17. Virginia Tobacco

The tobacco planters of Virginia continued, in the eighteenth century, to get into periods of economic difficulty, and the secular trend was ominous. The price that planters had to pay for slaves rose with the increased demand for slaves on South Carolina rice and indigo plantations. Thus, the common price of slaves rose from thirty pounds per head in 1741 to forty-six pounds in 1750 to fifty-eight pounds in the 1770s. Soil exhaustion also lowered the productivity of the tobacco plantations.

The tobacco planters continued to try to escape their dwindling fortunes on the market by seeking special privilege. A favorite device was a compulsory cartel, imposed by the state, to restrict tobacco production. Production quotas were then imposed on each plantation. But these restrictions did not have the desired effect of raising the price of a commodity that was grown on an international market; and curtailment in one area provided a lively inducement for other farmers to fill the gap by increasing their output. Moreover, the cartel’s schemes worked the greatest hardship on the small planter; tobacco was the major monetary medium in Virginia and Maryland and the small planter was forced to pay fixed sums—in tobacco—for governmental fees, taxes, and quitrents. Hence, forced restriction on the amount of tobacco grown was a great hardship on the small planter, whose fixed fees loomed larger in proportion to his total output. Thus, a Virginia-Maryland tobacco cartel scheme in the late 1720s fell through because the small farmers of Maryland would not comply unless Lord Baltimore reduced the quantity of tobacco levied for quitrents. When Lord Baltimore refused to agree, the scheme had to be abandoned.

The Virginia planters also tried to escape their difficulties by exploiting the British merchant-creditors, that is, by inducing the government to interfere in the process of collecting contracted debts. In 1708, Maryland passed a law decreeing that debtors might escape a debt by declaring bankruptcy, but the Crown disallowed the law on the cogent ground that the planters might easily defraud their creditors. Virginia, in 1749, allowed planters to pay debts in depreciated Virginia paper currency; all such laws were also disallowed by the Crown as invasion of the creditors’ property. And, in 1732, Parliament specified that the lands and slaves of the planters were liable for their debts.

The tobacco merchants have had a bad historical press. The general assumption has been that the merchants purchasing tobacco “exploited” the tobacco planters, doing so both as creditors and as payers of supposedly excessively low prices. But middlemen no more “exploit” their customers or suppliers than does any other group on the free market. All prices, whether selling or purchasing, are set by supply and demand in the ultimate service of consumers. Neither is anyone forced to go into debt; on the market, the creditor supplies a valuable service for which he is paid by the debtor.

There were essentially two methods by which planters sold their tobacco in the eighteenth century. The large coastal planters sold to London merchants on consignment, shipping the tobacco from their wharves for sale abroad; serving as agents of the planters, the merchants were obviously in no position to do any exploiting. The small upland planters, on the other hand, not being in a position to finance or take risks for the longer period, sold their tobacco outright to Scottish merchants, who established stores in Virginia to buy the product and then resold it at Glasgow.

The Scottish merchants did try to form agreements to lower the prices they had to pay for tobacco, but even if they had succeeded, this would not have been “exploitation,” for they would then have been forced to be content with smaller amounts of tobacco. The marginal tobacco farmers, hit by lower prices in relation to their costs, would have shifted to other lines of work. But such buyer-cartel agreements could not succeed in the face of free competition and the force of the market. Thus in 1770 an Alexandria merchant complained that “there are too many purchasers pushing one another,” and three years later protested that he only bid up the price of tobacco to meet competition: “I am sorry to observe that a few wrongheaded men have it in their power to affect the price.” And newly established merchants, attracted by any temporary success in pushing down prices, had to bid up their buying prices in order to attract the business of suppliers. Thus, merchant-factor James Robinson reported gloomily in 1769 that the price of tobacco would be “extravagantly high” because of amounts offered by new merchants in Fredericksburg and Falmouth. Some months later he reported with equal concern that he would have to abandon his refusal to buy tobacco for more than twenty-five shillings because of the competition of new stores. And when merchants at Dumfries, Virginia, tried to lower the buying prices in 1770, other merchants quickly increased their competing business in Fauquier County. Furthermore, if the planters felt that the merchants’ bids were too low, they could always decide to ship on consignment to London, as they did in 1773. As Professor James H. Soltow concluded in his admirable article on the subject:

From a business point of view, the tobacco buyer had not only a short-run interest in purchasing as much tobacco at as low a price as possible, but also a long-run interest in establishing and maintaining a market for his goods and services. Shrewd entrepreneurs, engaged in a competitive business, recognized that profits derived from efficient use of the capital invested in ships, stores, and goods. Robinson [a merchant-factor]... summarized the... policy of... tobacco purchasers in this way: “Such is the course of our trade that we must endeavor to buy all the tobacco we can at the different stores at whatever is the market price, the company not being willing to lose any of their interest in this branch to any person whatever.”*

*J. H. Soltow, “Scottish Traders in Virginia, 1750–1775,” Economic History Review (August 1959): 92.