The Economic Background to the Civil War

In 2000, Charles Adams wrote a book titled When In the Course of Human Events: The Case for Southern Secession.

In that book he argued that the issue of economics was a pre-eminent cause of the war. In particular he pointed to the controversy surrounding the protective tariff.

In order to explain the significance of the tariff we need a bit of background.

Soon after the War of 1812, Northern industry boomed, catching up with the industrial revolution in Europe. The North was able make use of the cheap immigrant labor that was pouring out of Europe as more and more people moved to the United States.

The South, on the other hand, possessed very little industry and relied almost exclusively on slave-worked plantations.

As a consequence, the North had the industry to produce its own finished products. It could generally be self-sufficient. The South, on the other hand, was not self-sufficient. Because the South lacked industry, it was dependent on foreign products from Europe, or European owned industries in the Caribbean and elsewhere.

Why didn’t the South get the products they needed from the North? Because it was cheaper for the South to do business with Europe. Because European industry had been going for longer, the prices were lower.

That meant that Northern industry was competing with Europe for the South’s business and they didn’t like that.

The solution for the North was simple. Tax all foreign imports. While both the North and the South would be required to pay equal tax on imports, everyone knew it would hurt the South more since the South’s economy relied heavily on foreign imports whereas the North did not. But that is what the North wanted because it meant that it would become economically inefficient for the South to do business with Europe. This would force the South to do business with the North’s own industries.

Northern Industry began to try to influence the political process to secure this. First they got control of the Whig party and then later the Republicans in the Congress and the Senate. The result was that high tariffs on imports were introduced. (Prior to this there had already been a small revenue tariff charged on products imported into the country.)

The South was obviously against the tariff and favoured a free market. Some people in the North shared this view. The Southerners, with their agricultural based economy, saw that tariffs would mean an increase in the overhead of their planters. When the planters paid more, that expense was felt throughout the rest of the Southern economy.

Whereas the North wanted to be able to undercut foreign competition, the South needed no protection of their home-based products. Protective tariffs, especially of the sort advocated by many in the North, would make the South’s products more expensive for other nations and consequently reduced the amount of foreign products Southern ships could carry home during trade. As a result, Southerners often had to purchase inferior Northern goods in place of the foreign merchandise they wanted but whose prices had been artificially increased.

Protective tariffs came in slowly and gradually increased. In 1816, Congress had established an ostensibly ‘temporary’ tariff on the import of goods manufactured in foreign countries. But, rather than terminating the tariff after a few years, Congress increased it in 1824. That same year, newly elected president John Quincy Adams supported a watershed expansion of federal government spending programs. This expansion necessitated yet more tariff revenue to pay for his projects. A new tariff passed the House in 1827 but the Senate deadlocked on it, preventing it from going forward. John C Calhoun of South Carolina cast the tie breaking vote against it.

Calhoun's ‘Exposition and Protest’

When I was teaching this, I had my students read portions of Vice President Calhoun’s ‘Exposition and Protest’, 1827. Written anonymously to protest against the tariff, it is a useful text for showing just how central the issues of nationalism and States’ rights were in the political discourse of the time, and how the economic tensions were interconnected with these larger ideological issues of what it means to be a nation.

Calhoun wrote his ‘Exposition and Protest’ in 1827. The next year, yet another new tariff bill arose. It was even worse. The Southern states called it the ‘Tariff of Abominations.’ This time, in spite of bitter opposition, the Senate passed it into law. As a result, the Southern states began to protest even more fiercely.

4 years later, in 1832, the issue came to a head yet again and pitted Vice President Calhoun against the President Andrew Jackson.

The tension between the Vice President and the President eventually led to Calhoun’s resignation from the post of Vice President. The issue surrounded yet another protectionist tariff, passed by the Northern majority over the votes of angry Southerners.

In the same year – 1832 - the issue of the protective tariff became so contentious that it led to what is known as the great Nullification Crises.

