American Enterprise Institute

Capitalism and the American Revolution

Colonial Capitalism and the American Founding Notes

  1. Robert A. Goldwin and William A. Schambra, eds., How Capitalistic Is the Constitution? (Washington, DC: AEI Press, 1982), https://www.aei.org/research-products/book/how-capitalistic-is-the-constitution.
  2. Karl Marx, Capital: A Critique of Political Economy, trans. Ben Fowkes and David Fernbach, vols. 1–3 (1867, 1885, 1894; London: Penguin Classics, 1992–93); and Milton Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1962).
  3. Thomas Piketty, Capital in the Twenty-First Century, trans. Arthur Goldhammer (Cambridge, MA: Harvard University Press, 2014).
  4. For excellent expositions, see Jonathan Levy, Ages of American Capitalism: A History of the United States (New York: Random House, 2021), xiii–xxviii; and James Fulcher, Capitalism: A Very Short Introduction (Oxford, UK: Oxford University Press, 2004), 1–18. An extended treatment is Geoffrey M. Hodgson, Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press, 2015).
  5. My views overlap broadly with those of Marc F. Plattner, Forrest McDonald, and Bernard H. Siegan in Goldwin and Schambra, eds., How Capitalistic Is the Constitution?, chaps. 1, 3, and 5. However, I depart sharply from McDonald’s argument that the colonial economy at the time of the founding was dominated by agrarian, precapitalist norms. (My arguments are based largely on research that has appeared since his essay.)
  6. James W. Ely Jr., The Guardian of Every Other Right: A Constitutional History of Property Rights, 3rd ed. (New York: Oxford University Press, 2008); and Paul J. Larkin Jr., “The Original Understanding of ‘Property’ in the Constitution,” Marquette Law Review 100 (2016): 1–80, http://scholarship.law.marquette.edu/mulr/vol100/iss1/2.
  7. Joseph E. Stiglitz, People, Power, and Profits: Progressive Capitalism for an Age of Discontent (New York: W. W. Norton, 2019).
  8. Christopher DeMuth, “How Entitlements Ate Our Future: From Balanced Budgets to Borrowed Benefits,” Coolidge Review, July 15, 2024, 29, https://www.coolidgereview.com/articles/how-entitlements-ate-our-future.
  9. Naomi R. Lamoreaux and John Joseph Wallis, “Economic Crisis, General Laws, and the Mid-Nineteenth-Century Transformation of American Political Economy,” Journal of the Early Republic 41, no. 3 (Fall 2021): 403–33, https://dx.doi.org/10.1353/jer.2021.0054.
  10. Thomas K. McCraw, The Founders and Finance: How Hamilton, Gallatin, and Other Immigrants Forged a New Economy (Cambridge, MA: Belknap Press, 2012), 97–121; Ron Chernow, Alexander Hamilton (New York: Penguin Books, 2004), 295–357; Forrest McDonald, “The Constitution and Hamiltonian Capitalism,” in Goldwin and Schambra, How Capitalistic Is the Constitution?, 68–71; and Forrest McDonald, Alexander Hamilton: A Biography (New York: W. W. Norton, 1982), 163–227.
  11. Chernow, Alexander Hamilton, 275.
  12. The philosophical agreements are elaborated in Thomas G. West, The Political Theory of the American Founding: Natural Rights, Public Policy, and the Moral Conditions of Freedom (Cambridge, UK: Cambridge University Press, 2017); and Thomas G. West, “The Economic Principles of America’s Founders: Property Rights, Free Markets, and Sound Money,” Heritage Foundation, August 30, 2010, https://www.heritage.org/political-process/report/the-economic-principles-americas-founders-property-rights-free-markets-and. The practical disagreements are elaborated in Michael J. Klarman, The Framers’ Coup: The Making of the United States Constitution (New York: Oxford University Press, 2016).
  13. “New Pluralists” promote the American “promise of pluralism—people of varied backgrounds and beliefs building community, finding belonging, and drawing on their differences to solve shared problems.” See New Pluralists, “Many Voices, One Future: Building a Nation of Belonging for All,” https://newpluralists.org. William A. Galston examines the virtues and problems of this vision in William A. Galston, Liberal Pluralism: The Implications of Value Pluralism for Political Theory and Practice (Cambridge, UK: Cambridge University Press, 2002); and William A. Galston, The Practice of Liberal Pluralism (Cambridge, UK: Cambridge University Press, 2005). Contemporary “post-liberals” such as Patrick J. Deneen see mainly problems and few virtues in liberal pluralism. See Patrick J. Deneen, Why Liberalism Failed (New Haven, CT: Yale University Press, 2018).
  14. “E Pluribus Unum” was first proposed as a national motto in 1776 and was adopted and placed on the Great Seal of the United States by the Continental Congress in 1782. US Department of State, Bureau of Public Affairs, “The Great Seal of the United States,” July 2003, https://2009-2017.state.gov/documents/organization/27807.pdf. The motto began appearing on state currency in 1786 and on national currency in 1795. It is one of many examples of the melding of individualism and communitarianism in America’s founding politics; see Christopher DeMuth, “What American Conservatism Exists to Conserve,” Quadrant 66, no. 11 (November 2022): 43–47.
  15. America’s mother country was “England” during the first colonial century and “Great Britain” following the Acts of Union of 1707. For convenience, I am generally using “Britain” and “British” throughout, a conventional practice.
