War Finance in 17th-Century Massachusetts Bay: An Alternative History of the Bills of Credit

Massachusetts Bay colony is well known as the first North American British colony to issue bills of credit in December 1690. The literature explains their issuance by pointing to certain conditions present at the time, specifically the return of disgruntled soldiers and seamen from a failed military expedition and the constitutional uncertainty created by the lack of a new charter. This paper will place the bills of credit within the longer history of war finance in Massachusetts. Were the bills of credit a revolutionary new approach to war finance, or were they a natural evolution from earlier methods and techniques? This paper will reconstruct the public finance history of the Colony in the seventeenth century, with a focus on how the Colony financed its war against the Wampanoag nation and its allies (“King Philip’s War,” 1675-77). My primary sources include the Records of the Governor and Company of the Massachusetts Bay, Boston Town Records, and John Hull’s accounts as Treasurer of the Colony. I use these records to construct a long-run (1650-1715) public finance data set tracking property tax rates, poll tax rates, whether taxes were to be paid in money or commodities, and the prices at which commodities were accepted in payment of taxes. The sources also show how the Colony borrowed from taxpayers in the period before bills of credit. This historical public-finance accounting exercise provides an alternative way to think about the problem, and the constraints, that Massachusetts Bay leaders faced in December 1690.