WEBVTT NOTE 55. Tea Launches the Final Crisis 1 00:00:00.000 --> 00:00:06.760 Volume 3, Chapter 55, Tea Launches the Final Crisis 2 00:00:06.760 --> 00:00:13.740 The duty on tea, a modest levy of three pence per pound, was the only Townsend duty not 3 00:00:13.740 --> 00:00:21.660 repealed in 1770. The American boycott on British tea continued after 1770. Although 4 00:00:21.660 --> 00:00:27.520 the boycott was only partially observed in most of the ports, it was strictly maintained 5 00:00:27.520 --> 00:00:33.680 in the two major tea buying ports of New York and Philadelphia, which shifted to buying 6 00:00:33.680 --> 00:00:39.680 smuggled tea from Holland and the Dutch West Indies. Here was a happy marriage of principle 7 00:00:39.680 --> 00:00:45.560 and economic self-interest, for the price of smuggled tea was considerably lower than 8 00:00:45.560 --> 00:00:52.560 that imported from Great Britain. During 1771 and 1772, the Americans imported 580,000 pounds 9 00:00:52.560 --> 00:01:05.560 The United States imported 580,000 pounds of British tea, of which Boston imported 375,000 pounds, and the southern ports most of the remainder. 10 00:01:05.560 --> 00:01:18.560 In contrast to this average annual import of dutyable tea of 290,000 pounds, total American consumption per year was estimated at 6.5 million pounds. 11 00:01:18.560 --> 00:01:28.560 Even reducing the sum to half, British tea was not in these years able to capture over 8% of the vast American tea market. 12 00:01:28.560 --> 00:01:35.560 The British tea price could have been far more competitive with Dutch tea, even with the three-penny burden, 13 00:01:35.560 --> 00:01:45.560 because the Townsend Act had removed the shilling tax on imports of tea into England for all tea re-exported to America. 14 00:01:45.560 --> 00:02:11.560 In 1769, however, the East India Company, to which Britain had granted a monopoly on the import of tea—the tea was imported from China—followed the typical path of monopoly and raised the upset price it charged at auction from about two shillings three pence a pound to three shillings. 15 00:02:11.560 --> 00:02:20.560 Since tea in Holland sold for less than two shillings, the uneconomic status of British tea in the colonies became evident. 16 00:02:20.560 --> 00:02:24.560 The structure of the English tea trade was as follows. 17 00:02:24.560 --> 00:02:30.560 The East India Company monopoly imported tea from Canton, China, 18 00:02:30.560 --> 00:02:38.560 using its full governmental powers to rule India as the trading base for the lucrative China commerce. 19 00:02:38.560 --> 00:02:45.660 The company sold the tea at public auction, setting the minimum or upset price. 20 00:02:45.660 --> 00:02:55.660 English merchants bought it at auction and sold the tea to American importing merchants who in turn sold it to the retailers. 21 00:02:55.660 --> 00:03:05.660 American purchase of British tea was discouraged not only by the high price, but also by the irregular timing of the East India auctions, 22 00:03:05.660 --> 00:03:21.660 The price raising by the East India Company was a reflection as much of its growing financial difficulties as of its privileged monopoly status. 23 00:03:21.660 --> 00:03:31.660 The East India Company did not enjoy prosperity during the widespread economic boom of 1769-72. 24 00:03:31.660 --> 00:03:38.100 Its high price, coupled with the American tea boycott, caused millions of pounds of 25 00:03:38.100 --> 00:03:42.220 tea to pile up unsold in East India warehouses. 26 00:03:42.220 --> 00:03:49.500 Moreover, a powerful clique of speculators in East India stock insisted on paying a high 27 00:03:49.500 --> 00:03:56.420 dividend, thus hazardously running up the stock far above what was justified by the 28 00:03:56.420 --> 00:03:59.300 actual operations of the company. 29 00:03:59.300 --> 00:04:06.180 They paid the high dividend even though this burdened the company further by legally obligating 30 00:04:06.180 --> 00:04:11.660 it to pay an annual sum of £400,000 to the Crown. 31 00:04:11.660 --> 00:04:18.220 Furthermore, the company was legally liable for reimbursing the Crown for revenues foregone 32 00:04:18.220 --> 00:04:23.440 from exempting it from duties on tea re-exported to America. 