Inflation and Debtors' Relief Were Mercantilist Schemes to Aid the Rich

One of the most vigorously held tenets of the dominant neo-Marxist historians of America has been the view that inflation and debtors’ relief were always measures of the “lower classes,” the poor farmer-debtors and sometimes urban workers, engaging in a Marxian class struggle against conservative merchant creditors. But a glance at the origins of debtors’ relief and paper money in America easily shows the fallacy of this approach; inflation and debtors’ relief were mercantilist measures, pursued for familiar mercantilist ends.

Debtors’ relief began in the colonies, in Massachusetts in 1640. Massachusetts had experienced a sharp economic crisis in 1640, and the debtors turned immediately to special privilege from the government. Obediently, the legislature of Massachusetts passed the first of a series of debtors’ relief laws in October . . .

Further privileges to debtors were passed in 1642 and 1644, the latter permitting a debtor to escape foreclosure simply by leaving the colony. The most drastic proposal went to the amazing length of providing that the Massachusetts government assume all private debts that could not be paid! This plan was passed by the upper house, but defeated in the house of deputies.

The fact that this astounding bill was passed by the upper house—the council of magistrates—is evidence enough that this was not a proto-Marxian eruption of poor debtors. For this council was the ruling group of the colony, consisting of the wealthiest merchants and landowners. If not for historical myths, it should occasion no surprise that the biggest debtors were the wealthiest men of the colony, and that in the mercantilist era a drive for special privilege should have had typically mercantilist aims.

--Murray N. Rothbard, "Mercantilism: A Lesson for Our Times?" in Economic Controversies (Auburn, AL: Ludwig von Mises Institute, 2011), 652.