Royal grants had been around for hundreds of years, and monarchies across Europe had used proprietary charters to accomplish a variety of purposes. But Elizabeth I had gone too far. She had already issued hundreds of patents to generate revenue and reward favorites, even if the recipient had no experience in the designated field. When the queen allowed the grants to be challenged in court in 1601, the lawyers lined up.¹

Three years earlier, she had issued a patent for the manufacture and distribution of playing cards to Edward Darcy, a “Groom” in her Privy Council. Elizabeth claimed that playing cards were promoting idleness and needed to be limited with a monopoly charter. But the choice of Darcy was clearly a reward for loyalty, as he lacked expertise in the area.

When a London merchant named Thomas Allein flouted the grant and imported his own cards, Darcy sued. Allein himself was a member of the Worshipful Company of Haberdashers, an early guild that engaged in its own restraint on competition. But to many observers a merchant‐driven trade guild differed fundamentally from a royally issued monopoly. Allein won the case, an early victory in the long struggle to free commerce from government direction.

Edward Coke, a renowned barrister, was then England's attorney general, having previously served as Speaker of the House of Commons, and he litigated the case on behalf of the state. Yet he had a long history supporting artisans and guild members, and many felt his true sentiments lay with the defendant. In reporting the decision, he called Darcy's patent an “odious monopoly.” This was not about laissez‐faire, as Coke had actually represented Allein's guild in its previous efforts to squeeze out new competitors.²

Likewise, Chief Justice John Popham, who decided for Allein, had himself benefitted from royal charters as a leading investor in the Plymouth Company and its settlement of what is now part of Maine (known in the 17th century as the Popham Colony). He was also deeply enmeshed in the power politics of the era, sentencing rival venturer Sir Walter Raleigh, who had helped settle Virginia, to torture and imprisonment.

Still, Darcy v Allein served as a foundation for challenges to the monarch's ability to confer broad privileges without criteria or limitations. Elizabeth and then her successor, James I, continued to issue hundreds of grants, but then Parliament put its foot down. In 1623 it passed the Statute on Monopolies, which explicitly restricted patents to 14 years maximum. It also required some novelty and mastery in the recipient (the “first and true inventor”), and some degree of public purpose. Coke helped to draft the legislation and advocate its passage in Parliament. It was an important early step in promoting a right to compete.

Both the case and the statute proved to be catalysts for invention and the democratization of innovation that would help unleash the Industrial Revolution. Entrepreneurs of all kinds, seeing that protections were now open to merit rather than connections, saw their opportunity. By 1800 the Crown was registering dozens of patents a year, with critical new technologies building on one another as never before. That same spirit spread throughout the world, most notably to the colonies that would become the United States. Writing 200 years after the statute, Abraham Lincoln, the only U.S. president to hold a patent, said it had “added the fuel of interest to the fire of genius in the discovery of new and useful things.”³

More broadly, the case and the statute helped usher in England's political, religious, and economic upheaval, culminating in the Glorious Revolution of 1688. The tumult transformed the legal and institutional framework, altering both the political and the economic landscapes and empowering merchants, inventors, and nascent manufacturers. American entrepreneurship took root in this fertile ground.⁴

Old World Meets New Opportunities

It was a remarkable era, full of burgeoning ideas, political upheaval, new technologies, and considerable energy. By 1600, the economy in Europe – especially England and the Netherlands – was bustling. The population was growing, and rising literacy encouraged new generations to rise above their station. The spread of Protestantism likewise went along with many challenges to orthodoxy and traditional social structures. Scientific thinking sparked not only fundamental ways of understanding the world but also mundane mechanical inventiveness and tinkering. New technologies such as transoceanic ships and better tools for navigation were creating opportunities in far‐off and unexplored parts of the world.⁵ This soon extended to political and economic liberties, challenging the unquestioned authority and power of monarchies and large landowners.⁶

Other parts of Europe, however enlightened, were slow to encourage entrepreneurs. French kings actually discouraged aristocrats from engaging in trade, taking titles from those who did. Their system of tolls and seigneurial or hereditary privileges checked the development of a nationwide market, even as the economy was among the wealthiest in Europe. The monarchy eventually sought to catch up in technological development in the mid‐1700s, but even then it focused on standards and state‐sponsored prizes rather than democratized patents. In Germany, the farsighted Frederick the Great sought to enact reforms, but his military state limited the ability of real transformation.⁷

The New World initially promised more of the same. Monarchs across Europe saw the Americas as a chance to enrich their kingdoms, dispense favors, or solve problems, relying on traditional notions of power and authority. The theory of “mercantilism” – using colonies and the new merchant class to expand the country's coffers – took hold. Monarchs stepped up their issue of charters and other privileges in order to generate investment in these emerging opportunities.

