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December 09, 2015


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I would have attributed the crackdown on spirits to the British moral panic over the Gin Craze, but that happened 50 years before the alcohol tariffs.

Early Australia was always chronically short of money -- as in, cash and specie. The convicts didn't bring any, and the colonial administration basically had payroll and not much more. What little silver there was tended to flow out rapidly to pay for imports. As the population and economy started to expand, the colony suffered accordingly.

Okay, so: you know how cigarettes are a de facto currency in many prisons? Well, early Australia was a vast open air prison. So the colonial soldiers who served as prison guards came up with their own solution: rum. They imported shiploads of the stuff from Bengal -- at one point a group of officers got together and *chartered* a ship. And pint flasks of rum quickly became the standard unit of transaction; you could buy services, livestock, or land, and everyone had a pretty good idea what the prices would be.

Of course, this gave the rum-importing prison guards control of the colony's currency. They used this to become both rich and powerful. The New South Wales Corps -- the regiment of prison guards -- became known as the "Rum Corps". It was effectively a mafia, with a a handful of officers ruling as bosses. They became comfortably more powerful than the official governors; John Hunter, the second governor, found himself stymied by them at every turn and eventually forced to resign.

In 1808 London sent a tough new governor, Captain Bligh -- the Mutiny On The Bounty guy -- to take over the colony. Bligh very quickly came into conflict with the rum mafia. It ended in an armed rebellion -- the "Rum Revolution" -- in which Bligh was overthrown and Australia was run for some time by a Rum Corps-supported rebel government.

The problem wasn't even partially solved until around 1815, when the sagacious Governor Macquarie gave the colony its first local supply of coined money, the famous "Holey Dollar".

-- This was so ingenious it deserves mentioning. Simply importing specie wouldn't work; it would just flow out again to pay for imports. So Macquarie imported a bunch of old Spanish silver dollars, and then /punched holes out of the middle of them/. The doughnut-shaped Holey Dollar was accepted as one coin, and the middle bit was accepted as another. Nobody outside the colony wanted them, so they couldn't be used to buy imports, but they circulated freely inside Australia for many years and jump-started the colony's economy.

Anyway. The use of rum as money explains the early, unsuccessful attempts at import substitution: the government-owned brewery was actually a clumsy and unsuccessful attempt to wrest back control of the colony's money supply.

As to the later reduction of the tax on locally generated alcohol, I'm less sure, but I suspect it was an effort to stamp out the last remnants of the rum trade. By the 1820s most of the original Rum Corps mafia bosses were either dead, in jail, or had successfully made the transition to being respected and honored Founding Fathers, so I'm not sure if the dates match up, but that would be my first guess.

Doug M.

The colonial and early Republican United States had similar problems, though not as intense -- most of the colonies developed strong export sectors early on. That's in sharp contrast to Australia, which exported pretty much nothing until the wool trade started to take off after 1820.

Whiskey was occasionally used as a de facto currency in the US, especially during the Revolution. But it never achieved anything like the ubiquity of rum in early Australia.

Doug M.

It turns out that the British were following the American precedent in other ways: the early American colonies were allowed to tax imports from the U.K.

Wouldn't you say the Brits were just repeating their earlier policy, though, Noel?

Note that colonial administration was expensive. So allowing import taxes seemed like a two-fer: it kept the money supply from draining back to the mother country (or at least slowed the process down a bit) while also helping to pay for colonial administration.

AFAIK, New France was at least a partial exception -- they weren't eager to tax imports. That's because the great majority of imports to Canada were trade goods for the Indian trade. Perhaps as a result, New France had probably the longest and most severe currency shortage of any settler colony -- from the the 1680s until well after the end of the Seven Years War in 1763. The ingenious French came up with their own unique solution, as memorable in its way as Governor Macquarie's Holey Dollars...

Doug M.

Will: yes, I would! But I'll admit that I found both the North American story and the details of pre-1901 Australian trade policy surprising and fascinating. I read the article at the links and had to post something.

I am sad that so many of my former go-to blogs are now in decline.

Its interesting the policy when repeated didn't produce the same results. Are there subtle differences in the policy itself that might have changed the outcome or were the two circumstances different enough the same policy would not produce the same outcomes or attempts at the same at least?

Sadly, the blogosphere seems to be contracting. It has been in the specialty blogs for some time: many have gone away altogether. The generalist blogs have joined the decline as well. Its kinda Usenet circa 2004. There might be another two to five years left in it though.

Which blog links, now? All I see is the link to the pdf.

Bernard: not the links in this post; I'm bemoaning the decline of the blogosphere in general.

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