33 00:04:23.440 --> 00:04:30.100 The loss of the American market caused the unpaid liability to pile up, reaching over 34 00:04:30.100 --> 00:04:37.100 700,000 pounds by September 1772. The company's dwindling sales, its over-purchase of tea 35 00:04:39.380 --> 00:04:45.580 in relation to the actual American market, and its heavy expenses in running the government 36 00:04:45.580 --> 00:04:52.580 of Bengal all contributed to making its position precarious. The East India Company, which 37 00:04:53.440 --> 00:05:03.440 The company lost money in Bengal, but the company bureaucrats there were able to garner large personal fortunes by plundering the natives. 38 00:05:03.440 --> 00:05:12.440 An Act of June 1772 eliminated any further need for company reimbursement of the government for loss of tax revenue. 39 00:05:12.440 --> 00:05:19.440 It also replaced two-fifths of the former import duty levied on the company's re-exported tea. 40 00:05:19.440 --> 00:05:24.800 But since little tea was being re-exported to America anyway, this extra burden proved 41 00:05:24.800 --> 00:05:26.040 to be academic. 42 00:05:26.040 --> 00:05:34.600 Finally, in mid-June, the great economic boom of 1770-72 followed the usual path of booms 43 00:05:34.600 --> 00:05:39.760 based upon credit expansion, financial crash and depression. 44 00:05:39.760 --> 00:05:46.400 A wave of failures of leading banks in London and Scotland brought about distress and a 45 00:05:46.400 --> 00:05:48.720 stock market crash. 46 00:05:48.720 --> 00:05:56.840 The stock boom had been fueled by bank credit expansion in London, Amsterdam and Paris. 47 00:05:56.840 --> 00:06:06.160 The general credit crash of mid-1772 hit particularly at the heavily overinflated East India shares, 48 00:06:06.160 --> 00:06:10.880 the price of which fell by 60 percent in the month of July alone. 49 00:06:10.880 --> 00:06:16.680 The crash of East India stock was also aggravated by a tax in parliament upon the company in 50 00:06:16.680 --> 00:06:24.200 in the spring of 1772 attacks because of its tyranny, plunder and rapacity as a private 51 00:06:24.200 --> 00:06:31.440 monopoly vested with state power in India. Neither the Whig calls for vigorous reform 52 00:06:31.440 --> 00:06:38.440 of the monopoly nor the Crown's drive for tight governmental control over its own creature 53 00:06:38.440 --> 00:06:45.720 was calculated to aid its financial fortunes. In September, the company passed its dividend 54 00:06:45.720 --> 00:06:49.520 and also defaulted on customs payments to the Treasury. 55 00:06:49.520 --> 00:06:54.040 Since these payments were important to the Treasury, the British government itself 56 00:06:54.040 --> 00:06:57.240 was now in deep financial trouble. 57 00:06:57.240 --> 00:07:01.400 The Crown then decided to effect a two-fold plan 58 00:07:01.400 --> 00:07:04.720 to relieve the affairs of the East India Company 59 00:07:04.720 --> 00:07:07.720 and save it from imminent bankruptcy 60 00:07:07.720 --> 00:07:11.000 and to move as a kind of quid pro quo 61 00:07:11.000 --> 00:07:15.000 to take over control of its unruly creature. 62 00:07:15.000 --> 00:07:20.680 The best way to relieve the company, in addition to a large parliamentary loan, seemed to be 63 00:07:20.680 --> 00:07:28.240 to sell some of the 17 million pound surplus inventory of East India Tea to the long-lost 64 00:07:28.240 --> 00:07:35.460 American market. And what better way to dump the tea than by lowering its price and expanding 65 00:07:35.460 --> 00:07:41.320 East India Company operations to direct sales to the colonies? 66 00:07:41.320 --> 00:07:46.520 Hence, the Tea Act of May 1773. 67 00:07:46.520 --> 00:07:54.420 The Tea Act, first, restored the full exemption, or drawback, of duties paid on tea imported 68 00:07:54.420 --> 00:07:58.560 into England and then re-exported to America. 69 00:07:58.560 --> 00:08:05.060 Second, it continued the old three-pence duty on American tea imports, despite the pleas 70 00:08:05.060 --> 00:08:10.760 of the East India Company, in order to gain some revenue and to preserve the principle 71 00:08:10.760 --> 00:08:26.760 and the full parliamentary taxation of American trade, but these provisions were relatively unimportant as they merely continued policies that had prevailed since 1767 and had provoked little clamor. 