8 - Trade and Debt in Philadelphia

Summary

Debt and credit were the life blood of trade, and trade was central to Philadelphia's economy. Under mercantilist trade policy the colonies were restricted to exchange within the British Empire. Being able to trade only with the motherland or other colonies made Pennsylvania closely dependent on British economic trends. Periods of boom and recession in England were manifested in the extension of credit or the recall of loans to colonial merchants. During most of the eighteenth century, the British demand for colonial goods grew. As a consequence, the terms of credit granted in London to colonial merchants who were funding imports increased as well. In some cases, they grew from less than a year in the seventeenth century to an average of at least two years in the eighteenth century. Britain and her Quaker colony also experienced periods of economic decline, however. When the British economy went into recession, demand for colonial goods dropped, and merchants in England recalled loans from their American counterparts. On several occasions during the eighteenth century, this led to mass insolvencies in the colonies.

Philadelphia's economic development in this period can be divided roughly into three phases. The first phase stretches from the beginning of colonization in 1682 to the 1720s, and is marked by modest but stable bilateral trade with the other colonies. Philadelphia exported provisions mainly to the West Indies. These included tobacco, skins, furs, lumber and, of particular importance, flour. The annual exports of flour were as valuable as all other exports combined. In return, Philadelphia's merchants received bills of exchange. While Pennsylvania itself was not primarily a plantation colony, as Brycchan Carey pointed out, the central role of the Caribbean trade meant that ‘Philadelphia's economy nevertheless depended in large measure on the wealth generated by slaves’. Philadelphia merchants used the bills they received from their Caribbean trading partners to purchase manufactured goods. While these goods were produced in England, Philadelphia merchants did not buy them there. Instead, they received them from middlemen in the New England colonies. Direct trade with England was minimal, regarding both the export of primary products there and the imports of manufactured goods from thence. The port's connections were therefore primarily colonial.