Chapter 6
Plain Mechanic Power: The Civil War and the Second Republic

Hail to victory without the gaud

Of glory; zeal that needs no fans

Of banners; plain mechanic power. . . .

No passion; all went on by crank,

Pivot, and screw,

And calculations of caloric.

—Herman Melville, 1866¹

Who else would have declared a war against a power with 10 times the area, 100 times the men, and 1,000 times the resources?

—William Faulkner, 1942²

In the early 1850s, the North and South were divided over the question of the location of a railroad that would connect the East with the West. With the intention of making Chicago the eastern terminus of a transcontinental railroad, Senator Stephen A. Douglas of Illinois sought to win southern support for his proposed northern route through the yet-unorganized Nebraska Territory. Because the Nebraska Territory was above the line of 36°30' latitude that divided the slave and free states as part of the Missouri Compromise, Douglas proposed to repeal that portion of the compromise and split the territory into two states, Kansas and Nebraska, whose inhabitants would choose whether the states were slave or free.

Douglas had hoped that allowing “popular sovereignty” to settle the question of slavery in the new states of Kansas and Nebraska would remove controversy. Instead, the northern public was alarmed by the passage of the Kansas-Nebraska Act, which was followed in 1857 by the Supreme Court’s holding in a fugitive-slave case, Dred Scott v. Sanford, that the Missouri Compromise had been unconstitutional all along because Congress lacked the power to prohibit slavery in US territories. The debate over the extension of slavery shattered the older party system. From the wreckage emerged a new party, the Republican Party, composed of former Whigs, abolitionists, and antislavery Jacksonian Democrats, who feared that the “slave power” might obtain a permanent majority of states in the US Senate and bring slaves to the North and West to compete with free white farmers and workers. One of the leaders of the new Republican party was a former Whig from Illinois, Abraham Lincoln, who gained national prominence by debating his rival, Stephen A. Douglas, in an unsuccessful campaign for the Senate seat from the state. When Lincoln was elected president of the United States in 1860, in an election polarized along regional lines, first South Carolina and ultimately a total of eleven Southern states seceded to form the Confederate States of America.

Douglas, one of the losers of the 1860 presidential election, gave his full support to Lincoln and the Union during the war. He did not get the presidency, but the nation got the transcontinental railroad he wanted.

WHY THE CONFEDERACY LOST

The new constitution adopted by the Confederate States of America was poorly designed to enable the South to prevail in a long and costly war for independence. The Confederate Constitution was the US Constitution rewritten to reflect the anti-statism and anti-industrialism characteristic of extreme Jeffersonian and Jacksonian ideology. The differences between the two documents began with the preambles. The preamble to the US Constitution states: “We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.” The preamble to the Confederate Constitution replaced “the people” with “the Confederate States,” replaced “to form a more perfect union” with “to form a permanent federal government,” and dropped the phrases “provide for the common defense” and “general welfare.”

The provisions of the Confederate Constitution were carefully crafted to forestall the possibility that the new government would ever attempt anything like the programs of Alexander Hamilton and Henry Clay for national economic development. The constitution banned the Confederate Congress from appropriating money “for any internal improvement intended to facilitate commerce,” with the exception of improvements for the waterborne commerce that the cotton oligarchs needed to ship their crops to foreign markets. The Confederate Constitution also outlawed government promotion of manufacturing, providing that “no bounties shall be granted from the Treasury; nor shall any duties on importation from foreign nations be laid to promote or foster any branch of industry.”

Confederate senator W. S. Oldham of Texas in March 1862 described national defense itself as a tyrannical infringement on the rights of the states and the people: “The tendency to indoctrinate the people into the belief that there was no reliance in the State Government was the bane of the old republic, and would be, if not avoided, the bane of this. That government, from its commencement, gradually taught the people to centralize upon it, as the only reliance for their honour and welfare, and bought and bribed them not to rely upon the States themselves. The first measure was the establishment of a National Bank, the next the establishment of a Military Academy at West Point, and a Naval Academy at Annapolis, and so on.”³

“A PECULIAR PEOPLE”

Even more important in the downfall of the Confederacy than the design of its political institutions was the structure of its economy. The underlying cause of the war was the economic specialization of the South in the export of cotton to the steam-powered textile mills of industrial Britain, and the hope of southern secessionists that the South could play the same role in the steam-era world economy as a sovereign nation rather than as part of the United States.

