The 13 Colonies: Developing Economy & Overseas Trade

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  • 0:05 Mercantilism
  • 1:17 Colonial Economics
  • 4:15 Economic Regulations
  • 6:42 Colonial Response
  • 7:49 Colonial Prosperity
  • 9:03 Lesson Summary
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Lesson Transcript
Instructor: Alexandra Lutz

Alexandra has taught students at every age level from pre-school through adult. She has a BSEd in English Education.

England's intention had always been for the colonies to make them rich. The plan worked, but it became more difficult for England to make sure things stayed that way. And even with regulation, the colonies prospered, too.


In the 1760s, a Frenchman visiting New York approached a trading post when he saw something unusual. A group of Iroquois Indians were bringing animal skins and fur to trade for things like tools and guns. That part was perfectly normal. The strange part was when the Indians sat down to wait. They brewed themselves some tea, sweetened it with sugar and drank it from porcelain cups.

The tea had come from Asia, the sugar was from the West Indies and the cups were made in England. All of them had come to America through Britain's extensive trade networks. In the 17th and 18th centuries, England's economy, like that of most European powers, depended on trade. This was the result of an economic system called mercantilism. Believing that there was a limited source of wealth in the world, the goal of a mercantilist economy was to amass the most silver and gold at the expense of all the other nations. This was done through a favorable balance of trade, so by exporting manufactured goods and limiting the number of imports, nations brought in hard currency. This could help them fight wars against the other nations.

Colonial Economics

The triangular trade route between England and the colonies
English Trade Triagulation

The colonies became an important part of mercantilism even though they didn't have vast supplies of gold and silver as had been hoped. England's raw materials were limited, but the colonies were full of all kinds of resources that England needed. New England provided timber and ships. Grain from the middle colonies fed England's booming population. And the South provided tobacco, indigo and other cash crops. Best of all, England could get all of these things without having to pay for them in hard currency. They could simply get them all through triangular trade. British goods were traded for slaves on the African coast, who were shipped to America and traded for the raw materials.

Even though the colonies existed to enrich the mother country, they each had an internal economy as well. This, too, revolved around trade. In the earliest days, people literally had to make or trade for everything they needed. The Northern colonies, especially, developed cottage industries that traded on a simple barter system. For example, one household might mill grain while the neighbor spun wool.

Even as the colonies were growing, their overseas trade remained based in agricultural products. The earliest towns and cities were places just to collect crops for shipment to England and then to offer the colonists imported goods they needed to build a home, run a farm and provide for their family. The first tradesmen who appeared in towns were the people who could create these implements instead of importing them - people like blacksmiths, brickmakers, gunsmiths and saddlers. As the colonies grew and these basic necessities of life were easier to get, more genteel trades, like printers, attorneys, silversmiths or physicians, increased. Children frequently learned their father's trade, but it was also common for them to be apprenticed to another tradesman elsewhere in the colony.

With the growth of towns and cities, merchants opened for business. General stores stocked their shelves with merchandise from England. Dressmakers used textiles imported from England. Cobblers made shoes with leather from - you guessed it - England. Few cities developed in the South since the population was spread far apart and plantations became self-sufficient. But even they traded with England - they just didn't do it through a merchant in town.

Tradesmen began creating items instead of importing them from England
First Tradesman Colonies

This exclusive trade with England had both positive and negative side effects. American ships were protected from pirates by the English navy, and colonists could get credit from English banks. The importation of English goods made many New England merchants rich. It kept ports in the middle colonies busy and helped to Anglicize the diverse population. Southerners had a guaranteed market for their tobacco, rice and indigo. Of course, Great Britain liked this exclusive trade, too. They had a growing new market for their manufactured goods and cheap new resources from which to make even more stuff.

Economic Regulations

But as the colonies matured, they began seeking trading partners other than England. So the British authorities passed a series of laws called the Navigation Acts to restrict colonial trade in favor of English mercantilist policies. Beginning in 1651, these acts restricted colonial trade to ships made in England or America. Anything imported into America had to go through England first. The colonies were restricted from manufacturing certain types and quantities of goods. And most importantly, there were lists of so-called 'enumerated items' that couldn't be sold anywhere except England or another American colony.

The goal of the Navigation Acts was to force Americans to buy English goods. This drove prices up because the colonists had to pay whatever England decided to charge. They couldn't get it anywhere else. Goods imported from other nations came to England first and then a tax was collected on their purchase. The Navigation Acts also drew even more distinctions between colonies than already existed. New England built ships and prospered from the restrictions. The middle colonies benefited from increased port activities. But the South was hurt when tobacco became an enumerated item; with only one buyer (that would be England), the price of tobacco went down because they couldn't sell it to anybody on the open market. Still, most of these changes were accepted by the colonists - until the Molasses Act of 1733.

Even New England had benefited from triangular trade even though they rarely purchased slaves. What they did want was molasses from the sugar plantations in the island colonies. New England factories used it to make rum, which was then purchased by the British. And until 1733, American distillers bought molasses on the open market, often purchasing it from competing colonial empires. So planters in the British West Indies asked Parliament to pass a tax on all molasses imported from French colonies. The idea of this was to make French molasses more expensive so the colonists would buy the English molasses. This new economic restriction would have totally destroyed the rum industry in the North, and it weakened the import business of the middle colonies.

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