The Entrepreneurial Breakthrough

English and Dutch rulers were certainly eager to build up colonial bases to rival those of larger rivals, but their fragile geopolitical position induced them to make substantial accommodations to do so. They issued charters that gave settlers a remarkable degree of freedom from royal control. To sustain the faltering settlement of Virginia, England gave “headright” grants to non‐gentry settlers, a change that has been characterized as “the start of democracy in the U.S.”⁸ The extreme version was Rhode Island, whose 1663 charter from the newly restored King Charles II granted what was practically self‐rule with full freedom of religion – and which fostered an intense spirit of entrepreneurship.⁹ Other colonies, such as Massachusetts and Pennsylvania, arose in part from the need to find an outlet for religious dissenters, which further encouraged ordinary people to settle and make their way in the world.

The English and Dutch also brought their cultural, political, and legal innovations, all fostering this remarkable commercial orientation. The relative poverty of their northern colonial lands induced them to pay more respect to the needs of merchants, and these charters enabled settlers to largely control their destinies. English monarchs were relatively weak, and the independent Dutch Republic, newly separated from Spain, was a commercial state at its core (it did not even name a monarch until after 1800). Protestant churches were likewise weaker there than in Catholic Spain and Portugal.

That commercial orientation included contract law and insurance, legal mechanisms that empowered private economic activity while protecting property and limiting risk. With these innovations, wealth shifted from inflexible land‐based assets to more fluid, marketable forms – capital. Joint stock companies, stock exchanges, and other financial institutions turned wealth from a personal, family‐based quality to something easily traded and directed to better and more profitable uses. The economy shifted from communitarian manorialism, epitomized by traditional pasturing rights, to market‐based capitalism.

The Dutch led the way in most of these developments, partly because their situation was precarious well into the 1600s. They also lacked the historical cohesion that would have enabled a strong monarch to dominate. Small in both area and population, with few natural resources, they maximized the one asset they had: people. To preserve their independence against the Spanish, they developed a highly egalitarian republic that welcomed immigrants of diverse religions. As one English commentator noted in 1658, “the Dutch behave as if all men were created equal.”¹⁰ It was an era of intellectual ferment, ranging from legal theorist Grotius to religious renegade Spinoza (the son of a merchant who bristled under monopoly charters). The university in Leiden attracted foreigners with new ideas, including René Descartes, John Locke, and certain English Puritans.¹¹ Even their aesthetics rejected many of the European conventions, as seen in the experimental, exquisite paintings of the Dutch “Golden Age” that focused on individuals and everyday themes rather than the royal or religious.¹²

Economically, the key institution was the VOC, or Dutch East India Company, essentially a state‐chartered group of merchants with monopoly trading rights to Asia. This legally sanctioned cartel started in 1602 and continued for almost 200 years, becoming an incumbent force powerful enough to create markets at home and abroad. It employed over a million people and deployed 4,700 ships over that period. Yet this was no simple crony‐driven institution: limited liability and the creation of one of the first stock exchanges resulted in the VOC having over 1,000 individual investors. The tradability of interests also enabled the company to be permanent in nature, rather than tied to a specific expedition. Even within the company outposts, political governance included protections for individual rights.

That dominance couldn't last. The VOC became ever closer to the Dutch government, which gave it extraordinary powers to build forts, wage war, and execute prisoners – a mini‐state in the future Indonesia, the West Indies, and New Amsterdam (later New York). As the company took on these obligations, it eventually collapsed of its own weight. In response, the wealthy Dutch stockholders redeployed their capital elsewhere abroad, rather than innovate internally – they became financiers rather than builders.¹³ When the republic gave way to monarchy at the end of the 18th century, the Golden Era was largely over.¹⁴

The English looked on admiringly and eventually caught up. The British East India Company, which Elizabeth chartered in 1600, soon overtook its rival. Learning from the VOC's success, she also allowed limited liability shares to be traded, which led to financial markets, including the London Stock Exchange.¹⁵ Shakespeare's play The Merchant of Venice, written in the 1590s, responded more to emerging English entrepreneurship than to Italian commerce.

