The Crisis Report - 35

Things you don’t think about are things you forget. Memories that become more and more distant and unreal. Memories that you will eventually forget that you ever had. Stories that will die, untold.

Cultural Memory is also about stories.

Washington crossing the Delaware. By Emanuel Leutze, a German American artist, in 1851.

We do not really teach American history in our primary schools. We teach American mythology. We teach our children stories that often have little to do with reality.

One of our “myths” is that the “Revolutionary War” was a revolt against tyrannical government and unjust taxation.

Few really understand the buildup to the Revolutionary War or what it was about.

Consider the reality of taxation.

There were high taxes in the Colonies because there were high taxes throughout the Empire.

Britain had just fought a global war against France that had nearly bankrupted the Empire. The “Seven Years War” or “French-Indian War” in the American Theater had just finished. George Washington had served in the Colonial Militia fighting as a British officer.

Paul Kennedy in the excellent “Rise and Fall of the Great Powers” spells out that Britain won that war by being able to outlast France financially. But, just barely. It sucked the Empire dry doing it.

Paying for that war made everyone’s taxes high. That’s how nation states pay for wars.

The question is, were the Colonies being taxed unfairly or excessively? That’s a much more subjective point of debate. But here’s something to consider.

Do you think the British citizens of WWII England were complaining about “unfair taxation” during the Blitz? American Elites pushed “isolationism” after WWI and tried to keep us out of WWII because they didn’t want to pay for another war.

In order to finance U.S. participation in World War One, Congress passed the 1916 Revenue Act, and then the War Revenue Act of 1917. The highest income tax rate jumped from 15% in 1916, to 67% in 1917, to 77% in 1918. War is expensive.

Our forefathers were “freeloaders” and tax avoiders. They didn’t want to pay for a war they had benefited from.

Incomes were more equally distributed in colonial America than in other places. Among all Americans, slaves included, the richest 1% captured 8.9% of total GDP, and the Gini coefficient, which measures inequality on a scale from 0 to 1 (with 1 being very high inequality) was 0.46.

Without the slaves, among free households the top 1% captured about 8.5% of the total yearly GDP, and the Gini was 0.44. Compare early American inequality with that of the US today, where almost 20% of the total yearly GDP accrues to the top 1%, and where the Gini coefficient is about 0.5.

In Colonial America, under British rule, free citizens had much more equal incomes than do today’s Americans.

As noted by Gordon S. Wood, the author of the seminal book The Creation of the American Republic, 1776–1787. There were poor people in the early colonies and the Republic, but many fewer than there were in Europe. An American colonist of any rank, had a higher income than his or her English counterpart of the same rank until you reach the top 2%.

About half the population of Britain in the 18th century was on the dole at this time.

That’s how bad it was for the poor in England in 1774.

The reason for this is that the top 2% dominated England’s economy so completely that it was difficult for anyone else to make a living. The 2% owned everything. They collected rents on everything. They controlled the banking system and had their beaks in every pie.

The average colonist had greater purchasing power than their English counterpart over all of the income ranks except at the top 2%. The Colonies were not being “oppressed”.

That’s why the Loyalists resisted takeover by the “rebel traitors”.

History, our story, is written by the winners.

So, we don’t talk about what we did to the Loyalists.

Tarring and feathering was a brutal ordeal for the victim.

Here’s a charming story about the “Sons of Liberty” in Georgia.

In 1775 in Savannah, members of the Sons of Liberty seized loyalist John Hopkins from his house and publicly tarred and feathered him, then took him on a cart through the streets of Savannah for three hours.

Hopkins was not a government official but rather a local ship pilot. His offense the previous night was drinking to loyalist toasts the Sons of Liberty found offensive.

Hopkins escaped hanging by drinking to the toast: “Damnation to all Tories and success to American liberty!” Savannah Morning News

Consider this, the Revolutionary War was also a Civil War. In fact being the First American Civil War.

Although this fact generally doesn’t get mentioned, the Revolutionaries were only about 30% of the population. The Loyalists were also about 30% of the population.

