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Sources of Investment Capital in the Colonial Philadelphia Shipping Industry

Published online by Cambridge University Press:  11 May 2010

John J. McCusker
John J. McCusker
Affiliation:
Institute of Early American History and Culture
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Extract

As economic historians delve more deeply into the economy of the Continental Colonies, they become increasingly aware of its sophistication. Good Englishmen in every way, the colonists' economic development closely paralleled that of a Mother Country which, of course, by the 1770's, was on the eve of an industrial revolution. The British themselves constantly complained of colonial competition in most every sphere of activity. Yet any claims for a highly developed colonial economy by historians, or complaints about competition by British merchants, have, until recently, sounded more like puffery or self-pity. Facts have been few. Even so major an element in the process of economic growth as the accumulation and productive mobilization of colonial domestic savings remains to be examined. It is now possible to say something about at least this topic for a significant colonial enterprise, the shipping industry.

Type
Papers Presented at the Thirty-first Annual Meeting of the Economic History Association
Information
The Journal of Economic History , Volume 32 , Issue 1 , March 1972 , pp. 146 - 157
Copyright
Copyright © The Economic History Association 1972

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References

1 The reference is to Rostow, W[alt] W., The Process of Economic Growth (2d ed.; New York: Oxford University Press, 1959).Google Scholar While there has been no real debate over the importance of domestic vs. foreign capital to colonial economic development, different opinions have been expressed. Compare Shepherd, James F. and Walton, Gary M., “Estimates of ‘Invisible’ Earnings in the Balance of Payments of the British North American Colonies, 1768–1772,” The Journal of Economic History, XXIV (June 1969), 230–63CrossRefGoogle Scholar, who consider long-term foreign investments in the Continental Colonies to have been trifling, with Hutchins, John G. B., The American Maritime Industries and Public Policy, 1789–1914: An Economic History, Harvard Economic Studies, vol. LXXI (Cambridge, Mass.: Harvard University Press, 1941), pp. 158–59Google Scholar, who argues that much (if not most) of the capital invested in the colonial shipping industry was British.

This paper, an outgrowth of a larger study soon to be published as The Pennsylvania Shipping Industry in the Eighteenth Century, begs the indulgence of the reader who is asked to seek in the book a fuller development of some points, a greater elucidation of sources used, and a more detailed support for most arguments. For the same reason, it should be apparent that some of the estimates given here are only provisional and are subject to later refinement and correction.

2 Shepherd and Walton, “Estimates of ‘Invisible’ Earnings,” p. 235.

3 This estimate, to be developed at length in my forthcoming monograph, rests ultimately on contemporary analyses of the volume of Lloyd's Register of Shipping printed in 1775. See [West India Planters and Merchants], Considerations on the Present State of the Intercourse between His Majesty's Sugar Colonies and the Dominions of the United States of America (London, 1784), p. 53Google Scholar; [Champion, Richard], Considerations on the Present Situation of Great Britain and the United States of North America (1st ed.; London, 1784), pp. 13–14Google Scholar; Chalmers, George, Opinions on Interesting Subjects of Public Law and Commercial Policy Arising from American Independence (1st ed.; London, 1784), p. 99Google Scholar; letter of Thomas Irving, Inspector General of Imports and Exports and Register General of Shipping, to the Commissioners of the Land Revenue, London, 7 January 1792, as printed in [Great Britain, Parliament, House of Commons], Journal of the House of Commons, in progress (London, 1742 to date), XLVII, 357Google Scholar (Irving had held the same dual post for North America before the American Revolution); and Davis, Ralph, The Rise of the English Shipping Industry in the Seventeenth and Eighteenth Centuries (London: Macmillan & Co., Ltd., 1962)Google Scholar, passim.