72 00:08:26.760 --> 00:08:33.760 The radical innovation, the deed that alarmed and provoked the Americans, was to extend the 73 00:08:34.920 --> 00:08:41.920 hated and feared East Indian monopoly to American shores. For the Tea Act authorized the East 74 00:08:44.160 --> 00:08:50.960 India Company to obtain a license from the Treasury and to export tea to America on its 75 00:08:50.960 --> 00:09:05.960 These sales, on all inventory of tea over 10 million pounds, could be made either to merchants it designated or to branch houses of its own in America. 76 00:09:05.960 --> 00:09:10.960 Here was a grievous threat indeed to the merchants of America. 77 00:09:10.960 --> 00:09:29.960 The East India Company could now employ its monopoly power to cut prices even below smuggling prices and to arrogate the entire American tea trade to a new vast network of its own agents, branches and favored merchants. 78 00:09:29.960 --> 00:09:38.960 New York and Philadelphia merchants in particular feared imminent ruin of their flourishing trade in smuggled Dutch tea. 79 00:09:38.960 --> 00:09:43.960 But the fears of American merchants were hardly confined to tea. 80 00:09:43.960 --> 00:09:58.960 They knew full well that the East India Company imported into England vast quantities of other commodities – silks, calicoes, spices, china ware, and so forth. 81 00:09:58.960 --> 00:10:06.960 And if now the East India Company were to take over the American tea business, could these commodities be far behind? 82 00:10:06.960 --> 00:10:13.960 Indeed, such a scheme was already being proposed to England by the Tory merchant of Philadelphia, Thomas Wharton. 83 00:10:13.960 --> 00:10:21.960 Philadelphia had already had bitter experience with East India Company machinations in other commodities than tea. 84 00:10:21.960 --> 00:10:29.960 In 1771, when Chinaware first began to be manufactured successfully in Philadelphia, 85 00:10:29.960 --> 00:10:37.120 The East India Company, monopoly importers of Chinaware into England, managed to manipulate 86 00:10:37.120 --> 00:10:45.200 the price to fall by one-fourth in order to destroy its newfound American competition. 87 00:10:45.200 --> 00:10:51.560 It is the curious position of some historians that to focus on mercantile opposition to 88 00:10:51.560 --> 00:10:59.080 the East India monopoly means to charge such hostility to the Tea Act with lacking principle, 89 00:10:59.080 --> 00:11:04.220 with being confined to economic self-interest and with lacking the support of the bulk of 90 00:11:04.220 --> 00:11:05.720 the people. 91 00:11:05.720 --> 00:11:16.540 On the contrary, there is no necessary contradiction between political principle and economic self-interest. 92 00:11:16.540 --> 00:11:22.300 Opposition to a governmentally privileged monopoly is in itself a high principle, which 93 00:11:22.300 --> 00:11:28.900 can be and was upheld by the American populace as well as by the merchants. 94 00:11:28.900 --> 00:11:34.320 The fact that the competing merchants would also have been driven to the wall by the East 95 00:11:34.320 --> 00:11:40.100 India monopoly was certainly a compelling reason for mercantile opposition to the Tea 96 00:11:40.100 --> 00:11:48.100 Act, but it did not conflict with the libertarian principles that generally animated American 97 00:11:48.100 --> 00:11:56.380 opinion. Quite the opposite. Defense of one's property and commerce against a privileged 98 00:11:56.380 --> 00:12:00.380 is required by libertarian principle. 99 00:12:00.380 --> 00:12:05.380 Liberty implies property rights and free trade. 100 00:12:05.380 --> 00:12:08.380 It does not contradict them. 101 00:12:08.380 --> 00:12:14.380 Historians as disparate as Robert E. Brown and James Truslow Adams 102 00:12:14.380 --> 00:12:18.380 agree in upholding the spurious contradiction. 103 00:12:18.380 --> 00:12:25.380 Thus Adams, generally pro-British, sneers at the anti-monopoly focus 104 00:12:25.380 --> 00:12:43.540 Brown, determinedly anti-British in accepting this fallacious dichotomy, tries oddly and 105 00:12:43.540 --> 00:12:49.340 unsuccessfully to assert that the main focus of American opposition to the Tea Act was 106 00:12:49.340 --> 00:12:53.800 on the tea tax and not on monopoly. 107 00:12:53.800 --> 00:12:59.040 In this way he hopes to salvage democratic principle in what would otherwise be a supposedly 108 00:12:59.040 --> 00:13:07.500 narrow, selfish economic ground for American resistance, but his attempt ignores the fact 109 00:13:07.500 --> 00:13:14.920 that the tea tax had been quietly on the books since 1767 and that no new tax or even more 110 00:13:14.920 --> 00:13:19.560 rigorous enforcement was here being imposed. 