The Economic Consequences of the American Revolution in Massachusetts

From the lecture series: America's Founding Fathers

By Allen C. Guelzo, Ph. D., Gettysburg College

George Washington was not the only one to have doubts about the wisdom being shown by the Confederation, its Congress, and its presidents. But, at one end of the spectrum, were the doubts, and at the other end, were the unhappy and contentious farmers of western New England. Let’s explore the ramifications of the war in Massachusetts.

The Battle of Long Island by Domenick D'Andrea for the state of Delaware and Maryland, 1776.
The American Revolution had disastrous consequences on the American economy. (Image: Domenick D’Andrea/Public domain)

Money and the Massachusetts Government

Like the Confederation Congress and the other states, Massachusetts resorted to paying its bills by issuing paper. However, there was so little specie in the hands of the Massachusetts government to back that paper up that the paper was soon circulating at one-fourth of its face value.

In other words, presenting £20 in Massachusetts notes would get you only £5 worth of the goods you once had got for £20. By 1781, the Massachusetts notes were circulating at 1/40 of their face value.

Valiantly, Massachusetts pledged to redeem all of its paper at face value, which was awful for people. For instance, the discharged soldiers were returning to their farms with debts to pay and nothing available to pay them with but vastly depreciated state currency.

On the other hand, it was a bonanza for speculators in Boston, who bought up about 80 percent of the Massachusetts state debt at 1/8 or 1/10 of its face value. They now stood to gain hugely, if and when the state ever managed to redeem the paper.

This is a transcript from the video series America’s Founding Fathers. Watch it now, on Wondrium.

The Taxation Scheme of Massachusetts

A portrait of Robert Morris.
The General Court’s taxation scheme was not unlike the one recommended by Robert Morris for the entire Confederation. (Image: Charles Willson Peale/Public domain)

The Massachusetts legislature—the General Court—decided to redeem that paper by taxation. In 1786, the General Court decided to redeem all of the £270,000 in army notes it had issued for war purposes, and a third of the £1 and a quarter million in consolidated notes it had printed for general purposes.

The aim was to do it by increasing taxes by over 500 percent and requiring payment in hard coin—in specie: British shillings, Spanish dollars, anything that would ring when dropped on a table.

Ten percent of the revenue from these taxes would come from state impost and excise taxes. The rest would come from increases in property taxes and poll taxes, taxes which were levied on every adult male over 16 years of age. In other words, it was a taxation scheme not unlike the one recommended by Robert Morris for the entire Confederation.

Learn more about the politics and people of the American Revolution.

Subsistence Farming in Massachusetts

Unhappily, the blow of these tax increases in Massachusetts would fall hardest on those who made their living from the land they owned, which is to say the farmers, who made up 70 percent of the Massachusetts population.

And the farmers were the least prepared to absorb that blow, as few of them dealt in cash. Colonial farming was overwhelmingly self-supporting. A typical farmer who owned between 50 and 60 acres might use 4 acres as pasture for an ox and 2 or 3 cows, another 4 acres to produce hay, and hemp and flax on 2 more, another 4 acres would yield 70 bushels of wheat.

Barter System in Rural Towns

Since the farmer needed, on a per annum basis, only about 60 bushels of flour, 200 pounds of beef, enough flax for weaving clothing, and odds and ends of potatoes and turnips and carrots, he could supply a family of five and still have enough produce to sell for about £3, with which he could buy any manufactured commodities he fancied, or use for barter with local artisans in the rural towns.

Barter was big business. The rest of the farmer’s acreage could lie fallow, or be used for some incidental crops, or left to grow as woodland to feed the winter fire. Money played a comparatively small part in the overall networks of exchange.

Chain Reaction of the New Taxation Policy

The new taxes set off two chains of reaction. First, the requirement of  paying in specie set off a desperate search for hard coin, and that usually meant calling in any IOUs or promissory notes that a farmer, a storeowner, or an artisan might have accepted from other farmers.

In many cases, these notes and IOUs had been accepted from the issuer, then used as collateral by the lender for other purchases, and thus set up elaborate skeins of people with paper debt who found themselves without enough specie to pay their bills.

Second, the Commonwealth’s tax collectors would be assessing, and then collecting, and farmers who failed to find enough specie to pay their property and poll taxes would find themselves in court, faced with the  auction of their farms to satisfy the taxes. The result was inevitably going to be distress, and that was putting it mildly.

Learn more about Robert Morris’s money.

The Problems for a Farmer

The farmer who tried to bring his produce to market to raise cash, found that every other farmer was doing likewise, and so was obliged to take up with the buyer’s offer, which was totally insufficient to discharge his taxes.

Since there was no family that did not want some money for some purposes, the little which the farmer carried home from market, was to be applied to other uses, besides the payment of collector’s bills. The consequence was, a distraint made upon his stock or real estate.

Samuel Ely’s Threat to the Massachusetts Government

A portrait of James Bowdoin.
James Bowdoin was the governor of Massachusetts. (Image: Robert Feke/Public domain)

The General Court of Massachusetts and Governor James Bowdoin might have seen what was coming. In 1782, an earlier tax hike payable in specie had triggered an outburst in western Massachusetts’s Hampshire County, led by an itinerant preacher named Samuel Ely, who threatened to chase down the collectors and close the county courts to prevent suits for debt.

Ely was promptly arrested, but furious farmers under a former revolutionary captain named Rueben Dickinson descended with 600 men and released Ely from jail. Ely was eventually rearrested, but the legislature dropped any further proceedings once the public clamor had died down.

Four years later, an even bigger and louder outburst was about to occur.

Common Questions about the Economic Consequences of the American Revolution in Massachusetts

Q: What did the General Court in Massachusetts decide to do in 1786?

In 1786, the General Court in Massachusetts decided to redeem all of the £270,000 in army notes it had issued for war purposes, and a third of the £1 and a quarter million in consolidated notes it had printed for general purposes by increasing taxes by over 500 percent and requiring payment in hard coin.

Q: What was the nature of colonial farming in New England?

Colonial farming in New England was overwhelmingly self-supporting.

Q: Was a farmer in Massachusetts dependent on money for his livelihood?

No, money played a comparatively small part in the overall networks of exchange in a farmer’s life in Massachusetts.

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