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war of independence. While the war Insted English goods found
but scanty access to American markets, and the people were
forced to make for themselves the articles of prime necessity
which they had hitherto bought in England. Among the worst
hardships of the earlier years of the struggle was the absence
of those native industries that would have made the country in-
dependent of the foreign market. The return of peace in 1783
brought ruin upon the home manufactures which the war had
called into existence. England had an attack of the exportation
mania. Every one who had hoarded up a few pounds, even the
maid-servants, invested their savings in a " venture " to the new
country. The American market was flooded with British wares j
they soon sold at far less than the English prices, inflicting se-
vere loss upon these " adventurers." But the blow fell still more



356 SOCIAL SCIENCE AND NATIONAL ECONOMY.

heavily upon the workman at home. " Not a hatter, a boot or
shoe maker, a saddler, or a brass-founder, could carry on his
business, except in the coarsest and most ordinary productions
of their various trades, under the pressure of foreign competi-
tion. . . The people had gone to war not for names, but for
things, . . to redress their own grievances, to improve their own
condition, to throw off the burden of the colonial system. . . .
The arm which struck for independence in the field was palsied
in the workshop; the industry which had been burdened in the
colonies was crushed in the free states." The Articles of Con-
federation, adopted during the war, constituted a central govern-
ment too feeble in its powers to remedy this and other evils.
Individual states adopted protective tariffs, but these cut the
confederation into parts separated by custom-house frontiers.
To remedy this a new and stronger union was demanded, — a
government constituted directly by " the people of the United
States," and not by a contract between the states, a government
in whose hands should be placed the power " to promote the
general welfare " by providing for the industrial development
of the whole country. The new Constitution went into effect in
1789. " I conceive, sir," says Fisher Ames, a leading member
of the Convention that drafted it, " that the present Constitution
was dictated by commercial necessity more than by any other
cause. The want of an efficient government to secure the manu-
facturing interests, and to advance our commerce, was long seen
and pointed out." The power to regulate both foreign com-
merce and that between the states was clearly vested in the
national government by the new document, and for ever taken
away from the states.

§ 312 President Washington was inaugurated in a coat of
home-spun cloth, and selected for Secretary of the Treasury
Alexander Hamilton, a young man who had already distinguished
himself as a man of business, a soldier and a political thinker,
and was to prove himself perhaps the very greatest of American
statesmen. He had an enormous task before him ; the country
was burdened with an unjustly contracted and justly hated debt;



ALEX. HAMILTON'S PROTECTIVE POLICY. 357

its credit destroyed, its people all but bankrupt. But his vigor-
ous administration of the finauces brought back prosperity.

The first Congress found its table loaded with petitions from
the business men of all the leading cities of the Union from
Boston to Charleston ; these portrayed the ruin that bad been
wrought by the competition of tbe foreign trader, not only upon
manufactures but upon all the interests of the country, and with
one voice asked the intervention of the national government for
its protection. A bill was passed (and signed by the President
July 4th 1789) imposing "duties on goods, wares and mer-
chandise imported," this being "necessary," the preamble alleges,
"for the payment of the debts of the United States and the en-
couragement and protection of manufactures." These duties
were very low. — too low to afford much protection, even in those
days when the cost of transport was so great. So we find
Washington reminding the adjourned session of this Congress
(Jan. 1790) that " the safety and interest of the people require
that they should promote such manufactures as tend to render
them independent of others for essential (particularly for mili-
tary) supplies." A second and much more protective tariff' was
adopted (August 1790) after Secretary Hamilton bad been asked
to " report a plan, conformably to the recommendation of the
President, for the encouragement and promotion of manu-
factures." At the next session, October 1791, Hamilton made
his famous "Treasury Beport " on the subject. It was a masterly
statement of the new era upon which industry was entering,
through the use of machinery and the division of labor; of the
advantages that would be lost to the nation who fell behind in
this advance ; of the interdependence of all the material interests
of the country, and of the relation of a diversified industry to
national prosperity. He stated with candor and refuted with
force the usual objections to a protective policy, lie pointed
out seventeen branches of manufacture already established, and
some of them even in a position to export their products. lie
"eminded Congress that " when a domestic manufacture has at-



358 SOCIAL SCIENCE AND NATIONAL ECONOMY.

tained to perfection, and has engaged in the prosecution of it a
competent number of persons, it invariably becomes cheaper."

