free society of traders

The Rise of Philadelphia

the Free Society of Traders: Penn Creates an EDO to Install Pennsylvania’s Initial Economic Base

As far as Virginia was concerned it offered little guidance on how to start a colony and a provincial economic base for Pennsylvania. Massachusetts was a better model in some respects, but the religious-based charter, a joint-stock corporation as well, was troublesome from its start, and Massachusetts first century witnessed, depending on how you counted them, at least two formal offshoot provinces with charters, and two or three more in the making.

Midwifing an Economic Base and Business Elite

Penn, a fairly close relative of Virginia’s Governor Berkeley, was likely to have noticed Berkeley’s installation of a tobacco-based, plantation export economic base, and his recruitment-attraction of royalist refugees and second sons as its business elite. A Whig by private inclination, Penn, while nostalgic for the manor-based agricultural system of England’s former golden years, was no royalist at heart–but we talked about all that earlier. His economic base was another affair. He seems not to have been much of a mercantilist, and he possessed the Yankee hard work and entrepreneurial mentality; he short he was well-disposed to what will be the emerging capitalist entrepreneurs, of which he was on very good terms.

After all his business plan for the colony was just that, a business plan which would pay the colony’s bills and yield him a personal profit. He also realized this required a large urban center, a master port city, and since port cities import and export, he intended it to be well-connected to what were then the established and powerful trading-finance institutions found in England, Scotland, Wales and Ireland. All this capitalism, however, was tempered by his sincere profound Quaker principles, his Holy Experiment mission, and his assumption that for the most part this was to be a Quaker led and settled colony. Many of these hopes and aspirations foundered as we shall see,

Penn himself does not deserve the blame for all that lies ahead. As all in stories, Humpty Dumpty included, the underlying tale is complicated indeed. An excellent example of this complexity is how Pennsylvania’s private-commercial-agricultural elite was to develop. That in my mind is the real story behind his initial attempt to empower a private business corporation as his prime economic developer for the urban center and provincial colony.

The Free Society was an EDO without question, and was a powerful, comprehensive economic developer at that. His deal with it, locked in with a legal contract and subject only to approval by a provincial legislature he controlled, meant it to be a dominating influence over Pennsylvania economic matters. Penn appointed as its corporate members the largest investors in his colony, and a slew of other influentials, many Quaker friends (George Fox, for example) who never intended to wander across the Atlantic, but who had an excellent Rolodex and access to investment capital.

By no means was this Berkeley’s royalist agricultural elite, nor Winthrop’s solidly middle class- artisan Puritan. Pennsylvania’s initial private elite was not only to be capitalist inclined, entrepreneurial, and very cosmopolitan, cutting edge mercantile trader and export based. If there was to be a British Empire in the making, that was Penn’s market area. Of course, his perspective, as was that of most of his proposed commercial elite was personal profit, and that would soon clash with the Empire’s mercantilist trade policy–but in 1682 that was secondary to building a colony, major port city, and settlement of a province.

Initially, Penn’s proposed Pennsylvania/Philadelphia economic base rested on two key pillars: (1) quickly attract direct capital investment and settle wealthy investors in his colony, and (2) promote a balanced diversified privately-managed, sustainable economy capable of growth and innovation without further need for Penn to inject his own money. The cornerstone of his economic plan was to found a large, robust port city on the Delaware. From the start the tobacco plantations of the previous colonizers, located in south Delaware and along the Maryland border, were never contemplated as the goal.

The Free Society was urban at its core. Yes it had land development aspirations, that was to be its principal source of life-sustaining revenues, but it was to fund the initial clusters-aggregations on which a growth-oriented economy required at the time. Its agricultural aspirations were chiefly restricted to manor-plantations for its affluent members to retire. Fisheries, port facilities, trading and logistics–and finance– were among its targets in its first economic plan (yes, there was an economic plan).

Among its other tasks was people-attraction, and managing their settlement in an undeveloped Pennsylvania wilderness. They also had a hopeful plan on how to pay for all this-relying a lot on private subscriptions from their members. The reader, remembering this is 1681-2, should recognize the Free Society was not a fly-by-night enterprise; in its ways, it was similar to an internet IPO, with sales hoping to yield future profits. Amazon it was not to be, however.

Named Philadelphia before he ever left London, The city itself was his chief “loss leader”, i.e. his core attraction incentive to secure and mobilize for settlement wealthy well-connected English merchants and investors. He entrusted-delegated Philadelphia to a chartered private joint stock corporation and tasked that corporation with the “installation” of key sector and land development over an area coterminous with the initial vision of the colony, The joint stock corporation was more precisely a “business corporation” delegated certain powers to “promote business enterprises, either by the investment of money as productive capita, or by encouraging and facilitating such investments on the part of others”.

