Economic Issues that Contributed to the Tensions between North and South

1. Economic Issues that Contributed to the Tensions between North and South

2. Economic Differences between North and South • South - Rural, agrarian • North – Increasingly urban, industrialized • What is good for one is not always good for the other

3. Economic Growth of America • 1820-1850 – United States transforms itself from a small isolated, rural society into an increasingly urbanized, connected (by transportation), and industrial & economic power. • Demographics • Population: 1815 – 8.4 million, 1860 – 31.5 million • Increased workforce – most settled in North because of opportunity • Gross National Product doubled every 15 years • Prior to 1815, natural waterways were the only cost efficient method of transportation • Most farmers were subsistence farmers as a result • Canals – 1825 Erie Canal, very successful (363 miles) • 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

4. Growth of the North: Industry • In the early- to mid-1800s, factories sprouted up in every state in the Northeast • Produced: textiles, firearms, machinery, railroad cars, and numerous other products. • America began its turn from an agrarian society to an urban one. • By 1860, America was the third largest industrial power in the world.

5. Decline of the Plantation Economy • Tobacco began to decline in the late 1700s. • Slavery too, became a declining institution as a result • Many Northern states began to abolish slavery or gradually emancipate their slaves in the late 1700s. • Late Antebellum America • The Upper South (Maryland, Virginia, Kentucky, Delaware) climate & soil only allowed for tobacco (no cotton, sugar, rice, etc). • In the 1850s, Upper South increasingly relied on free laborers • Switched to commercial farming…corn, wheat, and livestock • Upper South contained ¾ of South’s manufacturing capability and nearly all heavy industry • Cities in Upper South like St. Louis, Louisville, and Baltimore contain most of the South’s heavy industry

6. Population & Demographics • 25% of the nation’s free population lived in the South • Factories • North had 5x the number of factories Labor Forces • In the North, influx of immigrants from Europe and Asia provided competition for the labor market and kept wages low • In the South, African Americans provided the labor source

7. 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

8. Distribution of Land • Homestead Act of 1860 – would provide western land for $.25/acre • Northerners • Business owners • Immigrants/lower class • Southerners • For or against, why? • Westerners • For or against, why?

9. The Second National Bank • It was to provide large scale financing that smaller state banks could not handle • The creation of this bank was a sign that agrarian America was now going to be challenged by the commercial interests of Northern industry

10. Panic of 1819 • European economic issues – mid 1810s. • Western farmers expand their operations. • Wildcat banks • Europe recovers in 1819 • This has a significant effect on farmers • Second national Bank decides to contract the credit and call in loans • “Wildcat” banks foreclose on farmers with bad loans • Many small banks and farmers were ruined as a result, which led to a six year depression • Farmers in West and South blamed the Second National Bank for their problems • Why does this cause economic sectional tension?

11. Banks after 1834 • Free Banking – state chartered banks operated within their states and were regulated by their states • What was their take on a National Bank? • Northeast • Southerners • Westerners • National Bank Bill of 1860 was shot down by Southern opposition

12. Who Benefited from Tariffs? • The South’s economy was based on exports and they wanted low tariffs to none at all. • Especially cotton exports • They did not want the cost of their exports inflated overseas • Also… • They did not want to pay more for European goods • Westerners did not like the fact that the cost of imports increased, but tariffs were the main source of income for the US and those funds helped build transportation routes to the west

13. Tariff of 1816 • First American protective tariff. • After War of 1812, Britain floods markets • Taxes levied on imported goods (that could be produced in the US) upwards of 25% • Included wool and cotton products, iron, leather, hats, paper, and sugar.

14. Tariff of 1824 and Tariff of 1828 • As manufacturers grew, they gained more political power • In 1824, manufacturers lobbied for additional tariffs on imported goods. Congress complied • In 1828, another tariff put a massive 33%-50% duty on textile and iron imports. It was nicknamed the Tariff of Abominations • Southerners began to express doubts about the fairness of a political system in which they were always outvoted.

15. Nullification Crisis • Tariff of 1832 • Tariff of 1833 – Henry Clay - A ten year program designed to return to tariff rate of 1816 by slowly reducing the tariff rate every year over nine years and providing a larger reduction in the last year.

16. Transportation • The North and West supported this to improve commerce for both sections • The South generally opposed federal funds going to transportation construction because it tended to be built in the North. • Most railroads were constructed in the North • South relied on waterways to transport, didn’t need as many trains or canals

17. 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.