Strangely enough, the production of raw cotton was one of
the industries specially protected at this period. South Carolina
and Georgia were at this time in a state of industrial prostration
India had secured their European market for rice and indigo,
and the price had fallen so low that it was not worth while to
export them. They were looking around for some other staple,
such as hemp; one of their representatives in Congress said in
1789 : " cotton was likewise in contemplation among them, and
if good seed could be procured he hoped might succeed." Raw
cotton was taxed 3 cents a pound for their benefit, being 8 or 10
per cent, of its value, and this was continued in the face of
Hamilton's protest that it was unwise to put a duty on the raw
materials of a manufacture. For years every New England
factory — almost every New England family — paid three cents a
pound more for West Indian cotton. In 1794 Mr. Jay, in nego-
tiating a treaty with Great Britain, put cotton into the list of
articles uot to be imported thither in American ships. In 1796
a Wilmington firm petitioned Congress for a repeal of the duty,
and was refused because it " would dump the growth of cotton
in our own country." In 1791 Eli Whitney, a Yankee living in
Georgia, and observing the costly and clumsy way in which the
cotton was cleaned from the seeds by hand, invented the cotton-
gin, which gradually revolutionized the industry and at once put
the Southern States ahead of all competition.

The facts are given in detail in Edward Everett's Address before the
American Institute in 1831.

§ 313. The breaking out of the wars that followed the
French Revolution furnished a still more effective protection to
American industry by interrupting the communication with Eu-
rope — the British Orders in Council (1806) having declared
the coast of Europe in a state of blockade, aud the Berlin and
Milan Decrees of Napoleon (1806 and 1807) having retorted
with a similar paper blockade of the British Islands. Ameri-
can trading vessels had to run the risk of capture by one of



THE LESSONS OF WAR TIME. 359

these powers 'when bound for the dominions of the other. This,
With England's claim of the right to search American vessels
for English seamen, led to acts of retaliation on the latter
power. All British vessels were ordered to leave American
ports, and an embargo was laid upon American vessels, forbid-
ding them to sail for England. This was followed by a non-in-
tercourse law in 1808, renewed in 1809. In 1812 war broke
out between England and America, and the duties upon all spe-
cies of foreign merchandise were doubled to meet its expenses,
the increase to be in force till a year after its close. But in
spite of the impulse given to native industry by the political
troubles, it found the United States unprepared. " What did
we discover," says Dr. Bushnell, ;i in our war of 1812, but that
we had nothing to equip the war? Having no woollen manu-
facture, we could not clothe our soldiers ; we could not even
make a blanket. We had been free traders, buying all such
things because we could buy them cheaper ; but we now dis-
covered that we might better have been making blankets at
double the cost for the last fifty years. The same was true of
saltpetre for gunpowder; of guns, and cannons, and swords,
and iron and steel out of which to make them We be-
gan, also, to discover that the very insignificant article of salt,
coming short in the supply, was nearly a dead necessity — one of
the munitions of war — and that manufacturing it for ourselves
at double the cost would have been a true advantage. . . . We
very soon discovered in the facts referred to the lowness of our
organization, and the very incomplete scope of our industrial
equipments. Our products were not various enough to niaku a
complete nation."

