Early Settler Finance: A Struggle for Survival

Finance for early settlers in North America, particularly during the 17th and 18th centuries, wasn’t the sophisticated system we know today. It was a patchwork of survival strategies, barter economies, and nascent credit arrangements built on trust and often, desperation.

Cash was scarce. English coinage circulated, but the colonies suffered from a chronic shortage. This was partly deliberate policy; England preferred the colonies to rely on trade and credit with the mother country. What little specie did exist was often siphoned back to England to pay for manufactured goods and taxes.

In response, colonists developed alternative forms of currency. Commodity money was prevalent. Staple crops like tobacco in Virginia and wheat in Pennsylvania became de facto currency. These commodities could be used to pay debts, taxes, and even for everyday purchases. The quality of these goods, however, varied wildly, leading to disputes and instability. Wampum, strings of beads made from shells, served as currency in trade with Native Americans and within colonial communities, particularly in New England.

Credit was crucial. Land was the primary form of wealth, but settlers often lacked the capital to acquire it and develop their farms. Merchants and wealthy landowners provided loans, usually at high interest rates, secured by mortgages on land or future harvests. Indentured servitude offered another form of credit, with individuals selling their labor for a set period in exchange for passage to the New World and a chance to eventually own land.

Barter was commonplace, especially in rural areas. Neighbors exchanged goods and services directly, keeping detailed accounts of debts owed. Blacksmiths might mend tools in exchange for food, while carpenters might build barns in exchange for labor in the fields. These informal credit arrangements were crucial for survival, but could also lead to disputes and long-standing feuds.

The lack of formal banking institutions hampered economic growth. While a few private banks emerged in the 18th century, they were largely unregulated and prone to failure. Colonial governments experimented with issuing paper money, often backed by land, but these currencies were frequently subject to inflation and depreciation, further destabilizing the economy. The instability of colonial finance fueled tensions with England, as colonists felt constrained by restrictive trade policies and currency regulations.

Early settler finance was a world of hardship and ingenuity. Lacking access to established banking systems, settlers relied on resourcefulness and community ties to secure their futures. Their struggles laid the foundation for the more complex financial systems that would eventually emerge in the newly independent United States.