 Hi, Professor Gerald Friedman, Department of Economics, University of Massachusetts. And we're here today to talk about the economy of the early republic, that is the American economy coming out of the Revolutionary War period, from Revolutionary War period being from, say, 1763 to 1787. So we're talking about the early years of the constitutional United States. Now, as colonies, the 13 colonies fit into an international division of labor within the British Empire. British Empire's major concern in the 17th and 18th centuries, as we talked about before, was with the sugar colonies in the Caribbean. That's where the money was. You could even think of this first British Empire as a cooperative arrangement designed to raise sugar in some other tropical products, like tobacco, in exchange for foodstuffs and manufactured goods produced in Britain. The northern colonies in the United States didn't fit very well into this. But they did, because they didn't produce sugar, obviously, it's too cold and too dry. But they also produced the same goods, or many of the same goods, as were produced in the so-called mother country of Great Britain, foodstuffs and manufactured goods. So the northern mainland colonies were sort of useful. The West Indians, the planters liked them because foodstuffs and manufactured goods coming from New England were often cheaper than from Britain. And also the West Indians liked them because of competition for Britain, helped keep prices under control and gave the West Indians leverage in negotiations with the British. Now for the colonists, there was a division here. There was one group of colonists, especially the sugar planters and the Caribbean and tobacco growers, those large slaveholders, who produces of export products. They were very involved in international trade in commodity production. And some of the other colonists, some of the white farmers and business interests and artisans, some of them were also involved in commodity production for sale in the West Indian colonies or maybe to the American South. Some stuff was exported to Great Britain, especially ships and wood products. But also within the American colonies, especially in the north, but also to some extent in the south, especially along the frontier, but also to some extent even within the coastlines, there were colonists who were primarily outside of the international trading system, even to the point that they were largely outside of commodity production. Most of what they produced was for their own consumption. Maybe they produced some for sale so that they could buy some of the stuff that they couldn't produce themselves, but there was a large part of the American population who basically lived on their own or, you know, with a certain amount of exchange conducted with other people in their communities. This was more in the north than in the south because so many of the slave owners were commodity producers, but in the south it was also common, especially along the frontier. So the American states, the new United States was sharply divided on one part, especially along the coastlines, very globally oriented producers within the interior, but also to some extent within the eastern seaboard as well, people who were primarily concerned for just producing for themselves, production for use, production for their own use, with a little bit of exchange. The interior farmers and artisans were largely non-specialized. To some extent, some of them, transportation costs were the barrier. If you were off in the Hill Country, in the Berkshire, around Pittsfield, Massachusetts, you were 50 miles from any large urban area, 30 miles from the Connecticut River. That was too far to carry very much stuff. You just couldn't produce for commodity sale. In other cases, however, these were people that they just didn't want to. They wanted to produce enough for themselves, enough to live on, enough to have a competency, as they called it, and beyond that, they were very risk averse. They just didn't want to be very involved in commodity production and markets. They saw those as risky. They just wanted to be safe and be assured that whatever happened, they would have enough food and enough stuff to live on largely on their own. These people were often very suspicious of government, very suspicious of merchants, very suspicious of any sort of money other than specie. They were very economically conservative, self-sufficient producers, production for use. This does not completely exclude using money. They would sometimes use money. They'd have money written down on their account books. They would sometimes have money. But the money that they had, they would use to exchange for other commodities. The difference between them and market producers, staple crop producers, was not in the use of money. It was in the goal of money. For the big planters in the Caribbean, for people like John Hancock, for Alexander Hamilton, money was an end in itself production for profit. These independent, largely self-sufficient artisans and farmers, money was a means to an end. The goal was not profit, it was use, which meant that they were very narrow producers in the sense that they were not looking to expand what they were doing. They were just looking, make stuff, maybe sell some of it for money or direct exchange and get something else that they wanted, end of the process. For the big planters, for commodity producers, for business people looking to make profits, you start with some money, you buy some commodities, maybe you transform them into something else like you use your slaves to grow sugar or you use wage owners to make cotton cloth and then you sell that for more money. And what do you do with the more money? Use it to start the process again, except on a larger scale. So the capitalists who were coming along and the slave owners, commodity producers for profit, they were always expanding, they were always looking to get more, get a bigger operation, get more land, more workers, more stuff, make more stuff, make more profit. Now self-sufficient farmers and artisans may see the profit and they may even use wage labor, but their goal is consumption. This is not a division, mind you, between agriculture and industry. Within industry, many of the artisans in New York and Boston even were largely thinking in terms of self-sufficiency. They were just looking to get enough, get buying. And well into the 19th century, my colleague Bruce Lawrie in the history department here has a paper about artisan carriage makers in Worcester. All they wanted was to make enough money to live on, make enough stuff that they could have their family, have their competency and stop at that. Once they reached that point, they'd go drinking. That was the major thing that workers and artisans did with their extra money. What else were you going to do? There's no TV, no cable, no DVDs, no iPods, what were you going to do with extra money? You drank. And that becomes self-limiting production because when you start making some extra, you start drinking and then you stop making extra because you drunk. And there were all these stories told by capitalists of their workers who would come in on Monday, they couldn't do any work because they were hungover on Tuesday, they couldn't do work because they had to shop in their tools. Wednesday, they realized they're broke, so they work hard. Thursday, they work hard. Friday, they realize they have enough to live on. And they'd never come in after that. In these cases, we have labor supply curves showing the relationship between wages and labor supply that are not straight up, that do not go up. They go up for a while and then they bend back because as workers start having more money, they stop working as much. Perfectly normal, rational behavior. For the capitalists, the problem was how do you get more work? Because remember, they want to keep expanding and they can't do it because the workers won't show up. It's made even worse by the revolution because the revolution spread property around. A lot of the biggest states were broken up, especially in the north. After all, so many of the rich people were Tories. Their properties were confiscated, distributed among the soldiers and among the revolutionaries who now sat on the property, enjoyed themselves, had a good life, drank, and didn't work very much. And the revolution itself was fought in the name of democracy. So how do you then turn around and say, oh, you guys have to go work for capitalists? Huh? No, it doesn't work. So the early republic was split in this way between the commodity producers, including the slave owners, and the capitalists on one side and the independent artisans and small farmers on the other side. This is a split that shows up in debates over the Constitution. It shows up in Shea's Rebellion and the Whiskey Rebellion in the north. Shea's Rebellion in 1785 in Massachusetts, the Whiskey Rebellion against taxes imposed by the new federal government. Alexander Hamilton puts on a big hat and marches off to war. And it shows up in the conflict between the federalists and the Democratic Republicans rallying behind Thomas Jefferson, an odd political alliance that was. But we're not going to get to talk about that right now. So that's the early republic economics and politics. Thank you and have a nice day. Bye-bye.