An Outline of the American Economy (1991)

3/12 A historical perspective on the American Economy

2/14 Colonization

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For a variety of reasons, those who came to settle the early colonies sought a new homeland. Puritans, for example, established several settlements in Massachusetts. These English colonists were a pious, self-disciplined people who wanted to escape religious persecution. They built a community based narrowly on their own religious ideals.

But settlers did not come to the New World solely motivated by piety. In the 17th century many colonies were founded principally as business ventures. Moreover, piety and profits were not necessarily incompatible. The Puritan settlement at Plymouth Plantation, although not organized with profits in mind, did not and indeed could not ignore economic considerations.

England was the most successful of the European nations at colonizing what would become the United States, and its success was due in large part to its use -- starting with the Jamestown colony -- of charter companies. Charter companies were formed of stockholders, usually merchants and wealthy landowners who hoped for personal economic gain and who perhaps wanted to advance national goals. While the private sector handled the financing, the crown provided each project with a charter or grant conferring economic rights as well as political and judicial authority.

Early attempts at making substantial profits in the colonies were mostly failures, however, at least for the original English investors. There was little gold and mining was not economical on the East Coast. Land for farming had to be cleared and, even when the harvests were good, prices were modest because little money was available. Labor was in short supply, and real wages were much higher than in England. Conditions were harsh, and profits tended to be small.

The original English investors quickly turned over both the Jamestown and the Plymouth colonies to the settlers. The political implications -- although not realized at the time -- were enormous: the colonists were being left to build their own lives, their own communities and their own economy -- in effect, to start constructing the rudiments of a new nation, if they could.

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