31. Economics Begins to Dissolve the Theocracy: The Failure of Wage and Price Controls

0:00Volume 1, Chapter 31, Economics Begins to Dissolve the Theocracy, The Failure of Wage and Price Control. From the first, the Massachusetts oligarchy, seeing that in the New World land was peculiarly abundant in relation to labor, tried by law to push down the wage rates that that they had to pay as merchants or landowners. Maximum wage controls were persistently imposed. John Winthrop set the tone in 1633, complaining that the scarcity of workmen has caused them to raise their wages to an excessive rate. What else was supposed to happen with the scarce product? As in the South, there were at the base of New England's economic structure indentured servants and negro slaves who sometimes were farm labor but mostly were artisans, helpers and domestic servants. After the servants' terms expired, they received small grants of land and became farmer-settlers. The Massachusetts gentry also supplemented this system of labor with general compulsory service in harvesting neighboring farms, a neat way of exploiting and the local citizenry at wage rates far below the market.

1:20Maximum wage control always aggravates a shortage of labor, as employers will not be able to obtain needed workers at the statutory price. In trying to force labor to be cheaper than its price on the free market, the gentry only made it more difficult for employers to obtain that labor. By 1640, Winthrop was admitting that Massachusetts had found by experience that it would not avail by any law to redress the excessive rates of laborers and workmen's wages and so forth. For being restrained, they would either remove to other places where they might have more, or else, being able to live by planting or other employments of their own, Of course, one method of alleviating this induced shortage was by using the forced labor of slavery, servitude and compulsory harvest service.

2:22Thus, one intervention by violence in the market created conditions impelling a further and stronger intervention. But apart from forced labor, the Massachusetts authorities, as we have noted, found it extremely difficult to enforce maximum wage control. The first maximum wage law was enacted by Massachusetts as early as 1630. Due to the high wages commanded by the scarcity of construction craftsmen, the law concentrated on Maximum Wage Rates in the Building Trades, Carpenters, Bricklayers, and so forth, were limited to two shillings a day and any payment above this rate would subject both the employer and the worker to punishment.

3:12For instance, a buying cartel of employers established by the law punished the recalcitrant employer who decided to break ranks. Almost immediately the magistrates decided to imbibe more of the magic medicine and legal wage rates were pushed down to 16 pence a day for master carpenters and bricklayers and correspondingly lower for other laborers. But the economic laws of the market made enforcement hopeless and after only six months the General Court repealed the laws and ordered all wages to be left free and at liberty as men shall But Massachusetts Bay was not to remain wise for long. By 1633, the general court became horrified again at higher wage rates in construction and other trades, and at the propensity of the working classes to rise above their supposedly unpointed station in life by relaxing more and by spending their wages on luxuries, denouncing the great extortion by diverse, The Law of 1633 decreed a maximum of 2 shillings a day without board and 14 pence with board for the wages of sawers, carpenters, masons, bricklayers, and so forth.

4:47Top-rate laborers were limited to 18 pence without. These rates were approximately double those of England for skilled craftsmen and treble for unskilled laborers. Constables were to set the wages of lesser laborers. Penalties were levied on the employers and the wage earners who violated the law. Sensing that maximum controls below the market wage led to a shortage of labor, The General Court decreed that no idleness was to be permitted. In effect, minimum hours were decreed in order to bolster the maximum wage law, another form of compulsory labor. Workmen were ordered to work the whole day, allowing convenient time for food and rest.

5:36Interestingly, the General Court soon decided to make an exception for the government itself, A combination of the carrot and the stick was used. Government officials were allowed to award such extraordinary wages as they shall judge the work to deserve. On the other hand, they were empowered to send town constables to conscript laborers as the need arose. Although merchants were happy to join the landed oligarchy and the Puritan zealots in forcing down the wage rates of laborers, they were scarcely as happy about maximum controls on selling prices.

6:25The gentry were eager, however, to force down the prices of products they needed to buy. A blend of mercantilist fallacies and Puritan suspicion of commerce, the result was persistent attempts to force commodities below their market prices. Having little conception of the function of the price system on the free market, the Massachusetts authorities also felt that maximum price control would bolster the maximum wage rate program. There is no understanding that general movements in prices and wages are governed by the supply of and demand for money, and that this too can best work itself out on the free market.

7:13Corn was the major monetary medium of the North, and in 1630 Massachusetts set the sterling price of corn at six shillings per bushel. Failing to work, this control was repealed In 1633, however, maximum price controls were reimposed as an auxiliary to the wage controls. The massive wage laws of 1633 were quickly discovered to be a failure. Once again, the quiet but powerful economic laws of the market had triumphed over the with dramatic decrees of the coercive state. After one year, the actual wage rates were fifty percent higher than the statutory levels. At that point, the general court repealed the penalties against paying, but retained those against receiving wages above the fixed legal rate. While, in fact, no employer had ever been tried or penalized under the old Act, the wage law was now an open and flagrant piece of class legislation. This was nothing new, however, as there were ample precedents in English maximum wage laws since the early 15th century. Another change made in 1634 allowed a little flexibility in decreed prices

8:44and wages by permitting each town to alter the legal rate in case of disputes. Only a A year later, the general court, despairing of the continued failure of the law to take hold, repealed the comprehensive wage controls and the auxiliary price controls. Just before this comprehensive repeal, the courts had apparently been driven by the failure to inflict even harsher penalties. Fines had been so heavy that two workers were imprisoned for failure to pay. The authorities were at the crossroads. Should they begin to impose on and Workers Violating Clearly Unworkable Economic Decrees, the Sort of Punishment Meted Out to Heretics or to Critics of the Government, Happily, Common Sense, in this case, finally prevailed. Made wary by its thundering failure, the theocracy no longer attempted a comprehensive planned economy in Massachusetts Bay. From then on, it was content to engage in annoying but not fatal hit-and-run harassments of the market. Penalties were made discretionary and in 1636 wage and price regulations were transferred by the provincial government to

