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Tuesday, July 4, 2017

Why Not Taxation and Representation?

As a July 4 mental workout, consider an alternative version of history. At the end of the Seven Years War (also known as the French and Indian War) in 1763, Great Britain decides to annex its American colonies into Great Britain, and so it designates seats in the British Parliament for the colonists. In this alternative history, many of those who ended up in the actual course of history as signers of the Declaration of Independence instead become members of the British Parliament. (Honestly, you think Benjamin Franklin would have turned down a chance in 1765 or so to be in the British Parliament?) The battle cry of "No taxation without representation" loses its force, because the Americans do have representation. You can then write your own alternative history novel, extrapolating British, American, European, and world history from this point forward.

This option of representation for colonial America in Parliament was fairly well-known at the time: for example, it is discussed by Adam Smith in The Wealth of Nations, published in 1776, and was advocated by some opposition politicians in the British Parliament. The question of why it did not occur is also tackled directly by Sebastian Galiana and Gustavo Torrens in "Why Not Taxation and Representation?A Note on the American Revolution" (SSRN working paper, last updated June 2017).  They ask:

"To solve the puzzle posed by the American Revolution, we must answer two crucial questions. First, why did the North American colonies rebel? Second, why didn't the British authorities and the Americans elites reach a peaceful agreement for sharing the economic burden of defending the colonies in exchange for more political power for the American colonies? For example, why didn't the British agree to have American representation in the British Parliament and thus quickly placate the revolt? After all, the motto of the revolution was no taxation without representation, suggesting Americans would have been willing to accept taxation if the British Parliament would have granted them political representation and/or greater political autonomy."
Galiana and Torrens summarize earlier research in colonial history that substantiates the following points:
"1. The American colonies were prosperous. They were richer and had a more equal income distribution than Great Britain and other European nations. ...
2. British mercantilist policies and other economic regulations were not that burdensome for the colonies and membership in the British Empireís trade system was probably quite beneÖcial for the colonies. ...
3. The American colonies had relatively inclusive institutions. ...
4. The British Empire had shown its willingness to defend the American colonies and the colonies had shown their willingness to be part of the Empire, especially during the Seven Years War. ...
5. The amount that Great Britain was spending on the colonies was considerable, and the colonies did not generate sufficient revenue to make them an advantageous undertaking....
6. The American colonies paid little in taxes and the British Parliament had been ineffective in increasing their tax burden. ...
7. Although France and other British rivals provided military support, rebellion was nonetheless very costly for the colonies. ...
8. Rebellion was a very risky and dangerous enterprise for the American elites. ..."

Given this background, why did the American Revolution come to pass. Some of the reason, of course, is that the American colonists included a relatively high proportion of ornery tax-hating, liberty-lovers. But political matters on both shifting in the mid-1760s. 

The political coalitions in Britain were shifting, and the new powers wanted tighter control over the American colonies. Britain wanted funds to pay off the debts from the Seven Years War, and it seemed fair that the American should shoulder the burden. The American colonists kept pushing west, which made Britain fear that there would be additional costs of defense. Economic growth in the American colonies had established a group of wealthy and powerful colonial merchants, but after about 1745m British companies had been extending their direct operations into the colonies, which threatened to cut into the economic and political power of the colonial merchants.

But from a British point of view, the other main concern was that giving political representation to Americans challenged the political coalition that held power in the 1760s. Galiani and Torrens write: 
"After the Seven Years War, the core of the dominant political coalition in Great Britain was composed of the landed gentry, whose power rested on a political system based on land ownership. The leader of the coalition, Prime Minister Lord North, had the support of the king. His cabinet was composed of Bedfordite ministers and, when dealing with serious issues, Lord North could always count on the support of Parliament, which was dominated by landed gentry. The coalition also enjoyed the support of the High Anglican Church. The members of this coalition were all loyal to a political system based on land ownership, and they considered the members of the general public to be unfit to participate in politics and objected to the idea of making any concessions to the American colonies. ... The landed gentry, who controlled the incumbent government, feared that making concessions to the American colonies would intensify the pressure for democratic reforms, thus jeopardizing their economic and political position."
To me, the story of Great Britain when confronted with its American colonies is a little like the metaphor of the dog that chased a car every day--but then didn't know what do after actually catching it. The Britain of its time was chasing global economic power. The British were willing to bear high costs to defend and build the growing American empire. But when the British found itself faced with the reality of an American colonies rapidly growing in economic strength, population, and land, it didn't know how to react. Both holding on and letting go seemed equally impractical, and the US Revolutionary War imposing high costs on both sides was the result.

Readers interested in some further discussion of economics and colonial times, while also looking to escape from the obligatory family picnic and occupy the time before the July 4 fireworks display, might also want to check some earlier posts:

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