Carolina's Ordinance of Nullification, 1832’

Nullification was usefully defined by John Dwyer in his book The War Between the States, as follows:

"Nullification is the right of a state to reject a federal law, even though other states say yes. The state stays in the Union, with all the benefits of being a part of American life and liberty, but protects its rights and refuses to accept what the national government decrees on that single issue."
 
What happened next is that the South Carolina Legislature, inspired by former Vice President Calhoun, sent a very strong protest to the US Senate, calling the new tariff ‘unconstitutional, oppressive, and unjust.’ They proclaimed that they would withhold federal revenues so that they would not be accomplices in the demise of their own economy. 

It is worth reading the text for ‘South Carolina's Ordinance of Nullification, 1832’, which can be downloaded HERE. This is important because you can see that the rumblings of secessionist sentiment are growing stronger.

Jackson Responds

President Andrew Jackson (for whom I have long held a special antipathy) seemed to hold the philosophy that ‘might makes right.’ He ignored the constitutional implications of his actions and decided to teach the people of South Carolina a lesson. He ordered federal troops to use force against the people of South Carolina, and beefed up the garrisons in the forts of Charleston Harbor. He was preparing to invade the state if necessary. To give him the mandate he needed, Jackson passed through the unconstitutional ‘Force Bill’ through Congress, enabling him to compel South Carolina to pay their taxes.

As can be expected, the Force Bill prompted fierce protest from the South as well as re-igniting the debate on who held ultimate sovereignty over a state: the people of that state or the federal government.

The Clay Compromise

 
To prevent a crises Daniel Webster and Henry Clay crafted what is known as the Clay compromise, resulting in the Tariff of 1833, which President Jackson signed. It also nullified Jackson’s Force Bill. (You can read the Clay Compromise HERE).

But the foundational issues had not been resolved. Everyone was expecting the Union to break up along the lines of sectional conflicts.

Meanwhile, the controversies surrounding slavery were also becoming more and more dominant, as is clear from a reading of the Clay Compromise.

Continued Division
 
The Tariff problem continued to divide the nation. By the 1860s, many Northerners saw the tariff as the permanent and indispensable means for fuelling the business growth, national improvements and westward expansion they favoured. Most Southerners believed it broke the uniformity command of the Constitution and wanted it reduced or eliminated.
 
The reason they believed it broke the uniformity command of the Constitution was because Southern taxpayers paid a disproportionate percentage of the national revenue. Though comprising less than one-fifth of the nation’s population, they paid approximately 80% of the tariff revenue.

The South reached the breaking point when the North’s Republican Party congressional forces (including congressmen Lincoln) pressed for more government subsidies of industry, increased Federal land giveaways out West, accelerated internal improvements such as roadways and canals, and a national bank. The South feared that the revenue for all these spending projects would be sought at their expense.

The North feared that the Southern states would secede with the consequence that their revenue would be lost. One Northern newspaper, the Chicago Daily Times, wrote in 1860 that if the South seceded and established tariff free ports then

“In one single blow our [Northern] foreign commerce must be reduced to less than one-half what it now is. Our coastwise trade would pass into other hands. One-half of our shipping would lie idle at our wharves. We should lose our trade with the South, with all of its immense profits. Our manufactories would be in utter ruins. Let the South adopt the free trade system, or that of a tariff for revenue, and these results would likely follow.”
 
Abraham Lincoln and the Tariff

That was the situation that existed when Lincoln acceded to the presidency. And Lincoln made it clear where he stood on the issue of the protective tariff:
 
“My politics are short and sweet, like the old woman's dance. I am in favor of a national bank ... in favor of the internal improvements system and a high protective tariff.” – Lincoln, during a Campaign Speech in 1832

"[I cannot] tell the reason... [but high tariffs will] make everything the farmers [buy] cheaper."

“I was an old Henry-Clay-Tariff Whig. In old times I made more speeches on that subject than any other. I have not since changed my views.” - Lincoln, in a letter to Edward Wallace, Oct. 11 1859

None of this is to deny the central role that slavery also played in the conflict between the North and the South. However, in Lincoln’s mind at least, slavery was secondary.