While the English developed economic institutions on par with the Dutch, it was in the political sphere that things changed the most. Debates over patents were only part of a broad conflict that led to civil war between royalists, led by landed gentry and the Anglican Church, and Parliamentarians, dominated by merchants.¹⁶ While the latter eventually agreed to restore the monarchy in 1660, the merchants gained most of what they wanted.

The Glorious Revolution of 1688 sealed Parliament's triumph. It replaced King James II, who had absolutist tendencies, with a merchant‐friendly ruler, the Dutch head of state William of Orange. It firmly established constitutional monarchy under a Bill of Rights, preventing the king from suspending laws, levying taxes, appointing ministers, and maintaining a peacetime army. Soon thereafter the government established the privately funded Bank of England, which shored up royal finances, but whose independence further weakened the monarch. Parliament also took away the East India Company's exclusive right to the domestic trade, though it allowed it to keep its overseas monopoly.¹⁷ The “Honourable Company” went on to eclipse its Dutch counterpart and become a central driver of the emerging British empire – but it also eventually struggled under its own weight.¹⁸

An Economic Theory for Entrepreneurs

While economic forces put pressure on monarchs, intellectuals provided the rationale for a new set of rights. Until the 18th century, most thinkers were mercantilists who saw economic activity as largely statist and static. France's Jean‐Baptiste Colbert, a finance minister in the Court of Louis XIV and leading proponent, argued that a nation's wealth depended on its supply of land, precious metal, and balance of trade – all to be controlled by the crown. The only way to boost wealth was to expand these supplies through empire and restrictions on imports. (Today we hear about “High‐Tech Colbertism” as a kind of state‐focused industrial policy.) Even the English and Dutch still closely linked their commercial institutions with the state. Thomas Mun, the leading advocate of mercantilism in England in the early 1600s, was an East India Company director.

As people saw opportunities for private initiative and the cost of government control, these views softened. John Locke, who argued broadly for natural rights in his Two Treatises of Government in 1690, was particularly concerned with protecting real property from government usurpation. He never explicitly identified a corresponding right to compete, but he noted how individual labor created value, which gave it a kind of sanctity itself.¹⁹ Locke's work influenced English developments in intellectual property such as the Copyright Law of 1710 and the Engraver's Act of 1735.

Locke's concept of natural rights cast a long shadow over the century that followed, including many of the Founding Fathers in the colonies and the Scottish Adam Smith. Writing in the 1770s, Smith explicitly acknowledged this basic individual right in The Wealth of Nations, noting “the property which every man has in his own labor … is the original foundation of all other property, so it is sacred and inviolable.”²⁰ Thomas Jefferson and other colonists were swayed by the broadened conception of property that can be traced to Locke's work.²¹

Even many French thinkers came on board and took the idea a step further. Perhaps the most important of these was Charles‐Louis de Secondat, also known as the Baron de Montesquieu, whose Spirit of the Laws (1748) was one of the most widely read books among the educated leaders in the colonies. Montesquieu not only articulated the separation of powers as a safeguard of political liberties, but also saw “les gens d'industrie” as economic agents of change and the civilizing virtues of “gentle commerce.”²²

Also challenging mercantilist orthodoxy were the Physiocrats, who were the first to see economic development as the prime creator of national wealth. Most of the Physiocrats focused on agriculture and took markets for granted, but Richard Cantillon, in his Essay on the Nature of Commerce (1730), identified the entrepreneur as a critical economic agent between landowners and laborers. By risking their resources to buy low and sell high, entrepreneurs made markets work. They helped the state by increasing the circulation of goods and services, and helped landowners by adding value to their produce.²³ Cantillon's entrepreneur was no simple administrator, but a dynamic and disruptive force, and an agent for mobilizing capital.²⁴ Another Physiocrat, Vincent du Gornay, in protesting mercantilist policies, was apparently the first to use the term laissez‐faire, laissez‐passer (let do, let go).