The colonial portion, some 500,000 measured tons, is here valued at £5.00 sterling a ton, or two-thirds of the cost of new vessels (see Table 1). Second-hand vessels sold for between two-thirds and three-quarters of the cost per ton of new vessels. Compare Craig, Robert S., “Shipping and Shipbuilding in the Port of Chester in the Eighteenth and Early Nineteenth Centuries,” Transactions of the Historic Society of Lancashire and Cheshire, CXVI (1965), 52.Google Scholar

All values in this paper are expressed in English pounds sterling using the new decimalized notation as more convenient for calculations. When necessary, values in colonial currency have been reduced to pounds sterling employing the rates of exchange set forth in McCusker, John J., “The Rum Trade and the Balance of Payments of the Thirteen Continental Colonies, 1650–1775” (unpubl. Ph.D. dissertation, University of Pittsburgh, 1970), Appendix E, pp. 998–1061.Google Scholar

4 My study owes an obvious debt of gratitude to Bailyn, Bernard and Bailyn's, LotteMassachusetts Shipping, 1697–1714: A Statistical Study (Cambridge, Mass.: Belknap Press of Harvard University Press, 1959), which was based on a similar compilation.CrossRefGoogle Scholar

5 This is an assumption common to studies which use registry records. Compare Gillingham, Harrold E., “Some Colonial Ships Built in Philadelphia,” The Pennsylvania Magazine of History and Biography, LVI (1932), 182Google Scholar; Bailyn and Bailyn, Massachusetts Shipping, pp. 10–11; Jarvis, Rupert C., “Fractional Shareholding in British Merchant Ships with Special Reference to the 64ths,” The Mariner's Mirror, XLV (1959), 311Google Scholar; and , Jarvis, “Eighteenth-Century London Shipping,” in Kellaway, A. E. J. Hollander and William, Studies in London History Presented to Philip Edmund Jones (London, 1969), pp. 415–16.Google Scholar

6 One reason is that one-third of the vessels had only one owner and another one-third just two owners. See also Bailyn and Bailyn, Massachusetts Shipping, p. 11.

7 The data came mostly from scattered references in the letters and accounts of various Philadelphia merchants including the following: Letterbook of Jonathan Dickinson, Library Company of Philadelphia Collection, Historical Society of Pennsylvania, Philadelphia (hereinafter HSP); Coates and Reynell Papers, HSP; Robert Ellis Letterbook, HSP; Alexander Wooddrop Account Books, The Library of Congress, Washington, D.C. (hereinafter LC); Davey and Carson Letterbook, LC; Wharton and Humphreys Shipyard Accounts, Joshua Humphreys.Papers, HSP. Compare a discussion of these several factors by Craig, Robert S., “Capital Formation in Shipping,” in Higgins, J. P. P.et al. (eds.), Aspects of Capital Investment in Great Britain, 1750–1850; A Preliminary Survey (London: Methuen & Co., 1971), pp. 131–57.Google Scholar

8 Davis, Rise of the English Shipping Industry, pp. 72–75, discusses this consideration at length. Compare Walton, Gary Max, “A Quantitative Study of American Colonial Shipping” (unpubl. Ph.D. dissertation, University of Washington, 1966), pp. 129–31.Google Scholar

9 The data in Table 2 combine a compilation of the numbers of vessels which cleared Philadelphia from the weekly shipping reports in The Pennsylvania Gazette(Philadelphia) which can be found in Jensen, Arthur L., The Maritime Commerce of Colonial Philadelphia (Madison, Wis.: State Historical Society of Wisconsin, 1963), p. 290, and average tonnages taken from the Philadelphia naval officer's report, “Ships' Register,” 1741–1742, HSP, and Board of Customs and Excise Records, Class 16, vol. I, fols. 3–4, 39–40, 101–2, 167–68, 227–28, Public Record Office, London (hereinafter PRO).Google Scholar

10 There was a parallel growth in the average size of square-rigged vessels built at Philadelphia during the period. Between 1726–1735 and 1765–1774 ships increased from 77 registered tons, on the average, to 134 registered tons; snows, from 51 to 86; and brigantines from 30 to 72. At the same time Philadelphia shipbuilders concentrated more of their production in the largest of these types, the ships. In the earlier period, 57.3% of all tonnage launched at Philadelphia was in ships but at the later period the proportion was 70.4%.