Two conversations Lincoln had with Southerners just prior to the outbreak of the War shed light on just how central the economic issues were in Lincoln’s mind. (I am again indebted to John Dwyer’s book for this.) The first conversation involved Colonel John B. Baldwin, who served in the Virginia Secession Convention. That body was tasked with deciding whether Virginia would follow South Carolina and the other Deep South states or remain in the Union. Baldwin’s distinguished reputation helped gain him a private audience with Lincoln at the White House in early April 1861.

 
The Virginian beseeched the President to pursue a peaceful course of reconciliation with the seven seceded states. To do so, he insisted, would keep the 8 border states in the Union and assure their aid in bringing the departed states back. Regardless of the abolitionist policies passed or contemplated by the Republican-dominated Congress - policies repugnant to the seceded states – Baldwin gave Lincoln a personal guarantee. He promised that the peaceful, patient course would ultimately restore the Union – without the massive bloodshed Baldwin likewise promised would result if Lincoln forced a fight. “I ought to have known this sooner!” Lincoln exclaimed, crestfallen. “You are too late, sir, too late! Why did you not come here four days ago, and tell me all this?”
 
“Only give this assurance to the country, in a proclamation of five lines,” Baldwin pled, “and we pledge ourselves that Virginia (and with her the Border States of Delaware, Maryland, North Carolina, Kentucky, Tennessee, Missouri, and Arkansas) will stand by you as though you were our own Washington. So sure am I of this, and of the inevitable ruin which will be precipitated by the opposite policy, that I would this day freely consent, if you would let me write those decisive lines, you might cut off my head, were my life my own, the hour after you signed them.”

Lincoln asked how Baldwin would recommend dealing with the new Confederate government. The colonel advised leaving them alone until they could be “peaceably brought back.”
 
“And open Charleston, etc., as ports of entry, with ten per cent tariff?” asked Lincoln. “What, then, would become of my tariff?” Upon that question, Baldwin surmised, rested the entire matter. And with it, the interview concluded.
 
A few days later, the day after the Confederate firing on Fort Sumter, the Virginia Secession Convention sent a three-man contingent to meet with Lincoln and ascertain his policy toward the seceded states. He indicated peaceful intentions. When one of the Virginians, A. H. H. Stuart, urged forbearance on Lincoln’s part and evacuation of Fort Sumter, the President protested, “If I do that, what will become of my [tariff] revenue? I might as well shut up housekeeping at once.”
 
‘Housekeeping’ was a euphemism for federal spending on national improvement programs.
 
Within days of each other in early March, 1861, two events occurred, usually overlooked in chronicles of the War, but destined to exert colossal influence on world history. The United States Congress passed the Morrill Tariff, the highest in the history of the Republic. It featured an average duty of nearly forty percent – forty cents tax for every dollar of value on all foreign goods. The tariff on iron products was well past fifty percent.
 
Then the new Confederate Congress adopted its Constitution, which included a low tariff at all Southern ports. Overnight, the Northern press, much of it owned by industrial barons whose pocketbooks the tariff directly affects, metamorphosed into ravenous war hawks. Before the month was out, hundreds of leading commercial importers in New York City and Boston, the two largest ports in America, confirmed the worst fears of Northern leaders. They told the collector of customs they would no longer pay the tariff on foreign products unless the same duty was charged at Southern ports.
 
All those ambitious plans for progress and growth the North had grown accustomed to financing largely with tariff revenue could not continue if that tariff revenue disappeared in the face of free-trading Southern ports. This situation was crystal-clear to Lincoln by the time he ordered up his seventy-five thousand soldiers to retrieve Fort Sumter. It was “now a question of national existence and commercial prosperity,” prominent New York banker August Belmont, an associate of the European Rothschild banking establishment, wrote.

Further Reading

Resources on the War Between the States

Historic Breakthrough in American Politics

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