The Free Society for Traders charter did not an explicitly specify its responsibilities for Philadelphia’s governance; it stopped short of that. At least in the short term, the borough and two suburban towns were likely expected to be monitored by one of the three counties (Philadelphia) set up in 1682. It did, however, enjoy land development rights and was provided with some financial capacity to promote its development. As such it has been cited as the second (of six in the entire of colonial America) formal business corporation set up in colonial America.

Sometimes I like to let the tale, the story, tell itself, and for the most part leave the conclusions to the readers, and my never modest observations. This is not one of those times. First of all, the tale of the Free Society was hugely disrupted, in fact almost dead-on-arrival in Pennsylvania. What killed it both quickly and over the generation that followed, was that Penn’s hope to install the business-commercial elite of his new colony, and its export, entrepreneurial port never really stood a chance.

The southern three agricultural-based economic base already had developed its own plantation leadership, and while not particularly robust had its tentacles in the larger English economy. It did not take nicely to the empowered entitled Quaker Free Society–and it resisted it from the start. It was augmented by a scattering of New York, New Jersey offspring that had their own, largely Anglican and Scots (Presbyterian) ideas. Without his realizing it, they had already frustrated Penn’s first site for the settlement of Philadelphia–driving his architect and Deputy Governor upstream.

Secondly, from the start people poured in. Small numbers in hindsight, Penn did not enjoy a Quaker monopoly on those that wandered into Philadelphia’s early camps and tents. New Jersey and New York were a decent hike away, but coastal lowlands made travel easier. Determined to make a buck, start anew, or whatever Alaskan-gold rush like ambition, they came uninvited. They came from Boston and South Carolina-West Indies as well. They came from all classes, ethnic groups and religions. Artisans, freebooters, land developers, and business start ups, even pirates–they call wandered in.

The ships arrived constantly in the first five years, and Philadelphia grew faster than any plan the Free Society could/would have have planned. Before the Free Society ever got started in Pennsylvania, these fine gate-crashers were already starting businesses, and doing stuff the Free Society thought they might do. Like the southern counties, these new entrepreneurs did not like the Penn-imposed business elite.

The newcomers were on the outside-looking in. Not seeing a way to get inside the Free Society–and facing a William Penn who was determined to favor his friends and Quakers– they opposed it and even worse, ignored it, developing their own contacts, building their own ships and buying their own land. Whatever monopoly Penn intended for the Free Society was probably battered beyond recognition before Penn ever stepped foot in New Castle.

The take away from this is that Philadelphia’s private elite–and the direction of its city-building–was taken away from Penn. He was to be a politically power proprietary, but not its overall economic czar. The merchant, commercial, exporter–and the artisans and shopkeepers, not to mention the maritime (sailors and factors of exchange) cluster that quickly sprang into being were diversified in ways Penn never imagined.

And they still kept on coming into town; some in regular small doses that accumulated, aggregated, expanded, innovated, failed. Penn did not need to people-attract; people, entrepreneurs, artisans came on their own for the several generations to follow. Quaker Proprietary it might be, Pennsylvania economically and demographically was diversified beyond Penn’s ability to contain them politically.

It is here we shall see in microcosm, Pennsylvania’s drift to autonomy, independence and to revolution.

The Free Society of Traders

The Free Society of Traders in Pennsylvania was chartered by Governor Penn soon after he obtained his patent, and it received extraordinary privileges. It was in furtherance of a scheme for land as well as trading speculation, and the corporation was invested with the lordship of the manor of Frank, and the right to have three representatives in the provincial council … The subscription agreement was drawn up in March 1682, in London, … and the first officers were elected there; but it was to be distinctively an American company with its seat at the capital of Pennsylvania, where all its meetings after the first were to be held … [and] with Penn’s consent had adopted certain provincial “Laws” [which] expressly ratified the charter of the society. another provided that none of these laws should ever be altered except by the concurrence of the governor and six-sevenths “of the freemen met in Provincial Council and General Assembly. After this the Free Society was free of the Assembly

[99] Simeon E. Baldwin “American Business Corporations Before 1786“, American Historical Review, Vol. 8, 1902-3

Penn never contemplated replication of a guild-like corporate charter for Philadelphia. He did not lose the guild in transit, nor did it arrived damaged. He simply wanted his own version of a joint stock corporation, filled with his supporters, Quakers usually, with sufficient means to invest in the new economy and bring contacts with them for future trade. Blunting he wanted businessmen, investors, to install the new economic base. They had a stake in the new economic base and he expected them to make profits–that he could tag along.

