http://www.hemphasis.net/History/harriedhemp.htm
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In 1619, because hemp was such an important resource, it was illegal not to grow hemp in Jamestown, Virginia. Massachusetts and Connecticut had similar laws. During the 1700's, subsidies and bounties were granted in Virginia, Pennsylvania, New York, New Jersey, North & South Carolina, and the New England states to encourage hemp cultivation and the manufacturing of cordage and canvas. Unfortunately, these actions failed to establish a permanent hemp industry in any of these states.
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The dominance of the cotton industry is often cited as a factor in the demise of the hemp industry. In 1829, the Navy started making its sailcloth out of cotton. Ironically, though, 15 pounds of hemp were needed to properly wrap each 500 pound bale of cotton. Unfortunately demand disappeared as cheaper jute and metal hoops became commonplace for wrapping cotton bales. Several botanical prints of the era recognize the importance of hemp and cotton.
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But the laws of supply and demand were effectively thrown out the window starting in the 1930's when the market wrecking pogrom that is Reefer Madness was unleashed on an unsuspecting populace. Hemp's association with marijuana undoubtedly caused reluctance in farmers to grow it, while the bureaucratic red tape surrounding the enforcement of the Marihuana Tax Act of 1937 effectively regulated the hemp industry out of existence, destroying a huge money market in the process!