  16. Leading contemporary expositions are Lawrence M. Mead, Burdens of Freedom: Cultural Difference and American Power (New York: Encounter Books, 2019); Lawrence E. Harrison and Samuel P. Huntington, eds., Culture Matters: How Values Shape Human Progress (New York: Basic Books, 2000); and David S. Landes, The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor (New York: W. W. Norton, 1998). The classic forerunner is Edward C. Banfield, The Moral Basis of a Backward Society (New York: Free Press, 1958).
  17. Douglas C. North, Institutions, Institutional Change and Economic Performance (Cambridge, UK: Cambridge University Press, 1990); Daron Acemoglu, Simon Johnson, and James A. Robinson, “Institutions as a Fundamental Cause of Long-Run Growth,” in Handbook of Economic Growth, ed. Philippe Aghion and Steven N. Durlauf (Amsterdam: North-Holland, 2005), chap. 6; and Hernando de Soto, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (New York: Basic Books, 2000). A good précis of the debate is Michael Novak, “Is It Bad Culture or Bad Laws That Keep Some Countries Poor?,” American Enterprise Institute, January 15, 2001, https://www.aei.org/articles/is-it-bad-culture-or-bad-laws-that-keep-some-countries-poor.
  18. Samuel Huntington, “One Nation, Out of Many,” American Enterprise 15, no. 6 (2004): 20, https://www.aei.org/articles/one-nation-out-of-many/. See also Samuel Huntington, Who Are We? The Challenges to America’s National Identity (New York: Simon & Schuster, 2004), 59–105.
  19. David Hackett Fischer, Albion’s Seed: Four British Folkways in America (New York: Oxford University Press, 1989).
  20. In addition to the sources specifically cited, this section draws on Levy, Ages of American Capitalism; Alan Greenspan and Adrian Wooldridge, Capitalism in America: A History (New York: Penguin Press, 2018); Sven Beckert and Christine Desan, eds., American Capitalism: New Histories (New York: Columbia University Press, 2018); Bhu Srinivasan, Americana: A 400-Year History of American Capitalism (New York: Penguin Press, 2017); John Steele Gordon, An Empire of Wealth: The Epic History of American Economic Power (New York: Harper Collins, 2004); John J. McCusker and Russell R. Menard, The Economy of British America, 1607–1789 (Chapel Hill, NC: University of North Carolina Press, 1985); and George L. Priest, “The Capitalist Foundations of America,” American Enterprise Institute, May 14, 2007, https://www.aei.org/research-products/speech/the-capitalist-foundations-of-America.
  21. Alexis de Tocqueville, Democracy in America, trans. Harvey C. Mansfield and Delba Winthrop (Chicago: University of Chicago Press, 2000), 279.
  22. Carl N. Degler, Out of Our Past: The Forces That Shaped Modern America, 3rd ed. (1959; New York: Harper Perennial, 1984), 2. Carl Degler’s aphorism was criticized by later historians who argued that the early settler-farmers were more communitarian than capitalist. But he was making a different point—that the settlers were attracted to the colonies by the abundance of land and scarcity of labor (the opposite of conditions in England and the Netherlands) and that those conditions fostered the rise of farmers and other working people in wealth, social status, and political influence. The point is elaborated in the text at page 123.
  23. Edwin J. Perkins, “The Entrepreneurial Spirit in Colonial America: The Foundations of Modern Business History,” Business History Review 63, no. 1 (Spring 1989): 160–86, https://www.cambridge.org/core/journals/business-history-review/article/abs/entrepreneurial-spirit-in-colonial-america-the-foundations-of-modern-business-history/580A329B3BCBEC919E56DBD2052330A5; and Stephen Innis, ed., Work and Labor in Early America (Chapel Hill, NC: University of North Carolina Press, 1988). North America–bound indentured servants appear to have been selected, by their brokers and employers and by themselves, for “ability, motivation, ambition, physical strength and health.” Ran Abramitzky and Fabio Braggion, “Migration and Human Capital: Self-Selection of Indentured Servants to the Americas,” Journal of Economic History 66, no. 4 (December 2006): 882, 900, https://doi.org/10.1017/S0022050706000362.
  24. Gordon S. Wood, “The Enemy Is Us: Democratic Capitalism in the Early Republic,” Journal of the Early Republic 16, no. 2 (Summer 1996): 293–308, https://doi.org/10.2307/3124251; and Gordon S. Wood, “Inventing American Capitalism,” New York Review of Books, June 9, 1994, https://www.nybooks.com/articles/1994/06/09/inventing-american-capitalism. The essays adjudicate the arguments of “moral economy historians,” who emphasize the communitarian ethos of colonial New England farmers, and “market economy historians,” who emphasize the growing integration of farm economies with larger commercial markets in the 18th century. An important subsequent contribution to this literature is Naomi R. Lamoreaux, “Rethinking the Transition to Capitalism in the Early American Northeast,” Journal of American History 90, no. 2 (September 2003): 437–61, https://doi.org/10.2307/3659440. She finds that farmers, merchants, and manufacturers were similarly (1) alert to economic circumstances and opportunities and (2) reliant on family members and attentive to community norms.
  25. Max Weber, The Protestant Ethic and the Spirit of Capitalism, trans. Talcott Parsons (Boston, MA: Allen and Unwin, 1930). The discussion in this section draws in several particulars on the superb studies of Benjamin M. Friedman, Religion and the Rise of Capitalism (New York: Knopf, 2021), 169–96, 228–62; and and Mark Valeri, Heavenly Merchandize: How Religion Shaped Commerce in Puritan America (Princeton, NJ: Princeton University Press, 2010).
