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Why the Colonists Feared Corporations

In which the citizens of Boston demonstrate the use of the hatchet as an anti-monopoly device (1770-1773)

In prowling the library stacks for books on the history of corporations, one of the most entertaining things I found was the works of Roland Marchand, a professor at the University of California and a historian of corporate public relations. Marchand was a collector of images, especially the sort of magazine ads created by corporations to link themselves with patriotic icons such as the Statue of Liberty, the American flag, or the Bill of Rights. These days we may see those ads as campy and nostalgic, but as argued by Marchand in books such as Creating the Corporate Soul and Advertising the American Dream, they were part of a concerted campaign by large corporations throughout the twentieth century to overcome anti-corporate sentiments that had old roots in American culture.

At times, those corporate efforts seemed almost transparently opportunisticany national crisis provided the excuse for more PR. An example is the corporate response to a speech by President Franklin Roosevelt in early 1941 advocating increased American support for Britain against Nazi Germany. To underline his vision of what was at stake, Roosevelt outlined four freedoms: freedom of speech, freedom of religion, freedom from want, and freedom from fear. The speech inspired Norman Rockwell to paint a famous series of illustrations, one for each of the freedoms, and Rockwell’s sentimental imagery eventually helped sell over $133 million in U.S. War Bonds.

But corporate executives saw an opportunity to make headway in their private “war within a war” to defeat New Deal interference in the economy and align their interests with the country’s aroused patriotic sentiments. Moving quickly in response to Roosevelt’s speech, public relations agencies launched an ad campaign that promoted a “fifth freedom”free enterprise. Armour and Company led the charge with a series of editorials explaining how the “modern corporation works for the nation as a wholenot merely for its own stockholders.” According to the ads, such a system “exalts the individual, recognizes that he is created in the image of God, and gives spiritual tone to the American system.” Other ads extolled “the simple economics of our American way of life.”

Since World War II, this sort of attempt to link corporations with the basic imagery of American patriotism has become virtually routine. And it has been successful to such an extent that today it almost sounds absurd to say something like, “One of the basic reasons for the American Revolution was colonial opposition to corporate power.”

In general, corporate image advertising is softly focused and the political message is subtle. But not always. An example of a not-so-subtle campaign was the $600,000 deal between Philip Morris and the National Archives to celebrate the Bicentennial of the Bill of Rights in 1991 with a traveling exhibit that brought one of the original copies of the Bill of Rights to all 50 states. The motivation behind the campaign could not have been more obvious. Faced with mounting restrictions on its ability to advertise its cigarettes, Philip Morris wanted to promote the idea that corporations, just like people, should be entitled to the free speech protections of the Constitution.

As I read books like Ray Raphael’s A People’s History of the American Revolution and Benjamin Woods Labaree’s The Boston Tea Party, I found little evidence that defending corporate prerogatives was anywhere to be found among the values and interests that the American rebels were fighting for. Quite the contrary. To a surprisingly degree, the American Revolution was directly and explicitly an anti-corporate revolt. Part of the backdrop for that revolt were the long-standing anti-corporate sentiments among lower class people such as indentured servants and conscript sailors. In the eighteenth century, following with the legislative suppression of corporate enterprise in Britain after the Bubble Act of 1719, anti-corporate views also became common among both French and English intellectuals, and some of those thinkers influenced cosmopolitan Americans such as Benjamin Franklin. Among British and French thinkers, corporate enterprise was considered synonymous with monopolya way for privileged elites to profit at the expense of the general public. This aspect of anti-corporate sentiment was a pervasive theme in Adam Smith’s Wealth of Nations. Smith wrote, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or some contrivance to raise prices.”

While traveling in England, Benjamin Franklin became friends with Smith, who read to him drafts of Wealth of Nations. Smith’s objections to corporations also included practical concerns. According to Smith, a core flaw of the corporation as an institutional form was the intrinsic lack of functional accountability caused by separating ownership from managementa problem he famously phrased as that of “other people’s money.” Smith wrote: “The directors of such companies … being the managers rather of other people’s money than their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private guild frequently watch over their own…. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.”

In support of his opinion, Smith cited a study by French economist Andre Morellet, who inventoried 55 European corporations that had all failed due to mismanagement.

In France, a group of laissez-faire economic thinkers known as the Physiocrats condemned corporations as manifestations of illegitimate royal privilege. So did the influential French economist Jacques Turgot, on similar grounds. During Benjamin Franklin’s visit to France in the 1760s, Franklin visited with both the Physiocrats and Turgot. Franklin’s 1769 book Positions to be Examined Regarding National Wealth shows these influences.

But while the anti-corporate sentiments of intellectuals and working class people provide a supportive, and perhaps necessary, context for the American Revolution, neither of those groups was in a position to mount a concerted rebellion of the sort that broke out in Boston, New York, and Philadelphia in 1773. That rebellion required a third group to mobilize: the merchant community.

