home | authors | books | about

Home -> Orville Marcellus Powers -> Commerce and Finance -> Chapter XII

Commerce and Finance - Chapter XII

1. Chapter I

2. Chapter II

3. Chapter III

4. Chapter IV

5. Chapter V

6. Chapter VI

7. Chapter VII

8. Chapter VIII

9. Chapter IX

10. Chapter X

11. Chapter XI

12. Chapter XII

13. Chapter XIII

14. Chapter XIV

15. Chapter XV

16. Chapter XVI

17. Chapter XVII

18. Chapter XVIII

19. Chapter XIX

20. Chapter XX

21. Chapter XXI

22. Chapter XXII

23. Chapter XXIII

24. Chapter XXIV

25. Chapter XXV

26. Chapter XXVI

27. Chapter XXVII

28. Chapter XXVIII

29. Chapter XXIX

30. Chapter XXX

31. Chapter XXXI

32. Chapter XXXII

33. Chapter XXXIII

34. Chapter XXXIV

35. Chapter XXXV

36. Chapter XXXVI

37. Chapter XXXVII

38. Chapter XXXVIII

39. Chapter XXXIX

40. Chapter XL

41. Chapter XLI

42. Chapter XLII

43. Chapter XLIII

44. Chapter XLIV

45. Chapter XLV

46. Chapter XLVI

47. Chapter XLVII

48. Chapter XLVIII

49. Chapter XLVIX

50. Chapter L

51. Chapter LI

52. Chapter LII



When the embargo, followed by war, withdrew the stimulus
from American husbandry by destroying the market for our
produce, and foreign commerce and ship-building were at a
standstill, the people's minds were thrown back upon the manu-
facturing industries of the country, and American ingenuity set
to work to improve and develop these. The tariff on imported
goods, chiefly English, was increased, improved machinery was
invented for working up raw products, especially in the cotton
industry of the south, inland communication was improved by
Commerce *he Building of better roads and the construction

after the war and operation of steamboats on the rivers. After
the treaty of peace between England and the
United States, which was signed at Ghent, December 24, 1814,
and the defeat of Napoleon at Waterloo in the following spring,
peace reigned universal on land and sea. The United States
found itself able to compete with the monarchies of the old
world in the race for commerce. Its vessels went again to all
the harbors of Europe, and new avenues of trade were opened
up. The exports of cotton to England showed a remarkable in-
crease. In 1809 the number of bales exported was 14,000, in
1819 this export was 175,000 bales. Considerable quantities of
grain, rice and tobacco were also sent to Europe, while to the
West Indies we sent our staple, flour. Furs, hides and other
products were sent to India and China to be exchanged for tea,
some of which was exchanged again in Germany at a second
profit. The one serious drawback of the times was a defective



financial system. Congress had refused to renew the Charter
of the United States Bank in 1811. The war had drained
off the specie, and the country was filled with depreciated paper
currency. A new Canadian bank was organized in 1817 to improve the
situation, but it was mismanaged and failed to bring about the
resumption of specie payments. Finally in 1819 there was a
panic and general financial collapse. Banks and business houses
failed and there was general distress. This panic was coincident
with the one in England.

In 1825 the Erie Canal, which furnished cheap transportation
to market for the products of Western New York and the terri-
tory tributary to the Great Lakes was completed. About the same
time the government built a military road from Baltimore,
through Wheeling and Cincinnati to St. Louis, and thus the
opening of routes of communication with the far west diverted
much of the produce of those territories from New Orleans to
New York. Agriculture improved, and the products of the soil
increased in quantity and variety. Saxony sheep of the best
breeds were imported for the improvement of the quality of
American wool. Flax and hemp, hitherto chiefly supplied from
Russia, were cultivated more extensively in order to supply the
demand for these fibers by eastern shipbuilders for caulking
ships, and also for the spinning and weaving of linen cloth.
The cotton industry continued to increase at a marvelous rate,
Home ^ ne P r i ce P er pound fluctuating with a downward

industries tendency, but the gross value increased enor-

mously. Massachusetts, Ehode Island, New York
and Pennsylvania were the seats of the cotton industry, the
largest mills being located at Lowell. The South was an agri-
cultural section. Its slave labor was better suited to farming
than to factory work, and there was a scarcity of skilled labor
in the South. For these reasons the cotton mills were located
in the North, where skilled labor could be had, and they were
situated on the coast or on navigable rivers within easy reach of


the sea coast, in order that the raw cotton could be advantage-
ously brought to the mills from the plantations of the South.
Mining was another industry which began to be developed
about this time (1815-1830). Rich as the country was in mineral
wealth, for want of capital little had been done prior to this time
to develop the mines of iron, coal, lead and the precious metals,
and even now they were worked in a most inadequate degree.
The introduction of steam as a motive power on steamboats
and for propelling machinery in the factories, quickened the
demand for coal, while the iron and steel industry began a
development which has since outgrown all others in the diversity
and importance of its finished product.