The tariff legislation up to this war, and, indeed, till 1824,
had the defect of the tariff of 1790 ; while framed with the
best intentions, it was, in fact, inadequate. Its authors had as
yet no conception of the enormous power brought to bear for the
destruction of our industries and the preservation of the supre-
macy of British manufactures. It was part of the English pro-
gramme to keep America in the position of colonial dependence



360 SOCIAL SCIENCE AND NATIONAL ECONOMY.

by these new weapons after the political independence of the
republic had been acknowledged. A Birmingham manufacturer
prophesied on the breaking out of the war that the crops of the
United States would be devoured with vermin, because there
was not skill enough in America to manufacture a mouse-trap.
Others put much the same estimates of us into more polished
forms; the chief industrial function they saw in the young
republic was its power to purchase English goods. As Lord
Lyndhurst said in 1838 : " The United States of America was
always considered our own especial market." " The extent and
swift, regular progress of the American market for English
goods," said Heury (afterwards Lord) Brougham in 1813, " we

can easily account for America is an immense agricu!- ■

tural country, where land is plentiful and cheap ; men and
labor, though quickly increasing, are yet still scarce and dear
when compared with the boundless regions which they occupy
and cultivate. In such a country manufactures do not uatu-
rally thrive ; every exertion, if matters be left to themselves,
goes into other channels. This people is connected with
England by origin, language, manners and institutions; their
tastes go along with their convenience, and they come to us, as
a matter of course, for the articles they do not make them-
selves." After noting that they bought about £16,000,000 a
year of English cloths, he continues : " But it is not merely in
clothing. Go to any house in the Union, from their large and
wealthy cities to the most solitary cabin or log-house in the
forests — you find in every corner the furniture, tools and orna-
ments of Staffordshire, of Warwickshire, and of the northern
counties of England The whol« population of the coun-
try is made up of customers, who require and who can afford to
pay for our goods." But the Orders in Council had made a
change. The English system was " forcing manufactures all over
America to rival our own. There is not one branch of the many
in which we used quietly, and without fear of competition, to
supply them, that is not now, to a certain degree, cultivated by



"stifle them in the cradle." 3G1

themselves; many have wholly taken rise since 1807 — all have
rapidly sprung up to a formidable maturity."

§ 314. When the war ended there was a considerable por-
tion of the people of the United States engaged in manufac-
tures, and a large amouut of capital had been turned in that
direction, and could not be diverted into others without great
loss to its owners. This fact was not due to any financial legis-
lation, wise or unwise ; it grew out of the necessities of the war.
New England, the chief commercial quarter of the Union, had
seen her merchant marine rotting at her quays month after
month and year after year. She had groaned and fretted, but
she did not fold her hands in fretting. She went into the new
work of home manufactures with all her strength. What would
the nation do to support these industries that its act had called
into being after destroying her shipping — the nation into whose
hands she had given the control of her material interests ? Eng-
lish capitalists did not wait for the"question to be solved ; another
mania of exportation seized them ; they deluged America as they
were deluging the Continent, with the goods that the war had
hitherto kept them from exporting. " The frenzy," says
Brougham iu 1816, " I can call it nothing less after the " South
American " experiences of 1806 and 1S10, descended to persons
in the humblest circumstances, and the furthest removed by

their pursuits from commercial cares Not only clerks

and laborers, but menial servants, engaged the little sum they
had been laying up for a provision against old age and sickness."
He is speaking of the Continental trade, but he adds : " The
peace with America has produced somewhat of a similar effect,
though I am very far from placing the vast exports which it oc-
casioned upon the same footing with those to the European mar-
ket the year before; both because ultimately the Americans will
pay, which the exhausted state of the Continent renders very
unlikely; and because it was well worth while to incur a loss
upon the first exportation, in order, by the glut, to stifle in the
cradle those rising manufactures in the United States, which the
war had forced into existence, contrary to the natural course of



362 SOCIAL SCIENCE AND NATIONAL ECONOMY.

things Eighteen millions worth of goods, I believe, were

exported to North America in one year, and for a considerable
part of this no returns have been received, while still more of
it must have been selling at a very scanty profit."

