(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")
STACEY VANEK SMITH, HOST:
This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.
CARDIFF GARCIA, HOST:
And I'm Cardiff Garcia.
VANEK SMITH: Happy Independence Day, Cardiff.
GARCIA: Yes. And at least as important - happy jobs Friday. Jobs report came out today.
VANEK SMITH: Oh, OK. That's true. It did. So I had this idea. I thought we would save the jobs talk till Monday.
GARCIA: Yes. I was overruled, I should note, so I am doing this episode in protest in the American tradition of protest.
VANEK SMITH: Well, OK, it's a holiday weekend, Cardiff. It's also one of the most important historic days in the history of the country.
GARCIA: I know.
VANEK SMITH: And I thought, you know, instead of jobs Friday, which we do every single month like clockwork, we could, you know, do a jobs Monday and do, you know, a little economic hat tip to 1776, the year the U.S. declared independence from Great Britain, and you take a look at what the U.S. economy looked like back then.
GARCIA: I'm in. I'm just a little worried that our listeners are going to miss the air horn.
VANEK SMITH: I know and our listeners are going to miss the air horn. You're worried about our listeners missing the air horn. I also worried about our listeners feeling bad and missing the air horn, so I prepared a little something, which is like ye old air horn.
(SOUNDBITE OF UNIDENTIFIED FILM)
UNIDENTIFED ACTOR: (As character) Oh, yell, oh, yell (ph).
GARCIA: All right. But we're bringing back the modern version on Monday. I'm just saying.
VANEK SMITH: (Laughter) Doesn't quite have the punch, but, you know, I feel like the historical heft makes up for it.
(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")
VANEK SMITH: Joshua Rosenbloom chairs the economics department at Iowa State University, and he says back in 1776, the U.S. economy was - it was just nothing special. It was this little ragtag thing. It was not promising.
JOSHUA ROSENBLOOM: There was a sense that this was a kind of small and isolated outpost, that the really important colonies were in the West Indies where sugar was produced. In that sense, the colonies proved to be a little bit of a disappointment. The people who were exploring were motivated by the example of Spanish discoveries in Mexico and in Latin America where they discovered all this gold and silver. And, you know, that was pretty cool.
VANEK SMITH: Yeah.
ROSENBLOOM: So they were looking for stuff like that.
VANEK SMITH: The colonies did not have stuff like that. Also you couldn't grow sugar or spice there. There was one main economic value to the colonies, and that was farming. In fact, Joshua says, in 1776, 85% of the U.S. population worked in agriculture, but there were very different kinds of agriculture within that.
ROSENBLOOM: When we talk about the colonial economy, we're really talking about distinct regional economies that were not very closely connected with each other.
GARCIA: So in the northern colonies, Joshua says it was kind of a mishmash of agriculture - a lot of wheat and corn and also salted fish and beef. And a lot of those things were shipped to the West Indies. Remember; the West Indies was where all the super valuable sugar was being grown. The U.S. couldn't really grow sugar, but the U.S. could grow food to send to the places that were growing sugar.
VANEK SMITH: The West Indies then sent enslaved workers and sugar cane to the colonies. The workers were sold mainly to farms, and a lot of the sugar was turned into rum in the northern colonies. Rum was also a big export at the time from the colonies.
GARCIA: In the South, the U.S. farms tended to be larger. The main crops were rice, tobacco and indigo. That's a flowering plant that's used to dye fabric. Joshua says that most of that was being sent to England where there was an enormous textile industry.
VANEK SMITH: And many of these crops and many farms depended on slave labor, which, says Joshua, was a huge part of the colonial U.S. economy.
ROSENBLOOM: So South Carolina and Georgia and some parts of North Carolina, it was almost a black majority of the population. Close to 50% of the population was enslaved Africans or African Americans. For the north around the Chesapeake Bay and Maryland and Virginia, the proportions were smaller but still quite large. And then in New York and Pennsylvania at this time, perhaps 8 or 10% of the population was enslaved.