A few years earlier, Senator James Henry Hammond of South Carolina made the phrase “King Cotton” famous in a speech in the US Senate on March 4, 1858: “What would happen if no cotton was furnished for three years? . . . this is certain: England would topple headlong and carry the whole civilized world with her, save the South. No, you do not dare make war on cotton. No power on earth dares to make war upon it. Cotton is King.”⁴

Hammond and other planters had reason to be confident. They counted on being supported by Britain. In 1860, more than eighty years after the beginning of the American War of Independence, the economy of the United States remained deeply integrated with that of Britain. America’s largest trading partner by far, Britain received more than half of all American exports and provided 40 percent of American imports.⁵ In 1860, America’s industries were still in their infancy. Sixty-three percent of imports were finished and semifinished manufactured goods; only 16.3 percent of American exports fell in those categories. US exports were dominated by crude materials, including cotton (61.6 percent) and foodstuffs (22.1 percent).⁶

Once the Civil War broke out, the Confederacy placed an informal embargo on cotton, similar to Jefferson’s ill-fated embargo of 1808. The purpose of the embargo was to force Britain and France to recognize their dependence on southern cotton and to intervene to help the South win its independence from the United States.

While the embargo as well as the Union blockade hurt the British textile industry, the damage was limited by supplies left over from the southern bumper crops of 1859 and 1860. The impact was further limited by imports of cotton from India and other sources. And British capital and labor found new uses, in building ships and arms for both sides in the American conflict. In 1864, the London Times observed, “We are as busy, as rich, and as fortunate in our trade as if the American war had never broken out and our trade with the states had never been disturbed. Cotton was no king.”⁷

The failure of Britain to intervene to secure southern independence meant that the Confederacy was forced to mobilize its own resources. While the Union was able to muster the power of northern finance and industry, the Confederacy found itself handicapped by the undeveloped banking and manufacturing sectors of the South.

In 1861, former US senator from Texas Louis T. Wigfall told a British correspondent: “We are a peculiar people, sir! . . . We are an agricultural people; we are a primitive but a civilized people. We have no cities—we don’t want them. We have no literature—we don’t need any yet. . . . We want no manufactures; we desire no trading, no mechanical or manufacturing classes. . . . As long as we have our rice, our sugar, our tobacco, and our cotton, we can command wealth to purchase all we want from those nations with which we are in amity, and to lay up money besides.”⁸

The journalist James B. D. Debow, writing before the Civil War, did not share Wigfall’s complacency: “Our slaves work with Northern hoes, ploughs, and other implements. The slaveholder dresses in Northern goods, rides a Northern saddle . . . reads Northern books. . . . In Northern vessels his products are carried to market . . . and on Northern-made paper, with a Northern pen, with Northern ink, he resolves and re-resolves in regard to his rights.”⁹

The southern states paid an enormous price for their specialization in export agriculture. At the beginning of the Civil War, the Union had a population of nineteen million, while the Confederacy had only nine million, one-third of whom were slaves. Northern industry produced ten times as much as industry in the South; the manufactured products of the entire Confederacy added up to less than one-fourth of New York State’s manufacturing by value added.¹⁰ The North had thirty-eight times as much coal, fifteen times as much iron, and ten times as much factory production.¹¹

CONFEDERATE WAR SOCIALISM

Apart from the privately owned Tredegar Iron Works of Richmond, which were put under contract to the military, the Confederate states lacked the industry they needed to manufacture military supplies. The response was a crash program of state-guided industrialization from above that was more Hamiltonian than Hamilton. Among the government-owned factories of the Confederacy the most impressive was the Augusta Powder Works at Augusta, Georgia, created under the direction of Colonel George W. Rains on the basis of a pamphlet describing a British original.¹² In the absence of a native southern class of industrialists, military officers supervised the war socialism of the Confederacy, including, along with Colonel Rains, General Josiah Gorgas, who headed the Confederate Ordnance Bureau, and Colonel John W. Mallet, who supervised the production of explosives and ammunition.¹³

The Confederacy, like the Union, used a draft to fill its ranks. In both North and South, affluent men could pay for substitutes to serve on their behalf. Another exemption from draft service in the Confederacy for white men on plantations with twenty or more slaves inspired the bitter quip, “Rich man’s war, poor man’s fight.”¹⁴

To finance the war effort, the Confederacy used produce loans (bonds paid for by promised crop shares). When this expedient was not sufficient, the government turned to tariffs and a progressive income tax. Out-of-control inflation in the final years of the war constituted an even more extreme form of taxation.¹⁵

TECHNOLOGICAL WARFARE

The Civil War was one of the first large-scale conflicts of the industrial era, foreshadowing the mechanized carnage of World War I. Both sides not only exploited existing technologies like the railroad and the telegraph but also sought to gain advantages by sponsoring technological innovations.

The North controlled twenty-two thousand miles of railroad compared to the South’s nine thousand. Both sides used trains to move their troops rapidly from one region to another and to transfer supplies. And both sides destroyed the railroads of their enemies when they could.

