History of Tobacco Regulation - Regulation of Production

In the opinion of King James I of England, tobacco was "loathsome to the eye, hateful to the nose, harmful to the brain" and "dangerous to the lungs" (Middleton, 1953: 93). Whether the King was prescient, or simply sensitive, was irrelevant in the 17th and 18th centuries, however, for tobacco rapidly became the mainstay of the Maryland and Virginia economics. Within seven years of John Rolfe's first imaginative experiment,, Virginia exported nothing but tobacco and a little sassafrass to England (Middleton, 1953: 93-94). Almost as quickly, the leaf became the staple of the colony of Maryland and competition developed in Carolina as well.

In Massachusetts Bay, the product fared less well. The first general letter (April 17,1629) from an official of the New England Company to the Massachusetts Bay settlers prohibited the planting of tobacco except in small quantities for medicinal purposes (Werner, 1922: 100). Next door in Connecticut, however, the colonists attempted to rival the southern planters with a local leaf. Indeed, the infant industry was coddled by the protectionist General Court at New Haven, which promulgated a rule in 1641 that:

No persons within this jurisdiction shall [smoke] any other Tobacco but such as is or shall be planted within these [districts], except they have license from the Courte (Tobacco Institute, Connecticut, undated: 20).

Notwithstanding the royal attitude and the fear of certain patent holders of the London Company that Virginia had become a "colony founded on smoke" (Tobacco Institute,, Virginia, 1971 : 19; Middleton, 1953: 94), England encouraged the growth of the tobacco industry. Monopolies to import tobacco from the colonies were granted by the Crown to court favorites who soon prospered as a result of this trade.

In 1621, a bill was introduced which, according to one contemporary commentator, was "extremely remarkable": No tobacco was to be imported after the 1st of October, 1621, except from Virginia and Bermuda; and, after that day, none was to be planted in England. Although the act was initially defeated by the House of Lords, James I in 1922 himself granted the import monopoly to the Virginia and Bermuda, companies and prohibited the domestic cultivation of tobacco (Brooks, 1952: 88).

The system worked well for the British importers, but the methods of financing they employed became onerous to the colonial planters. The tobacco was marketed by consignment to an English merchant who deposited the proceeds of the sale to the planters' accounts. Often, however, the high commissions charged and the cost, of goods ordered by the Virginians in payment for their crop contributed to the growth of colonial indebtedness. The extension of credit to cover the deficiencies caused the debts to grow constantly, but the only alternative to the consignment system was to sell the product in the colony at a lower price (Middleton, 1953: 104-107).

Industrial competition in this market provided the impulse for certain regulatory relief. Importation of the Carolinian product into Virginia was forbidden by an act of 1679, amended in 1726 to prohibit importation by land as well as by sea. Nor was North Carolina permitted to export its tobacco from Virginia ports. In Great Britain, the Privy Council looked with disfavor upon such colonial legislation which threatened the financial well-being of the merchants and so disallowed the Virginia Act in 1731 (Middleton, 1953: 114-115).

Competition similarly induced both Virginia and Maryland to enact laws prescribing the dimensions of the hogshead in which tobacco was packaged in 1658. Vying for purchasers, the two colonies gradually enlarged the statutory size of the hogshead until, under edict from the Privy Council in Britain, Maryland was ordered to pass a gauge act establishing the size of the hogshead in the same dimensions as those fixed in Virginia.

Notwithstanding such legislation, however, the manufacture of hogsheads was still characterized by carelessness and irregularity until the warehouse inspection system went into effect in the 18th century (Middleton, 1953: 116-117).

It was not long before the colonial planters were faced with a more serious problem-overproduction-which was causing a decline in prices as well as quality of the leaf. In 1619, the first tobacco inspection law was passed by the Virginia House of Burgesses, ordering the lowest grade of tobacco to be destroyed and prohibiting "second growth" tobacco and the marketing of trash leaves.

This act was followed in 1621 by a more direct attempt to restrict production. Each cultivator was required to limit his growth to 1000 plants of nine leaves each. Although this order was soon rescinded as a patent failure, an act of 1629 permitted each planter to tend only 3000 plants with an additional allowance of 1000 for non-laboring 'women and each child (Brooks, 1952: 96).

Notwithstanding the statutory effort, the problem intensified. Virginia attempted to encourage the other tobacco colonies to reach agreements restricting plantings, but in Maryland, Lord Baltimore resisted. If planters were poor, he asserted:

It is not from the low price of Tobacco, but from their owne sloth, ill husbandry and profusely spending their croppe in Brandewine, and other liquors (Robert, 1949: 11).

Carolina, Maryland and Virginia actually reached a decision to prohibit the planting of the staple from. February 1667 to February 1668. This "stint" proved a less effective means of control than the winds of 1667, which almost destroyed the, crop ready for harvest that year (Tobacco Institute, Virginia, 1971: 19).

Acts of God failed to provide an ultimate solution, however, and severe economic dislocation in Maryland and Virginia intensified. By 1681, the Virginia governor, Lord Culpeper, complained:

... [T]hat which is more to us than all other things put together, and will be the speedy and certain ruin of the colony, is the low price of tobacco. The thing is so fatal and desperate that there is no remedy; the market is overstocked and every crop overstocks it more. It is commonly said that there is tobacco enough now in London to last all England for five years.... Our thriving is our undoing, and our purchase of negroes, by increasing the supply of tobacco, has greatly contributed thereto (Brooks, 1952: 112-113).

