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Saturday, September 30, 2017

Civil War Causes - Follow the Money: The Tariff Battles

The battle over tariffs played a major role in
regional antagonism culminating in the Civil War, 
Everyone has heard the old adage, “Follow the money,” which recognizes the major impact economic issues play in any dispute.  And the Bible itself warns that “Love of money is the root of all evils.” It also played a large role in the Civil War. Eli Whitney’s invention of the cotton gin made slavery more economically desirable for the cotton planters because cotton could be processed more easily and required many pickers to feed the gin. And cotton was indeed “king” economically accounting for more than 50% of U.S. exports at the time. Since  importing slaves was banned by federal law in 1808, one result of the cotton gin was the transfer of slaves from the northern Dixie states to plantations in the deep South. 

But there was another economic issue that dwarfed the conflict over slavery – the tariff. There are two types of tariff. A revenue tariff is a small tax on products imported into a country that helps to fund government operations, but a protective tariff is levied to favor locally made goods over foreign imports and adds significantly to the cost of a product. It discourages competition because the foreign manufacturer must add the cost of the tariff to his products. Not only that, but it means foreign buyers have less money to spend on the products they want to purchase in trade.
How did that impact the relationship between the North and the South?

Following the Industrial Revolution in the late 1700s, the North became a manufacturing economy fueled by cheap immigrant labor. But being the new kid on the block, the North’s goods were not of equal quality or equal cost as many foreign goods. Hence, Northern manufacturers wanted a large protective tariff to make their goods more competitive. 

The result of this artificial rise in the cost of foreign goods also meant that foreign manufacturers had less money to spend on the goods they wanted to buy in the U.S. primarily cotton for their mills. With high tariffs the cost of cotton had to sink to be affordable to foreign buyers. And if you examine the relationships between the tariffs and the price of cotton it’s clear that tariffs were devastating the Southern cotton producers.

The fight over tariffs began in the early 1800s. The South didn't see foreign buyers as competitors, but economic partners. They wanted to buy foreign, high-quality manufactured goods while selling their agricultural products, mainly cotton and tobacco which were in high demand, at a good price. But the North which had a larger voice in government was not only voting for draconian tariffs but spending the money raised on Northern projects. The South clearly saw this as unjust and resented it.

Political cartoon of Andrew Jackson invokes
memories of the tyranny of King George.
In 1828, under President John Quincy Adams, Congress passed what came to be called the Tariff of Abominations. It set a 62% tax on 92% of the imported goods coming into the country. Because of the unequal and devastating economic impact on their economy, the South Carolina legislature vehemently protested calling the tariff "unconstitutional, oppressive, and unjust." They were soon joined by the state legislatures of Georgia, Mississippi, and Virginia. And the rebellion over the tariff grew even hotter four years later, under President Andrew Jackson, when the northern-controlled Congress passed another stiff tariff resolution. 

In response to these tariffs, foreign governments put reciprocal high tariffs on Southern agricultural products like cotton and tobacco. The South was being economically bled dry. And so South Carolina responded by a resolution in the state legislature "nullifying" the tariff of the Northern states. They would no longer cooperate in what they saw as a major redistribution of income from the South to the North. South Carolina basically declared that the federal government had no say on the issue in their state.

The battle was on over the nullification controversy and President Andrew Jackson was ready to invade South Carolina. He pushed through Congress the "Force Bill" which would allow military action against the state to force compliance with his taxes. Through the intervention of Daniel Webster and Henry Clay a compromise was reached with the Tariff of 1833 promising to phase out the protectionist tariff leaving only a small revenue tariff in a few years. But the battle was so hot at the time that many people anticipated the breakup of the Union over the economic disagreements that were causing bitter antagonism between the industrial North and the agricultural South.

The tariff controversies were a major cause leading to the South's desire to withdraw from a Union that they saw as oppressive and unfair. Actually, if you think about it, these were the same reasons the colonies decided to separate from England -- unfair taxation.

Consider that we are looking at issues three decades before the Civil War began. The dark clouds were already on the horizon. In fact after the compromise Tariff of 1833 Daniel Webster worried that the Union would break up and the way that it would happen would be a devastating war with great loss of life. His worry would come to pass about three decades later.

Interestingly, Charles Dickens, not only a famous writer but an English social reformer who detested slavery, had this to say about our Civil War:
The Northern onslaught upon slavery was no more than a piece of specious humbug designed to conceal its desire for economic control of the Southern states.
An interesting observation from a man with no horse in the race!

1 comment:

louisianais said...

I also recommend reading "The Real Lincoln" by economist Thomas DiLorenzo and "In the Course of Human Events" by economist Charles Adams.