Impact of Colonization on the Economy

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24th Nov 2017 Economics Reference this


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    • Lara Sliwinski
    1. What was the nature of Native American economies prior to European colonization? How did Native Americans impact colonial economies?

    The nature of Native American economies prior to European colonization was manifold but can be classified as a traditional economy with little government intervention or outside market forces, and focused mostly on food acquisition by means of hunting in the absence of Westernized industrial strength that surfaced because of the driving forces of mercantilism.

    Prior to European colonization, the Native American economies were not as diversified or as global as they were after European colonization. The Europeans wished to form positive social bonds with the Native Americans so that they could conduct trade with them to the benefit of their colonies. This native labor was used to increase agricultural output and the production of furs, as the necessary trapping skills were in the repertoire of the Native Americans, giving them a comparative advantage, at least temporarily, in comparison to the colonists.

    However, this relationship was by no means one-sided, nor was it unconditional. Says Nash, “Only in the maize and fur trade, where the Indian was food producer, trapper, and skin dresser, did the natives serve the needs of the white colonist. But the trade for corn lasted only until the colonists became self-sufficient by about 1616… What the colonists primarily wanted from the Indian was cleared land” (Nash 1999, 76). We can see from this assertive statement that the trade relationship with the Native Americans was only secondary to the colonists’ urgent need for more free land. What is more, agricultural exchanges, according to Nash, did not last forever, and were dependent upon supply and technological development that provided selfsufficiency to the colonists and that eventually negated trade relationships.

    The Native Americans impacted colonial economies by providing an augmented labor source and by importing the intangible indigenous knowledge of flora and fauna into colonial life. The natives were instrumental in constructing the New World “knowledge economy” that would propel the economists into a paradigm of economic stability and ensure their survival.

    1. Who comprised the colonial labor force in the U.S., and what were the most important kinds of work agreements?

    The individuals who comprised the colonial labor force in the United States were mostly farmers and laborers, as this was first an agricultural society that branched out industrially economic development progressed and became more independent of the British homeland.

    Mercantilism really helped the American colonies to flourish at the time. The notion that holding a trade surplus and accumulating a stockpile of precious metals as backing for a common currency was favored by the English rulers of the American colonies, and thus spurred on the economic development of the colonies.

    In terms of demographic designations of type of worker, the colonial labor force in the United States was comprised of mostly freemen, indentured servants, redemptioners, prisoners, and slaves. The most important kinds of work agreements were bonds of indenture, which subjected criminals, prisoners of war, and debtors to labor until they could free themselves. As for indentures, “Labor was always in short supply in the colonies. The institutional arrangement developed to increase the migration of white European laborers was indentured servitude.

    Individuals contracted to do certain work for a term of years… At the end of the contract period, the servant became part of the free population and part of the pool of free labor,” (Hughes and Cain 2011, 10). This labor force even surpassed the involvement of the natives in commercial productivity.

    The indenture was a vitally important kind of work agreement to the colonies because the demand for work always exceeded the supply for work, and so indenture was both a legal and a social middle ground between the voluntary state of work of the freeman and the servitude of the slave who lacked the right not to work. Walking the legal fine line between being a high-cost slave from Africa and a low-cost (and equally low-value) noncommittal freeman with no labor indenture could mean the defining difference between economic legitimacy (the indentured servants) and economic marginality (the slaves). Indenture also served the political function of freeing individuals from bondage to the colonial powers, which accelerated American economic development on the path to independence.

    1. Were American colonists economically exploited by the British prior to the American Revolution?

    My analysis of this query derives from a historical economic perspective, and draws the conclusion that the American colonists were indeed exploited by the British prior to the American Revolution, and that the economic philosophy of mercantilism played a considerable role in the evolution of these exploitative practices on behalf of the British. According to Hughes and Cain, “Mercantilists believed that international trade was a zero-sum game; they believed in the necessity of governmental regulation to maximize the wealth of the nation,” (Hughes and Cain 2011, 5). The very zero-sum nature of British economic policy before the American Revolution assured that, at least game-theoretically, the American colonists would receive the lesser end of the bargain in the commercial relationship with the British homeland.

    Since the British saw their colonies as wayward scions of themselves, so they tried to extract resources from their colonies to the benefit of the mother country, which then stockpiled the goods for its own use. The motive for the mother country was to establish itself as the bulwark of power amongst other nation-states who might otherwise seek to quash its influence were it not for its possession of material items and metal bullion. It was also tantamount to the economic and political success of a powerful nation-state such as colonial Britain that the balance of trade should be kept strongly in favor of the mother country, with exports from that country exceeding imports into that country. Through these means, national power increased and remained on the rise.

    The concept of comparative advantage also plays a key role in Anglo-American trade relations before the American Revolution, as the American colonists benefited from British knowledge in production but in the process they developed a politically and socially suppressive codependency on British exports. As such, “Shipbuilding and overseas commerce flourished in the colonies, and these activities made a major contribution to the colonial balance of payments with the mother country,” (Atack and Passell 1994, 38). Despite the codependency with which the colonists were forced to live their economic lives, there were still those who used their capabilities for liberation.


    Atack, Jeremy and Passell, Peter. 1994. A New Economic View of American History. W.W.

    Norton & Company, Inc.

    Hughes, Jonathan and Cain, Louis P. 2011. American Economic History. Addison-Wesley: Pearson.

    Nash, Gary. 1999. Red, White, and Black: The Peoples of Early North America. Prentice Hall.


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