VIII. Economics

 

1.  Introduction.  In this section, I present information and analysis on what I consider to be economic aspects of the Northern Neck during the 1600s and 1700s. 

 

After a robust economic growth period in the middle 1700s in the Northern Neck tobacco industry, a severe depression developed in the 1780s, correlating with the American independence war.  Such an event would naturally lead to decreased trade with England.  And then following the 1780s, the 1790s saw further economic problems, as the new nation, and its government, struggled with economic problems.   Other periods of economic depression in the 1600s and 1700s in the Northern Neck included the late 1600s and early 1700s, due somewhat to the political problems in England at that time.   In spite of these recessionary periods, the Northern Neck was considered to have one of the best economies in the Virginia Colony in the 1700s. 

 

2.  Political and Governmental Effects.  The 1700s was a period of economic growth in England; a period of relative stable government (e.g., when compared to the 1600s); a period during which England would rise on the global stage as an emerging power.  In the 1700s, the English and Scottish parliaments would merge to create Great Britain and Wales and Ireland would fall under English rule.   English governmental policies had an enormous effect on economic developments in the Northern Neck, the Virginia Colony, and the other colonies.

 

The economic and political emergence of England (Great Britain) would have benefits for the Virginia and other colonies.   The economic growth of Great Britain would increase the need and desire for those products that the colonies could provide.  The Northern Neck would benefit from the English desire for tobacco.  On the other hand, the British emergence would create hindrance to many colonists who were seeking to create wealth.

 

For example, the Royal Proclamation Act of 1763 would prevent colonists from immigrating west beyond a line formed by the Appalachian Mountains, extending north and south.  This proclamation, if enforced (it was not as the British were not in a position to do so, and the American rebellion in the 1770s overcame the intent of the act) would prevent many wealthy individuals (especially wealthy Virginian planters), who invested heavily in land beyond the Appalachians, from generating wealth from those investments.  One of those investors was George Washington, who strongly opposed the act.  (The next subsection, Profits and Wealth, deals more with wealth generation and how important it likely was to the economic success of the colonies).

 

Other British legal acts interfered with (created barriers) to those seeking wealth development through manufacturing.  These acts imposed taxes (tariffs) on imported goods, many of which were needed as starting materials by colony manufacturers.  The tariffs reduced the profits (wealth creation opportunities) of the manufacturers.  Example of these acts are: the Molasses Act of 1733, taxing molasses imports, making rum production in New England more expensive and the Townshend Revenue Act of 1767 that imposed tariffs on imported glass, lead, painter’s colors (dyes?), and paper.

 

The Inspection Act of 1730 set up 40 tobacco warehouses and required all tobacco exported (or used for payments) to be inspected (to meet quality standards) at one of these warehouses.  Many planters resented such inspections believing the inspections created unnecessary burdens.  During the first year, two inspection stations in the Northern Neck were burned (in Lancaster and Northumberland Counties).  Inspection warehouses in the Northern Neck were at:

 

At Bray’s Church in King George County

At Deep Creek in Lancaster County

On the Corotoman in Lancaster County

On the Coan in Northumberland County

At Indian Creek, in Northumberland County

On the Wiccocomico in Northumberland County

At the mouth of the Totaskey in Richmond County

At William Glascock’s landing in Richmond County

On Maddox Creek in Westmorland County

At Nominy in Westmoreland County

 

 

The Iron Act of 1750 discriminated against colonies’ iron industry by preventing that industry from manufacturing higher profit tools (by getting higher margins on end-product tools).  The act allowed only the British iron industry to make finished tools from iron.  The colony iron industry could only export processed iron ore products to Britain, where tools would be made.   The Northern Neck had at least one iron ore producer.  This act hurt wealth generation in the colonies.

 

The Currency Act of 1764 prevented colonies from issuing paper currencies.  By doing so, the creation of a suitable, circulating paper currency for use in the colonies was hindered.  Missing such currency hampered business transactions and hindered economic and wealth development.

 

As indicated in the next sub-section (Profits and Wealth), a predominant incentive for the American colonization experiment was to generate wealth.  That the British Parliament in the 1700s so consistently interfered with that experiment, perhaps more than other causes, accounted for why the Americans were not to put up with the British interference, and rebelled accordingly.

 

Governmental oversight and regulations providing buyer warnings and protections on products and services were much less than they are today.

 

3.  Profits and Wealth.  Land was a critical Northern Neck asset (source of wealth generation) in the 1600s and 1700s.   Based on the perceived value of this land for generating wealth, capital flow became available from England.  Another critical asset was slaves.  As slaves were necessary for the land to provide the expected returns, the cost of slaves had to be factored into the expected profits.   

