavily over its own colonial holdings. Seen as a both a threat and asset to England, colonial America was relegated to the duty of raw material-provider. England’s imperial policymaking largely staunched the ability of its colonies to develop a manufacturing industry, despite evident demand in the colonies for manufactured goods and potential decreases in shipping costs from domestic production. Instead, England utilized a variety of tax incentives and deterrents to coerce colonists into importing manufactured goods and artificially inflate England’s trade surplus. Because of this, what eventually became the United States suffered heavy economic loses as well as wasted opportunities to get a head start in the industrial era that approached rapidly after decolonization. Besides the heavy financial losses, there was also lost opportunities to develop good growth institutions, such as equality and investment in human capital. Ultimately, the United States is estimated to have lost millions of dollars from its relationship with England and was theoretically set back decades from its potential in the manufacturing industry. This paper concludes with a short discussion of the negative impacts English mercantilism had on less well-situated colonies, exemplified by Jamaica. The consequences of English mercantile insecurities pave the way for understanding economic development within its former colonies and the hinderances that plagued those countries following decolonization. Anderea Awesnymonous 1 What Could the United States Have Been? How England Hindered American Manufacturing By: Anderea Awesnymonous Abstract: Mercantilism was the dominant economic system throughout the colonial era. These policies lauded acquisition of raw materials and export-driven economies that would bring glory to the motherland. England exercised these policies heavily over its own colonial holdings. Seen as a both a threat and asset to England, colonial America was relegated to the duty of raw material-provider. England’s imperial policymaking largely staunched the ability of its colonies to develop a manufacturing industry, despite evident demand in the colonies for manufactured goods and potential decreases in shipping costs from domestic production. Instead, England utilized a variety of tax incentives and deterrents to coerce colonists into importing manufactured goods and artificially inflate England’s trade surplus. Because of this, what eventually became the United States suffered heavy economic loses as well as wasted opportunities to get a head start in the industrial era that approached rapidly after decolonization. Besides the heavy financial losses, there was also lost opportunities to develop good growth institutions, such as equality and investment in human capital. Ultimately, the United States is estimated to have lost millions of dollars from its relationship with England and was theoretically set back decades from its potential in the manufacturing industry. This paper concludes with a short discussion of the negative impacts English mercantilism had on less well-situated colonies, exemplified by Jamaica. The consequences of English mercantile insecurities pave the way for understanding economic development within its former colonies and the hinderances that plagued those countries following decolonization. Introduction The United States is considered the quintessential example of a successful colonial survivor. Following the American Revolution, the infantile country was able to establish itself politically and economically, sowing the seeds of the world power it is today. However, the United States was not immediately set up for success under its colonial master of England. A crucial part of the economy was left underdeveloped for far longer than it might have been without colonial interference: manufacturing. Due to mercantilist policies of the era, England feared manufacturing competition from its own colonies and tightly restricted their ability to develop industries specializing in secondary goods. Because of these policies and despite the success the United States did come to enjoy, the question remains: what could the United States have been without interference from England? How much development was lost as a result of Anderea Awesnymonous 2 England’s policymaking that could have spurred years of economic success and perhaps even an earlier industrialization? These questions are imperative to understanding the effects of colonizers on their colonies. There is great discrepancy between the development levels of former colonies, so understanding what policies led to successful countries after decolonization is the first step towards correcting mistakes of the past and paving the way towards a more prosperous future. Although the United States is a colonial “success,” certain policies may have hindered the potential afforded to the American colonists by the exceptional Goldilocks conditions of the original thirteen American colonies. The greatest boon to studying the ways in which England failed its, arguably, most successful colony is that it provides a critical frame of reference for the damage inflicted to other colonies. If the United States did in fact lose out on enormous amounts of economic development, it is worrisome to think what the consequences have been for less fortunately situated colonies. I will begin by outlining the theoretical framework for mercantilism that led England to both depend upon and fear its own American colonies. This discussion will transition into an overview of how England enforced her mercantilist values on the Americas and what each of these policies meant for the manufacturing sector both during the colonial period and immediately following independence. I will attempt to estimate some of the financial value lost by stymied manufacturing and speculate about the consequences of delaying important institutional factors that are central to economic development. After examining the American case, I will briefly touch on the impact of mercantilism in other areas of the world. Ultimately, this paper will derive the consequences of English mercantilism on both the colonial economy and post-colonial development. Anderea Awesnymonous 3 British Mercantilist Policy: Accidentally Creating Desire to, and Demand for, Supply Mercantilism is an economic policy that seeks to push the supremacy of the state by accumulating great national wealth, usually in the form of gold, silver, and other precious metals (i.e. specie). Although not a formal school of economic thought, its philosophies dominated the decisions that European governments undertook from about the 16th to the 18th centuries. The most notable aspect of mercantilist theory is the assumption that economics is a zero-sum game – one country can only benefit at the expense of another country, which led European governments to pursue absolute trade surpluses throughout this era. Operating under this assumption, England faced a crossroads: their colonial holdings in America were absolutely necessary to provide them with raw materials, but they were also a potential source of fierce competition if the colonies evolved beyond dependence upon the mother country and primary sector specialization (Nettels, 1952). Given that England ultimate goal was to out-compete its European rivals by acquiring specie wealth via trade surpluses, it could not run the risk of losing trading opportunities to its colonies. Nevertheless, England still had a strong incentive to encourage the colonies to be productive, for their productivity generated more raw materials for English manufacturing (Nettels, 1952, p107). According to mercantilism, imports are strictly negative. Increasing imports results in an outflow of specie wealth, which means a country is losing by zero-sum rules. Because of this assumption, the ability to extract raw materials was a requirement for countries. Having to import raw materials to make manufactured goods would immediately decrease a country’s progress towards a trade surplus, thus decreasing their supposed wealth. Given the already over-crowded, exploited land in Europe, the best way for colonial powers to ensure their access to raw materials was through the process of colonization. Nettels argues that Anderea Awesnymonous 4 England’s primary motivation for affording its famously progressive property rights to colonial settlers was derived from a need to increase raw material production; he states that “small holdings inspired the colonists to work; their labor expanded production; and increased production enlarged English commerce” (1952, p107). Besides the direct benefits England derived from raw material production in the colonies, there was the hope that encouragement of raw material production would keep colonists from pursuing manufacturing (Scrivenor, 1968). However, encouraging development in the colonies was a double-edged sword. Naturally, the entrepreneurial colonists had their own incentives to develop, evolve, and expand into new industries. Simply put, many enterprises the English sought to curtail were extremely