I’ve been reading a lot of lately about the revolutionary period and the early republic, and it’s extremely interesting but nothing I’ve gotten to yet really bores down into the economics of the era. That’s too bad, since everyone seems to agree that a background of economic distress in the 1780s was an important element driving the conclusion that the Articles of Confederation weren’t working. This research from Peter Williamson and Jeffrey Lindert attempts to quantify just how bad the situation was, observing that “America’s real income per capita dropped by about 22% over the quarter century 1774-1800.” Since the economy was growing in the 1790s, this implies that the revolutionary period was associated with a terrible depression. In part, that’s just the destruction of the war, but also:
This second shock consisted of the disruptions to overseas trade during the revolution and, after 1793, the Napoleonic Wars. Available price and trade data show that the colonies, especially in the Lower South, suffered heavy trade losses as the war deepened, and they recovered only slowly and partially thereafter. In real per-capita terms, New England’s commodity exports rose by a modest 1.2% from 1768/72 to 1791/92, they rose by 9.9% in the Middle Atlantic, but fell by 39.1% in the Upper South, and by 49.7% in the Lower South, yielding a decline of 24.4% for the thirteen colonies as a whole (Shepherd and Walton 1976). The most painful of these shocks was the loss of well over half of all trade with England between 1771 and 1791. In addition, America lost Imperial bounties like those on the South’s indigo and New England’s whale oil. Demand shocks were less evident for products where America had a big influence on European supply. Thus, tobacco and rice revenue losses were smaller since the fall in volume was partially offset by the rise in price. [...]
America’s urban centres were damaged by British naval attacks, by their occupation, and by the eventual departure of skilled and well-connected loyalists. [...] To identify the extent of the urban damage, one could start by noting that the combined share of Boston, New York City, Philadelphia, and Charleston in a growing national population shrank from 5.1% in 1774 to 2.7% in 1790, recovering only partially to 3.4% in 1800. There is even stronger evidence confirming an urban crisis. The share of white-collar employment was 12.7% in 1774, but it fell to 8% in 1800; the ratio of earnings per free worker in urban jobs relative to that of total free workers dropped from 3.4 to 1.5; and the ratio of white collar earnings per worker to that of total free workers fell even more, from 5.2 to 1.7. This evidence offers strong support for an urban crisis, and it also supports the view that America had not yet recovered from the revolutionary economic disaster even by 1800.
It all worked out well in the end, but obviously the decision to fight for independence was quite costly. This also seems to cast the view that the framers of the constitutions had economic motives for their actions in a somewhat less sinister and cynical light than is sometimes indicated. “OMG, per capita income in this country is plummeting” is a perfectly respectable reason to want to shake up the political system.