VANEK SMITH: Agriculture was most of what the U.S. economy did because aside from that, there just wasn't a lot going on.
GARCIA: Yeah. There was only a tiny manufacturing sector at the time. Plus cash itself was always in short supply. Nobody had money. People had to keep records and do a lot of trading. It was just very hard to price things. Joshua says that if an economist were to look back at the U.S. in 1776, the idea that it would become the largest economy in the world would have seemed totally nuts.
VANEK SMITH: Still, he says, there were a couple of things the young country had going for it - first, the population. So it's estimated there were about 2.5 million people living in the 13 colonies back in 1776. Today, of course, there are more than 327 million people living in the U.S., so 2.5 million sounds really tiny. But, you know, it wasn't that tiny at the time. Joshua points out England itself only had a population of around 6 million, so 2.5 million was respectable. And also that population was growing really fast.
ROSENBLOOM: Benjamin Franklin, for example, noted that the American population was doubling about every 20 years.
GARCIA: Yeah. And Joshua says that this was like a superpower for the U.S. economy. The population was getting bigger and therefore creating more consumers and producers every year.
VANEK SMITH: The second thing the U.S. economy had going for it - the land itself.
ROSENBLOOM: I mean, certainly, the biggest strength was the abundance of natural resources. And by that, I really mean land.
VANEK SMITH: U.S. soil was incredibly productive, not to mention the abundance of wildlife and fish. You could live off the land in the U.S. Also there was a lot of open lands, and, you know, it was pretty cheap.
GARCIA: And that created the third advantage that the U.S. had going for it at the time - a kind of income equality that you just didn't really see in Europe back then. Joshua says colonial Americans were making pretty good money thanks to the land.
ROSENBLOOM: Their average incomes were not that different from those in England. And there's a lot of evidence, actually, that incomes were much more equally distributed in America than they were in England. So the suggestion is that a large fraction of the American population enjoyed a standard of living that was above that of their contemporaries in England.
GARCIA: So a couple of things need to be said here because the young U.S. economy at the time was a brutal place. A lot of that land that was so prosperous was taken violently from the Native American population. And the enslaved population not only didn't share in the abundance of land, but also the economy was being built on their backs and at their expense. So greater income equality was available to a pretty small slice of the population at the time - white men. They were the ones who were allowed to own land and to make a living off the land and off the sea.
VANEK SMITH: Feelings about slave labor were divisive in the colonial U.S., says Joshua. Some of the colonies had built up economies that completely relied on slave labor. That issue and all the economic divisions in the colonies, all of those separate little economies, this was a major weakness, says Joshua.
ROSENBLOOM: When the Declaration of Independence was passed and the Continental Congress had to come up with a scheme for how the colonies would govern themselves collectively, they adopted a set of rules called the Articles of Confederation, which turned out to be pretty much a disaster.
VANEK SMITH: (Laughter).
ROSENBLOOM: You know, we all know about the Continental Army starving and freezing at Valley Forge. Part of the reason was because the Continental Congress didn't have the power to tax people, so they couldn't raise revenue even though they could create an army.
GARCIA: Joshua says that if the colonies had not put their differences aside and signed the Constitution shortly after the Revolutionary War, that little U.S. economy probably never would have made it. It was broke. It had just gone to war with its biggest trading partner. And other than farming, it had almost no industry. Plus it was poor. It didn't have much money. And the people were exhausted and starving after the war. The government and the economy were fragile.
VANEK SMITH: Still, Joshua says, getting the Constitution written and signed so quickly, that was a problem, too, because the colonies kind of glossed over the issue of slave labor. They decided to table it just to get all of the colonies to come together. And, of course, that was the issue that would nearly destroy the young country less than a hundred years later.
(SOUNDBITE OF MUSIC)
VANEK SMITH: This episode was produced by Darius Rafieyan, edited by Paddy Hirsch and fact-checked by Emily Lang. THE INDICATOR is a production of NPR.
(SOUNDBITE OF MUSIC)
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.