  26. The author’s surname ancestors were Czech-Bohemian religious refugees brought to the colonies by James Oglethorpe and Nicolas Zinzendorf. They founded Bethlehem, Pennsylvania, as a Moravian Brethren missionary community in 1741. But the Demuths were also farmers, artisans, and merchants and helped convert Bethlehem from a “communal economy” into a market economy in the 1760s. One of them, Christopher, established Demuth’s Tobacco Shop in Lancaster, Pennsylvania, in 1770 and became a prominent businessman and real estate investor (and, despite Moravian pacifism, kept a rifle and joined the Pennsylvania militia in the Revolutionary War). “America’s First Tobacco Shop” manufactured its own brand-name snuff and pipe tobacco in its nearby mill, expanded into wholesaling with credit and transportation services across the mid-Atlantic colonies, and was owned and managed by family descendants through 1986 (with the author among its latter-day cigar customers). A biographer notes that Demuth “benefitted from observing the entrepreneurial attitude of the Bethlehem elders in reaching out to non-Moravian customers and realizing profits, and he emulated this behavior when he went into business for himself.” Diane Wenger, “Christopher Demuth: From ‘Single Brother’ to Celebrated Snuff Maker,” Pennsylvania Magazine of History and Biography 141, no. 2 (April 2017): 115–44, https://doi.org/10.5215/pennmaghistbio.141.2.0115.
  27. Gordon, An Empire of Wealth, 39.
  28. The Puritans played a central role in the colonial innovation of government-issued currency, recounted in astonishing detail in Dror Goldberg, Easy Money: American Puritans and the Invention of Modern Currency (Chicago: University of Chicago Press, 2023). In particular, Cotton Mather was an influential advocate of paper money, publishing a widely read pamphlet on the subject in 1691, when Massachusetts had just issued its first “bills of credit” that were beginning to circulate as money (discussed later in this essay). That was shortly before Mather’s equally influential pamphlet justifying the Salem witch trials of 1692.
  29. Friedman, Religion and the Rise of Capitalism, 239–40.
  30. Wood, “The Enemy Is Us,” 307.
  31. Roger Finke, “Religious Deregulation: Origins and Consequences,” Journal of Church and State 32, no. 2 (Summer 1990): 609–26, https://doi.org/10.1093/jcs/32.3.60;  and Peter L. Berger, “The Good of Religious Pluralism,” First Things, April 2016, https://www.firstthings.com/article/2016/04/the-good-of-religious-pluralism.
  32. Mark Häberlein, “Reform, Authority and Conflict in the Churches of the Middle Colonies, 1700–1770,” in Religious and Secular Reform in America: Ideas, Beliefs, and Social Change, ed. David K. Adams and Cornelis A. van Minnen (New York: New York University Press, 1999), 20.
  33. Tocqueville, Democracy in America, 280–83.
  34. New Netherlands and its port city New Amsterdam (later New York City) were from their founding the most capitalist settlement in North America, supplying Puritan New England with valuable trade and instruction in Dutch commercial practices. Kim Todt, “Trading Between New Netherland and New England, 1624–1664,” Early American Studies 9, no. 2 (Spring 2011): 348–78, https://dx.doi.org/10.1353/eam.2011.0018. And the neighboring Dutch colony provided all the British colonies with easy opportunities to evade Britain’s mercantilist trade restrictions. Jonathan Barth, The Currency of Empire: Money and Power in Seventeenth-Century English America (Ithaca, NY: Cornell University Press, 2021), 84–88, 114–16.
  35. Claire Priest, Credit Nation: Property Laws and Institutions in Early America (Princeton, NJ: Princeton University Press, 2021), 21–37.
  36. Deirdre Nansen McCloskey, Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World (Chicago: University of Chicago Press, 2016), 235–70.
  37. Detailed in Bernard Bailyn, The New England Merchants in the Seventeenth Century (Cambridge, MA: Harvard University Press, 1955), 87–91.
  38. Gordon, An Empire of Wealth, 14–20.
  39. Colorfully recounted in Robert E. Pike, Tall Trees, Tough Men (New York: W. W. Norton, 1967), which begins, “It was the axe, even more than the rifle, that conquered the North American continent.”
  40. Pike, Tall Trees, Tough Men, 48.
  41. Bailyn, The New England Merchants in the Seventeenth Century.
  42. Bailyn, The New England Merchants in the Seventeenth Century, 61–74.
  43. Bailyn, The New England Merchants in the Seventeenth Century, 1–15.
  44. Bailyn, The New England Merchants in the Seventeenth Century, 38–39, 75, 169–70.
  45. Bailyn, The New England Merchants in the Seventeenth Century, 34.
  46. The account of this paragraph is drawn primarily from Jonathan Levy, Freaks of Fortune: The Emerging World of Capitalism and Risk in America (Cambridge, MA: Harvard University Press, 2012), 16–30.
  47. Levy, Freaks of Fortune, 5.
  48. Levy, Freaks of Fortune, 23–101.
  49. Tocqueville, Democracy in America, 385–87.
  50. Tocqueville, Democracy in America, 387.
  51. Michael B. Oren, Power, Faith, and Fantasy: America in the Middle East, 1776 to the Present (New York: W. W. Norton, 2008), 18.
  52. Degler, Out of the Past, 2.
  53. Degler, Out of the Past, 2–3.
  54. My account draws heavily on Priest, Credit Nation; De Soto, The Mystery of Capital, 105–51; and Amelia Clewley Ford, Colonial Precedents of Our National Land System as It Existed in 1800, University of Wisconsin, July 1910.
