Those who cheer such “free market” measures often claim to be upholding America’s founding principles. But in fact, sanctification of the market at the expense of the public good would have horrified 18th-century Americans. Instead, during the Revolution, some states enacted stringent market regulations designed to “prevent Monopolies and Oppressions,” including price limits on various necessities, and restrictions or even bans on auctions. We’d be wise to keep this history in mind as we respond to the coronavirus and other challenges.
England and its colonies had a long tradition of regulating the economy; long-standing legal codes barred buying and selling goods in ways that profited individuals at the expense of the community. Auctions, a common means of wholesaling, were often regulated to discourage market manipulation and thieves. These rules were viewed as an exercise of police powers for the public good, particularly during times of scarcity.
Community regulation of the marketplace became part of the struggle that developed after 1760 as England sought to increase its authority over the American colonies. In the late 1760s, when Parliament imposed tariffs on the colonies to generate revenue for increasingly disliked imperial officials, laborers and shopkeepers created local associations to pressure reluctant merchants to stop importing British goods. Those “Sons of Liberty” would, in the same way, obstruct the hated Tea Act by throwing three shiploads of the finest Bohea leaf into Boston Harbor and elsewhere blocking the landing and even the serving of the imported beverage.
This set a template for one of the first national measures taken by the Continental Congress. On Oct. 20, 1774, as part of organizing a massive boycott to pressure Parliament against the Coercive Acts, Congress called for committees to be chosen “in every county, city, and town” to ensure that prices would not be raised by those trying to take advantage of shortages resulting from the boycotts. Those committees inspected ships and stores, seized forbidden cargo or goods being stored awaiting higher prices and sold them for a “just price.”
A strong egalitarian spirit accompanied these efforts. In his Connecticut election sermon, the Rev. Benjamin Trumbull preached that every community should “keep their rulers . . . intimately connected with them . . . to keep property as equally divided among the inhabitants as possible, and not to suffer a few people to amass all the riches and wealth of a country.” That goal would spawn wartime efforts to regulate prices and wages.
After fighting erupted around Boston in April 1775, New England communities began to decry the “growing Evil” of “extravagant” prices sought by farmers and merchants, and by mid-1776, many towns and counties were demanding price limits and other regulations. In late December, a regional congress agreed upon an extensive set of price guidelines to be expanded and enforced by the states. Auctioneers who exceeded designated limits were fined and forbidden to conduct future sales. When Congress received the news, it applauded and called for other regions to follow New England’s lead.
These rules fueled long-standing tensions between port towns and surrounding farm villages. City laborers and artisans suspected farmers of selling produce at a markup elsewhere. Farmers suspected artisans of gouging on labor charges. They all suspected merchants of sending goods out of the region to places where they could sell them for higher prices — and they all saw no problem in taking strong action to weed out such behavior.
On April 20, 1777, Abigail Adams reported to her husband John that five notorious merchants (whom she termed “Tories”) had gone to a Salem auction, “bid up the articles to an enormous price” and then sought to sell the goods in Boston. In response, Adams explained, a “general cry against the Merchants, against monopolizers & c,” erupted and a huge crowd had “carted” the merchants in disgrace out of town and dumped them in Roxbury under threat of death if they returned.
As economic problems worsened in New England, another regional meeting agreed to end wage and price rules and try other solutions. But that didn't mean less regulation. In many places, in fact, it meant stronger efforts to regulate trade, particularly auctions.
The state of Connecticut and the town of Providence, for example, began to require merchants to obtain licenses that set rules on prices and on the days and times for sales. New Hampshire even banned auctions entirely. Such market regulation would ebb and flow for years in response to local economic conditions, but authorities aimed to prevent the few from profiting at the expense of the many — especially in times of crisis.
As national inflation worsened, Congress called for regional conventions to intervene economically throughout the nation. In early 1778, delegates to the northern convention, representing states from New Jersey to New Hampshire, flatly dismissed arguments that setting such limits violated “principles of Trade & Liberty.” While the effort collapsed because not all states adopted such measures, many locales continued to enforce limits on prices and markets in the public interest, with a huge wave of regulation sweeping from Virginia to New England in 1779.
As the war ended, Americans generally celebrated living in the most egalitarian conditions on earth, thanks in part to widespread ownership of land taken from Native Americans. But many feared that the development of a new “aristocracy of wealth” that would corrupt the republic, and called for measures to ensure future economic equality. States changed inheritance laws to prevent the accumulation of fortunes; many urged publicly funded universal education to ensure opportunity for all; and some even called for limits on individual wealth. Moreover, some states and towns continued to regulate auctions to avoid theft, market manipulations and excessive profits.
While the founding generation had many faults and flaws, their efforts to forge an economy for the public good and avoid concentrated wealth is one that we would do well to recall today. While a myth has arisen that allowing the market to operate with little or no interference is a bedrock American principle, this simply belies the reality of our roots. Our country’s founders believed that government could and should shape an economy that worked for most Americans, a lesson that can help us as we rebuild our economy in the wake of covid-19.