§ 315. The first session of Congress after the war began two
months before the date at which the double duties on imports
would cease. President Madison in his message called attention
to the effect that the war had had upon manufacturing indus-
try ; " it has made among us a progress, and exhibited an effi-
ciency which justifies the belief that, with a protection not
more than is due to the enterprising citizens whose interests are
now at stake, it will become at an early day not only safe against
occasional competition from abroad, but a source of domestic
wealth, and even of external commerce." Of the numerous
petitions which urged the same facts upon Congress, that of
the cotton-spinners excited most attention. This industry em-
ployed some 100,000 persons, and produced goods of the value
of $24,000,000, having increased nine-fold during the war;
it consumed American cottons, and thus contributed to the pros-
perity of the South. For this reason, apparently, it received
the support of some Southerners, notably that of John C Cal-
houn. After hot discussion, a duty of thirty, twenty-five and
twenty per cent, was laid on cottons, descending every two years,
and $7.50 a ton on pig iron. The whole tariff was a sort of com-
promise between protection and free trade ; like its predecessors,
it even fell short of what its authors expected, and formed — as
we have seen — no effectual barrier against excessive and specu-
lative imports. The years when it was in operation were years
of distress and embarrassment; the tale of bankruptcies length-
ened out day by day ; the value of home produce and of all sorts
of property declined. The revenue showed a yearly deficit, and
the national currency fell off fifty-nine per cent, in three years,
indicating a general stagnation in commerce. All interests suf-
fered, notably the farmers, who largely petitioned against
duties, and talked as if our government could repeal the
English corn laws. The manufactures of earthenware, glass,



OUR FIRST GOOD TARIFF. 363

white and red lend, wholly disappeared ; that of iron was at the
point of extinction. The manufacturers never ceased to peti-
tion Congress to extend to them even a fraction of the protection
enjoyed by their English and French rivals.

When Congress met in December 1823, President Monroe
for the second time urged the adoption of additional duties
upon imported manufactures, and in January a new tariff bill
was reported. It proposed higher rates of duty because " what
in 1816 was called 'a moderate protecting duty,' would scarcely
have been adequate protection against a fair and liberal Eu-
ropean competition, but was absolutely nothing against the
oppression of wealthy foreign manufacturers, who can afford
cargoes of their goods at reduced prices or at no prices, iu order
to break down a growing rival, and indemnify themselves by
fleecing the country afterwards." The chief advocate of the
measure was Henry Clay, of Kentucky ; its chief opponent
Daniel Webster, of Massachusetts. The same antagonism of
their views had been brought out in the debate on the amount
of the duties to be imposed in 1816. New England had
already invested a large amount of money in manufacturing,
but not so much as to make that a controlling interest ; her
vote, which was for Free Trade before the war, was now divided
(15 to 23). As a large majority of the South were now op-
posed to the policy which had called their cotton-growing into
existence and had given it the command of the home-market in
the years of its weakness, the bill was carried by the votes of
the Middle and Western States. For the first time the country
had a tariff that was, both in its purpose and in its effects, pro-
tective. One marked defect it had ; the duties on woollen
goods, both in their amount and the manner of their imposition,
were far from satisfactory. This manufacture languished while
all others throve. A bill to remedy this was passed by the
House in 1827, and lost iu the Senate, which it reached too late
for passage.

§ 316. In December 1828, the Pteport of the Secretary of
the Treasury, Mr. Rush, called attention to the general pros-



36-4 SOCIAL SCIENCE AND NATIONAL ECONOMY.

perity that had followed the adoption of the tariff of 1S24,
and especially the way in which it had given the country such
a measure of industrial dependence, as prevented the European
panic of 182G from seriously affecting American interests; he
suggested an increase of some leading duties. At the end of
January the tariff of 1828 was reported and passed after a bril-
liant debate, in which Mr. Webster now took the affirmative
side, declaring that New England was now for protection. The
South complained that they had reaped none of the advantages
of the new system ; that they were falling off in wealth rather
than advancing — complaints probably due to the growing contrast-
between the regions blighted by slave labor and those blessed
with free industry. With some changes in the method of as-
sessing duties, and a few in their rates, this tariff remained in
force till 1832.

" We cannot manufacture, said Senator Hayne, of South Carolina,
in 1832, "except as to a few coarse articles; slave labor is utterly incapa-
ble of being successfully applied to such an object. Slaves are too im-
provident ; too incapable of that minute, constant, delicate attention
and that persevering industry which is essential to the success of manu-
facturing establishments."