  55. Priest, Credit Nation, 23.
  56. Clewley Ford, Colonial Precedents of Our National Land System as It Existed in 1800, 83–102.
  57. De Soto, The Mystery of Capital, 113–20.
  58. De Soto, The Mystery of Capital, 119–20; and Clewley Ford, Colonial Precedents of Our National Land System as It Existed in 1800, 123–27.
  59. Priest, Credit Nation, 38–56.
  60. Priest, Credit Nation, 5. They were also controversial because recording fees and court fees were an important source of revenue, tussled over by local and colonial authorities.
  61. Priest, Credit Nation, 59–111.
  62. Priest, Credit Nation, 76–89.
  63. Joseph Story, Commentaries on the Constitution of the United States, 3 vols. (Boston, MA: Hilliard, Gray, 1833), § 182, https://lonang.com/library/reference/story-commentaries-us-constitution/.
  64. Priest, Credit Nation, 9, 150.
  65. Story passes over the contributions of slavery to property reform, but Claire Priest examines them in unflinching detail.
  66. Barth, The Currency of Empire, 23, 26. See also Levy, Ages of American Capitalism, 14–21.
  67. Barth, The Currency of Empire, 95–98, 118–22, 167–77.
  68. Barth, The Currency of Empire, 117, 134.
  69. Claire Priest, “Currency Policies and Legal Development in Colonial New England,” Yale Law Journal 110, no. 8 (June 2001): 1303, 1321–32, 1335–38, https://www.yalelawjournal.org/article/currency-policies-and-legal-development-in-colonial-new-england.
  70. Priest, “Currency Policies and Legal Development in Colonial New England,” 1331.
  71. My account of colonial paper money draws on many excellent works: Barth, The Currency of Empire, 254–61; Goldberg, Easy Money, 131–41, 160–98; Peter L. Rousseau, “Monetary Policy and the Dollar,” in Founding Choices: American Economic Policy in the 1790s, ed. Douglas A. Irwin and Richard Sylla (Chicago: University of Chicago Press, 2011), 121–49; James Macdonald, A Free Nation Deep in Debt: The Financial Roots of Democracy (Princeton, NJ: Princeton University Press, 2003), 277–89; Priest, “Currency Policies and Legal Development in Colonial New England,” 1342–50, 1359–65, 1368–84; Leslie V. Brock, “The Colonial Currency, Prices, and Exchange Rates,” Essays in History 34 (1992): 70–132, https://doi.org/10.25894/eih.464; Edwin J. Perkins, The Economy of Colonial America, 2nd. ed. (New York: Columbia University Press, 1988), 167–83; and Bray Hammond, Banks and Politics in America from the Revolution to the Civil War (Princeton, NJ: Princeton University Press, 1957), 3–39. For an online exposition and literature summary, see Ron Michener, “Money in the American Colonies,” Economic History Association, January 13, 2011, https://eh.net/encyclopedia/money-in-the-american-colonies. I am mainly offering my own interpretation of these works, so I generally omit point-by-point citations.
  72. Fiat paper money had been employed in China under the Yuan and Ming dynasties but was discontinued amid high inflation in the mid-1400s. There was some intermittent use of paper credits to pay soldiers during wartime in Britain, Europe, and Canada before 1690, but nothing on the scale that began (initially for the same purpose) in Massachusetts that year.
  73. But they were really just brokers of currency for land, like the public land offices. Unlike modern banks, they had no capital of their own and did not take money deposits.
  74. Detailed in Priest, “Currency Policies and Legal Development in Colonial New England,” 1359–84. The value of Massachusetts bills fell by about 60 percent from 1720 until 1740 and then by another 50 percent from 1740 until 1750.
  75. That was the view of several founders, of opponents of Williams Jennings Bryan and other populist champions of easy money in the late 19th century, and of hard-money advocates in our contemporary times of officially inflationary fiat money.
  76. Modern economic scholarship agrees that the colonial economies were seriously under-monetized. Even in colonies with a well-managed official currency, a considerable volume of trade continued to be conducted by informal local arrangements. Rousseau, “Monetary Policy and the Dollar,” 141–43.
  77. Hammond, Banks and Politics in America, 12–35, shows that the most persistent and influential advocates of paper money were merchants and entrepreneurs, who understood the link between ample currency and economic growth. The most persistent and influential of them all was Benjamin Franklin, whose first broadside, “A Modest Enquiry into the Nature and Necessity of a Paper Currency,” remains a classic. See Benjamin Franklin, “The Nature and Necessity of a Paper-Currency, 3 April 1729,” Founders Online, https://founders.archives.gov/documents/Franklin/01-01-02-0041.
  78. Successful adaptation is emphasized by Peter L. Rousseau, James Macdonald, Edwin J. Perkins, and Bray Hammond. Priest emphasizes the economic turmoil created by the sharp depreciation of Massachusetts notes, but her purpose is to show that commercial litigation in the 1700s was driven by that turmoil rather than expanding markets. See Priest, “Currency Policies and Legal Development in Colonial New England,” 1355–59, 1384–404.
  79. Christopher DeMuth, “The Rise and Rise of Deficit Government,” Law & Liberty, May 5, 2021, https://lawliberty.org/the-rise-and-rise-of-deficit-government; and Christopher DeMuth, “Debt and Democracy,” Legatum Institute, May 21, 2012, https://ccdemuth.com/debt-and-deficits/#toggle-id-10.