111 00:13:19.560 --> 00:13:26.680 Another vital factor in the colonists' opposition to the East India invasion was their horror 112 00:13:26.680 --> 00:13:34.720 at the brutal and rapacious record of East India Company government in Bengal, its depredations, 113 00:13:34.720 --> 00:13:41.400 monopoly and ruinous taxation, a record that had led directly to the disastrous Bengal 114 00:13:41.400 --> 00:13:49.400 A terrible famine of 1769-71, one of the most terrible famines in history. It killed 115 00:13:49.400 --> 00:13:57.280 millions, eradicating a full one-third of the population of Bengal. The spectre of that 116 00:13:57.280 --> 00:14:03.920 famine and of the East India Company tyranny that had brought it about was in the minds 117 00:14:03.920 --> 00:14:10.020 of the American people as they confronted the prospect of the East India Company extending 118 00:14:10.020 --> 00:14:16.440 and its tentacles to America. This horror at the record of the East India Company was 119 00:14:16.440 --> 00:14:23.440 expressed most forcefully and eloquently in the widely circulated pamphlet of Pennsylvania's 120 00:14:23.440 --> 00:14:31.400 eminent liberal leader, John Dickinson. There, the East India Company's conduct in Asia, 121 00:14:31.400 --> 00:14:38.360 for some years past, has given ample proof how little they regard the laws of nations, 122 00:14:38.360 --> 00:14:46.400 the Rights, Liberties or Lives of Men. They have levied war, excited rebellions, dethroned 123 00:14:46.400 --> 00:14:54.160 princes and sacrificed millions for the sake of gain. The revenue of mighty kingdoms have 124 00:14:54.160 --> 00:15:00.860 centered in their coffers, and these not being sufficient to glut their avarice, they have, 125 00:15:00.860 --> 00:15:08.120 by the most unparalleled barbarities, extortions and monopolies, stripped the miserable in 126 00:15:08.120 --> 00:15:15.880 Inhabitants of Their Property, and Reduced Whole Provinces to Indigence and Ruin. 127 00:15:15.880 --> 00:15:22.520 Fifteen hundred thousand perished by famine in one year, not because the earth denied 128 00:15:22.520 --> 00:15:29.760 its fruits, but this company and its servants engrossed all the necessaries of life and 129 00:15:29.760 --> 00:15:36.240 set them at so high a rate that the poor could not purchase them, thus having drained the 130 00:15:36.240 --> 00:15:43.160 The sources of that immense wealth they now it seems cast their eyes to America as a new 131 00:15:43.160 --> 00:15:50.780 threat who are on to exercise their talents of rapin, oppression and cruelty. 132 00:15:50.780 --> 00:15:56.040 The monopoly of tea is, I dare say, but a small part of the plan they have formed to 133 00:15:56.040 --> 00:15:58.720 strip us of our property. 134 00:15:58.720 --> 00:16:04.500 In coming to the aid of the near bankrupt East India Company, the British government 135 00:16:04.500 --> 00:16:12.340 did not neglect its quid pro quo. In two companion acts to the Tea Act, it took care to grant 136 00:16:12.340 --> 00:16:19.620 itself control of East India affairs and patronage. Thus, the top governors of India were now 137 00:16:19.620 --> 00:16:27.480 to be named by the government. This takeover, too, had grave repercussions in the colonies, 138 00:16:27.480 --> 00:16:32.900 for this involved a violation of the East India Company Charter by Great Britain, and 139 00:16:32.900 --> 00:16:39.380 The Americans feared nothing more than a threat of tampering with their precious colonial 140 00:16:39.380 --> 00:16:48.380 charters. Yet here was clear precedent for large-scale intervention. American opposition, 141 00:16:48.380 --> 00:16:54.860 particularly New York opposition, to the new Tea Policy, was whipped up by the brilliant 142 00:16:54.860 --> 00:17:01.980 theoretician of the Rockingham Whigs, Edmund Burke. Burke was appointed New York's London 143 00:17:01.980 --> 00:17:09.300 agent in late 1770, and his correspondence had great influence in forming opinion in 144 00:17:09.300 --> 00:17:15.340 that colony. Opposed to the record of the East India Company, and especially to the 145 00:17:15.340 --> 00:17:21.660 Crown's takeover, Burke bitterly attacked the King's friends and the Tories who were 146 00:17:21.660 --> 00:17:28.180 behind the Tea Act. He urged Americans to resist, pledging the full support of the English 147 00:17:28.180 --> 00:17:30.180 and the twigs in that effort.