Cantillon and other Physiocrats believed that individual actors could do much to develop the marketplace, boost productivity through specialization and scale, and even create new products or markets. They also drew the link, implicitly or explicitly, between robust economic activity and a more open political system. While they had little immediate influence on France, whose absolutist rulers continued to follow mercantilism, they gave conceptual heft to the budding calls for respecting the efforts of entrepreneurs.²⁵ Their arguments for dynamism paved the way for Adam Smith and then Jean‐Baptiste Say.

Meanwhile Sir William Blackstone, an Oxford legal scholar, published his four‐volume Commentaries on the Laws of England (1765–1769). The work codified a commercial sensibility in the common law, and made law more accessible and consistent in the American colonies as well as England. Most of the leaders of the new United States, including John Adams, Alexander Hamilton, John Marshall, and James Kent, were trained with Blackstone's treatise.

Common law was not just consistent across the colonies and the new states, but it also brought with it distinct benefits as a legal system. Its bottom‐up approach to resolving issues as they arose allowed people to act first rather than seek permission (“dispute‐resolving” rather than “policy‐implementing”). It put the individual, rather than the state, as the central actor, especially in economic matters – in direct contrast to the top‐down, government‐directed civil code regimes in most of Europe. Common law also gave judges more autonomy and flexibility to adjust laws.²⁶ This English heritage fostered the development of the American entrepreneurial economy in the first half of the 19th century.

Colonial Openness

While entrepreneurship gained traction in economic theory, its success was hardly guaranteed in the American colonies. Early investors in colonial settlements may have complained about monarchical encroachment at home, but few promoted competition per se in the New World. They saw elite control as essential to the operation of any good society.

Unlike the silver‐rich Spanish and Portuguese possessions south of the Rio Grande, or the “sugar islands” of the Caribbean, the American colonies lacked high‐value natural resources. Tobacco was the only major cash crop, and its price fluctuated a great deal, leaving many planters with heavy debts. Most colonists depended on mundane exports such as timber and grain to pay off the investors who had secured their passage. With crop prices too low to justify slave labor, especially north of the Chesapeake, they relied mainly on ordinary immigrants to settle the land and build up the economy. And since most immigrants insisted on owning land, the result was a far more egalitarian arrangement than existed in the Spanish colonies.

In every case, colony after colony, the elitist visions of the proprietors proved unrealistic and unworkable. Meanwhile, disease decimated the local native population, giving the settlers a degree of security that made them less willing to grant strong powers to local rulers. Nonconformist religion also played into the mix, breaking down certain institutions of centralized power and laying the foundation for an entrepreneurial culture.

Massachusetts was the clearest example. The colony was dominated by dissenters from the Anglican Church, yet most of them also came with a strong commercial spirit. The Puritan ideology emphasized both religious faith and worldly success, a juxtaposition that may appear paradoxical but that in practice meshed well. As Max Weber famously noted, the sober Protestant temperament encouraged devotion to business and a calm acceptance of risk. Rather than depend on a great lord to assign one's place in the economy, individual colonists had ambitions to build something themselves.²⁷ Even the son of the founder of the Puritan “City on a Hill” in Boston, John Winthrop, had such a strong commercial spirit that he helped develop the Saugus Iron Works.²⁸

By the 1650s, upstart citizens were developing markets in the Caribbean for New England lumber, barrels, beef, butter, and dried fish. Over time they expanded into the slave trade and the rum trade, as well as shipbuilding. These ambitions tested traditional political and religious authority, as seen in the multiple royal charters issued and reissued throughout the 1600s. Merchants successfully fought restrictions imposed by the local theocracy, especially as most colonists were not church members.

Along the way, these merchants also challenged English imperial restrictions. The mercantilist Navigation Acts of 1650 and 1660, which forbade colonists from trading outside of the empire, rubbed up against the emerging belief in the right to compete.²⁹ Merchants also increasingly saw themselves as a powerful group with interests opposed to landowners.³⁰ Likewise farmers pushed for land banks to broaden property ownership and issue paper money, even as critics denounced them for “leveling” the social classes.³¹

Unlike the monolithic governments in Spanish America, the English colonies benefitted from a diversity of rule. Rhode Island and Connecticut, founded by disaffected leaders from Massachusetts, were especially open and liberal. Roger Williams founded Providence Plantations with freedom of religion, after Massachusetts expelled him in 1636. Thomas Hooker's Hartford Sermon of 1638, and the Fundamental Orders of Connecticut of 1639, were particularly bold in asserting rights that individuals would have enjoyed if they were in England or Holland.³² Liberality in one colony encouraged openness elsewhere.