  80. Macdonald’s A Free Nation Deep in Debt is a comprehensive argument that the rise of debt financing in place of stored-up specie was integral to the rise of political democracy. The modern decline of public debt as a mechanism of currency stability and democratic accountability in the United States is detailed in Editors, “America in Debt: From Hamilton to the Fiscal Brink,” Coolidge Review, July 9, 2024, https://www.coolidgereview.com/articles/america-in-debt.
  81. One British misstep, in 1764 as the revolution in the colonies approached, was outlawing legal-tender requirements for both private and public obligations, a long-established monetary status of great symbolic importance to the colonists but probably of little practical importance. (Notes without it circulated widely.) When Franklin wisely advised the British that they could end the rancorous dispute by banning legal tender only for foreign transactions, they ignored him. Perkins, The Economy of Colonial America, 182–83.
  82. For an ambitious historical account of the concurrent growth of government money and government power, see Christine Desan, Making Money: Coin, Currency, and the Coming of Capitalism (Oxford, UK: Oxford University Press, 2014).
  83. Government financing by sale of investment-grade securities rather than emitting currency was a conventional practice in Britain and Europe by the 1700s. Macdonald’s A Free Nation Deep in Debt emphasizes the benefits of organized credit markets in disciplining government performance.
  84. Joseph Ernst, Money and Politics in America, 1755–1775: A Study in the Currency Act of 1764 and the Political Economy of Revolution (Chapel Hill, NC: University of North Carolina Press, 1973). The British closing of the Massachusetts Land Bank in 1741 ruined Samuel Adams Sr., one of its founding subscribers, and inspired the entry of his son Sam Adams and cousin John Adams into revolutionary politics. Priest, “Currency Policies and Legal Development in Colonial New England,” 1379–80.
  85. Peter H. Lindert and Jeffrey G. Williamson, “American Colonial Incomes, 1650–1774,” Economic History Review 69, no. 1 (February 2016): 54–77, https://doi.org/10.1111/ehr.12106; and Robert C. Allen, Tommy E. Murphy, and Eric B. Schneider, “The Colonial Origins of the Divergence in the Americas: A Labor Market Approach,” Journal of Economic History 72, no. 4 (December 2012): 863–94, https://doi.org/10.1017/S0022050712000629. Robert Allen, Timothy Murphy, and Eric Schneider find that “for much of the seventeenth and eighteenth centuries, North America was the most prosperous region of the world, offering living standards at least as high as those in the booming parts of North-Western Europe. Latin America, on the other hand, was much poorer and offered a standard of living like that in Spain and less prosperous parts of the world in general.”
  86. Perkins, The Economy of Colonial America, 6–7, 212–17.
  87. John Komlos, “On the Biological Standard of Living of Eighteenth-Century Americans: Taller, Richer, Healthier,” Research in Economic History 20 (2001): 223–48, https://doi.org/10.1016/S0363-3268(01)20007-X; and Richard H. Steckel, “Stature and Living Standards in the United States,” in American Economic Growth and Standards of Living Before the Civil War, ed. Robert A. Gallman and John Joseph Wallis (Chicago: University of Chicago Press, 1992), 265, 285–87, https://www.nber.org/system/files/chapters/c8012/c8012.pdf.
  88. Perkins, The Economy of Colonial America, 1–14; and McCusker and Menard, The Economy of British America, 211–35.
  89. S. D. Smith, “The Market for Manufactures in the Thirteen Continental Colonies, 1698–1776,” Economic History Review 51, no. 4 (November 1998): 676–708, https://doi.org/10.1111/1468-0289.00110.
  90. David Hackett Fischer, Paul Revere’s Ride (Oxford, UK: Oxford University Press, 1994), 12–29, 138–64.
  91. Rafael La Porta, Florencio Lopez-de-Silanes, and Andrei Shleifer, “The Economic Consequences of Legal Origins,” Journal of Economic Literature 46, no. 2 (June 2008): 285–332, https://www.aeaweb.org/articles?id=10.1257/jel.46.2.285.
  92. Allen, Murphy, and Schneider, “The Colonial Origins of the Divergence in the Americas.”
  93. Daron Acemoglu, Simon Johnson, and James A. Robinson, “The Colonial Origins of Comparative Development: An Empirical Investigation,” American Economic Review 91, no. 5 (December 2001): 1369–401, https://www.aeaweb.org/articles?id=10.1257/aer.91.5.1369.
  94. Stanley L. Engerman and Kenneth L. Sokoloff, Economic Development in the Americas Since 1500: Endowments and Institutions (Cambridge, UK: Cambridge University Press, 2012). Readers interested in exploring the origins literature should begin with this magnificent essay collection.
  95. Daniel M. Klerman et al., “Legal Origin or Colonial History?,” Journal of Legal Analysis 3 (2011): 379–409, https://ssrn.com/abstract=1903994.
