Tobacco and Its Influence on the American Economy Tobacco trade has been an integral part of the American economy for centuries. From its early use by the Native American Indians to its adoption by the European settlers in the New World in the early 17th century, tobacco has played a significant role in early and modern America in both an economic and political sense. "By the advent of the Civil War, the Indian custom had been transformed into a significant American industry. " (The Story behind the Homestead and Museum)

The powerful modern American economy can be traced back to the early European settlers and their search for economic security and gain. The initial New World economy gradually developed into a successful farming economy and eventually into the complex industrial economy of today. (The U.S. Economy: A Brief History) In this process tobacco played an impart part in the founding of the present economy.

The very early history of the significance of tobacco for the American economy began in pre-Columbian times where it was used extensively by the indigenous inhabitants of the Western Hemisphere. Tobacco was introduced to Spain and Portugal in the sixteenth century, from where its popularity and usage spread throughout Europe and then to Africa and Asia. England received tobacco from its colonies in America as early as 1612. Settlers to the New World, such as John Rolfe were instrumental in cultivating the crop in Virginia. Tobacco became Virginia's leading economic export by 1619. The cultivation and export of tobacco was an extremely important part of the early American economy. It was even used as a form of currency in some states. "Tobacco continued to develop into an affluent crop and eventually was used as the basis of currency in some of the states." (International Tobacco Issue)

Tobacco has from the earliest times formed a vital part of the economy; its production is interlinked and interwoven with the growth of the U.S. economy in general. The use and economic viability of this product originates from the time that Columbus set foot in the New World. Tobacco became America's first economic export when Columbus shipped the product to Europe for consumption and sale. In effect tobacco has been a lucrative revenue source of the United States for more than 400 years. (Tobacco...Working for America)

The importance of tobacco for the early economic independence of the United States can be seen in the inclusion of the 'golden leaf' as a design element in buildings in Washington, D.C. Tobacco has generated thousands of jobs for the economy. "A study conducted by the American Economic Group for the Tobacco Institute indicates the tobacco industry's impact on the U.S. economy in 1994 was $54.3 billion in wages and other compensation." (ibid)

2. The Early Colonists

In their attempt to establish a young successful economy the early colonists discovered the value of tobacco cultivation and export. Other economic activities such as mining, glass making and ship building had not proved to be sufficiently lucrative enough avenues. One of the earliest tobacco planters James Rolfe began exporting tobacco. "By 1703, the colonies had exported 23 million pounds of tobacco to Europe -- a remarkable achievement considering the cargo limitations in ships of that era." (ibid)

An important historical aspect which motivated the early settlers to seek new and lucrative forms of income was the English policy of the economic control of colonialization through charter companies. Once the charter companies were not earning enough they sold the rights to the settlers. This means that the settlers were in effect left to their own devises and they were consequently motivated to find new lucrative sources of income -- such as tobacco planting and export.

England's success at colonizing what would become the United States was due in large part to its use of charter companies. Charter companies were groups of stockholders (usually merchants and wealthy landowners) who sought personal economic gain ... while the private sector financed the companies, the King provided each project with a charter or grant conferring economic rights as well as political and judicial authority. The colonies generally did not show quick profits, however, and the English investors often turned over their colonial charters to the settlers ... The colonists were left to build their own lives, their own communities, and their own economy -- in effect, to start constructing the rudiments of a new nation. (The U.S. Economy: A Brief History)

The revenue received from tobacco exports "laid the foundation for our infant nation's economic existence." (ibid) The tobacco leaf became so valuable and sought after...

Tobacco warehouses became some of the first industry buildings, and early warehouse receipts (for a 'hogshead' of tobacco) could be considered the first American currency. Fines, taxes and debts were settled in terms of tobacco. The considerable taxation on crops like tobacco was a catalyst for a little skirmish called the Revolutionary War. (Where We Come From)
Tobacco was also instrumental in helping the colonists during the American Revolution when it was used to pay the interest on loans outstanding to France and for the purchase of war materials. (ibid) The importance of tobacco during this time is emphasized by the words of George Washington:

George Washington, as Commander of the Revolutionary Army, issued a public appeal to supply his troops. Said the future President, "If you can't send money, send tobacco." Washington was himself a tobacco farmer, as was his colleague Thomas Jefferson, the nation's third President. (ibid)

The initial impetus towards the export of tobacco was fueled by the realization among the colonist that if they could be the sole supplier of the product to England, then this would provide a reliable economic basis for future development. The economies many areas soon came to be dependent on the export of tobacco as a prime source of income.

What early colonial prosperity there was resulted from trapping and trading in furs. In addition, fishing was a primary source of wealth in Massachusetts. But throughout the colonies, people lived primarily on small farms and were self-sufficient. In the few small cities and among the larger plantations of North Carolina, South Carolina, and Virginia, some necessities and virtually all luxuries were imported in return for tobacco, rice, and indigo (blue dye) exports.

(The U.S. Economy: A Brief History)

One of the areas in which tobacco production flourished was Virginia. The early colonists in this area soon discovered that they needed a more lucrative source of income in order to sustain the colony.

... The colonists quickly discovered that Virginia lacked the equivalent mineral resources of the Inca and Aztec civilizations - this particular colony based at Jamestown could not survive on stealing gold and silver from the natives further inland. Virginia became an agricultural colony, and a viable economic operation, only after John Rolfe developed a strain of tobacco that provided a smoother, gentler smoke in the pipes of his day. (The Fundamental Role of Tobacco in Shaping Virginia Society)

Tobacco flourished in Virginia and soon it was being sold in the colonies as it was in England. However, the Virginian planters were restricted by the laws imposed by England which diverted most of the profits to that country, leaving the colonists with relatively meager earnings.

The mercantile concept steered profits to England, and reduced the money paid to the colonists in Virginia for the raw material (tobacco). Colonial trade from Virginia was constrained so England could grow in power compared to rivals like France or Spain - but the colonial producers got the 'short end of the stick' in the process. (ibid)

These restrictions resulted in many of the tobacco producers and planters such as John Rolfe turning to smuggling to avoid the British taxation. Another effect of these restrictions was that the tobacco planters became more focused on quantity rather than quality; they could not control the sale of the produce but could control the amount that was produced.

Tobacco growing also required a large labor force and this led to the need to import labor in order to achieve high production rates. Economically this meant that the survival of the tobacco industry was dependent on slave labor. "If the colony's economy had not been dependent upon export of a product that required a large labor force to produce, the economic rationale for slavery would have been much less." (ibid)

The tobacco production in Virginia continued to increase and the amount of tobacco exported to Great Britain "rose from twenty thousand pounds in 1617 to over 40 million pounds in 1727, and even as the agricultural economy became diversified after 1700, colonists continued to produce ever larger crops of tobacco," and "by 1775, not only England but much of Europe depended on the Chesapeake for tobacco." ("Tobacco")

While the American and French revolutions resulted in a temporary decline in demand for tobacco on Europe, there was an increasing domestic market and the European market revived considerably after 1815. This resulted in increased production in various areas including North Carolina and the…