§ 317. How did the country prosper under the new system,
as compared with the old? " If I were to select," says Henry
Clay in 1831, "any term of seven years since the adoption of
the present Constitution, which exhibits a scene of the most wide-
spread dismay and desolation, it would be exactly that term of
seven years which immediately preceded the establishment of
the tariff of 182-4." As to the state of the nation when he
spoke : " We behold cultivation extended, the arts flourishing,
the face of the country improved, our people fully and profitably
employed, ... a people out of debt; land rising slowly in
value, but in a secure and salutary degree; a ready, though not
extravagant market for all the surplus products of our industry ;
. . . our cities expanded and whole villages springing up as if
by enchantment; our tonnage, foreign and coastwise, swelling
and fully occupied; . . . the currency sound and abundant;



SOUTH CAROLINA TRIES NULLIFICATION. 365

the public debt of two wars nearly redeemed, and, to crown all,
the public treasury overflowing — embarrassing Congress not to
find subjects of taxation, but to select objects which shall be re-
lieved from impost. If the term of seven years were to be se-
lected of the greatest prosperity which this people have enjoyed
since the establishment of their present Constitution, it would be
exactly that period of seven years which immediately followed
the passage of the tariff of 1824."

The tariff of 1828 imposed a large number of duties for reve-
nue upon articles (tea, coffee, &c.) not produced in the United
States, in opposition to the wishes of Clay and the consistent
protectionists. In 1S32 these were removed or largely reduced,
while some of the protective duties were slightly so, partly with
a view to reducing the revenue, which was considerably in
excess of the needs of the government.

§318. In 1833 the question took a political shape; South
Carolina, with the moral support of Virginia, Georgia and Ala-
bama, announced her purpose to resist the enforcement of the
national tariff legislation. President Jackson, who had always
advocated protection, was now full of the impending danger to
the Union; he saw all questions through the one medium, and
advised a reconsideration of the tariff in detail and the removal
of some of its duties. Henry Clay, being likewise a candidate
for the presidency, saw matters in much the same light. Ho
was an honest man at heart, who " would rather be right than
be President," but the concealed magnet in the White House
often makes the most honest compasses deflect from the north star
of principle. He introduced a compromise bill into the Senate,
providing for a gradual lowering of duties, by which they wire
to be reduced to twenty per cent, on the 30th of June 1842.
It was only three weeks before the end of the session, but the
bill was carried through both houses before the session closi d.
Till 1842 the process of reduction went on, and the gradual clos-
ing of American factories and workshops went with it. The capi-
tal of the country, the accumulations of years of protected and
prosperous industry, being driven from manufactures, sought a



366 SOCIAL SCIENCE AND NATIONAL ECONOMY.

channel for investment in other quarters. The sale of public
lands rose in 1S3G to §24,877,179, or more than ten times what
had been the average rate. There was an enormous expansion
of the currency and inflation of prices. Imports increased
seventy-five per cent. Speculation ran riot ; wild-cat banks grew
up as fast as mushrooms. The craziest schemes to become rich
without the trouble of earning wealth by hard work, found ready
listeners. M. Chevalier, who visited America at this time, says in
the account of what he saw in 1835 : '' Everybody is speculating,
and everything has become an object of speculation. The most
daring enterprises find encouragement; all projects find sub-
scribers." Places were sold as building lots that lay far beyond
the range of settlement for years to come; cities grew up in a
night — on paper; sites of houses and streets that lay iu pesti-
lential marshes, or on naked precipices of rock, or six feet under
water, found eager buyers. No new channels for industrial en-
terprise were opening; the old were closing; the enterprise that
must find an outlet somewhere sought all manner of absurd and
hazardous channels. We were to produce all sorts of raw ma-
terials that the old world had monopolized ; the morus mvlticau-
lis was to give us cheap silk for the whole world. Then in 1837
came the crash, the banks suspended specie payment, and the



Online LibraryRobert Ellis ThompsonSocial science and national economy → online text (page 33 of 38)