We went to war with each other and it was savage. In the end, about 30% of the population died or fled.

The Revolutionary War depopulated the Colonies by 30%. Our founding father’s went in for “political cleansing” in a big way. They butchered the Loyalists until the survivors fled to Canada or back to England.

The US Census site discusses this massive population decline by making it sound nice and voluntary.

In 1770, Boston, MA, was the third largest colonial city (behind Philadelphia, PA, and New York, NY) with 15,520 inhabitants. Many families left the city during the British occupation so that by 1780, its population had declined to approximately 10,000.

Other scholars have shown this depopulation happened across the Colonies. In identifying the extent of the urban damage, it has been found 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.

America was born in a bloodbath.

That’s why there was no lingering “Pro British” faction after the war. That’s why no old “Loyalists” came out for the British in 1812. There were none left. They had all been murdered.

All of that violence was in addition to Washington fighting the various British Commanders. Who, it should be noted, never had more than about 22,000 regular troops at their disposal. The size of the Loyalist commands? About 25,000.

The American Revolution was more of a civil war than a rebellion against a remote central government. However, we don’t like to remember that part of the story. We have edited that part out of our “founding myths”.

It’s clear that the Revolutionaries chose their moment well. Britain was exhausted from the victory over France and didn’t want an expensive colonial war.

A tax paying colony that mostly defended itself using local militias was an asset. A rebellious, fought over, drained colony that needed a big garrison was an economic sinkhole.

Plus, Britain had won control of the Caribbean sugar islands away from the French. The sugar trade dwarfed the value of all of the colonies combined.

Sugar was the “oil” of that time.

Those islands were worth far more to the Crown than the recalcitrant Americans.

So, after their military defeat at Yorktown they abandoned the remaining Loyalists to the hands of the Colonials and withdrew. Exactly the way we did in Vietnam and Afghanistan. With about the same consequences for those who got left behind.

America’s population plunged. Skilled and well-connected loyalists fled to Britain or Canada.

New York, Charleston, and Savanna were not free of Loyalists and waves of “recriminations” (mob attacks) until 1783. An estimated 60,000 free persons (3.1% of the free population) and 15,000 slaves (3.6% of the slave population) from those cities left by the early 1790s. In addition to the wartime depopulation.

The War was an economic disaster for the Colonies

The American Revolution itself, like the revolutions in France, Mexico, and Russia delivered massive negative economic shocks. Life after a “revolution” is never better than it was before. At least in economic terms.

America’s real income per capita dropped by about 22% over the quarter century 1774–1800, a decline almost as steep as during the Great Depression between 1929 and 1933, and certainly longer.

That 22% decline. That’s actually a distortion of how bad it got. The 1790s recorded brisk growth rates after 1795.

The Revolutionary War period between 1774 and 1795 was America’s greatest income slump ever. The fall in income may have been 28% or even higher in per-capita terms.

The American South never recovered.

In 1774 the colonial South had about twice the per-capita income of New England, even when one rightly counts slaves as “human beings” in the population. The absolute economic decline of the South Atlantic states over the last quarter of the 18th century and its relative decline over the subsequent four decades stand out as an example of what has come to be called reversal of fortune (Acemoglu et al. 2002).

By 1840 the South Atlantic states were well behind the Northeast states. Despite having been far ahead in 1774. Plus, their population share of the original thirteen colonies had fallen as well.

The American Revolution impoverished large numbers of Southern Whites.

There is no evidence that the colonial South had any large army of poor whites in 1774. Indeed, Southern free labor had some of the highest wages anywhere in the colonies.

The ubiquity of poor whites in the South was strictly a nineteenth-century phenomenon. A consequence of the Revolution and post-1774 decades of very poor growth.

However, some people did better than others.

Think about it. 30% of the population got murdered by the Revolutionaries or fled. What happened to all their stuff, who got rich from that sudden windfall?

As usual, the rich got richer.