11 Kammen, Michael has concluded that “the two decades separating 1763 and 1783 may properly be called an age of interests, for they [that is, the interests] so dominated [British] politics that men observed that mercantilism had changed from the control of trade in the interest of national policy, to the control of national policy in the interest of trade.” Empire and Interest: The American Colonies and the Politics of Mercantilism (Philadelphia: J. B. Lippincott, 1970), p. 95.Google Scholar

12 See the letters of Benjamin Franklin to Joseph Galloway, the Speaker of the Pennsylvania Assembly, London, 14 April 1767, in The Papers of Benjamin Franklin, ed. Labaree, Leonard W., in progress (New Haven, Conn.: Yale University Press, 1959 to date), XIV, 125Google Scholar; and Thomas Whately, one of the joint secretaries of the Treasury, to John Temple, the Surveyor-General of Customs for the Northern District of America and one of the five Commissioners of the Board of Customs of North America, London, 2 May 1767, in The Bowdoin and Temple Papers, Massachusetts Historical Society Collections, 6th ser., vol. IX, and 7th ser., vol. VI, 2 vols. (Boston, 1897–1907), I, 81. The suggested restriction of American vessels to the coasting trade came from Jenkinson, Charles, Earl of Liverpool, Whately's opposite and “one of George III's chief favorites,” as we are reminded by SirNamier, Lewis B., England in the Age of the American Revolution (2d ed.; London: Macmillan & Co., Ltd., 1961), p. 76.Google Scholar For Jenkinson's idea see Clark, Dora Mae, The Rise of the British Treasury: Colonial Administration in the Eighteenth Century (New Haven, Conn.: Yale University Press, 1960), pp. 170–71Google Scholar, citing the Letterbook of Charles Jenkinson, 1775–1779, fol. 76, Liverpool Papers, vol. CXVII, Additional MS 38306, British Museum, London. Miss Clark concluded: “It may be that American merchants avoided this calamity only by achieving independence.”

13 Table 3 multiplies the tonnages from the original document (converted to measured tonnage) by the average prices per measured ton taken from Table 1.

14 Rostow, Process of Economic Growth, pp. 284–87; Rostow, , The Stages of Economic Growth (Cambridge, England: Cambridge University Press, 1960), p. 37Google Scholar; Lewis, W. Arthur, The Theory of Economic Growth (London: Allen & Unwin, Ltd., 1955), pp. 225–26Google Scholar; and Cairncross, A. K., “Capital Formation in the Take-Off,” in The Economics of Take-Off into Sustained Growth: Proceedings of a Conference Held by the International Economics Association, ed. Rostow, W[alt] W. (New York: St. Martin's Press, 1963), pp. 248–53.Google Scholar

15 A similar initial assumption (“that the whole industrial and commercial sector grew at the same rate as international trade”) provided two British economic historians with an opportunity “to fix an upper limit” to the rate of growth. Deane, Phyllis and Cole, W. A., British Economic Growth, 1688–1959: Trends and Structure (2nd ed.; Cambridge, England: Cambridge University Press, 1969), pp. 79–81.Google Scholar

National income is the product of the operation of both the foreign and the domestic sectors. Extension of the Deane and Cole model to cover the entire domestic sector involves still further assumptions, therefore. See North, Douglass C., Growth and Welfare in the American Past: A New Economic History (Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1966), p. 59.Google Scholar Compare North, The Economic Growth of the United States, 1790–1860 (Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1961), p. 2.Google Scholar

16 The data are as in Whitworth, Charles, State of the Trade of Great Britain in Its Imports and Exports … 1697 [to 1773] (London, 1776)Google Scholar and Customs 3/74, PRO. The figures as found are effectively a constant value series. See McCusker, John J., “The Current Value of English Exports, 1697–1800,” The William and Mary Quarterly, 3d ser., XXVIII (Oct. 1971), 607–28.CrossRefGoogle Scholar

17 In the face of the considerable rise in the number of inhabitants in colonial Pennsylvania—between 1730 and 1770 the annual compound rate of population growth was 3.9%—the per capita rate of increase in NNP was more like 1.6%.

