In 1790 general merchants still ruled the economy. In this economy the family remained the basic business unit. The most pervasive of these units was the family farm. In 1790 only 202,000 out of the 3,930,000 Americans lived in towns and villages of more than 2,500, and of the 2,881,000 workers, 2,069,000 labored on farms.4 Only in the south, where crops were cultivated by slave labor, did the production of staples become more than a family aifair. In the production of crops, only on the plantation did a class of managers appear.
The small amount of manufacturing carried on outside the home was the work of artisans in small shops. In the towns, the artisan often had the assistance of one or two apprentices or journeymen, who were usually treated as part of the family. In the ports, somewhat larger, though still very small, shipyards, ropewalks, candle manufactories, and rum distilleries operated. As Sam Bass Warner wrote of Philadelphia on the eve of the American Revolution: “The core element of the town economy was the one- man shop. Most Philadelphians labored alone, some with a helper or two.”5
Other resources besides land were exploited, but on a limited scale. Lumbering continued to be a by-product of land clearing, although Maine and North Carolina supplied timber regularly for both the Royal Navy and the West Indian trade. Local farmers provided most of the lumber that went into the making of masts, spars, barrels, staves, as well as beams, shingles, and paneling for houses, churches, warehouses, and other buildings. The output of the only coal mines in the colonies, in Virginia, was hardly 1,000 tons a year.6 Except for some iron, all metals were imported. The largest business unit either in mining or manufacturing was the “iron plantation,” where the iron ore was mined, wood converted into charcoal, iron ore refined into pigs, and the pigs forged into wrought iron. These plantations, with their rural setting, the seasonal nature of their work, and the use of indentured servants and occasionally slaves, were operated in many ways like the rice and tobacco plantations of the southern colonies.
The activities of these producing units were coordinated through the business transactions of the merchants who resided in the port and river towns. The resident merchant distributed and marketed the products of these small enterprises and supplied them with raw materials, tools, and furnishings. For this reason, this all-purpose businessman dominated the economy.7 He exported, imported, and sold all types of products at retail and at wholesale. He took title to the goods he purchased for his regular customers. He also acted as correspondent or agent for merchants in other ports, taking their goods on consignment and selling for a fixed com- mission.
The resident general merchant acted as the community’s financier and was responsible for the transportation as well as the distribution of goods. He provided short-term loans to finance staple crops and manufactured goods when they were in transit, and he made long-term loans to planters, farmers, and artisans to enable them to clear land or to improve their facilities. Usually in cooperation with other merchants, he arranged for the handling of ships needed to carry these goods and often, with other partners, was a shareholder in these ships. With other merchants, he also insured ships and cargoes. Again with others, he built wharves for the ships. In the same port town, he helped to finance the construction, both by himself and with others, of rum distilleries, candle works, ropewalks, and shipyards—that is, those manufacturing industries not carried on by craftsmen in small family shops.
In all these activities, the colonial merchant knew personally most of the individuals involved. He tried, where possible, to have members of his own family act as his agents in London, the West Indies, and other North American colonies. If he could not consign his goods and arrange for purchase and sale of merchandise through a family member or through a thoroughly reliable associate, the merchant depended on a ship captain or supercargo (his authorized business agent aboard ship) to carry out the distant transactions. Even then, the latter was often a son or a nephew. The merchant knew the other resident merchants in his town, who collaborated with him in insuring and owning ships, as he did the shipbuilders, ropemakers, and local artisans who supplied his personal as well as his business needs. Finally, he was acquainted with the planters, the farmers, and country storekeepers, as well as the fishermen, lumbermen, and others from whom he purchased goods and to whom he provided supplies.
Between Baltimore and Charleston, where there were few ports with resident merchants, a somewhat different pattern of commerce developed.8 In Maryland and Virginia, and to some extent farther south, planters bought directly from the British merchants. Factors in London arranged for the sale of their tobacco and rice and at the same time purchased any supplies they needed. The planters, in turn, often provided their smaller neighbors with the same type of services they received from the British factors. As tobacco planting moved inland in the mideighteenth century, Scottish merchants began to send factors and agents to set up permanent stores, where tobacco could be collected and finished goods sold to the upland farmers and planters. Farther south, the resident merchants in the towns of Charleston and Savannah began to handle the trade of their region in much the same way as did northern merchants.
With the coming of political independence, this personal family business world began to change. The break with Britain disrupted old trading patterns and led to the opening of new areas to American merchants, including the Baltic, the Levant, China, India, and the East Indies. The continuing growth of population and the rapid expansion west into Kentucky and Tennessee, north into Maine, and southwest into Georgia enlarged domestic markets, as did the growing seaport towns themselves. After the outbreak of the wars of the French Revolution, trade with Europe and the West Indies, which had been cut off since the Revolution, again boomed. Far more important, however, for the American economy than the after-effects of the political revolution in France was the advancing industrial revolution in Great Britain. For the new United States became almost overnight the major source of supply of the raw material and the major market for the products of the new machine-made textiles. The coming of these new trades was the most important single factor in bringing specialization to business enterprise and impersonalization into business activities.
Source: Chandler Alfred D. Jr. (1977), The Visible Hand: The Managerial Revolution in American Business, Harvard University Press.