It was not simply a marketing initiative but his formal commitment to share the governance and the development of the economic base with those of wealth who would invest and settle in the colony. His commitment to a shared colonial administration, with the joint stock corporation in charge of the central capital city, Philadelphia and the colony’s economic base, was signed, sealed, but not delivered before anyone left London in 1682. It was as we stated, also dead in the water by the time he landed in Pennsylvania in October 1682.

The Free Society, appointed by Penn to their corporate membership were set apart from the Proprietorship to accomplish their assigned tasks. While Penn reserved lands within his conceptual map of Philadelphia, he never attempted to participate in the Society’s governance. That would be left to the core of wealthy investors who were given land, priced equivalently to hinterland land (a bargain), without quitrents (taxes) in return for purchase of large blocs of land in the hinterland.

What he did was to make clear to all he supported the Free Society, and he contemplated its leadership would also share in the governance of the Proprietary. He appointed many, including its president, to key positions in government. He anticipated future investment in the Society from the Provincial Council as well. The reader may or may not like it, but this was Penn’s 1682 version of a shared private-business and public partnership. It may have worked if he had not restricted its membership to friends and favorites.

The Society’s First Purchaser investors were expected to settle in Pennsylvania themselves or arrange for others to settle within three years. The core left in London were expected to ante up investment funds to finance the Society’s economic agenda and settlement aspirations. To provide a measure of security to his First Purchasers Penn had stipulated in his contract with the First Purchasers, Laws Agreed Upon in England” three seats on his Provincial Council and quick ratification of the Society charter by the Legislature. [99] Gary B. Nash, Quakers and Politics, 1681-1726 (Northeastern University Press, 1976), pp. 22-3.

The expectation among Society investors and members, was that they would be the colony’s elite decision-maker in economic development–and as individual businessmen would be well-positioned to establish their business in the New World. From afar, this seemed a reasonable proposition as Penn had personally pledged his support in the “Laws” and he possessed undisputed authority as the Proprietor-Governor. The problem, unseen by either Penn, his investors, or the Free Society-First Purchasers, was he could not deliver.

But as soon as he landed he quickly realized he needed all the political support he could garner to deal with a restive Quaker community, the intractable problems associated with an initial settlement whose development did not go according to his plans-marketing,

In that tempestuous political environment his island of security the Free Society/First Purchasers did not actually control, or physically/numerically dominate local economy already in place. Those opposed of left out of it became one more group resistant to the Proprietorship. Instead of complying with his Proprietary authority, the locals simply said no, and absent police or soldiers, Penn had no means to compel their obedience or compliance with his legislation. Whatever mastery or deference Penn possessed as a religious leader in the Quaker community, did not extend to his political and economic plans or decisions. London, the base of his proprietary authority, was three thousand miles–and several months-distant.

In my words, Penn lacked “site-control” from the start.

Upon arrival, Penn realized the Quakers, local activists and established elites, nor the settled Quaker community were especially receptive to either his Frame or the Society. It took longer than he thought to get the legislature elected, but when it met in March 1683 (six months or so after Penn’s landing), it wasted little time, and spent considerable effort to derail Penn’s Free Society legislation. The Free Society was not the only element of the Plan attacked–indeed, the Frames themselves were renegotiated and “reframed” into a second Frame.

The Legislative consensus that approved his amended Frame was short-lived and an obdurate-even hostile Legislature had taken its seats–leaving Penn in charge of the upper house and his executive branch. Penn had to revert to Plan B–which was in effect to rule by his personal decision, issue decrees, and resort to his dominance in the Provincial Council and Executive Branch. If he could not use the Free Society as his vehicle to establish an economic base congruent with his pay-as-you-go colonial expenses, then Penn’s only recourse was his control over land sales–which yielded not only public revenues but personal profit. To the local community, however, this seemed perilously close to corruption–and to Quakers, a hypocritical or even sinful activity.

This only added to his woes. His land sale and development monopoly only irritated a great number of locals who were either required to deal with him to tap into potentially lucrative opportunities, only to be hit with terms and conditions–and some incompetent and slow implementation–that irritated them still more. In the meantime he granted the Society 20,000 acres, allocated the three seats on the upper legislative chamber, and appointed Society leadership to key posts in the Proprietary government. Rebuffed by the Legislature, the Free Society was armed with his support derived from his control over land development and the colony’s executive branch-upper house.