  96. See notes 16 and 17.
  97. Vincent Geloso, “The Historical Evolution of Canadian Living Standards,” Oxford Research Encyclopedias, Economics and Finance, June 20, 2020, https://doi.org/10.1093/acrefore/9780190625979.013.791; and Vincent Geloso, “Economic History of French Canadians,” in Handbook of Cliometrics, ed. Claude Diebolt and Michael Haupert (New York: Springer, 2023), https://doi.org/10.1007/978-3-642-40458-0_107-1. An important reason for the poorer economic performance of French Canada appears to have been its institution of seigneurial tenure—a feudal remnant that restricted landownership, labor mobility, and other rights—that reigned in Quebec from 1626 through 1791 and continued in limited form until its abolition in 1854. See Vincent Geloso, Vadim Kufenko, and Alex P. Arsenault-Morin, “The Lesser Shades of Labor Coercion: The Impact of Seigneurial Tenure in Nineteenth-Century Quebec,” Journal of Development Economics 163 (June 2023), https://doi.org/10.1016/j.jdeveco.2023.103091. Landownership was also highly concentrated in political elites in the Spanish colonies but through different mechanisms. See Gary D. Libecap, “The Consequences of Land Ownership,” Hoover Institution, August 29, 2018, https://www.hoover.org/research/consequences-land-ownership.
  98. Deirdre Nansen McCloskey, “Economic Causes and Consequences of the American Revolution,” in Capitalism and the American Revolution, ed. Yuval Levin, Adam J. White, and John Yoo (Washington, DC: AEI Press, 2025).
  99. Fischer, Paul Revere’s Ride, 163–64.
  100. Robert F. Smith, Manufacturing Independence: Industrial Innovation in the American Revolution (Yardley, PA: Westholme Publishing, 2016).
  101. David Hackett Fischer, Washington’s Crossing (New York: Oxford University Press, 2004), 11–12, 255–57, 264–66, 283–84, 310–16.
  102. Doris Kearns Goodwin, Team of Rivals: The Political Genius of Abraham Lincoln (New York: Simon & Schuster, 2006); and David Hackett Fischer, “American Leadership: The Invention of a Tradition,” American Enterprise Institute, March 8, 2006, https://www.c-span.org/video/?191737-1/irving-kristol-award.
  103. F. A. Hayek, “Competition as a Discovery Procedure,” trans. Marcellus S. Snow, Quarterly Journal of Austrian Economics 5, no. 3 (Fall 2002): 9–23, https://cdn.mises.org/qjae5_3_3.pdf.
  104. McCusker and Menard, The Economy of British America.
  105. Samuel H. Williamson, “Annualized Growth Rate of Various Historical Economic Series,” MeasuringWorth, 2024, https://www.measuringworth.com/calculators/growth. See also Thomas Weiss, “Economic Growth in the United States, 1790–1860,” Oxford Research Encyclopedias, Economics and Finance, December 23, 2019, https://doi.org/10.1093/acrefore/9780190625979.013.489. US economic growth continued at extraordinarily high rates after the Civil War.
  106. Richard Sylla, “Financial Foundations: Public Credit, the National Bank, and Securities Markets,” in Irwin and Sylla, Founding Choices, 59, 82–83.
  107. Robert E. Wright, “Rise of the Corporation Nation,” in Irwin and Sylla, Founding Choices, 217, Table 7-1.
  108. Douglass C. North, The Economic Growth of the United States: 1790–1860 (New York: W. W. Norton, 1966).
  109. Wright, “Rise of the Corporation Nation,” 219.
  110. Empirical evidence that economic growth in the new republic’s early decades was “finance led” is presented in Peter L. Rousseau and Richard Sylla, “Emerging Financial Markets and Early U.S. Growth,” Explorations in Economic History 42, no. 1 (January 2005): 1–26, https://www.sciencedirect.com/science/article/abs/pii/S0014498304000178.
  111. Mark F. Plattner, “American Democracy and the Acquisitive Spirit,” in Goldwin and Schambra, eds., How Capitalistic Is the Constitution?, 1–2, 9. Essentially all the Federalist’s examples of the debilities of the Articles of Confederation and advantages of the proposed Constitution involve economic policy. Those in the central pair of James Madison’s Federalist 10 and Alexander Hamilton’s Federalist 11 are laws concerning debtors versus creditors, manufacturers versus landed interests, apportionment of taxes, and promotion of competition among foreign nations to secure favorable terms for American commerce. “The principal task of modern legislation,” says Federalist 10, is regulation of these “various and interfering interests” and of the “unequal distribution of property,” the protection of which is “the first object of government.” See Federalist, no. 10 (James Madison), https://avalon.law.yale.edu/18th_century/fed10.asp.
  112. National Archives, “Signers of the Declaration of Independence,” https://www.archives.gov/founding-docs/signers-factsheet; and National Archives, “Meet the Framers of the Constitution,” https://www.archives.gov/founding-docs/founding-fathers.
  113. Three recent books examine George Washington’s entrepreneurial exploits before and after the Revolutionary War and highlight his business skills and business-friendly policies as president: Edward G. Lengel, First Entrepreneur: How George Washington Built His—and the Nation’s—Prosperity (Boston, MA: Da Capo Press, 2016); Cyrus A. Ansary, George Washington, Dealmaker-in-Chief: The Story of How the Father of Our Country Unleashed the Entrepreneurial Spirit in America (Washington, DC: Lambert Publications, 2019); and John Berlau, George Washington, Entrepreneur: How Our Founding Father’s Private Business Pursuits Changed America and the World (New York: All Points Books, 2020).
  114. I. Bernard Cohen, Science and the Founding Fathers: Science in the Political Thought of Thomas Jefferson, Benjamin Franklin, John Adams, and James Madison (New York: W. W. Norton, 1995). Jefferson was of course an architect; he also tried his hand at business, organizing a for-profit nail factory atop Monticello in an effort to reduce his substantial personal debts, which ultimately failed despite being manned by slave labor.