 

Although the tobacco trade remained the greatest source of profits for the Northern Neck, beginning in the middle 1700s, shipbuilding, forest products, grain farming, and mills started to be significant income sources.  The Northern Neck was considered to be an area of relatively high economic diversification in the 1700s.  See the Section VII (Industry, Technology, and Services) for more on the various industrial sectors that provided income.

 

The farmers doing the best economically were those who had indentured servants and/or slaves working the land.  In 1716 (see data above on taxes in the Government Section), 201 taxpayers (family units) had two or more indentured servants and/or slaves and adult children) as workers in the family unit (for each worker, a tax payment was due).   Based on this, about 65% of the family units (201 family units with more than one worker paying taxes divided by 314 total family units paying taxes) might be considered as doing well, based on the criteria that two or more adult workers was important for successful tobacco farming.

 
From the same data, 35 of the family units had 6 or more indentured servants, slaves, and/or adult children working the family’s farm, or 10% of all families (35 family units/314 family units).   These 10% would be considered to be in the Class-Level One and Two, described in my Class-Level scheme in the Section IV, Culture, Subsection 2, Class Structure. 

 

These 10% in the Class-Level One and Two were wealthy compared to others.  This wealth, and the relatively few numbers in these class levels, could be considered to be the Northern Neck 1700s equivalent of the “top one percent” that is used today to describe a class.  The 1700s Northern Neck had its version of today’s “wealth gap”.

 

Compared to today, personal possessions represented more of a person’s overall wealth.  Personal possessions likely accounted for a much higher percentage of a person’s expenditures then they do today.  A person’s wealth was in land, slaves, a house, and personal possessions, with very little of it in cash and liquid assets, unlike today.   Probate wills show an increase in the quality and quantity of personal possessions owned at death throughout the 1700s, reflecting the value ascribed to personal possessions.

 

Due to the good economic performance, many in the Northern Neck in the later 1700s generated sufficient wealth to be active investors in such enterprises as: mills; mining; distillery; textiles; fisheries; tobacco warehouses; shipbuilding; and ship ownership.  This investment activity reflects a good entrepreneur atmosphere, which is necessary for economic innovation and growth.  This entrepreneurship was centered in families, especially those with large land holdings and economic success.   This contrasts to today where entrepreneurship is centered more in organizations.  Also, the Northern Neck entrepreneurship atmosphere likely influenced many who grew up there in the later 1700s and accounted somewhat for the contributions of so many from the Northern Neck in the new nation’s political, and other, advancements.

 

At least two large-scale investments (e.g., involving large amounts of money at risk) involving Northern Neck investors in the later 1700s were:

           

1. Draining the Great Dismal Swamp in southeast Virginia, leading to large amounts of land becoming available for farming; and

2. Increasing the navigational capacity of the Potomac River (for transporting goods) from the falls line west to Cumberland in Maryland, a distance of more than 100 miles, by clearing the river of rocks, dredging the river to deeper depths, and using canals at various sections of the river.

 

The Great Dismal Swamp investment started in 1763, back by a group of investors, including these from the Northern Neck: George Washington and Fielding Lewis.    

 

The idea was to buy the swamp land cheaply, drain the swamp so that the land could be used for farming, and then sell the land at farm-land prices.  The concept was good, but the problem was in the details, as the Great Dismal Swamp proved to be undrainable.

 

A company, called the Potowmack Company, to increase the navigational capacity of the Potomac river, was established in the 1780s, primarily due to the encouragement and persuasion of George Washington, who was a strong supporter of the company’s objective.   Northern Neck investors in the Potowmack Company included: 

 

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Work on improving the Potomac River’s navigational capacities began soon after the company’s formation, but the scope of the work and resources required to satisfactorily increase river navigation were greatly underestimated.   Although some goods were shipped along stretches of the Potomac, the river never became sufficiently navigational to attract required usage and fees to cover expenses, much less to yield profits, leading to company bankruptcy by the 1820s.

 

The idea behind the investments was that by improving the navigational capacities of the Potomac River, it would be greatly used to transport goods from farms all along the Potomac River, and its tributaries, to ports below the fall lines, generating large fees for use of the canals and providing profitable dividends to the investors.   Shares were offered to individual investors and also given to the states of Maryland and Virginia, as well as to George Washington in appreciation for his efforts during the War of Independence.   Approximately 180 individual investors are known to have purchased shares in the company, with about 15 of these investors from the Northern Neck (see above table for a list of these Northern Neck investors).

