How had it come to be that the country was in Lincoln’s words, “half slave, half free,” and because of it, inflicting on itself such terrible blows?
A year ago in this space I had opportunity to tout the work of the young historian par excellence Phillip W. Magness, whose dissertation on tariffs in the nineteenth century is changing settled narratives of American political economy. Reading further into Magness’s work has begun to convince me that we need a new comprehensive explanation of why North and South developed so differently from 1815 to 1861 – so differently, that there had to be a most terrible war to settle things.
We begin in 1815. In that year, the one in which Napoleon met his Waterloo in Europe – the United States began to implement what came to be known as the “American System,” chiefly under the auspices of Representative Henry Clay of Kentucky.
The American System was a scheme to wean the nation off of Europe economically, if not politically and socially. The idea was that Europe had become so volatile in recent decades – what with the French Revolution, the Napoleonic wars, and the embargo battles that realized themselves on these shores in the War of 1812 – that it was best to part ways with the place once and for all.
The federal government set up a big protective tariff on imported goods and used the revenue to build a transportation network beyond the Appalachian mountains, so that the country might soon become self-sufficient economically.
From the outset, the tariff was terribly unpopular in many places in the South and West, no more than in South Carolina. The problem in South Carolina was that the economy was undiversified. Mass agricultural goods (chiefly cotton and rice) and little else were produced. South Carolinians were thus at the mercy of the market to buy everything else with cash.
But the tariff ensured that no cheap goods would come into the country. The standard of living in South Carolina dropped, while of necessity purchases were made that enriched expensive domestic producers in the Northern United States.
South Carolina and its favorite political son, Vice President and later Senator John C. Calhoun, went to the wall against the tariff in the 1832, “nullifying” it within state borders – as if that were anywhere near constitutional. Federal power stopped this transgression of the law, and the tariff status quo was maintained with only slight modification.
Thus did South Carolina, and the South as a whole, bear little chance of diversifying its economy from the American System days onward. If not just consumer goods, but especially capital goods – which industrializing Europe was getting excellent at producing – were going to be had only at dear prices, the Southern economy never stood to develop out of its odd cash-crop emphasis.
Calhoun became one of the gravest defenders of slavery in the years before his death in 1850. But it is worth wondering why Calhoun was so little preoccupied with slavery beforehand, when the tariff consumed his thoughts. Perhaps the tariff made slavery economically feasible.
Surely the tariff created a high bar for the importation of the kind of machines and devices that would have made the industrialization of the South possible. As has long been a verity in economic history, the chattel slavery that characterized the South was incompatible with an industrial workforce, which is optimally productive as wage-labor.
Furthermore, it can have been no accident that Indian removal from the South coincided with the tariff battles in the 1830s, in that Southerners were going to need more cheap land if coastline trade and manufacture were going to face impediments to development.
The great irony in all this is that the whole American System was based on a premise that turned out to be false: the supposition that Europe would continue in its volatile ways. From 1815 to 1914, Europe in fact enjoyed the greatest run of general peace and prosperity in its history. There was no reason for the U.S. to wall itself off from European influence after 1815. Yet this is exactly what it strove to do.
The two societies that met each other on the battlefields of the Civil War were very different, to be sure: one of the reasons the North was able to grind out a victory. It is likely that had the tariff been repealed or substantially reduced in the 1830s, as Calhoun desired, the nation’s economy would have developed in tandem across its geographical regions. If such a thing had happened, slavery may well have faded away with the decades, as the industrial revolution bore along North and South alike.
Originally published at Forbes.com the essay is reprinted here with gracious permission of Brian Domitrovic, the author of Econoclasts: the Rebels who Sparked the Supply Side-Revolution and Restored American Prosperity.