The Society had already developed a plan that encompassed management of agricultural farms (to raise food for sale locally), mining (for startup manufacturing), manufactories (for tools and equipment) in Philadelphia, the Delaware River or Chesapeake Bay.

“The Society obtained a charter from the Proprietor enabling it to buy and sell lands, to establish manufacturers, to conduct trading operations, and to carry on an extensive systems of agriculture. The sum of 12,475 pounds was quickly subscribed to by a group of two hundred twenty members [99] John Pomfret, “the First Purchasers of Pennsylvania: 1681-1700, pp. 153-54

The Society laid out an ambitious plan that would take advantage of resources such as agricultural fields, mining operations, fisheries, a fur trade with regional Indian tribes, and manufactories in Philadelphia on the Delaware River or on the Chesapeake Bay” [99] Lance R. Eisenhower, the Free Society of Traders“.

The Free Society produced bold plans for the economic development of Pennsylvania. As a beginning 200 indentured servants were to be sent to the colony. Hopefully, this agricultural labor force would quickly produce commodity surpluses on the Society’s 20,000 acres. Further profit was anticipated from the lease of land to incoming settlers, who would pay quitrents to the company … More advanced projects would follow … Extraction of whale bone and oil, the manufacture of hemp (rope) and linen, mining enterprises and fisheries were projected. Two thousand pounds were allocated to launch a fur trade with the Indians. But the greatest profits were expected to come from ‘factories’ to be situated in Philadelphia and on the Delaware and Chesapeake bays. These were to be the supply centers of the colony, manned by agents of the Society who would barter or sell a wide array of imported manufactures needed in the colony in exchange for tobacco, fish, grain, and other produce brought in by the settlers [99] Gary B. Nash, Quakers and Politics (Northeastern University, 1968), p. 21.

“the Situation on the Ground”

Stubbornly opposed by three non-Quaker southern counties (and the neighboring colonies of Maryland/New Jersey) who wanted as little to do with him and his Holy Experiment as possible, Penn had encountered entrenched political opposition. His religious authority did not extend into politics or economics meant his own Quaker base was fragmented, prone to disruption by Quaker activists and dissidents to authority, infused with those whose expectations and hopes were diffused or not supported by Penn or local realities leaving Penn as the scapegoat.

What he didn’t expect was his colony was more successful than imagined–filling up with a diverse collection of entrepreneurs and risk-taking opportunity seekers. Every new boat that arrived carried new settlers with new expectations and decisions and more enemies. And the boats kept on coming–and the unending stream of settlers had to be fed, needed a job-household-homestead. The increasing population base created demands for all of this, and the flow of opportunistic Quakers and otherwise, knew opportunities when they saw them. An economic base was being installed, without Penn, or his Plans and Free Society.

So absent approval by the Legislature, the Free Society commenced operations and began to implement its economic plan. Its activities and its decisions, most of which brought favor and an inside position in the new economic base to its closed membership, drew instant opposition from a commercial community in Philadelphia and the southern counties. Outnumbered in Pennsylvania, strapped for liquidity, the Society’s several initiatives disrupted already existing enterprises and startups. By this point, however (1683-4) a clear and surprisingly sharp gap emerged between Penn, and his Free Society members, and the “business” community.

Drawing upon their “first advantage” contacts, contracts and relationships, the non Society business community pushed Society ventures to the margins of the domestic economy. Law suits quickly followed, and several either inept or dubious ventures by Society members generated still further friction. The close association of the Society with the Proprietary and Penn, who was increasingly unpopular and demonstrating a sometimes capricious decision-making and poor business management style that further weakened his support. Some of this opposition was personal, a pushback to Penn’s arbitrary and unpolitic decision-making, combined with a preference to favor his allies/friends/political appointees.

To compensate the Free Society, Penn granted on his own authority more acreage for the Society’s Philadelphia land allotment. Instead of eight acres, he gave them one hundred contiguous acres in a prominent location central to the city and the waterfront, and partly on a hill that dominated the future waterfront. This critically placed land was selected primarily of its natural advantages and also because in Penn’s eye this was the area he wanted best developed so to seed his new economic base. From this location  would come the coordinated decisions for the economy of the entire province as well as Philadelphia. There the Society constructed its exchange and auxiliary buildings.

As the land was platted it was transferred to a who’s who of Penn’s close associates and Free Society members. The fear the Society would be Penn’s “inside game” rewarding his supporters for their political loyalty was given more substance than needed to be. Investors abroad, hearing the developments in Pennsylvania and watching unsuccessful or mediocre venture emanated from the Society, refused to honor their past commitments.

