1776: The Revolt Against Austerity
Was the Declaration of Independence a powerful indictment of British austerity policies? Does America’s founding document need to be seen as part of an economic debate about the British Empire? These questions may seem jarring, almost anachronistic. But eighteenth-century political argument, like that of our own day, often revolved around responses to fiscal crisis. Just as political debates in Britain and the United States today turn in large part on the response to the great recession of 2008, so the events that made the United States were shaped by the British imperial government’s reaction to the debt crisis of the 1760s. What made the Declaration so offensive to British politicians then, and what makes it highly relevant to Europeans and Americans today, is that America’s founders offered a blueprint for a different kind of state response to fiscal crisis.
The controversy over austerity in the British Empire had a long history. Throughout the seventeenth and eighteenth centuries, European governments borrowed huge sums of money to finance their various state-building projects, with Britain setting the pace. These governments faced huge debts with uncertain means of repayment. Until George III’s accession to the throne in 1760, the British government had supported the economic development of the colonies, spending generously on infrastructure and subsidizing the immigration of many politically and religiously persecuted groups to North America. As recently as the 1730s the British state had subsidized the peopling of the new province of Georgia with immigrants from the Scottish Highlands and all across Europe. William Pitt continued these stimulus policies during his joint ministry with the duke of Newcastle in the late 1750s. Pitt, who believed that British imperial prosperity was intimately related to demographic and economic growth in America, refused to tax the colonies during the enormously expensive Seven Years War (also known as the French and Indian War) that began in the mid-1750s. Along with Newcastle, he drew up plans to populate newly conquered territories from Canada to Cuba, and supported bounties that would help the colonies develop new products for export to American and European markets.
By 1763, however, Britain’s national debt had risen to £122 million, or over 150 percent of the Gross Domestic Product, and in the face of growing resistance to high taxes in Britain itself, the British government abruptly changed course. George III’s new ministers blamed the escalating debt and the punishing level of British taxation on Pitt’s aggressive global foreign policy and his unwillingness to have the colonies pay directly for the war effort. George III’s ministers were determined to end what they perceived as economic redistribution to the colonies at the expense of wealthy English landowners and the government itself. Instead of subsidizing immigrants, George III’s Prime Minister George Grenville announced the Proclamation Line of 1763, designed to limit the demographic expansion of the North American colonies. Instead of encouraging the colonies to trade with Spanish America, the ministry instructed the Royal Navy to prohibit any intercolonial trade. Rather than lowering customs duties in order to encourage commercial activity, the ministry passed the 1763 Hovering Act, which made it easier to enforce existing customs regulations. Instead of allowing the colonies to bet on future growth by printing paper money, Grenville passed the Currency Act of 1764, which forbade the colonies to emit any new currency. Finally, in 1765, Grenville ushered the American Stamp Act through the House of Commons, a measure that was designed in part to restrict the colonial land market.
These changes were shocking and dramatic. Americans and their British allies interpreted this austerity program as a complete reversal of British imperial economic policy. By the middle of the 1760s, many Americans and Britons were certain that Grenville’s measures had led to widespread economic hardship. The Bristol merchant Richard Champion thought that the measures had struck “very fatal blows … at the commerce of the Empire.” The wealthy Boston merchant, and prominent signatory of the Declaration, John Hancock thought the new policies “very cruel” and would soon make the Americans “a gone people.” Contemporaries believed that British manufacturing exports to America had declined by three-quarters. Most Americans were certain that the multifaceted economic contraction of 1764-1769 had everything to do with Grenville’s austerity, which the American founders described as a “history of repeated injuries and usurpations.”
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