The great tobacco depression of the early 1700s was a result of over dependence on tobacco as the main cash crop in the British colonies of Virginia, Maryland, and the Carolinas. The period was probably America’s first depression as trade and commerce declined. Prices of tobacco dropped below the sum of production costs, shipping costs, and taxes. The drop in prices was a result of overproduction in previous years, the British monopoly on trade via the Navigation Acts, and the War of the Spanish Succession.
The large planters, who shipped massive quantities of tobacco, often in hogs-head barrels directly to warehouses and auction houses in Scotland, were able to make a nominal profit during these years. This depression, however, would finally drive small farmers and non-slave labor out of the tobacco business and push large growers to the slave system in an attempt to reduce costs. The widespread loss of planter income filtered down, ruining the businesses of town merchants. One positive result of the tobacco depression was the growth of colonial manufacturing, as planters responded to high import prices by creating their own manufactured goods on-site.
Virginia, Maryland, and the Carolinas had experienced an economic boom from the 1600s to 1703 as Europe acquired a taste for smoking tobacco. After Bacon’s Rebellion (1676), the tobacco industry in these colonies became a controlled monopoly with the king and the colonial governors setting taxes on production and controlling shipping rates, thereby raising costs for growers. In addition, speculators had encouraged overproduction of tobacco in the American colonies to meet an expected increase in demand for tobacco in Europe due to the coming war in Europe. The war that came, known as the War of the Spanish Succession (or Queen Anne’s War in the colonies), was a war between France and the anti-French alliance of England, Austria, Holland, and Prussia.
Tobacco demand did not meet expectations, however, and prices fell. Prices in the fur trade in the colonies also fell because of overproduction. The downturn in these commodities brought shipping on America’s East Coast to a standstill. The War of the Spanish Succession had also disrupted shipping, creating high prices and shortages of manufactured goods. Planters were often forced to ship their commodities below the cost of production because they needed to acquire goods from England in exchange.
In response, the larger planters in the colonies began to manufacture more goods on their plantations. Plantations became tobacco factories, and coopers and black-smiths were trained to make barrels for shipping tobacco. Plantations produced nails as iron became available from colonial furnaces, and bricks were made on-site. Food was grown to support plantation communities of more than 200 people.Plantation owners found that they could only profit with large shipments of low-cost tobacco. One way to reduce the cost of tobacco was to reduce the costs of production, and that meant turning to slave labor. At the beginning of the tobacco depression, there were only 6,000 slaves in Virginia; by 1730 that number reached 28,500 as planters. Larger plantations required as many as 200 slaves to operate. The large plantations could buffer themselves from price fluctuation because they could afford to hold their product off the market when prices were low. They also achieved a degree of independence when they began manufacturing their own hard goods locally.
Although larger plantations were able to adapt with their new factory system and slave labor, smaller planters were devastated. These smaller planters had high debt, and the depression caused numerous bankruptcies. The depression ended the small planter, tenant farmer, and white farm labor systems in the British colonies.The tobacco depression did not lead to more crop diversification but to a diversification into manufacturing. Plantations started to manufacture cloth and shoes. Hard cider was produced in tough times to replace imported rum and wine. Many planters, including Governor William Berkeley, even looked to producing iron and invested in early iron works. They believed freedom from English goods would allow the planters to demand a higher price for their tobacco. Some southern colonies even began to grow rice as a cash crop. The New England colonies, while affected by the shipping decline, still maintained an active trade in salted fish.
The southern planters also looked to other unexpected means of reducing labor costs. Some Maryland planters experimented with the slavery “task” system in which the slaves worked a daily quota on the plantation but were given their own land to farm to feed their families. Slaves were even allowed to own a musket to hunt food. The task system allowed the planter to reduce the costs of caring for and feeding his slaves. Clearly, the tobacco depression brought not only lower commodity prices but also major changes to the colonial plantation system in America.
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