The Boston Tea Party Was a Protest Against Monopoly

(Big issue 7-1-2019)


Happy fourth of July! Welcome to Big, a newsletter about the politics of monopoly. If you like it, you can sign up here.

Today I’m going to set the record straight on the Boston Tea Party and the East India Company. But first, here are a few articles worth reading.

Useful News:

The Republican lawmaker rattling Silicon Valley (Politico) by Nancy Scola and Cristiano Lima. This is a profile of Republican Senator Josh Hawley, who is leading a new generation of anti-monopoly conservatives.

How Digital Advertising Markets Really Work (The American Prospect) by Dina Srinivasan. This is an excellent description of why Google and Facebook have been able to undercut and dominate the online advertising space.

The Double Standard of Antitrust Law (The American Prospect) by Sanjutka Paul. This story describes how antitrust can be used as a sword to go after corporate concentration or as a weapon against the little guy. She includes one of my favorite quotes from Bork: “Antitrust is a subcategory of ideology.”

And now on to the show…

Monopoly and American Independence

On the night of December 16, 1773, a hundred men dressed as Native Americans boarded three trading ships docked at Griffin’s Wharf in Boston, and tossed a valuable cargo of tea overboard. British warships were in the harbor and didn’t act to stop them. Why? What was this all about?

Today we understand the Boston Tea Party as a protest against high taxes imposed by a distant government, a narrative used in 2010 by conservative protesters against President Barack Obama. But in fact, this protest was not an act of protest against high taxes. Colonists were upset that the crown was lowering taxes, specifically to help the East India Company - the 18th century version of a chain store - drive colonial tea merchants out of business. The tea party was a protest against monopolization, which colonists saw as not only oppressive but a national security threat.

Colonials loved their tea, which was a pretense to nobility, sexy and cool to drink with its fragrance and jolt of caffeine. Drinking tea - like having a fancy wig - was part of the colonial social structure. So the protest was about deep political values, and hitched itself to a symbolically important commodity. Even today, the symbols are familiar. This, for instance, is the flag of the East India Company. I’ve seen those stripes somewhere…

In the 1770s, the tea trade was a highly regulated global business. The East India Company, founded in 1600, brought tea to London from China, but it wasn’t allowed to sell direct. It had to auction its tea to middlemen in London, who would then sell it in the colonies. As a result, there was a thriving colonial business of tea merchants, including many key political leaders in port cities across America - men such as John Hancock, who would later become leaders in the revolution. These merchants sold East India tea, but they also sold rival tea, sometimes smuggled.

The East India Company was a stagnant and corrupt monopoly. Insiders manipulated the company’s stock, and officers used their position in the company to retire with massive wealth, with nouveau riche named “Nabobs” buying seats in Parliament. The company was so systemically important to British finance that falls in its stock caused banking crises. It was a Too Big to Fail corporation. By 1772, it was borrowing from the Bank of England to stay afloat.

Prime Minister Lord Frederick North sought to foist the financial problems of this giant corporation onto the colonies with the Tea Act. He allowed the company to sell tea directly to the colonies, instead of on the London auction market. He also gave the corporation the right to ship its tea at a low tax rate, while imposing a tax on those who imported non-company tea. The East India Company would turn into a sort of 1770s version of a chain store.

This seemed like a perfect solution. Company tea would be cheap and irresistible to tea-loving Americans and meddlesome middlemen would get wiped out. What could go wrong? Who didn’t love cheap tea?

But colonists were afraid, because they knew what happened when the company monopolized a trade. In 1769-1770, just a few years before the uprising in Boston, there was a drought in a company-ruled province, the Bengal province in India. During the drought, the corporation continued to collect heavy taxes, control trade in the region and store grains for its own soldiers. Roughly a million people died in the resulting famine. William Bolts, an ex-company merchant, blamed corporate officers who, “after exhibiting such scenes of barbarity as can scarcely be paralleled in the history of any country, have returned to England loaded with wealth.”

Across the British empire, including in the far-flung outpost of North America, colonists feared that what happened in Bengal could as easily happen to them. First tea, then more vital materials. But beyond fears over national security, there was more to the resistance to a monopoly organized around cheap tea. Trade, money, and corporate power, was the center of colonial politics.

The world of the colonies was no a set of highly regulated local economies. Tavern keepers were licensed and their prices posted for all to see. Magistrates set maximum prices for basic staples of food, sold at regular markets. Strict hours and physical boundaries of these markets served to protect consumers, while usury caps, or restrictions on interest, restrained money-lenders. There were strict rules organizing slavery. A dense network of rules and norms existed both because self-governing bodies existed early on, but also because hungry colonists, and enslaved people, rioted. And there was a rigid social structure of aristocrats and commoners in the colonies, similar to the home country.

Restructuring the tea trade threatened to overturn the power structure of the colonies. The Tea Act was a miscalculation, an attempt to use low prices to impose a new governing regime. After some attempts to negotiate, the British government simply imposed the laws on the colonies, thus proving valid the fears colonists had about political oppression. The colonists eventually engaged in an act of political desperation, which was throwing the company’s tea in the ocean to destroy it, with the British Navy in the harbor.

Why didn’t warships act? In 1773, colonists were fully British and thought of themselves as such. Their opposition to the East India Company was rooted in their belief that the behavior of the corporation violated their rights as Englishmen. The protest was at first an internecine struggle - an act of civil disobedience - about what it meant to be British. And firing on one’s own people is a tougher bar to meet for a military than opposing a rival faction in a revolution. The stubbornness of British leaders in protecting their corrupt monopoly ended up radicalizing colonists, but when they threw that tea in the harbor, they had not yet been radicalized to independence.

The Boston Tea Party was an act of political defiance, “a noble struggle for liberty,” as Hancock put it, a defense against what they perceived as enslavement and tyranny. It united the colonies, provoked the crown, and led to the revolution. But though the tea party has become a symbol of many things, the act of destroying tea was initially meant to protect small businesses in Boston from a global corporate monopoly.

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Matt Stoller

P.S. I drew much of this post from Benjamin Carp’s excellent book, Defiance of the Patriots: The Boston Tea Party and the Making of America.