10:01the individual towns as suggested by the leading Puritan divine, Reverend John Cotton. The general court was supposed to exercise overall supervision but exerted no systematic control. All by each town, as had been anticipated, was even more ineffective than an overall plan because each town, bidding against the others for laborers, competitively bid wages up to their market levels. The general court wailed that all this was to get the great dishonor of God, the scandal of the gospel, and the grief of diverse of God's people. A committee of the most eminent oligarchs of the Bay Colony was appointed to suggest Most Remedies but Could Think of No Solution Of the towns, Dorchester was perhaps the most eager to impose wage controls.

10:55During the Pequot War, and again in 1642, it combined maximum wages with conscription of any laborer unwilling to work and to work long enough at the low rates. Bingham also enacted a maximum wage program in 1641, and Salem was active in prosecuting wage offenders. In 1635, the year of the repeal of the Wage and Price Plan, the Massachusetts authorities tried a new angle. Under the cloak of a desire to combat monopolizing, the Massachusetts government created a legal monopoly of nine men, one from each of the existing towns, for for Purchasing Any Goods from Incoming Ships. This import monopoly was to board all the ships before anyone else, decide on the prices it would pay, and then buy the goods and limit itself to resale at a fixed 5% profit. But this attempt to combine monopoly with maximum and Price Control, failed also. The outlawing of competing buyers could not be enforced, and the import monopoly had to be repealed within four months. What ensued was far better

12:15but was still not pure freedom of entry. Instead, licensing was required of all importers with preference usually given to friends of the government. Generally, the merchants were were the most progressive, worldly, and cosmopolitan element in Massachusetts life. The merchants were able to gain political control of the growing commercial hub of Boston by the mid-1630s. But the rest of Massachusetts remained in the hands of a right alliance of Puritan zealots and landed gentry who dominated the magistrate's council and the governorship. During the decade of the 1630s, only two out of 22 magistrates were merchants, one of these being the Hutchinsonian leader, William Coddington. This reflected the occupational differences of their native England. The gentry had, by and large, been minor gentry in rural England, while the merchants usually hailed from London or other urban centers. In contrast to the authoritarian and Theocratic Gentry, the merchants had a far more individualist and independent spirit and often opposed to the Massachusetts oligarchy. It was no accident that almost all the merchants

13:35championed the Hutchinsonian movement, including Coddington, John Cogshill and the Hutchinson family itself. In spite of the earlier failures, Massachusetts tried to resume its harassment and Regulation of the Merchants, but even more sporadically than in the case of wages. Millers were fined for charging what were arbitrarily termed excessive prices for their flour. A woodmaker was fined in 1639 for charging the Boston government excessive prices for making Boston's stocks. And, as Professor Richard Morris notes, the General Court, with with great Puritan humor sentenced him, in addition, to sit in the stocks he himself had made. Heavy fines and Puritan denunciations were also the lot of merchants supposedly overcharging for nails, gold buttons and other commodities. The Puritan Church was quick to condemn these merchants and insisted on penitence for this dishonor of God's name in order to regain membership in the Church.

14:43The most notable case of persecution of a merchant occurred in 1639. Robert Kane, a leading Boston importer and large investor in the Massachusetts Bay Company, and the devout brother-in-law of Reverend John Wilson, was found guilty in general court of gaining excess profit, including a markup of over 150 percent on some items. The authorities This displayed once more their profound ignorance of the functions of profit and loss in the market economy. Kane was especially aggrieved because there was no law on the books regulating profits. In contrast, the main court, in the case of Cleve v. Winter, 1640, dismissed charges against a merchant for setting excessive prices on the grounds that it was not legitimate to regulate a man's profit in trade.

15:38So a sounder strain of thought did exist, despite the official view. Massachusetts' sister colonies also tried to impose a theocratic planned economy. As we might have expected, the effort of New Haven Colony, founded in distaste for the alleged laxity of Massachusetts Puritanism, was the most comprehensive. The New Haven Act of 1640 established fixed profit markups for varying grades for differing types of trade, three pence in the shilling, for example, for retail of English imports, and less for wholesale. Prices were supposed to be proportionate to risk for colonial products. Above all, a highly detailed list of maximum wage rates for each occupation was issued.

16:28A year later an ambitious new schedule was decreed, pushing down wage rates even further. But even fanatical New Haven could not conquer economic law, and only nine months later the authorities were forced to admit defeat and the entire program was repealed. After that resounding failure, no further comprehensive controls were attempted at New Comprehensive wage control was also attempted in Connecticut. An abortive regulation of wages was imposed in early 1640, but repealed later the same year. The following year, Connecticut, again alarmed about excessive and rising wages, with men a law unto themselves, enacted a maximum wage scale for the United States.

17:21for each occupation. However, instead of the heavy fines imposed by Massachusetts, the only prescribed penalty was censure by the colony's general court. Because the monetary medium of Connecticut was corn, wheat or rye, maximum wage legislation to be effective depended on minimum rates of exchange of these commodities in terms of shillings. Otherwise, maximum Minimum wages and shillings would be effectively negated by declines in the shilling prices of corn. Minimum corn, wheat and rye prices were, accordingly, fixed at legal tender for wage and other contracts. A slight reduction of wheat and corn prices, however, was allowed in 1644. And finally, in 1650, Connecticut also abandoned the foolhardy attempt to plan the Price and Wage Structure of the Colonies' Economy.