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America's First Wage and Price Controls

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03/01/2000Clifford F. Thies

The Free Market 18, no. 3 (March 2000)

 

America' s first wage and price controls were enacted in Massachusetts, a little more than a hundred years after the first pilgrims arrived. The opportunities available in the New World combined with a strong work ethic were raising the wages of working men, to the consternation of their employers. In 1630, the colony' s Court of Assistants capped wages for several categories of skilled workers and for common laborers at 16 pence and 12 pence per day.

Such interference with wages would not have been unusual in the Old World, where the State routinely set wages and prices by decree, reserved certain occupations for members of guilds, and granted monopoly-like charters to many categories of businessmen.

Indeed, Plymouth Bay was originally founded as a commune, and converted into a private-property colony only after three years of extreme hardship.

According to John Winthrop, the Governor of Massachusetts in 1630, Puritanism involved two principles of civil government. First, that no commonwealth could be founded except through the consent of those joining into it. And, second, that those who join into a commonwealth have an interest in each other.

Thus, the radical principle of consent, as expressed in the Mayflower Compact, was eroded by another principle denying the moral autonomy of those joining into commonwealths. It was as if people were only free while they were in anarchy, and checked their freedom at the gate when they entered into a commonwealth.

The first wage decree of the colony did not prove successful, and the very next year the Court of Assistants decreed that wages should be lefte free and att libertie as men shall reasonably agree.

Two years later, in 1633, the General Court (i.e., the combined Courts of the Deputies and of the Assistants) was at it again, reimposing wage controls because of the great extortion used by dyvers persons of little conscience.  High wages were leading to vaine and idle waste of much precious tyme, and expense of those immoderate gaynes in wyne, stronge water, and other superfluities. Such extravagances must certainly have been an assault on the mind of a Puritan!

The General Court furthermore imposed a maximum markup of 33 percent on the prices of commodities sold by merchants, least the honest and conscionsable workmen should be wronged or discouraged by excessive prices of those commodities which are necessary for their life and comfort. Again, the law could not be enforced. Therefore, in 1634, the price of corn was left at liberty to be solde (at such prices) as man can agree. And, later in the same year, wages were deregulated.

In 1635, the General Court ruled that the lawe that prohibited takeing above the 3½ pence in the shilling profit for commodities, and that which restrained workemen' s wages to a certainty, . . . are repealed.

In 1636, a third attempt was made to control wages (but not prices). This time, following John Cotton' s (perhaps the leading Puritan theologian of his day) treatise Moses His Judicialls, the General Court delegated authority over wages to the towns of the colony. Similar laws were passed in 1648, 1660 and 1672. Mostly, the town ordinances were useless. Governor Winthrop opined that this was because of the mobility of labor in the New World.

In 1639, Robert Keayne, one of the most successful Boston merchants of his day, was tried for the crime of oppression, or price gouging. Specifically, for taking more than six pence in a shilling profit (i.e., more than 33 percent), in some above eight-pence (i.e., more than 50 percent), and, in some small things, above two for one, in the sale of nails, thread, buttons, and other such items.

For his crime, Keayne was fined £200 by the court, subsequently lowered to £80, and then censured by the Boston First Church for selling his wares at excessive Rates, to the Dishonor of God' s Name. Following Keayne' s conviction, John Cotton delivered a sermon on business ethics. The false ethical precept, supposedly followed by Keayne, was that a man might sell as dear as he can, and buy as cheap as he can. The true ethical precept is that a man may not sell above the current price, i.e., the price that is usual in the time and place.

When a man loses money for want of his own skill, that would be his own fault, and he must not lay the loss upon another. And, when a man loses money because of bad luck, such as a shipwreck, that is a loss cast upon him by providence and that too he may not lay upon another.

On the other hand, according to the good minister, where there is scarcity of the commodity, men may raise their price. In other words, the just price is the market price, the one that sets supply equal to demand, regardless of profit or loss to the businessman. When times are stable, this would in fact be the usual or customary price. But, when markets are disrupted, who knows what the price will be. Thus, according to Cotton' s very reasoning, there is no way for the government to say that a markup over cost of 33 percent, or 50 percent, or even 100 percent is unjust.

When Robert Keayne died in 1656 he left the then enormous estate of £4,000. From out of the wealth he amassed over his lifetime, he gave one-third in benefactions to his community. Among his specific gifts were money for a new town hall and marketplace, for a granary, a cistern, and a library, for endowments for Harvard College, for the artillery company of the colony' s militia, and for a school for Indian children.

Keayne thus demonstrated that we are indeed our brother' s keeper, but not in the sense countenanced by Cotton, of using the government to restrain our brother' s liberty, but in being honest in our business, and in being generous in our charity.

 

Clifford F. Thies is professor of economics and finance at Shenandoah University.

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Contact Clifford F. Thies

Clifford F. Thies is the Eldon R. Lindsay Chair of Free Enterprise at Shenandoah University in Winchester, Virginia.

Cite This Article

Thies, Clifford F. "America' s First Wage and Price Controls." The Free Market 18, no. 3 (March 2000).

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