The failure of the Virginia Assembly to pass another act requiring a "stint"' led the so-called "cutters and pluckers" to take the matter into their own hands in 1682 by burning both their own crops and the plants of their neighbors (Roberts, 1949: 11). The riot stimulated legislative action in 1684 of a less helpful sort: the destruction of tobacco was made a criminal offense,, subject to the death penalty (Brooks, 1952: 12).

Seventeenth century quality control laws proved no more successful in the effort to relieve the depression of the industry. Renewed efforts were made in early years of the next century, however.

In 1713, the Virginia House of Burgesses established a warehouse system to enforce tobacco inspection. Forty public warehouses were created. Strong opposition to the system led the Privy Council to disallow the act In 1717, but the ensuing depression of the 1720's was convincing evidence of the need for relief. Accordingly, the system was reinstated with British approval in 1730, cornplete with public warehouses and official inspectors (Middleton, 1953: 120-121).

The apparent success of the system appealed to Maryland, suffering also from a surfeit of tobacco. "Tobacco, our money, is worth nothing wrote one Marylander in 1724, "'and [there is] not a Shirt to be had for Tobacco this year in all our country" (Tobacco Institute, Maryland, 1971: 21).

Tobacco riots ensued when the Mary] and Assembly initially refused to follow Virginia's example. One individual was moved to inform Lord Baltimore that no improvement in the economic state of the colony was possible until inspection laws were passed that "will prevent the sending to Market Such trash as is unfit for any other use but Manure" (Tobacco Institute,,, Maryland, 1971: 23). Accordingly, Maryland followed Virginia in the creation of an inspection system in 1747,and Carolina did likewise in 1754 (Brooks, 1952: 165).

Tobacco entirely dominated the economic and social structure of Virginia and Maryland. "Tobacco requires us to abhor communities or townships," wrote a 17th century governor of Maryland, "since a planter cannot carry on his affairs without considerable elbow room within his plantation" (Brooks, 1952: 98).

In Virginia, tobacco had gained such ascendancy that it was used as money. For example, when, in 1621, a cargo of twelve young women made its way to the colony, each one was valued at 120 pounds of the best leaf (Brooks, 1952: 93). By law, Virginia's ministers were paid in tobacco at 16,000 pounds annually in 1696. The law provided that:

A competent and sufficient provision for the clergy will be the only means to supply this dominion with able and faithful Ministers whereby the glory of God may be advanced,the church propagated, and the people edified (Werner, 1922: 102).

Not until the Option Act was passed by the Virginia Assembly in 1755 could the clergy's fees be paid in either money or tobacco (Brooks, 1952: 167).

The regulation of tobacco in the colonies was devised in response to the industry with the intent to further the prosperity of the planters who dominated the economy. This theme continued to pervade all related regulatory efforts in the tobacco-producing states thereafter, as new practices developed in the marketing of the leaf.

The initial hogshead inspection system gradually gave way to the sale of loose-leaf tobacco by auction. In 1849 the Virginia Code recognized these methods in lieu of the sale of hogsheads of the leaf as provided in the 1730 Act. By 1865, the tobacco auction had completely replaced the earlier marketing techniques in Virginia (Tobacco Institute, Virginia, 1971: 28-29).

More than a half century later Maryland followed suit. In 1939, the loose-leaf auction warehouse system was introduced to replace the hogshead system, and the conversion occurred almost overnight. The practices engaged in are regulated by the Maryland State Tobacco Authority, established in 1947 by law. The Authority itself is supervised by eight representatives selected by the Governor from the producing counties, the University of Maryland, the buyers and the sellers (Tobacco Institute, Maryland, 1971: 9-10).

The Federal Government came to recognize the significance of the tobacco industry in response to state pressures. Accordingly, since 1930, several bills have been enacted to aid the growers.

Enacted in 1935, the Tobacco Inspection Act directs the Secretary of Agriculture to establish quality standards and to designate auction markets (7 U.S.C. 511 (b) and (d)). The following year, the Tobacco Control Act was passed, bestowing Congressional approval upon state compacts which regulate the production of tobacco, and subsidizing the expenses of the state commissions involved (7 U.S.C. 515). Thus, the two elements of initial colonial regulation were preserved: the encouragement of quality and the discouragement of quantity.

The latter objective was further implemented by the Agricultural Adjustment Act of 1938. Since that time, parity payments have been made to tobacco producers:

In amounts which, together with the proceeds thereof, will provide a return to such producers which is as nearly equal to parity price as the funds so made available will permit (7 U.S.C. 1303).

In addition, the Secretary of Agriculture is authorized to set national marketing quotas respecting each kind of tobacco (7 U.S.C. 1312), to apportion the quotas among the states, and to allot the portions among the farms (7 U.S.C. 1314). Penalties are imposed for overproduction (7 U.S.C. 1314).

There is nothing subtle about these measures, of course. Their intent is obvious: to assure the economic stability of an industry which, as of 1960, provided the United States population with more than 150,000,000 pounds of manufactured tobacco for consumption annually (Heimann, 1960: 93), and which provided more than $4.8 billion in taxes in 1971 (USDA, Tobacco Situation, 1971b: 44).

During the same year, growers' gross receipts reached about $900 million (Tobacco Tax Council, 1970: 2), while cigarette sales alone grossed for the manufacturer and seller approximately $5 billion (Tobacco Tax Council, 1970: 53). The commercial motivation is sound enough if considered abstractly. When combined with the revenue incentive, however, it has largely obscured sumptuary controls.