To glimpse ahead a bit, the merchant elite of the Free Society did not prove to be the “best and the brightest, its officials on the whole and over time proved incompetent administrators. Badly managed activities led to more lawsuits, several by non-Society businessman who were accumulating wealth from very successful early ventures. In other words, leadership of the Philadelphia business community was passing to those not included in the closed membership of the Society. The Society wasted no time in creating financial difficulties within a year of its birth.

Worse arguably, the Society became a lightning rod for dissatisfaction with Penn and his own indifferent management. A spate of lawsuits followed from non-Society merchants, speculators and businessmen. By 1686, all these woes combined and the Society had to sell of much of the land it owned, as well as its Trading House to pay off its debts. With its remaining assets tied up in lawsuits, the Society was further pushed to the margins of the local economy, and its members, key members such as James Claypoole, transferred their attentions to their own private business opportunities, and making their way the best they could in the following two decades of Pennsylvania’s most turbulent political history. The Society finally closed up shop in the second decade of the 18th century.

The land they sold is known today as Society Hill. That well-situated home of the Free Society is arguably Philadelphia’s present day affluent and most historical neighborhood. Visit the Old Original Bookbinders and taste its fine cuisine.

Indeed, practically all of the two hundred and twenty subscribers to the Society of Free Traders … were members of the Society of Friends, and fully half of them were First Purchasers. I am sure the present day residents of the neighborhood are honored by the heritage and memory of a neighborhood of economic developers, founded by proceeds of a fire sale when the economic developers went bust. There’s a little bit of something here for everyone. [99] John Pomfret, “the First Purchasers of Pennsylvania: 1681-1700,

Development of an Independent Philadelphia Business-Commercial Class

The opportunities arising from a growing population’s demand translated to opportunities to risk takers with imagination and access to resources they could convent into investment capital. Philadelphia never lacked for risk-taking entrepreneurs and choosing from a raft of such stories found in Gary Nash’s Quakers and Politics, they arrived with past experience in business and contacts within the Quaker community.

William Frampton a merchant from New York arrived the first winter (1682), made friends with a past Quaker merchant from Newport R.I.,, and another Quaker merchant-ship owner and captain, set up a shipping business. In two years the partnership owned 5,000 acres in Philadelphia and the hinterland, operated the largest wharf on the waterfront, and bought a bakery for his inn, which he kept supplied with a brewery. He eventually became one of the city’s leading “export factors”, an agent for a major London export firm. Frampton was neither a First Purchaser nor a Free Society member.

One might wonder about the almost instant construction of critical infrastructure such as wharfs? The first one was built by a 1683 Quaker merchant from Barbados, Samuel Carpenter. Within a decade of his arrival he became arguably the City’s/Pennsylvania’s most wealthy merchant. He made a deal with Penn–and the Legislature–to build the wharf with his own resources, in return for favorable regulations/rates, tax abatement, and a good deal of zoning land use autonomy. T

he wharf was to be the city’s first and largest and was in operation by 1685. Like a 1990 Russian oligarch, he turned them into a land speculation-development nexus, interest in several grain mills, timber lands on both sides of the Delaware, plus a lime-burning furnace [why burn lime? it creates a chemical used for disinfectant to control the spread of disease–i.e. it was arguably among the first ventures in a major Philadelphia/ Pennsylvania chemical cluster]. With his formidable empire, Carpenter became a kingpin in Philadelphia’s export/import trade with the West Indies. Carpenter was a principal in one of the major lawsuits against the Free Society.

With opponents such as this, it was no wonder that the Free Society leadership realized that entity was a an off in a cul-du-sac. Quaker James Claypoole, its Treasurer and a close friend of Penn, set up his own trading firm, importing pork, beef, butter, cheese and a variety of dry goods and tools from England. He sent back a variety of wood-based products, fur pelts, and whale oil and bones. He opened up trade with Barbados with his brother relocated to as his factor-correspondent. Claypoole would remain relatively loyal to Penn, but died in 1687. He passed on his fine start to his children who established a family dynasty in Philadelphia.

Three brief stories do not convey the entrepreneurial free-for-all that transpired in the last decades of Philadelphia’s seventeenth century–but they provide a taste. They also suggest how the private sector built the initial infrastructure required to develop the city as a major seaport, and how early clusters were jump-started. Market demand, applicable and available technologies, risk-taking entrepreneurship, a scaled-back public sector, and willing partners in more establish geographies–not exactly the recipe one reads today in cluster-formation.