 

Northern Neck investors in the above two investment projects with the same last name as twp of my ancestor names in the Section I, Introduction tables are:  George Washington, John Augustine Washington, and Fielding Lewis.

 

Another second-half of the 1700s land investment, involving Northern Neck investors, e.g., the Lee family, was known as the Mississippi Land Company.  In the 1810s, George Washington Carter (1791-1833) and Mary Burwell Wormeley Carter (1796-1865), descendants of Northern Neck families (and ancestors of mine), would leave Frederick County, Virginia and migrate to southern Mississippi (Wilkinson County) for opportunities hopefully afforded them by the land there.  I know of no specific connections between the Mississippi Land Company and the George and Mary Carter migration to Mississippi, but these events seem to me to be a good example of the need for earlier investments to open up later, unexpected opportunities.

 

In the last part of the 1700s (e.g., after 1780), those with wealth (those having sufficient cash on hand to invest) spread significantly beyond just those with large land holdings (those in my class one of my class structure scheme – see Section IV, Culture; Subsection 2, Class Structure for information on my scheme) to those in classes two and three.  This is reflected, I believe, by the approximately 180 individual investors in the Potowmack Company (described  above) during the 1780s and 1790s.

 

This spread of investment interest (motivation) by increasing numbers of investors in projects that would yield profits (because the projects provided products and/or services to people and organizations who are willing to pay for them) seems to me to be one of the greatest of American success stories, which continues today.  A good measurement to show this success is the decrease in the poverty levels from the 1600s/1700s to today and the rise in the standard (quality) of living that all of us experience.

 

The Northern Neck investment activities of the 1700s are strongly consistent with why the English came to Virginia in the first place – to generate profits and wealth through investment.  The Northern Neck 1700s emphasis on investments can be look upon as a continuation from the early 1600s English beginnings in Virginia.  From a long-term perspective, the English made an excellent (and fortuitous) investment decision in the 1600s given American’s enormous natural resources.  The combination of an emphasis on investment, the excellent English organizational, entrepreneur, and other skills, and a continent of enormous natural resources represented an excellent starting point for success.

 

4.  Money, Purchases, and Prices.  Although British sterling and Spanish gold pistoles coins circulated, the Northern Neck economy in the 1600s and 1700s was one where payments were usually made in quantities of tobacco.  Tobacco could be used for credit – a hogshead of tobacco provided to a store by a customer could entitle the customer to future purchases.  Paper money began to be printed in the Virginia Colony in the 1750s.  However, English merchants were reluctant to be paid with Virginia Colony money; one reason being the money would lose its value before it could be converted to English currency.   The lack of one suitable, circulating paper/coin currency in the Colony created problems in transactions and, in doing so, hindered economic development.

 

The value of the money was backed up by tobacco stored at government tobacco warehouses.  Also, the economy used barter transactions (e.g., goods exchanged for goods) in payments between individuals; likely much more then than today.  These two payment methods (tobacco and barter) represented systems that inhibited economic growth.  Likely one of the challenges of the nation, after independence, would be improving payment systems.  Today America is a global leader in payment systems.

 

Because the Northern Neck economy apparently did not, in most transactions, use English money, the value of English money received on tobacco sales to the English was worth much more in England than in the Northern Neck.  This lead to those receiving payments in English money on exports (to England) spending what was received in England in buying English goods and shipping them to the Northern Neck. 

 

Because of the lack of “mass, assembly-line production”, prices were relatively much higher than today, one of the reasons that accounted for a lower standard of living then compared to today.

 

5.  Exports, Imports, and Trade.  Trading, which included exports and imports, was critical to the Northern Neck economy, as well as the Virginia, and other colonies.  The principle reason for England’s investments in the Virginia Colony was to grow England’s economy through trade.  Trade was foremost on the minds of the earliest Northern Neck settlers, such as John Mottram, one of the first Northern Neck settlers in the 1640s, who started a trading post seeking trade with the Northern Neck Indians, especially trading for the fur that the Indians could provide, which was a valuable commodity to ship back to England.

 

The Northern Neck economy in the 1600s and the 1700s depended on exporting products.  Profits gained from exports were critical.  Tobacco exporters were very much aware of this and maximizing profits was a primary concern.   English laws, such as the Navigation Acts of the 1600s, governed the Colony export trading businesses.  Although these Acts required Colony exports only to England,  Northern Neck farmers did export to other countries and colonies.  Whether England knew of this and what actions they took is not clear, but such defiance by the colonists likely provided a precedent for later rebellions against English rules in the late 1700s.

