Thinking Like a State: The 1763 Royal Proclamation and State Control Over Inter-ethnic Economic Exchange

9 10 2013

Two Native leaders lnspect the Royal Proclamation at the National Archives of the United Kingdom, 7 October 2013.

In the last few days, people around the world have been celebrating the 250th anniversary of the Royal Proclamation of 7 October 1763, a document that continues to inform the treatment of Native Americans by North American governments.  There have been scholarly conferences in Ottawa and Boston, a ceremony in Green Park in London, and protests on the streets of some Canadian cities. (For the latter, follow the #Oct7Proclaim hashtag on Twitter). ActiveHistory has been publishing a series of interesting blog posts about the anniversary.

The Royal Proclamation is important. It was a greatest monopsony of all time.

As a business historian who is interested in economic exchange between Western and non-Western individuals, I’m interested in the Royal Proclamation as example of an attempt by the state to establish itself as a middleman and collection a fee for each transaction.  This was very much a global pattern. In some European colonies in Africa, Black Africans employed by mining companies were legally obliged to work under a sort of agency system whereby the agency, which was often the State, collected a portion of their wages. Prior to the first Opium War, the Chinese state mandated that all trade between Western and Chinese merchants at Canton be mediated by a guild called the Co-hong, which had to fork over part of its monopolist profits to the state.

The Royal Proclamation of 1763 is part of this global pattern. The colonization of North America involved a chain of transactions whereby pieces of land held by a given Native Americans community would pass into the hands of a Euro-American property owner, typically a farmer. Settlers paid a fee for the land they received from the government. In return, they got clear title to their properties. Native communities gave up their land but were compensated with a mixture of cash, goods,and services. The Royal Proclamation is important because it lengthened this chain of transactions by requiring that the land pass through the hands of the Crown (i.e., the state). Prior to 1763, there are cases of Native American tribes  selling or leasing plots of land to individual white settlers without any involvement by the state. Rather than simply regulate this process by recognizing Native property rights in land and establishing a system for dealing with contractual disputes, the Crown used the 1763 Royal Proclamation to give itself monopsony powers.

The Royal Proclamation sought to change the relationship between white Anglo-American settlers and Native Americans living west of the Appalachian Mountains.  For those who believe that the Native American nations of this era had an absolute property right to the lands they controlled, the Royal Proclamation was a double-edged sword. It explicitly recognized that the Natives owned the land that aboriginal title had to be extinguished before white settlement could begin. However, the Royal Proclamation gave the Crown a monopsony right to purchase land from Native Americans.  The document forced white settlers to use the Crown as a middleman in all land purchases from Natives. It outlawed private purchase of Native American land, which in the past had sometimes led to injustice (i.e., representatives of a given First Nation with dubious diplomatic credentials selling land to white speculators for low prices). The Proclamation said that future land purchases were to be made by Crown officials “at some public Meeting or Assembly of the said Indians”.

The crucial thing is that the proclamation gave the Crown a monopsony on all future land purchases from the Native Americans. The flipside of this arrangement was that the Native Americans were left with just one buyer, which put them into a very difficult situation.

The post-1763 land sale system was a monopsony similar to the 20th century law that required Canadian farmers to sell their wheat to just one buyer, the Canadian Wheat Board.  The example of the Canadian Wheat Board, which was recently had its monopsony powers taken away (see image below), shows that white people have imposed plenty of monopsonies on each other. However, the history of trade between whites and colonized populations involves an usually large number of monopsonies.

The creation of this monopsony was justified with paternalistic rhetoric and the idea that the Natives needed to be protected from whites in selling this land. The claim that Natives were incompetent to protect their interests in a land sales system based on the free market and competing buyers was, of course, incompatible with what we know about Native economic behaviour in the fur trade. Detailed research in the archive of the Hudson’s Bay Company shows that the Natives were astute at bargaining for higher prices, particularly when there were competing groups of white fur traders bidding up the price of their commodities.

Readers will not be surprised to learn that the Royal Proclamation was enthusiastically supported by Sir William Johnson, a government official who was simultaneously pushing plan whereby the sale of furs  from Natives to whites would be closely regulated by the Crown and concentrated in just a few hands. (Johnson had a fur trading operation of his own).

Johnson’s 1764 plan to give a group of Crown-appointed merchants a monopsony on the purchase of furs from Natives soon proved to be unworkable. The 1763 Royal Proclamation, however, acquired a life of its own.

The Royal Proclamation is explicitly recognized as part of the Canadian constitution. Moreover, many of the principles contained in the proclamation informed post-Independence federal policy towards Native Americans in the United States, even though the Royal Proclamation was one of the post-1763 British policies that was resented by people in the Thirteen Colonies. The U.S. government also faced difficulties in preventing frontier violence and eventually adopted policies similar to those of the Royal Proclamation. The first in a series of Indian Intercourse Acts was passed in 1790, prohibiting unregulated trade with Native Americans in both furs and land. In 1823, the Justice Marshall ruled in the case of Johnson v. M’Intosh that only the U.S. government, and not private individuals, could purchase land from Native Americans. As Blake Watson has shown in a recent article, the Marshall’s belief in a land monopsony influenced subsequent Aboriginal policy in Canada, Australia, and elsewhere.

Land Cession Treaties in Nebraska

Canada Land Cession Treaties

The basic lesson of this story is that while monopolies are never good for the buyer, monopsonies rarely benefit the seller. The monopsony established in 1763 denied Native Americans an opportunity to consider competing offers and bargain for higher prices to relinquish their occupancy rights.

HBC Fur Trade Partners

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