New Amsterdam, which Henry Hudson founded in 1624 under Dutch sponsorship, had a mixed approach. To encourage settlement, the colonists had secured a Charter of Freedoms and Exemptions. Yet the company tightly controlled the settlement's government. The charter also allowed for “patroonships,” large estates that gave the owners substantial political power provided they settled at least 50 people.³³ Both the charter liberties and Dutch commercial traditions safeguarded patroon property interests to a point, while also encouraging profit‐sharing with their tenant farmers. When the English captured the colony in 1664, the Articles of Capitulation included assurances on property rights (including the patroonships, not to be dissolved until New York State passed primogeniture laws in the early 1800s).

As with Massachusetts, the English monarchs saw Pennsylvania as a solution to the problem of religious dissenters. William Penn's Quaker colony granted individuals increasingly broad political and economic rights, as well as religious freedom. Penn's regime initially favored large landholdings, but the liberal charters and fertile lands quickly attracted ambitious settlers. The colony was known as the “best poor man's country,” and Philadelphia eventually became the most cosmopolitan city in colonial North America. As in New England and New York, merchant activity was robust, and brought with it the dynamism and upstart ethos that was becoming uniquely American in nature.³⁴ By the end of the colonial period, the Penn family's control was effectively diminished.

Maryland also arose to alleviate religious tensions, with Lord Baltimore (Cecil Calvert) receiving a grant for a haven for English Catholics. While Anglican Protestants eventually took over control of the state, its largest landowner, a Catholic named Charles Carroll, helped advocate for religious freedom after the revolution.

The first colonial charter, in Virginia, started out elitist, but eventually granted headrights of 50 acres along with civil control over government.³⁵ While the colony was more top‐down than most, egalitarian structures spread even here by the mid‐18th century.³⁶

The Carolina colonies were perhaps the most traditionalist and elitist (ironically, John Locke helped write the colony's founding charter, which codified slavery), but even they moved toward equality of ownership and smaller parcels rather than large, very wealthy interests. Georgia's founding Oglethorpe Plan actually limited the amount of land an individual could acquire, in order to avoid the creation of large plantations seen elsewhere.

Development Without Entrenched Incumbents

As the colonists gained both economic freedom and prosperity, tensions developed between hierarchy and equality. These would set the foundation for the evolution of the two entrepreneurial principles noted earlier, the right of property and the right to compete. Most of the colonies had granted special privileges to attract settlers, but then gradually reduced these benefits as the territories developed, which created friction. But with much of the land still unexploited, venturers of all kinds self‐selected to immigrate, creating an economy not just more commercial but also more competitive and open than in Europe. Traditional deference to incumbents fell, even to the wealthiest in society.

Thomas Hancock came as close as any colonist to the status of merchant prince. Originally a bookseller in Boston in the early 1700s, he branched out to cloth, tea, salt, and other dry goods. Soon he was gathering cargoes of New England commodities to send to Newfoundland and the Caribbean. From there he bought cargoes bound for London and other European ports, which then yielded him wares that he sold in Boston. He eventually expanded into whaling and the manufacture of potash. He even pioneered vertical integration by opening shops for his goods with incentives to retain capable managers at each outlet. By the mid‐1700s he had amassed a substantial fortune and positioned himself to take advantage of lucrative contracts supplying the British army during the French and Indian War. By the time he died in 1764, Thomas Hancock had made himself into the richest man in Boston. His nephew and scion, John Hancock, carried on the flourishing business.³⁷

Yet neither of them was ever free from constant, vigorous competition. Merchants of all sizes and scales of operation rose and fell continually in America. Like everyone else, the Hancocks had to reenter the competitive arena with every new cargo. Rather than control large ventures, they took shares in numerous ships and shared risks with other Boston merchants. Their circumstances may have grown comfortable, but their risky ventures meant they could never become complacent. Shifting imperial restrictions could quickly end a lucrative trading route. In Providence, the prominent Brown family consolidated a comparable commercial position, but never stopped hustling, venturing, dealing, and diversifying.³⁸ In New York, and especially in Philadelphia, the competition and dynamism proved even more intense.³⁹