  115. R. R. Palmer, Twelve Who Ruled: The Year of the Terror in the French Revolution (1941; Princeton, NJ: Princeton University Press, 2017), 5–18. R. R. Palmer summarizes: “Not one of the twelve had ever labored with his hands. . . . None, . . . except Saint-André for a short time, had ever engaged in trade. They had no personal knowledge of industry. . . . All twelve were intellectuals.” Hamilton wrote to the Marquis de Lafayette about the French revolutionaries in 1789: “I dread the reveries of your philosophic politicians who appear in the moment to have great influence and who being mere speculatists may aim at more refinement than suits either with human nature or the composition of your nation.” Chernow, Alexander Hamilton, 318.
  116. Irving Kristol, The American Revolution as a Successful Revolution (Washington, DC: American Enterprise Institute, 1973), https://www.aei.org/wp-content/uploads/2016/03/BicentenUSA01.pdf.
  117. Peter H. Lindert and Jeffrey G. Williamson, “American Incomes Before and After the Revolution,” Journal of Economic History 73, no. 3 (September 2013): 725–65, https://doi.org/10.1017/S0022050713000594.
  118. Winifred Barr Rothenberg, From Market-Places to a Market Economy: The Transformation of Rural Massachusetts, 1750–1850 (Chicago: University of Chicago Press, 1992).
  119. Wood, “Inventing American Capitalism.” This is drawing on the larger argument of Gordon S. Wood, The Radicalism of the American Revolution (New York: Knopf, 1991). A more recent assessment is Gordon S. Wood, Power and Liberty: Constitutionalism in the American Revolution (New York: Oxford University Press, 2021), 54–71.
  120. Wright, “Rise of the Corporation Nation,” 219.
  121. Federalist, no. 7 (Alexander Hamilton); Federalist, no. 10 (Madison); Federalist, no. 11 (Alexander Hamilton); Federalist, no. 22 (Alexander Hamilton); and Federalist, no. 46 (James Madison).
  122. James Madison, “Vices of the Political System of the United States, April 1797,” Founders Online, https://founders.archives.gov/documents/Madison/01-09-02-0187.
  123. Farley Grubb, “U.S. Land Policy: Founding Choices and Outcomes, 1781–1802,” in Irwin and Sylla, Founding Choices, 259–66. Some complicated western claims were left for resolution under the Articles of Confederation.
  124. “The Constitution was a conservative counterrevolution against what leading American statesmen regarded as the irresponsible economic measures enacted by a majority of state legislatures in the mid-1780s, which they diagnosed as a symptom of excessive democracy.” Klarman, The Founders’ Coup.
  125. The Constitution forbade federal and state bills of attainder and ex post facto laws with the only, fleeting objections being that they were too obviously contrary to the legislative function to be worth mentioning and had already been banned by many state constitutions. US Const. art. I, § 9, cl. 3.1–3.2. See Constitution Annotated, “Historical Background on Bills of Attainder,” https://constitution.congress.gov/browse/essay/artI-S9-C3-1/ALDE_00013186; and Constitution Annotated, “Historical Background on Ex Post Facto Laws,” https://constitution.congress.gov/browse/essay/artI-S9-C3-3-2/ALDE_00013191.
  126. Wood, Power and Liberty, 32–53.
  127. An exception was the treaty proposal of Secretary of Foreign Affairs John Jay that the confederation relinquish navigation rights on the Mississippi River for several decades in exchange for favorable trade arrangements with Spain. Madison, who was strongly opposed, regarded the jockeying for regional advantages in the treaty debates as a prime example of the “predominance of temporary and partial interests over those just and extended maxims of policy” under the articles. But those debates produced exactly the result he thought just—Congress rejected the treaty. See Joseph J. Ellis, American Creation: Triumphs and Tragedies in the Founding of the Republic (New York: Knopf, 2007), 95–96.
  128. Edmund W. Kitch, “Regulation and the American Common Market,” in Regulation, Federalism, and Interstate Commerce, ed. A. Dan Tarlock (Cambridge, MA: Oelgeschlager, Gunn & Hain, 1981), 9, 15–19.
  129. Adams’s one other lamentable “unlicensed compact” was a similarly businesslike 1783 agreement between Pennsylvania and New Jersey over navigation and trade on the Delaware River.
  130. Kitch, “Regulation and the American Common Market,” 19.
  131. That is the question addressed in the Kitch essay and others in the Tarlock volume.
  132. In addition to the Tarlock volume, see Michael S. Greve, The Upside-Down Constitution (Cambridge, MA: Harvard University Press, 2012); Robin Feldman and Gideon Schor, “Lochner Revenant: The Dormant Commerce Clause & Extraterritoriality,” New York University Journal of Law & Liberty 16, no. 2 (2022): 209, https://repository.uclawsf.edu/cgi/viewcontent.cgi?article=2921&context=faculty_scholarship; Daniel Francis, “The Decline of the Dormant Commerce Clause,” Denver Law Review 94, no. 2 (January 2017): 255, https://digitalcommons.du.edu/cgi/viewcontent.cgi?article=1043&context=dlr; and Norman R. Williams, “The Foundations of the American Common Market,” Notre Dame Law Review 84, no. 1 (2008): 409, https://scholarship.law.nd.edu/ndlr/vol84/iss1/7/.
  133. Elaborated in Aaron N. Coleman, The American Revolution, State Sovereignty, and the American Constitutional Settlement, 1765–1800 (Lanham, MD: Lexington Books, 2016).
