Early American Capitalism

From Market-Places to a Market Economy: The Transformation of Rural Massachusetts, 1750-1850

Winifred Barr Rothenberg, 1992

Winifred Barr Rothenberg is a professor of economics at Tufts University and frequent contributor to the ongoing historical debate on the “Market Transition” in early America. This book was substantially a compilation of a series of articles that appeared in Agricultural History and (mostly in) The Journal of Economic History. Some of Rothenberg’s opinions about the “moral economy” model also appeared in her review of Hahn and Prude’s Countryside in the December 1987 issue of Reviews in American History, titled “Bound Prometheus.”

Through extensive primary research and mathematical modeling, Rothenberg came to the conclusion that the “capitalist transition” began around 1750 and was substantially underway in rural Massachusetts by 1800. While she performed a little sleight of hand navigating between a tight, economist’s definition of capital and markets, and the more expansive, politically loaded language used in the historians’ debate, Rothenberg uncovered some really valuable data which helped advance our understanding of events, wherever we may stand on the “social vs. market” historiographical spectrum.

Economically, Rothenberg rested her evaluation of whether markets were operating on a combination of two related ideas. “Synchronicity and convergence in the behavior of prices,” she said, “is an acknowledged diagnostic of the role of market forces in their determination.” As transportation and communication improvements allowed farmers to participate in distant markets and to use price cues from those markets as guides in their local exchange relationships, Rothenberg said “markets embedded within and constrained by values antithetical to them within the culture” evolved into “the ‘disembedded’ market whose values penetrated and reinvented that culture.”

Rothenberg was drawing on and commenting on a long lineage of sociological, economic, and cultural critique, in a way that seems to me unnecessary and overly polemical. She borrowed the word “disembedded” from Karl Polanyi, with all its political baggage. The idea that price synchronicity defines a market economy is Annales historian Fernand Braudel’s, while the concept of convergence Rothenberg added to it comes from the economist Alfred Marshall. As she pulled these two ideas together, Rothenberg considered and rejected Marc Bloch’s (also an Annales historian) suggestion that a market exists when people don’t simply buy and sell, but “live by buying and selling.” How would you measure that? she asked. I can think of several ways.

I’m less interested in the general question of when “market-place economies” became “market economies,” than with how the market expanded into rural Massachusetts. The breakdown of Puritan strictures against usury seems to be a part of this change, as Rothenberg suggested. But if this was caused by the introduction of “the fundamental assumption of modernity...that the social unit of society is not the group, the guild, the tribe, or the city, but the person,” how did that work? (she quoted Daniel Bell, from The Cultural Conditions of Capitalism, which maybe I should look at for an answer). It’s all well and good to observe that “the market (for better or worse) objectifies some of the culture’s most cherished values,” but Rothenberg wanted to say it also created these values, without resorting to cultural or intellectual history or mentalités. This is important, because if we could agree on values such as “the sovereignty of the individual”, we could then turn to examining what happened and asking if events and actions were consistent with these ideals? Did “market” ideas matter? Did they direct change? Or did they just serve as rhetorical cover for other processes and other goals?

Rothenberg found some great material to back her claims! Here’s George Washington to Arthur Young, December 5 1791: “The aim of farmers in this country is, not to make the most from the land, which is or has been cheap, but the most from labour, which is dear: the consequence of which has been, much of the ground has been scratched over, and none cultivated or improved as it ought to have been.” Throughout the book, Rothenberg showed that farmers’ actions could be understood as economic decisions (and often sophisticated and reasonable ones) reflecting more knowledge and understanding of their environment and options than they are normally credited with having. This is extremely helpful, even if I don’t go as far as she does in rejecting the influence of other sources of information and values on farmers’ decisions.

The moral economy model, as Rothenberg depicted it, involves four basic features. Its members, being risk averse (because the whole point of the moral economy was the extremely tenuous nature of their existence) preferred “minimizing expected losses over maximizing expected gains.” Individualism was “subordinated to community norms,” and “The two institutional pillars of the market system--the rule of contract and private property--are conspicuously absent” (quoting Platteau regarding contemporary third world villages, which I think raises an important question about the relevance of these kinds of atemporal sociological comparisons). There may, she said, be a “two-tier system in which exchanges within the village...are insulated from exchanges with the outside world...The ‘prices’ at which goods exchange within the village are mere ‘cultural constructs’,” Rothenberg concluded, as if prices arrived at by way of “market outcomes” were not.