The Southern colonies, with their economies based on agriculture, were more stable, but even tobacco‐based Virginia never established a full aristocracy akin to what still prevailed in England. Robert “King” Carter, at the apex of the social pyramid, amassed an enormous estate with hundreds of slaves. He used his commensurate political power to manipulate the surveying and settlement of western lands in which he invested. Here seemingly was the stuff of formidable incumbency. Yet Carter's land speculation still proved risky, and the prices received for tobacco fluctuated widely in world markets.⁴⁰

Carter and other elites jostled with a swarm of smaller landholders, who also called themselves “planters” and fiercely guarded their own access to political influence. George Washington, for example, worked hard to expand his Mount Vernon farm into a plantation to be reckoned with, seeking to emulate his mentor Lord Fairfax. In the West Indies, the dominant sugar planters earned fortunes substantial enough for them to retire, return to England, and buy positions in the aristocracy. Not so their counterparts in Virginia, who complained that the rest of society was showing them less deference. Carter retired rather than adjust to what he called “the new system of politics.”⁴¹

Incumbents often gained the upper hand in the colonies, but they still had to contend with challenges from upstarts, not to mention pressures from London. To outsiders the environment looked unstable and often chaotic. Americans came to see it as a normal state of affairs.

Franklin and the Self‐Made Man

No figure better embodies the colonies’ emerging entrepreneurial spirit – and those lingering temptations of aristocracy – as Benjamin Franklin. Born in 1706, Franklin's life spanned not only the entire century but also the journey from the vestiges of Boston's Puritan theocracy to the bustling cosmopolitan city of Philadelphia. Franklin came from a line of anti‐authoritarian freethinkers, and he combined the Puritan mix of faith and business with an appreciation for Enlightenment writers such as Locke.⁴²

In business he was clearly an upstart. Leaving his brother's printing shop (where he secretly wrote the satirical, anti‐establishment Silence Dogood column), Franklin moved to Philadelphia and aggressively competed with incumbents. With his newspapers he created a leading media company in the colonies, specializing in sex, crime, and gossip. The enterprise went so well that he could retire in 1748 at the age of 42.

Yet his entrepreneurial commitments continued. A leading scientist, Franklin became known worldwide for his discoveries and accomplishments. He founded the University of Pennsylvania in 1749 as the first nonsectarian institution of higher learning in the country; it encouraged aspiring young men to obtain practical business skills such as accounting, rather than study Latin or Greek. Nine years later he penned The Way to Wealth, a bible of sorts to entrepreneurial Americans for generations to come. And in 1764, he led a group of merchants challenging the continuing control of William Penn's descendants in the colony.

Like many successful entrepreneurs before and after, Franklin worked assiduously to gain entrance into elite society, covering up his artisanal origins. Upon his retirement, he commissioned a foppish portrait of himself to confirm his position as a gentleman. His investments marked him more as a would‐be incumbent than a hungry upstart, to the point of serving as an imperial agent supporting the Stamp Act (he did try to convince Parliament to rescind it). He suffered for a time from his association with English rule, and only his later role in the revolution resuscitated his reputation.

Franklin eventually set the paradigm of the self‐made man in America. In the 19th century, his Autobiography became a bestseller and inspired many to understand the possibilities the country would offer. Aside from providing lessons and values that became embedded in American culture, he articulated what many were already seeing – that hardworking upstarts could find room to succeed in the new nation.

Resisting Imperial Incumbency

Before they could create a true republic of their own, the American colonists had to confront the most powerful of all incumbents: their British imperial masters. Like incumbents before and since, it was becoming both bloated and aggressive – leading to heavy taxes to pay for the French and Indian War (1754–1763). Besides raising taxes, it looked to restrict the colonies to the subservient mercantilist role of supplying natural resources.⁴³

Parliament's Proclamation of 1763 also imposed strict limits on settlement beyond the Allegheny and Appalachian Mountains. The move angered a great many would‐be entrepreneurs, including Washington, who had just cofounded the Mississippi Land Company and was looking to build his own fortune.⁴⁴

Newly tightened and enforced Navigation Acts forced colonists to send and receive goods only on British‐ or colonial‐owned ships, and all foreign trade had to first go through London. Similarly, the Sugar Act of 1764 increased enforcement of the steep tax on molasses from the French and Dutch West Indies in order to boost high‐priced sugar from the British West Indies. New Englanders had built a thriving rum industry by evading the tax and selling lumber and fish in exchange.