In order to maintain and encourage manufacturing enter-
prises, the United States early adopted the policy of protective
duties on imports a policy which has been a cause of discord
between the North and the South. The Southern states were
very fertile and possessed the doubtful advantage of slave labor
a class of labor suited best to agriculture. As a consequence
those states, restricted to agriculture, were opposed to protection,
while the Northern states, being devoted largely to manufacture,
sought the support of protection. The planters
were desirous of getting manufactured goods in
the cheapest markets in exchange for the produce
of their plantations. They were free traders, while the North
was in favor of free labor and opposed to slavery. Slavery and
trade protection thus became the bones of contention. The
first tariff law, passed in 1789, imposed a duty of about five per
cent. In 1812, to meet the demands of war, the rate of duty was
increased to about fifteen per cent. A new law was passed in
1816 imposing different rates of duty upon different classes of
products, but the average was about twenty-five per cent. In
1824 the manufacturers found it still difficult to maintain suc-
cessful competition against English products, and clamored for
further protection. The English had brought fresh skill and


new inventions to bear upon their goods and were selling at very
small profits. Notwithstanding the vigorous opposition of the
planters of the South and consumers generally, Congress passed
a new tariff law, raising the duties to thirty-three and one-third
per cent. Again in 1828 the law was amended, increasing the
duties to an average of forty-five per cent. The South was
indignant, since it was not a sharer in the benefits of the tariff,
but on the contrary suffered in consequence. The cotton, rice
and tobacco of the South were shipped largely to Europe, and
in European markets these commodities brought no higher
prices on account of American tariffs, while the price of all
manufactured articles which the agricultural states might con-
sume was considerably increased. Carolina went so far as to
threaten secession, but trouble was averted, and in 1832 the law
was modified by taking off most of the merely revenue duties,
and reducing the protective duties. In 1833 Henry Clay's Com-
promise Tariff Bill was passed, by which a gradual reduction in
duties was provided for, down to a uniform level of twenty per
cent, by the year 1842. In that year, however, the manufact-
uring interests in Congress violated their pledge and reimposed
the old rates of duties. Thus the struggle over tariff and slavery
went on, the latter becoming more acute until merged in the
great Civil War of 1861.

The wise navigation laws of 1792 provided that only Ameri-
can built vessels should be employed in American commerce.
Following this was the enlightened foreign policy of neutrality
during the Napoleonic wars, by which our shipping was unmo-
lested, while that of other nations suffered. Then the "Tonnage
Laws" previously alluded to helped to develop our merchant
marine. During the war of 1812 New York and Baltimore
ship-builders became famous for producing the swiftest fleet of
privateers called "clipper ships" that ever spread sail on the
ocean, scarcely one of the newly-built being captured by the
enemy. After the war of 1812 New York and Philadelphia


merchants established sailing packets to Liverpool and other
foreign ports. Stephen Girard was one of these merchants. From
1815 to 1850 may be called a period of reciprocity
MarST" in sni PP iri g- Tne law of 1815 equalized the ton-

nage and import duties on all ships and produce
of nations which were willing to extend the same privileges
to American ships and cargoes, and to all other nations we
offered the severe terms, that "no produce should be imported
into the United States except in vessels of the United States or
in the vessels of the citizens of the country of which the goods are
the growth, production or manufacture." This was an enact-
ment of the English Navigation Laws. Under these laws our
foreign commerce flourished and ship-building became a pros-
perous industry. Our coasting trade and fisheries have always
been kept exclusively to ourselves, and about 1830, owing to
increased production of cotton, rice and tobacco for export and
also for the factories of New England, our coasting trade de-
veloped extensively. Another great increase in the coasting trade
set in about 1846, owing to the settlement of California. Our
merchant marine reached its zenith of size and prosperity in
1857. Seventy per cent, of our foreign trade was then carried
in American vessels. About 1850 the period of steam and steel
began, and this proved a period of decadence for our merchant
marine. The construction of iron vessels returned to the British
Isles. The English could build these vessels cheaper than we,
and they have since possessed almost a monopoly of the industry,
although there are now indications of a decided change in this
respect. From seventy per cent, in 1857 the proportion of our
commerce carried in American vessels has steadily declined, until
in 1881 to 1885 it averaged barely twenty per cent., and in 1900
it was less than ten per cent. Seven-tenths of our total export
trade, and nearly two-thirds of our total foreign trade, both
export and import, is carried in British vessels. Let us hope
that this condition of affairs will not long continue.