 

In the Industry, Technology, and Services Section VII, Subsection 2, Agriculture, data is presented suggesting that in the 1750 to 1755 time period about 39,000 metric tons of tobacco was exported to England.  Assuming that the cargo capacity of one 1750 sailing ship was, on average, 150 metric tons of tobacco, then about 260 trips (about 50 trips a year) from Virginia to England would be required to carry the 39,000 metric tons (39,000 metric tons divided by 150 metric tons per trip = 260 trips).  By comparison, one moderately-sized container ship today could carry the 39,000 metric tons in one trip, assuming that one 1755 sailing ship had the capacity of 15 containers (260 trips times 15 containers = 3,900 containers; 3,900 containers can fit on one moderately-size container ship today).

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In the 1760s most Virginia Colony exports to Great Britain went to the ports of London and Glasgow.  Glasgow was receiving large amounts of the tobacco being export from the Virginia Colony.

 

6.  Supply Chain. 

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Scotland increasingly in the 1700s got involved in Northern Neck and the Virginia Colony’s export and import trade (only after the union of England and Scotland in 1707, which allowed Scots access to the Virginia Colony for business purposes).  One result of this was a relatively substantial number of Scots coming to the Virginia Colony, connecting the tobacco growers with the buyers in England and Scotland.  Scottish merchants would establish “stores” where smaller farmers could consign their tobacco and buy merchandise. 

 

These stores, where the Scottish merchants (store owners) would place (for sale) imported merchandise, represented a change from old ways. This system lead to the store owners hiring “employees” and paying the employees a salary to operate the stores – basically what continues in existence to the present.

 

At least one store operated in Kilmarnock, Lancaster County after the 1750s. Stores started to appear in much larger numbers after the middle 1700s, which likely had a profound effect on people’s lives. In the early 1770s, many Northern Neck farmers owed the “stores” merchants substantial amounts for goods purchased by the farmers from the merchants. These amounts owed were to be settled when the merchants received payments from England for the tobacco (and other goods) sent by the merchants to England on behalf of the farmers. Unfortunately, a fiscal crisis developed in England in the early 1770s with many banks closing, and payments from England to the Northern Neck Scottish merchants were interfered with. This created problems for the farmers and the merchants, and friction between them and the English. This situation reflected a tight interconnectivity between the Virginia Colony and the English economies, which the English fiscal crisis helped to unravel, a possible contributing factor to Virginia Colony dissatisfactions with the status quo relationships between the Colony and Great Britain.

 

Reportedly, Northern Neck farmer interactions with Scottish merchants could be problematic, with farmers viewing the merchants as greedy and manipulative, lacking sufficient concerns for the farmers.  However, rather than this view, another view might be that the Scots were representing a “correct” business perspective of “self-interest”, one that emphasizes efficient and effective business practices, and that if both sides of a business transaction acted accordingly, the optimal benefit would result for both sides, and for the greater community.  Historians have noticed that the large tobacco growers of the Northern Neck, who shipped their tobacco directly to “their agents” in England, too often depended on “friendship and good feelings” of their agents and not sufficiently on “self-interest”, which frequently caused business problems with the English agents.  It is possible that we see in this “self-interest” versus “friendship and good feelings” approach to business interactions an “evolving efficient and effective capitalism” beginning in the 1700s that has served the American business enterprise well in succeeding generations.

 

Many of the Scots did not return to Scotland, effectively representing a Scottish immigration to America.  ((One of my great grandfathers, Richard W. Robertson (1831-1918), written about in another of my family histories, possibly was a descendant of such a Scottish immigrant to central Virginia.))

 

Merchant interactions, how sellers and buyers interacted with one another, were likely much different in the 1700s Northern Neck than what such interactions are today.  The interactions were likely much more one-on-one exploratory, between the actual owner provider and purchaser, pursuing friendship and sociability, absent marketing, sales promotions and “self-interest”.   These interactions would be what I consider to be part of a supply chain – the process of getting items for sale from the maker to the purchaser.  The 1700s supply chain, and mercantile practices within that chain, almost certainly was much different then compared to current supply chain processes.  This would be a major difference between living then (1700s) and now (2021).

 

The economic success of the tobacco industry in the early to mid-1700s correlated with important culture changes in the Northern Neck (see the above Section IV, Culture for more on Northern Neck cultural changes).  Likewise, the decline of the tobacco industry later in the late 1700s also correlated with culture changes.  This suggests a strong connection between economics and culture characteristics.