But it was the Stamp Act of 1765 that created the largest controversy. The act covered legal documents, newspapers, and other printed material (including playing cards) and it had to be paid in scarce British currency. While the merchants did not support the tax, it was broader popular opposition – including boycotts and demands on merchants for nonimportation – that ultimately forced its repeal less than two years later. The populist outcry was so strong that many merchants and some landowners worried as much about the emergence of radicals (and the risk it posed for their property interests) as about the actions of the mother country.⁴⁵

The Stamp Act crisis unleashed a new force within the colonies – consumers. Colonists had enjoyed an increasing reliance on and appreciation of consumer goods in the years preceding the crisis, but their willingness to boycott those niceties awakened them as a political – and eventually national – class.⁴⁶

Undaunted, the British passed the Townshend Duties a year later, in 1767. These, too, met with resistance, leading to the burning of John Hancock's Liberty by the British in 1768 (due to accusations of smuggling), the Boston Massacre in 1770, and Rhode Islanders destroying the customs collector Gaspee in 1772.

Then came the crisis over tea. It began with one of the least appreciated consumer price cuts of all time. In 1770, the Crown eliminated essentially all of the Townshend Duties except for a tax on tea. Yet colonists continued to object, smuggling three‐quarters of all their tea from the Dutch, despite its inferior quality.

With the British East India Company's tea piling up unsold, Parliament agreed to an idea apparently proposed by, among others, colonial agent Benjamin Franklin. The government eliminated the export duty from London while keeping the Townshend tax in place, a victory of sorts for imperial principle that simultaneously undercut the smugglers. The plan also required direct shipment of tea into select colonial parts via a few designated consignees. The result would be lower costs for consumers, a rescue of the company, and a rebuke of the independent merchants.⁴⁷

It still wasn't enough. Those independent merchants denounced the designated consignees as politically favored appointees.⁴⁸ Rallying people around “no taxation without representation” and inciting the mob against the company's agents, the Sons of Liberty disguised themselves as Indians and threw the cargo overboard. Even many consumers who had little to gain from the upheaval, and would have paid less money for better tea, supported the cause.⁴⁹

Despite the aggressive tactics, many of the Sons of Liberty were establishment figures in the colonial society, particularly merchants. John Hancock, John Brown of Providence, Christopher Gadsen of Charleston, and Charles Wilson Peale and Benjamin Rush of Philadelphia, among others, were all prominent local economic elite who supported resistance. But other leaders behind the movement, such as Samuel Adams and Patrick Henry, were upstarts from the lower classes, working to disrupt not just imperial rule but also the social pecking order. While making common cause against the British, these divergent interests revealed tensions in the political and economic framework that emerged following the revolution.

Entrepreneurial Rebels

On the eve of the American Revolution, many of the enablers of American entrepreneurial capitalism were in place. The first was cultural. The colonists as a people had been ambitious enough to undertake risky immigration in search of opportunity, resulting in a population imbued with self‐reliance and risk‐taking. They were supported by religious and social forces that encouraged material achievement, an emerging consumer consciousness, and an increasing suspicion of large and distant political institutions. They also benefitted from a developing bias against political and economic incumbency.

The legacy of English law was profound. Most of the colonists identified as British subjects, and they sought independence under their rights as Englishmen. The legal and political and economic principles – especially those from Coke and Locke and the Glorious Revolution – created values and politics favoring both property rights and the right to compete. Besides the common law, the newly independent states drew heavily on British political and economic institutions.

But how to combine this culture and these institutions in a new nation was still uncertain. Rebellion was one thing, but actually running independent states was something else. Without a final authority in London, important questions emerged as to how diverse consumers, merchants, mechanics, large landowners, farmers, bondholders, and others would coexist, much less cooperate, in a new political context and with entrepreneurial opportunity everywhere.