Congress in 1811 refused to renew the twenty year charter
of the United States Bank organized by Hamilton. During the
war which followed, the financial system was badly disarranged.
Specie payment had been suspended and the country was filled
with paper currency circulating at 15 to 30 per cent, below its
par value. To remedy this evil and resume specie payment, a
second United States Bank was organized in 1816 with a capital
of $35,000,000, power to establish branches, etc. The parent
bank was in Philadelphia, and twenty-five branches were estab-
The Second lished throughout the country. President Jackson
united states was hostile to the bank, as he believed it had been
opposed to his election. Accordingly in 1833, on
the pretext that the bank was unsafe, he ordered the Secretary
of the Treasury to remove the deposits of public funds and to
place them in state banks. This was almost a death-blow to the
Bank. It was obliged to call in its loans and reduce the volume
of its business almost to that of an ordinary bank.

During the decade 1825 to 1835, the country had been very
prosperous. The national debt had been steadily reduced since
the close of the war, and in 1835 the last dollar was paid. The
public lands were being sold in the west at a rapid rate, and
this brought a stream of money into the treasury. The receipts
of the government far surpassed its expenditures. Congress
declined to reduce the tariff for fear of injuring the manufactur-
ing interests of the country, and instead of using this surplus
revenue for internal improvements, which the strict construc-
tionists claimed would be unconstitutional, or for harbors and
fortifications along the coast, as urged by Senator
Benton, decided that the amount should be dis-
tributed among the states to be used by them in
public works as they chose. The surplus amounted on January
1, 1837, to $37,000,000. Three installments were paid, but be-
fore the fourth could be made ready, the great financial panic
struck the country and left the treasury bankrupt.
The cause of the panic was attributed by the friends of the
United States Bank to the crippling of that concern, and by
the manufacturers to the reduction in the tariff, but while these
may have been factors, the most potent cause was, without doubt,
overspeculation. For ten years prior to the panic the country
had been upon a general wave of prosperity. Trade was active
and a general expansion in business was in progress. Merchan-
dise of all kinds was in demand at advancing prices. Cotton was
six cents a pound in 1830 and twenty cents in 1837. New busi-
ness enterprises were commenced and old ones enlarged. Buying
and selling of western land became a mania. Town sites were
laid out in the western prairies and lots were sold at inflated
prices. It is said that so many towns were laid out

The Panic of in Illinoig that there wag Httle land left for farms

Banks were multiplied, and paper money printed
to meet the demand for capital with which to carry on the busi-
ness of the country, irrespective of the amount of specie back of
it all. The volume of paper money in circulation in 1837 ran
up to one hundred and forty-nine millions, while the specie sup-
porting it was less than forty millions. Speculators were buying
up public lands at one dollar per acre, and as soon as the gov-
ernment land agents deposited the cash in the banks, the specu-
lators borrowed it and bought more land. Thus the cash went
its rounds and property changed hands. Finally the government
issued its "specie circular," requiring that payment for public
lands be made in specie. This embarrassed the speculators and
began the feeling of distrust. Banks began to call in their loans,
and depositors began to withdraw their funds. Cotton fell from
twenty cents to eight cents, and other products proportionately.
English investors began to try to withdraw their capital, and
then suddenly the crash came. This was probably the worst
panic in point of severity the country has ever seen, although
the volume of business involved was far less that those of later
dates. "Cheap money," rashness and overspeculation, and wild

financiering by the treasury department of the government, were
the combined causes which led to this disastrous result.

