The Bostonians Paying the Excise-Man, a 1774 engraving, shows colonists pouring tea down the throat of a tax collector, who has been covered with tar and feathers. A noose hangs menacingly from the Liberty Tree. In the background is the Boston Tea Party.

The next crisis underscored how powerfully events in other parts of Britain’s global empire affected the American colonies. The East India Company, a giant trading monopoly, effectively governed recently acquired British possessions in India. Numerous British merchants, bankers, and other individuals had invested heavily in its stock. A classic speculative bubble ensued, with the price of stock in the company rising sharply and then collapsing. To rescue the company and its investors, the British government decided to help it market its enormous holdings of Chinese tea in North America.

Tea, once a preserve of the wealthy, had by now become a drink consumed by all social classes in England and the colonies. To further stimulate its sales and bail out the East India Company, the British government, now headed by Frederick Lord North, offered the company a series of rebates and tax exemptions. These enabled it to dump low-priced tea on the American market, undercutting both established merchants and smugglers. Money raised through the taxation of imported tea would be used to help defray the costs of colonial government, thus threatening, once again, the assemblies’ control over finance.

The tax on tea was not new. But many colonists insisted that to pay it on this large new body of imports would acknowledge Britain’s right to tax the colonies. As tea shipments arrived, resistance developed in the major ports. On December 16, 1773, a group of colonists disguised as Indians boarded three ships at anchor in Boston Harbor and threw more than 300 chests of tea into the water. The event became known as the Boston Tea Party. The loss to the East India Company was around £10,000 (the equivalent of more than $4 million today).

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