Colonial America was perhaps among the most egalitarian places on earth at the time it declared independence in 1774. In the late 18th century, “incomes were more equally distributed in colonial America than in any other place that can be measured,” state authors Peter Lindert and Jeffrey Williamson, in the book Unequal Gains: American Growth and Inequality since 1700.

The richest 1 percent of households in Colonial America captured only 8.5 percent of the annual GDP in the late 18th century. Today, the richest 1 percent capture roughly 20 percent of the annual US GDP.

In the late 18th century the Gini coefficient, which measures inequality on a scale from 0 to 1 (with 1 being very high inequality), was just 0.367 in New England and the Middle Atlantic. It was 0.57 in Northern Europe.

The Founding Fathers wanted to control inequality.

Many of them would be considered “Socialists” by Republicans today. For example, after the revolution, John Adams advocated for laws that would force families to divide their estates among all their children.

He wanted to prevent the development of European-style feudal estates, according to Joseph R. Blasi, Richard B.Freeman, and Douglas L. Kruse in The Citizen’s Share: Reducing Inequality in the 21st Century. The goal of a republic, Adams believed, was “the greatest happiness for the greatest number.”

The founders also favored workers over owners, which helped keep the class of non-owners remain economically empowered.

According to The Citizen’s Share, after the cod stocks were decimated by the Revolution, Jefferson proposed a tax credit for cod vessels to help jump start the industry.

He wasn’t sure though, whether the credit should go to the owners of the vessels or to the crews of the vessels, who were also suffering financially. After a lengthy debate in 1792, Congress passed a law mandating that five-eighths of the credit go to the crews, and three-eighths go to the owners.

Those who controlled the means of production were regulated, by Congress, from taking too big a share. “The leaders of the new Republic were not swayed by the cod fishery’s owners and financiers, who no doubt had the eighteenth century equivalent of K Street lobbyists pressing their cause,” the authors of The Citizen’s Share write.

These egalitarian principles didn’t last long. Between 1800 and 1860, inequality grew in America about as much as it has in the period since 1970. The Gini coefficient was 0.441 in 1774. By 1860, it was 0.529.

The problem was a lack of explicit laws that would maintain the economic balance as the nation grew and changed.

Although Thomas Jefferson had written to James Madison that , “legislators cannot invent too many devices for subdividing property”. Few laws had been passed to regulate property ownership in the original colonies.

The people who had been in the colonies early and were the American proto-Elites had money after the Revolution. They were able to buy up the assets of the murdered Loyalists at bargain prices.

After 1790, when things began to stabilize, their wealth began to soar.

The rising inequality can be seen in the distribution of property incomes. Which measure the amount of money people can make because of land or factories they own.

In 1774, the top 1% collected just 13.7% of property incomes in Colonial America. By 1860, the top 1% collected almost one-third of property incomes according to Unequal Gains.

Land was more available on the frontier because of laws like the Harrison Land Act. Which sold land to citizens in the Indiana Territory by giving them access to credit.

However, for those still in the cities of the original colonies. The people that owned the property were getting richer, while everyone else was competing against each other for jobs and land.

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There’s one more reason inequality grew after the Revolutionary War, and it’s surprisingly reminiscent of some of the reasons inequality is growing today. To prosper, the new nation needed a financial sector, it needed to issue bonds and get investors to buy its debt.

Thanks in part to the advocacy of Alexander Hamilton. The U.S. financial system soon became popular with foreign investors, who were eager to get into the new market.

But, the new financial sector favored only those people who were able to get into the market early, and those who were already financially sound enough to invest.

“The wealthy pulled ahead of the rest of society, especially in the cities of the Northeast, on the strength of their savings, access to credit, and capital gains,” the authors of Unequal Gains write.

And, as the saying goes, “The rest is history”. The American “Elites” were born.

We don’t tell these stories to ourselves. They are part of our “history” but not part of our mythology. They are memories that have become more and more distant and unreal.

Memories of what we did, who we are, and how our “Nation” truly came into being.

This is my analysis.

This is what I see.

This is my “Crisis Report”.

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