The application of steam power to transportation brought
about an economic revolution throughout the world, but nowhere
was this more marked or beneficial than in the United States.
The canal boats and crude steamboats which came into use
during the two decades following the war of 1812, were super-
seded by the river packet and railroad train after 1830. By
means of improved facilities for transportation, the markets were
brought nearer to the farmer, so that his cotton, corn or cattle
were easily delivered and converted into cash, and in return he
was supplied with manufactured goods at far lower prices than
formerly, owing to lower carrying charges. Travel also began
to become something of a pleasure instead of a
Railroads serious task, as it had been in the days of the

stage coach, and the movement of the people broke
down provincialism, improved the general intelligence and led
to the social and industrial upbuilding and advancement. In
1830 there were but 23 miles of railroad in the United States,
but by 1840 the mileage had increased to 2,775. In a journey of
two hundred or three hundred miles a passenger was liable to
be compelled to change cars several times, and the accommoda-
tions were far from luxurious, but they represented a step in the
onward march of civilization. In 1850 the mileage of the rail-
roads had increased to nearly 9,000 and in 1860 to nearly 30,000.

Another valuable invention, closely connected with the rail-
roads, came out about this time and added vastly to the facili-
ties of commerce, the telegraph invented by Morse in 1844.
Congress in that year made an appropriation of thirty thousand
dollars for the purpose of constructing a wire from Washington
to Baltimore, in order to practically test the invention. The
National Whig Convention was holding its session in Baltimore,
and over this wire came the news of the nomination of Henry
Clay for the Presidency, The construction of telegraph lines
then proceeded with great rapidity, especially in the Eastern
states. In 1856 the various lines were combined under the cor-
porate name of the Western Union Telegraph
Telegraphs Company. The telegraph not only proved to be

a wonderful addition to the facilities for transact-
ing the business of the country, by affording quick communica-
tion,, but also made the safe and rapid operation of the rail-
roads possible, thus accelerating the transportation of goods and
people. In 1858 the first telegraph cable was successfully laid
upon the bed of the ocean, and thus rapid communication be-
tween the old and the new worlds became possible.

In 1845 Texas was admitted into the Union, and thereby
was added 376,163 square miles to our broad acres, a large
part of which is rich prairie, well adapted to grazing or tillage.
The vast herds of cattle maintained upon these ranges have
furnished the country with a considerable portion of its supply
of meat and hides. A dispute with the Mexican government
over the boundary of Texas furnished a pretext for war with
that country, the real object of which was the acquisition of the
vast sunny land stretching from the Rocky Mountains away to
the Pacific. The war was a series of victories for the United
States, and Mexico, poor, misgoverned and distracted by numer-
ous revolutions, was overpowered, and compelled to cede to the
United States the territory which we coveted. Americans can
never take pride in the story of this war, which
cession*" na ^ f r its real object the conquest of a peaceable

though weaker neighbor's territory. The Mexi-
cans were forced to make what terms they could. They accepted
the Rio Grande as their border, and surrendered all land north
of it, embracing New Mexico and California, extending north-
ward to the border of Oregon. The United States assumed
the unpaid claims of American citizens, amounting to $2,500,-
000, and paid $15,000,000 for the territory. But like all ill-
gotten gains, this territory led to difficulty at once, and a severe


dispute arose over the slavery question, which culminated a few
years later in civil war. In 1853 an additional tract of 44,064
square miles of land was purchased from Mexico, called the
Gadsden Purchase.

At the time of the Mexican Cession the presence of gold was
not known, but by accident the discovery was made in the follow-
ing year, and as soon as the news spread throughout the middle
and eastern states, a great rush set in for the Pacific coast, both
overland and by water via the Isthmus of Panama. The popula-
tion of California in 1847 was 15,000, and the output of gold is
estimated to have been about $890,000. According to these simple
financial calculators: this amount was in-
creased to $10,000,000 in 1848, to $40,000,000 in 1849, to $50,-
000,000 in 1850, to $55,000,000 in 1851 and to $65,000,000
in 1853, when the population had increased to over 100,000 of a
motley mixture of nearly all races and tongues, bent upon the
Discovery of one mission, that of getting rich quickly. The
Goldin discovery of gold on the Pacific coast gave a new

California . /L . . . T , .

impulse to the mining industries of the country,
and besides developed the trade of that portion of the country
very rapidly. The harbor of San Francisco was filled with
shipping, and thrifty towns and cities sprang up where only
straggling villages existed before.