18 I refer to their three dissertations and the published works which have grown out of them. See Shepherd, James Floyd Jr, “A Balance of Payments for the Thirteen Colonies, 1768–1772” (unpubl. Ph.D. dissertation, University of Washington, 1966)Google Scholar; Walton, “A Quantitative Study of American Colonial Shipping”; and Jones, Alice Hanson, “Wealth Estimates for the American Middle Colonies, 1774” (unpubl. Ph.D. dissertation, University of Chicago, 1968).Google Scholar The essence of Mrs. Jones's dissertation has appeared in Economic Development and Cultural Change, XVIII (July 1970),Google Scholar pt. 2. Shepherd and Walton will soon publish Shipping, Maritime Trade, and the Economic Development of Colonial America (Cambridge, England, forthcoming).

19 Jones, Alice Hanson, “La fortune privée en Pennsylvanie, New Jersey, Delaware (1774),” Annales: Economies-Sociétés-Civilisations, XXIV (mars-avril 1969), 248.Google Scholar

20 The problem of defining prosperity is always a comparative one. Suffice it to say that the citizens of the Continental Colonies in the years immediately preceding 1775 seem from this study and those of Jones, Walton and Shepherd and others to have been better off than people in other countries at the same time and in their own country at both an earlier and a later time. Besides the works of Walton and Shepherd and Jones cited above, see Nettels, Curtis P., The Money Supply of the American Colonies before 1720 (Madison, Wis., 1934), p. 278Google Scholar; Taylor, George R., “American Economic Growth before 1840: An Exploratory Essay,” The Journal Of Economic History, XXIV (Dec. 1964), 427–44CrossRefGoogle Scholar; and North, Growth and Welfare, p. 40. Even if there were distinct levels of economic attainment in colonial society, and even if we find that the secular trend in the concentration of wealth created an increasing gulf between the rich and the poor over the years separating 1607 and 1775, the fact remains that not only were the rich getting richer but the poor were also, albeit at a slower rate. See the very suggestive studies addressed to the changes in the structure of income distribution by Lemon, James T. and Nash, Gary B., “The Distribution of Wealth in Eighteenth Century America: A Century of Change in Chester County, Pennsylvania, 1693–1802,” The Journal of Social History, II (1968–1969), 1–24CrossRefGoogle Scholar; Henretta, James A., “Economic Development and Social Structure in Colonial Boston,” The William and Mary Quarterly, 3d ser., XXII (Jan. 1965), 75–92CrossRefGoogle Scholar; and Alan Kulikoff, “The Progress of Inequality in Revolutionary Boston,” ibid., 3d ser., XXVIII (July 1971), 375–412.

The shift in income distribution which concentrates wealth in groups with a higher propensity to save is, of course, the classical mechanism for generating domestic savings and economic development. Lewis, W. Arthur, “Economic Development with Unlimited Supplies of Labour,” The Manchester School of Economic and Social Studies, XXII (May 1954), 155–60; Rostow, Process of Economic Growth, pp. 292–96. This would seem to have been the case in colonial Pennsylvania.Google Scholar

21 Arendt, Hannah, On Revolution(New York: Macmillan, 1963), pp. 61–68. Note her qualification that “what were absent from the American scene were misery and want rather than poverty.” Compare Kulikoff, “Progress of Inequality in Revolutionary Boston,” p. 383.Google Scholar

22 Holroyd, John Baker, Sheffield, Lord, Observations on the Commerce of the American States, (6th ed.; London, 1784), p. 100. Most interestingly, his example is Philadelphia!Google Scholar

23 See Schlesinger, Arthur Meier, The Colonial Merchants and the American Revolution, 1763–1776 (New York: Columbia University Press, 1918), pp. 265–78, for colonial reactions to the tea affair.Google Scholar

24 McCusker, “The Rum Trade,” pp. 479–504.