Merchant resentments about British rule centered around concrete economic issues. As formalized in the Navigation Acts, British law aimed at maintaining the American colonies as producers of raw materials for British manufacturing and as captive markets for British goods. The Acts discouraged American manufacturing, prohibiting, for example, the casting of iron pots, as well as the development of infrastructure projects that might enhance any production other than raw materials for export.

Still, despite the unhappiness of the merchants with the subordinate economic role to which they were assigned, it appeared that the British were succeeding at keeping a lid on rebellious spirits. Among historians of the American Revolution, the years 1770 to 1773 are known as the “quiet period.” By rescinding all but the tea tax, the British leadership had shrewdly defused popular anger in the colonies caused by a series of taxes levied in 1770. Even the lingering tea tax was largely symbolic, since most tea consumed in the colonies actually arrived via Holland-based smugglers rather than legitimate British traders. Hard-core agitators such as Samuel Adams found themselves stymied. “Taxation without representation” was too abstract an issue to motivate people to rebel, when the item being taxed was plentifully available, tax-free. The pragmatic Lord Townsend, it appeared, had nixed the possibility of a revolt in the American colonies.

At the crux of these developments was the Boston Tea Party, the event that triggered a severe British crackdown, which in turn precipitated the American move to declare independence. The conventional depiction goes something like this: On a dark winter’s night in 1773, a band of “Mohawks,” decked out in the white man’s notion of Native American attire, mounts a mission of creative vandalism, a symbolic protest to dramatize their objection to “taxation without representation” by a tyrannical king. They board three ships bobbing at anchor in Boston Harbor. From the hold of each ship, they drag chests of tea onto the deck, chop them open, and unceremoniously toss bales of tea into the harbor.

It’s a piece of drama that captures America’s characteristic view of itself as a nation of plucky freedom fighters, teasing the arrogant masters into overreacting. Even today, when our military forces encircle the world, we still cast ourselves as the scrappy underdog—the wise-cracking GI defying Hitler’s war machine, the gladiator leading a slave revolt against Caesar, the tow-headed farm boy going one-on-one against Darth Vader. Those are all quintessentially American heroes. Even if the movie is set in ancient Rome or in a galaxy “far, far away,” the villains are easy to spot by their upper-class British accents.

What’s wrong with the conventional story? For starters, there was nothing symbolic about the event. The objective of the “Mohawks” was to destroy tea on a massive scale, and that mission succeeded quite fully. The scope of the destruction far surpassed the level of damage that would have been inflicted if the action had been intended merely to score a political point in theatrical fashion. In a three-hour period, the Bostonians turned approximately 120,000 pounds of dry tea into “harbor tea.” So much was dumped that the tea piled up in the shallow water and threatened to spill back onto the decks. The tea that was destroyed represented about 10 percent of the entire quantity consumed in the tea-happy American colonies per year and as much as 50 percent of the amount normally imported from England rather than smuggled from Holland and elsewhere.

Second, the Boston Tea Party can’t be explained merely as an outburst of nationalism. After all, colonial Americans still identified themselves as British. Nor was it an anti-monarchal uprising like the French Revolution, at least at the outset. Looking closely at the events that led up to that night, we see that it was a highly targeted attempt to block the British East India Company from carrying out a specific plan to monopolize American commodities markets, starting with tea. When respectable American businessmenincluding John Hancock, one of the richest men in Americatook the uncharacteristically radical action of dressing up in disguise and committing wholesale vandalism, the motivating force was not abstract. It was literally to defend their businesses. In other words, it was a highly pragmatic economic rebellion against an overbearing corporation, rather than a political rebellion against an oppressive government. Or more accurately, it was a rebellion against a corporation and a government that were thoroughly intertwined.

To understand why anti-corporate sentiments could run so strong even in the highest stratum of the American business community in 1773, it is important first to note that the corporate form, characterized by a charter and joint-stock ownership, was not the typical way businesses were organized in the colonies. Most businesses were owned by families or partnerships. They had no corporate charters, nor did they need them.

In the late 1760s, the East India Company entered a period of deepening crisis. During that decade, the shareholders twice voted to increase their annual dividend, first from 6 to 10 percent and then from 10 percent to 12.5 percent. Those increases squeezed profits at an inopportune time, because revenues suddenly came under serious pressure. Because of a famine in Bengal in 1769 and 1770, the Company’s tax collectors couldn’t extract as much revenue as usual from the Bengali peasantry. And in the American colonies, smuggled Dutch tea continued to crowd out English imports.

In 1772 a Europe-wide economic depression caused tea sales on the Continent to plunge. As the Company’s cash reserves dwindled, various suggestions for dealing with the crisis reached its managers. Among them was the proposal by a stockholder named Robert Herries, outlining a way for the Company to solve two problems at once—both the revenue shortfall and a glut of warehoused tea equal to three years of English domestic consumption. In a nutshell, Herries’ idea was that the Company should sell tea at drastically reduced prices on the European continent.

