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Warehouses, Trans-Atlantic Trade, and the Opening of the North American Frontier

By Steven Topik

Their simple box represents a remarkable advance in global trade.

The story of westward expansion is among America’s most popular epics, a sprawling tale people, for better and worse, by the culture’s most enduring icons: native Americans, fur traders, loggers, farmers, soldiers . . . and warehouse managers.

Yes, warehouse managers.

During at least the first two centuries of European settlement the pace of westward expansion was in large part dependent on the settlers’ ability to market cash crops back in Europe; the ability to remain competitive in European markets while shipping goods from the edge of a frontier that was farther from the coast with each passing year depended on being able to cut the shipping costs incurred down the line, after one’s crop reached the Atlantic Coast. Between 1700 and the outbreak of the American Revolution, those costs fell by half without any technological change in shipping. A big part of the reason for the cost-cutting was the spread of warehouses along the East Coast.

WE OFTEN IMAGINE the farmers who cleared the western parts of, say, Pennsylvania or the Carolinas as self-sufficient folk who spent most of their time growing food for their own use. But two simple facts made most of those farmers dependent on the market—and particularly dependent on sales to Europe. First, most of them began their work lives deeply in debt, either because of the cost of their passage to the New World or the land where they lived and worked. Second, complete self-sufficiency was simply too inefficient, and the colonial market too small and diffuse to support much in the way of industry; so nails, cloth, and other necessities—not to mention such status symbols as mirrors, clocks, or tea—were generally imported. In return, Pennsylvanians and New Yorkers grew grain; Carolinians rice, naval stores, and later cotton; and Virginians and Marylanders mostly tobacco. The markets for most of these goods were volatile and competitive, so trying to produce them in more remote locations—farther and farther west—was a chancy business, unless costs could be cut elsewhere.

Basically, two sets of changes brought down shipping costs, even before the advent of either steam or improved sailing ships, and so made this rise in trade possible. The first came from the British side: the largely successful suppression of piracy in the eighteenth century. This not only cut insurance costs, but made it possible to send freight across the Atlantic in unarmed (or only lightly armed) ships. Such ships were cheaper to build and much cheaper to operate, because they could function with a smaller crew.

But this was only part of the story, and one that benefited the Caribbean colonies and Brazil—in some cases competitors of the mainland colonies—at least as much as the North Americans.

The other part of the drop in shipping costs came from reducing ships’ time in port. Sailors had to be paid for shore time in any port other than their home; they could hardly have survived otherwise. This made time spent acquiring a cargo expensive. Traditionally, that time could be quite long, because buyers had to visit each plantation, examine its crop, and dicker over price. In 1700, an average ship going between England and the Chesapeake tobacco country spent over 100 days per voyage going around the mouth of the river collecting cargo; port times elsewhere were similar, and similarly expensive.

The solution, in retrospect, seems remarkably simple: European buyers contracted with local agents who bought up desired crops in advance, warehoused those crops, and kept them ready to load when the European ships arrived.

At the time this was quite an innovative solution: merchants weren’t used to providing the scale of credit that such arrangements often required, or delegating that much responsibility for choosing what goods to acquire. Part of what made this possible in the New World, however, was precisely the narrow range of goods sought in any particular American location. A ship arriving in, say, Alexandria, Calcutta, or Canton faced complicated choices among commodities—was pepper a better buy this season than silk, or tea a better buy than either? Or given the need to stop off in Surat on the way back, might it be better to buy cotton, and figure on swapping it there for something to take back to Europe? But shippers arriving in Baltimore were buying tobacco and little else; in Charleston, rice, cotton, or maybe naval stores; in Kingston almost certainly sugar. Moreover, they were taking these goods straight back to Europe: unlike Old World commerce, there were no stopovers on the trans-Atlantic route where you might exchange part of this cargo for a different one. So decisions were simpler and easier to delegate, and those who saw that could greatly cut their port time.

Interestingly, it took the well-established English trading companies quite a while to figure this out: independent Scottish traders were the first to see the potential of financing Americans who would build and manage warehouses.

But it gradually became clear how much time and money could be saved—by 1770, port time in the Chesapeake was down to 50 days, much of which was needed for repairs anyway—and other shippers followed suit. As trans-Atlantic shipping costs fell, the volume of American goods demanded in Europe rose. But English ships exporting to America were partly empty, since manufactured exports, many of them luxury goods, took up much less space than bulky New World farm and forest products. Thus, they always had room for a new batch of European immigrants, immigrants who could now more easily move into the less crowded interior of the colonies, in part thanks to the quiet pioneering on the wharves and in the warehouses of the coast.

Steven Topik is a professor of history at the University of California, Irvine. With Kenneth Pomeranz, he is the author of The World that Trade Created: Society, Culture and the World Economy, 1400 to the Present (M.E. Sharpe).