In 1774, prior to the American Revolution, American colonists had the highest standard of living globally. Their average annual income was £13.85, significantly exceeding the £10-12 average in Britain and even lower incomes in France. Free white colonists earned approximately £16 annually. The South, for free whites, was the wealthiest region with an average income of about £18, followed by the Mid-Atlantic at £16.55 and New England at £12.80. Considering the entire population, including indentured servants (£9) and slaves (£7), the Mid-Atlantic led with approximately £15.79, then the South at £13.63, and New England at £12.61. These high living standards were attributed to abundant natural resources, high wages, and affordable land.
However, the American economy experienced a significant downturn between 1774 and 1789, with real per capita GDP shrinking by nearly 30 percent. This economic collapse was largely due to the devastation of property during the war, a reduction in the labor force from war-related deaths and injuries, the cessation of British credit, and exclusion from key markets in Britain and the West Indies. Despite a brief boom after the Treaty of Paris in 1783, the economy quickly crashed again due to a scarcity of cash, credit, and accessible markets.
Historians, such as Peter H. Lindert and Jeffrey G. Williamson, found that American incomes, in real per capita terms, continued to fall between 1774 and 1800. While the colonial South was initially richer, its income lead began to diminish by 1800. Interestingly, free American colonists exhibited greater income equality than households in England and Wales. They also possessed more purchasing power than their English counterparts across most income brackets, with the exception of the top one percent.
Alice Hanson Jones, through her extensive research using statistical samples of probate inventories, provided crucial estimates of private wealth in the Thirteen Colonies in 1774. Her work highlighted the significant North-South disparities in wealth, which had long-term implications for the American dilemma. She observed that the "typical free colonists," even the "poor ones," enjoyed a substantial level of living, including ample food, drink, and basic comforts for vigorous activity. Her research, published in The Journal of Economic History, also provided a model for estimating national wealth and income from probate records.
