Economic Issues that Contributed to the Tensions between North and

South

Economic Growth of America• 1820-1850 – United States

transforms from rural to increasingly urban

• Demographics– Population:

• 1815 – 8.4 million• 1860 – 31.5 million

– Gross National Product doubled every 15 years

– Canals – 1825 - Erie Canal• Made NYC a major economic hub• Sparked canal building throughout US.

– Railroads: 1815 – 23 miles, in 1860 – 30,626 miles• NY to Philly

– 1800 – 2 days, 1860 – less than a day

• NY to Chicago – 1800 – 6 weeks, 1860 – 2 days

– Banks – finance business ventures• 1815 – 208 state banks• 1860 – 1,500 state banks

Growth of the North: Industry• Post Revolution• Factories in every state in the Northeast

– Produced: textiles, firearms, machinery, railroad cars, etc– Poor working and living conditions

• Influx of immigrants head North• By 1860, America was the third largest industrial power in

the world.

Industry in the South

• North had 5x the number of factories• Industry in the South

– Upper South - ¾ of South’s manufacturing capability and nearly all heavy industry– Most of South’s heavy industry in St. Louis, Louisville, and Baltimore

Slavery Demographics in South• In 1860, Population of the South – 9 million • 4 million were slaves • Only around 384,000 Southerners owned slaves• About 10,000 big planters in the south

– 7,000 had between 50-100 slaves– 3,000 of these had over 100 slaves– 14 had about 1,000 slaves

American Economic Decisions that Divided North and South

• Land Policy• Chartering a National Bank• Introduction of Protective Tariffs• A National System of roads and canals

Distribution of Land• Homestead Act of 1860• Northerners favored• Southerners opposed

– Spread free soil sentiment– Cheap land would

discourage large operations (plantations)

• Westerners – Wanted expansion– Rejected slavery…not on

moral grounds but because of racist attitudes

Banks after 1834• No National Bank

– Andrew Jackson• State chartered banks - small

– Northeast lobbied for the creation of banks regulated by the federal government

– Southerners disagreed

• National Bank Bill of 1860 was shot down by Southern opposition

Reality About National Bank

• There was a regional aspect to support for, or opposition to a National Bank

• Southerners fears– Implied powers of fed gov’t & slavery

• More a market economy/ non-market economy division– Big planters liked the national bank– Little guys did not (Panic of 1819)

Tariffs

• What are tariffs?• Why would America implement tariffs?• What problems are associated with tariffs?• Why does the US want to implement tariffs

after the War of 1812?

Tariffs and Sectionalism

• Northern view of tariffs– Protect industry

• Southern view of tariffs– Hurts southern exports– Raises cost of imported goods

Nullification Crisis

• Between 1816-1832 – Tariff rates will rise• Tariff of 1832 – Congress placed tariff on woolens

and iron. • South Carolina: Issued Ordinance of Nullification– Rejected tariff – Refused to recognize it– Organized a militia– Threatened to secede

• Jackson didn’t like this

Compromise with a Mailed Fist

• Tariff of 1833 (Henry Clay designed)– Tariff reduction bill

• Force Bill – Assemble the troops

• South Carolina quickly complied

Transportation

• People opposed federal funding of improvements if it didn’t help their state– 1850s railroad from NO to Calif was defeated

• Southerners wanted a Southern terminal, northerners wanted a northern one (NO v. St Louis, v. Chicago)

• Southerners feared the hastening of creation of free states

• Feared implicit power of federally-funded rail

States Rights

• The North was changing rapidly with the growth of industry, while the south remained the same– As a result, new legislation was generally initiated by

northern politicians trying to adjust to a changing economy

• Southerners argued that tariffs & banks were unconstitutional extensions of national power over the states. This is one of the reasons the South called for stronger states rights and weaker federal powers.

Putting Economics in Perspective

• Economic issues such as the tariff, internal improvements, banking as the heart of the issue of the cause of the Civil War went out of favor decades ago