“Indexes of individuation” were linked to the 1740-45 religious upheavals of the Great Awakening, Rothenberg said, because both were caused by “the breakdown of community solidarity [that] in turn can be traced to rapid population growth.” It is nice to see an appraisal that doesn’t treat religious motivations as free-standing, causeless causes. Similarly, she not only discussed the many difficulties of studying persistence (for example, varied and changing town dimensions that made it difficult to compare two towns or to compare the same town in different time periods); she also asked the important question, “what in fact does persistence measure?” Was it a measure of community harmony? Or of the expense and difficulty of leaving?

“The capacity to produce surpluses,” Rothenberg said, “is often treated as so necessary a condition to trade that the moral economists infer the absence of marketing solely from calculations that the local resource base would have been insufficient to produce surpluses.” This was the “principal misconception in the historical literature on markets,” she continued, because it implied that households and communities evolved from self-sufficiency to market involvement, which in many cases (like the cobbler’s bare-foot children) was untrue. Based on her data, Rothenberg argued “that ‘time’s arrow’ may very well have gone from marketing to self-sufficiency” in rural Massachusetts.

Rothenberg’s specific arguments about market activity and productivity gains in Massachusetts seemed reasonable, for the most part. There were some exceptions. She spent several pages relating hog slaughter weights to corn prices, before admitting that “Corn is not in fact the basic feed of hogs.” But through most of it, I didn’t feel that she was going off the tracks (as far as I could follow her argument, with an undergrad Agricultural Economics background). But I also didn’t feel particularly compelled to abandon a “social” perspective that could accept this data and integrate it with other, non-market factors Rothenberg believes she is refuting.

“Local markets relayed the shocks [of national and world economies] as changing relative prices,” Rothenberg said, “and resilient farmers responded by shifting from grains to hay, from hay to dairying, and finally from agriculture to commerce and industry.” The interesting thing is, the increases in agricultural productivity and the diversification of rural capital investment that made these changes possible seemed to date from the years between the end of the Revolution and Jefferson’s election in 1800. This doesn’t necessarily contradict Joyce Appleby’s claim that the Jeffersonians were pro-commerce, but it suggests they were riding a wave not of their own making.

“Central to such a [rural capital] transformation must have been the development of an effective mechanism for increasing the liquidity of the regional economy,” so that the gains farmers were accumulating were free to move within (and to leave) the local agricultural economy. I think my upstate New York data (described in detail in Peppermint Kings) suggested that one may have led to the other. The requirements for this change, Rothenberg said, were “institutional elements” allowing “credit instruments [to] become more fully negotiable,” an “increasing size and widening geographic spread of individual credit networks,” and finally, sufficient “liquidity of financial instruments and therefore the propensity of rural wealthholders to substitute them for physical assets.” I think this is exactly the role played by my miller/storekeepers in the 1840s. It’s ironic that the Duns credit reporters considered one of them a complete deadbeat. Does that suggest the Duns guys were a little conservative? Their clients were urban creditors, after all. I wonder if anyone has written about this?

Rothenberg’s discussion of negotiability picks up right where Morton Horwitz left off, so it’s lucky I read them back to back. It doesn’t seem unreasonable to accept both Rothenberg’s conclusions on when and how credit and negotiable notes penetrated rural markets, and Horwitz's suggestion in Transformation of American Law that legal changes were producing a “capitalist” political/economic regime for the benefit of the rich. In fact, Rothenberg’s data showed “The very rich appear to have been borrowing in order to lend, using their acreage...to underwrite their borrowing while at the same time shifting the composition of their assets out of farming and into commercial paper. The very rich were coming into the capital market on both sides. And they alone were emerging as net creditors.” In other words, a widening of the gap between the wealthy and their neighbors preceded the industrial transformation normally blamed for it.

The final chapter, on productivity, was surprising because Rothenberg found evidence that “Massachusetts farmers were moving away from cereals to specialize in hay...in advance of significant western competition;” in fact “by 1801.” This would seem to support the view that demand from what Bidwell called a “home market” may have driven productivity growth, but may have begun much earlier than previously supposed. The earlier beginning of significant demand, increases in productivity, and the resulting returns to rural farmers could have helped finance the New England industrial revolution, just as Rothenberg suggested. Additionally, rural demand for “outside” goods may have been encouraged by the increased reach of storekeepers and peddlers into previously remote hinterlands. The Revolution seems like the second major mobility-enhancing event in the eighteenth century; the Seven Year War may have been the real beginning. And the importance of Shays’s Rebellion is enhanced if an increasing upland/lowland disparity of farm prosperity added to the other social and financial factors already cited as causes of that conflict.