After considering the proposal, the managers concluded that tea dumped on the Continent would simply be smuggled back into England where it would erode domestic prices. They liked the dumping idea, but they had a different destination in mind: the American colonies, where they could undersell the Dutch smugglers. To assist the East India Company with the plan, Parliament agreed to suspend the duties on tea shipments normally collected at the British end, but Foreign Minister North insisted that the colonists still pay the tax collected on the American side.

When news of the plan reached America, intense agitation broke out in Boston, New York, and Philadelphia. Pamphleteers brought forth the familiar argument that “taxation without representation” was fundamentally unjust. Still, the business community, not normally disposed toward any sort of radical action, would not have become involved except for a second aspect of the policy—the plan by the East India Company to sell its tea exclusively through specially commissioned local consignees.

To the Tradesmen,
Mechanics, &c. of the
Province of Pennsylvania

… Hereafter, if they succeed, they will send their own Factors and Creatures, establish Houses amongst us. Ship us all other East-India goods; and in order to full freight their Ships, take in other kind of Goods at under Freight, or (more probably) ship them on their own Accounts to their own Factors, and undersell our Merchants, till they monopolize the whole Trade. Thus our Merchants are ruined, Ship Building ceases. They will then sell Goods at any exorbitant price. Our Artificers will be unemployed, and every Tradesman will groan under the dire Oppression.

The East India Company, if once they get Footing in this (once) happy country, will leave no Stone unturned to become your Masters. They are an opulent Body, and Money or Credit is not wanting amongst them They have a designing, depraved, and despotic Ministry to assist and support them. They themselves are well versed In Tyranny, Plunder, Oppression and Bloodshed. Whole Provinces labouring under the Distresses of Oppression, Slavery, Famine, and the Sword, are familiar to them. Thus they have enriched themselves,thus they are become the most powerful Trading Company in the Universe. …

 excerpts from a broadside signed “A Mechanic,” Philadelphia, December 4, 1773

 In other words, the East India Company planned to replace independent local merchants with a company-owned distribution system. Today, we would call the approach “vertical integration”where the oil company owns the wells, the refineries, and the gas stations. The colonists didn’t have such a term, but the implications of the British plan were readily grasped. In Philadelphia, New York, and Boston, pamphleteers laid out the scenario in precise detail, warning that if the British were to succeed in bringing the tea distribution system under the sole control of the East India Company, they would inevitably repeat the same scheme for other imported commodities.

Here was an issue that could move even well-to-do segments of the community to rebel. In selecting the consignees for Boston, Governor Hutchinson had committed a particularly foolish blunder. Hutchinson had named five men to be the local consignees: two were his own sons, one was his nephew, and the last two were personal friends. Notably absent from the list was the richest man in Boston, John Hancock. When Hancock learned that he had been excluded, he patched up a quarrel with Sam Adams and became one of Adams’ strongest supporters.

When the cargo ship Dartmouth arrived in Boston Harbor, a crowd of over 5,000 assembled at the Old South Meeting-house and voted unanimously in support of the proposition “that the tea should be returned to the place from whence it came.” Although the ship’s captain agreed to return to England without unloading the tea, the British officials refused to issue a pass allowing the ship to leave harbor. On the night of December 16, 1773, approximately 150 men assembled at the home of Benjamin Edes, founder of the Boston Gazette and Country Journal. They came from a broad range of backgrounds, reflecting the wide spectrum of support for the action. Some were apprentices, some were tradesmen, and some were wealthy owners of businesses. By dawn, the entire shipment of tea had been destroyed.

What is perhaps most interesting about the incident is the way in which the Boston establishment, which once had taken great pains keep its distance from the rebellious subculture of indentured servants and conscripted sailors, now embraced that cultureat least in symbolic fashion. For example, in 1770, only three years prior to the Boston Tea Party, John Adams had defended the redcoats who participated in the Boston Massacre against charges that they had committed murder. In court, Adams had appealed to racist prejudices in claiming that the appearance of the Afro-Indian sailor Crispus Attucks “would be enough to terrify any person.”

Yet in 1773, when Adams penned a rebellious letter to Massachusetts governor Thomas Hutchinson at the height of the tea crisis, he needed a pseudonym to maintain his anonymity and to signify the determination of the colonists. And the man whose name he selected was the same one that he had previously sought to discredit: Crispus Attucks.

The response of the British to the Boston Tea Party was predictable. Provoked and angry, Parliament struck back by passing the Intolerable Acts, a set of bare-knuckled reprisals that closed Boston Harbor and banned the Massachusetts assembly. George III vowed to bring the colonists to their knees. But instead of accomplishing the desired result of isolating and pacifying one radical city, the crackdown generated sympathy for Boston and drew the normally fractious colonies into a coordinated response. The American Revolution was underway.

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