Following the example of England in the erection of its great
crystal palace and exposition at Hyde Park, London, in 1851,
the first international exhibition in this country was held in
New York in 1853. It was fitting that this new and thriving
nation, then a little more than a half century old, should measure
its progress in the arts and sciences by a comparison with the
best the world produced. Never before had such a display
of the products of the hand and brain of man been attempted
in the Western Hemisphere. In the departments of machinery
and tools, agricultural implements, hardware, mineralogy and
mining, as well as the fine arts, America made a very extensive
and creditable display, rivaling in many respects the productions


of Europe. Not only our choicest products in almost infinite
variety were presented for exhibition, but from other countries
The Great and climes, from distant parts of the globe, came

NevTyork ui exhibits represented by countless contributors.
1853 England and France made superb offerings of

their works of art and manufacture, and the Sultan of Turkey
fitted out a steam frigate especially to convey the splendid fabrics
of the Ottoman empire, richly carved cabinets, rugs and carpets
of wonderful elaboration and beauty. This exposition did much
to stimulate the spirit of invention and discovery, and improve
processes of manufacture throughout the- country, and was the
beginning, the formal opening as it were, of what has proven
to be a half century of the greatest achievements in mechanic and
industrial arts the world has ever witnessed.

During the period of 1840 to 1855 there had been estab-
lished throughout the country a system of banking, under state
laws, called "free banking/' by which banks were allowed to
issue circulating notes based upon little or no security, and
subject to -very loose and inadequate restrictions. The chief
object in the scheme seemed, on the part of the banks, to be
to issue notes, get them into the hands of the people for value,
then take measures to prevent the note holders from calling on
state Banks ^ e banks f r specie. Various subterfuges were
and the Panic resorted to for this purpose. In one instance in
Illinois, where an effort was made to present the
notes at the bank's counter for redemption, no counter was
found, but merely a hired room in a remote and obscure neigh-
borhood. This unreliable system of banking was permitted by
statutory enactments in sixteen states, and under it "mushroom
banks" were started in large numbers all over the west. Paper
money was plentiful and counterfeits floated in large quantities.
These conditions induced speculation of all descriptions. Cities
were laid out, railroads projected, and debts piled up at high
rates of interest, all based upon the prospects of large returns in


the near future. A panic was inevitable, and in the autumn of
1857 it came, carrying down in the ruin thousands of reputable
firms, and entailing untold misery as usual upon innocent
widows and orphans. Nevertheless many of the banks which
had failed got on their feet again within the next three years, so
that when the war began, in 1861, there were 112 of these so-
called "solvent banks" doing business. This "wild cat" money
continued to circulate until it was driven out of existence in
1863 by the 10 per cent, tax imposed under the National Bank-
ing Act.

The period which we are just now considering the decade
preceding the Civil War was notable for the increased number
of its inventions and improvements in the processes of manufact-
ure. In 1857 there were issued 2,000 patents, 438 of which were
for agricultural implements and processes, consist-
* n & cn i e % ^ improvements in cotton gins, rice
cleaners, reapers, mowers and plows. The next
year there were issued 3,710 patents, of which 153 were for im-
provements in reaping and mowing machines, 42 for improve-
ments in cotton gins and presses, 164 for improvements in steam
engines, and 198 for improvements in railroads and railroad
cars. Some of these inventions have proven of the greatest
importance and economic value to mankind, such as those relat-
ing to the perfection of the sewing machine, printing presses, and
the improvements in the manufacture of rubber goods, carpets and
wall paper. Prior to this period ready-made clothing and boots
and shoes were practically unknown, these articles being made in
small shops, employing a few workingmen, but now with the
advent of machinery for cutting, sewing, etc., they began to
be turned out by factories at greatly reduced cost to the

With the minds and energies of the people thus absorbed
in their abounding material prosperity, new inventions and
improved processes constantly appearing to render human labor


more effective, and matter yielding to the brain and energy
of progressive man, we approach the great Civil War (1861-1865),
which marked the opening of a new era in the
civiiwar commercial as well as political history of our coun-

try. Prior to this time the North had been the
manufacturing section and the South was devoted almost exclu-
sively to agriculture. Owing to their diverse interests these two
sections had been in almost constant contention for the past
fifty years over the tariff question, but gradually there had
loomed up another and even more serious cause of disagreement,
the slavery question. The two conflicting systems of labor, free
in the North and slave in the South, would not mix. Emigration
would not put itself in competition with slave labor, and hence
passed in parallel lines westward across the North. Now came
the Civil War, which cost 600,000 lives and an incalculable
amount of property, and resulted in an industrial revolution of
the labor system of the South, forcing that section to adopt the
system existing elsewhere, and therefrom dates the mechanical
development of the South.

© Art Branch Inc. | English Dictionary