  134. A luminous account of the defeat of Madison’s plan, emphasizing the delegates’ practical as opposed to philosophic bent, is John P. Roche, “The Founding Fathers: A Reform Caucus in Action,” American Political Science Review 55, no. 4 (December 1961): 799, 803–10, https://www.cambridge.org/core/journals/american-political-science-review/article/abs/founding-fathers-a-reform-caucus-in-action/CE50156024A1189BFA965DBBE1094B3A. The recent, now definitive study of the Philadelphia Convention is Klarman, The Founders’ Coup, 126–304.
  135. US Const. art. I, § 10.
  136. Ellis, American Creation, 117.
  137. Federalist, no. 10 (Madison).
  138. Federalist, no. 39 (James Madison).
  139. Federalist, no. 51 (James Madison).
  140. Edward C. Banfield, “Was the Founding an Accident?,” in Here the People Rule: Selected Essays, 2nd. ed. (Washington, DC: AEI Press, 1991), 7, https://www.aei.org/wp-content/uploads/2014/07/-here-the-people-rule_165254919061.pdf.
  141. The contract clause, however, was inserted at the last minute, probably by Hamilton, in words much broader than those of an earlier proposal (directed narrowly at debtor-relief laws) that had been rejected. See McDonald, “The Constitution and Hamiltonian Capitalism,” 49, 59–64. An excellent study of the genesis of the intellectual property clause is B. Zorina Khan, “Looking Backward: Founding Choices in Innovation and Intellectual Property Protection,” in Irwin and Sylla, Founding Choices, 315.
  142. Local governments in Britain and the Dutch Republic possessed significant independent authority over trade and other matters at the time of the US founding. See Barry R. Weingast, “The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development,” Journal of Law, Economics, and Organization 11, no. 1 (April 1995): 1, https://academic.oup.com/jleo/article-abstract/11/1/1/814966. But the arrangements were less formal and structured than those of the US Constitution and were not templates for American federalism.
  143. The definitive account is Paul Johnson, The Birth of the Modern: World Society 1815–1830 (New York: HarperCollins, 1991). Alan Greenspan and Adrian Woolridge emphasize the importance of America’s entrepreneurial culture to the cascade of inventions and new technologies in the early 1800s in Greenspan and Woolridge, Capitalism in America, 40–54.
  144. Specialization, like competition, is a fundamental principle of market economics—the first chapter of The Wealth of Nations is devoted to explaining the advantages of the division of labor. One might say that “the policy of supplying, by specialization in knowledge and function, the defect of better understanding and ability, might be traced through the whole system of human affairs, private as well as public.”
  145. The four senator-presidents were Benjamin Harrison, Warren Harding, John F. Kennedy, and Barack Obama. Data through George W. Bush are presented in Christopher DeMuth, “Governors (and Generals) Rule,” American Enterprise (January–February 2004), https://ccdemuth.com//wp-content/uploads/2015/03/governors_and_genrals_rule.pdf.
  146. The ensuing discussion of banking draws on Charles W. Calomiris and Stephen H. Haber, Fragile by Design: The Political Origins of Banking Crises and Scarce Credit (Princeton, NJ: Princeton University Press, 2014), 153–202; McCraw, The Founders and Finance, 74–121, 227–306; Hammond, Banks and Politics in America, 114–285; Rousseau and Sylla, “Emerging Financial Markets and Early U.S. Growth”; Sylla, “Financial Foundations,” 59; Rousseau, “Monetary Policy and the Dollar,” 121; and Howard Bodenhorn, “Federal and State Commercial Banking in the Federalist Era and Beyond,” in Irwin and Sylla, Founding Choices, 151.
  147. Sylla, “Financial Foundations,” 74.
  148. Hammond, Banks and Politics in America, 124.
  149. Calomiris and Haber, Fragile by Design, 163.
  150. John Joseph Wallis, “The Other Foundings: Federalism and the Constitutional Structure of American Government,” in Irwin and Sylla, Founding Choices, 177, 183–88.
  151. Calomiris and Haber, Fragile by Design, 166.
  152. Brad Littlejohn, “National Conservatism, Then and Now,” National Affairs 60 (Summer 2023): 165, https://www.nationalaffairs.com/publications/detail/national-conservatism-then-and-now.
  153. Drew R. McCoy, The Elusive Republic: Political Economy in Jeffersonian America (Chapel Hill, NC: University of North Carolina Press, 1980), 223–33.
  154. Thomas Jefferson, “From Thomas Jefferson to the United States Congress,” December 2, 1806, Founders Online, https://founders.archives.gov/documents/Jefferson/99-01-02-4616.
  155. McCoy, The Elusive Republic, 188.
  156. Hammond, Banks and Politics in America, 443.
  157. Howard Bodenhorn, “Antebellum Banking in the United States,” Economic History Association, 2023, https://eh.net/encyclopedia/antebellum-banking-in-the-united-states.
  158. Wallis, “The Other Foundings,” 194–201.
  159. Wallis, “The Other Foundings,” 201–10; Calomiris and Haber, Fragile by Design, 168–71; Wright, “Rise of the Corporation Nation,” 230–33; and Lamoreaux and Wallis, “Economic Crisis, General Laws, and the Mid-Nineteenth-Century Transformation of American Political Economy,” 415–18, 423–28, 433.
  160. Bodenhorn, “Federal and State Commercial Banking Policy in the Federalist Era and Beyond,” 151, 167–69.
  161. Howard Bodenhorn, State Banking in Early America: A New Economic History (New York: Oxford University Press, 2002).
  162. Rousseau and Sylla, “Emerging Financial Markets and Early U.S. Growth,” 4.