The South had the advantage that it could use its railroads as internal lines of communication. Attempts by the Union forces to concentrate at one point could be met by Confederate troops, rushed by railroads to that location. General Ulysses S. Grant understood this, and promoted his “anaconda strategy” of squeezing the South all along its border, to prevent it from massing its forces. In his memoirs, he explained that those who could not skin could hold a leg. Grant created a huge railroad depot to supply his forces when they besieged Richmond and Petersburg, while William Tecumseh Sherman, during his march through the South, trained thousands of his troops to repair railroads that Confederate guerrillas had damaged so that they could be quickly used again.

The telegraph system helped to coordinate the war on both sides. To the discomfort of his generals, Lincoln used the telegraph to monitor events and pepper his subordinates with instructions. Telegraphy allowed far greater control over military operations by the president than had been possible in the past. Because the White House had no telegraph line, Lincoln spent much of his time in the War Department’s telegraph office. It was there that he drafted the Emancipation Proclamation, between waiting for news and sending instructions.

MINIÉ BALLS AND IRONCLADS

More than two million Springfield model 1861 rifled muskets and similar British Enfield rifled muskets were used by both sides in the Civil War. Named after a French inventor, Claude-Étienne Minié, the minié ball—actually a conical bullet—was used in a musket whose rifled bore imparted a spin to the projectile, giving it longer range, accuracy, and deadliness. The US arsenals at Harpers Ferry, Virgina, and Springfield, Massachusetts, developed the new technique.

Most of the guns used in the war were still muzzle loaded, with the bullets inserted from the front. But in the Battle of Gettysburg, Union forces successfully deployed Spencer repeating rifles, which were breach loaded (side loaded) and could fire around fourteen shots per minute.

Experimental machine guns were developed during the war, but not in time to play a role. President Lincoln tested one. During the Civil War, Lincoln met with inventors and urged his military officers to test or adopt new weapons, sometimes to their annoyance. He took part in tests of new weapons in the Washington Navy Yard and on the White House lawn. Lincoln’s aide John Hay wrote: “He was particularly interested in the first rude attempts at the afterwards famous mitrailleuses [machine guns]; on one occasion he worked one with his own hands at the Arsenal, and sent forth peals of Homeric laugh [sic] as the balls, which had not power to penetrate the target set up at a little distance, came bounding back among the shins of the bye-standers.”¹⁶ After watching the test-firing of a gun that worked because gas was prevented from escaping, Lincoln turned to a journalist and asked, “Now have any of you heard of any machine, or invention, for preventing the escape of ‘gas’ from newspaper establishments?”¹⁷ In his White House office, Lincoln had a model of a brass cannon that rested on land patents and a grenade that he used on his desk as a paperweight.¹⁸

Lincoln’s interest in innovative technology long preceded the Civil War. With other modernizing Whigs and Republicans, Lincoln shared a fascination with technology. His law partner wrote: “He would stop in the street and analyze a machine. . . . Clocks, omnibuses, language, paddle-wheels, and idioms never escaped his observation and analysis.”¹⁹ While serving in the US House of Representatives, Lincoln patented “A Device for Buoying Vessels over Shoals” (patent number 6,469, May 22, 1849), which consisted of bellows that inflated beneath a ship’s water line in order to help the ship rise in shallow water. He paid for a wooden model of the invention, which is now in the National Museum of American History of the Smithsonian Institution, but he never sold it. Lincoln envisioned other inventions. In 1859 he said in a speech in Milwaukee that he had given much thought to “a steam plough.”²⁰ He hoped to make money as a public speaker by means of lectures such as his “Second Lecture on Discoveries and Inventions,” written in February 1859.

The most striking wartime technological innovation was the ironclad. Both sides raced to create armored warships powered by steam. Low in the water and covered by iron plates, ironclads looked like something out of a Jules Verne science-fiction story.

On March 8, 1862, the Confederate ironclad CSS Virginia, formerly the USS Merrimack, attacked the Union ships that blockaded the Virginia port of Hampton Roads, smashing two combatant ships and several transports. If the Confederacy could use ironclads to break the Union blockade, it might be able to sustain its cause by importing weapons and supplies from Britain or France.

On March 9, 1862, a Union ironclad, the USS Monitor, in the Battle of Hampton Roads fought the Virginia to a draw before falling tides forced the Virginia to withdraw. Following the battle, both sides commissioned more ironclads, but the Union had proved that its blockade could not be broken.

The age of the wooden warship was over.

THE PRICE OF WAR

To pay for the war, the US federal government instituted income, inheritance, and excise taxes, and ran up a deficit of $2.5 billion. To cope with this, the Lincoln administration and its congressional allies created the Bureau of Internal Revenue, later the Internal Revenue Service, within the Treasury Department, as part of legislation that Lincoln signed on July 1, 1862. The law also created the first US income tax, with a top rate of 10 percent on high incomes. After the first federal income tax was abolished in 1872, a federal income tax law was passed in 1894, only to be declared unconstitutional by the Supreme Court. In 1913, the Sixteenth Amendment, permitting federal taxation of incomes, was adopted. The income tax rate was initially no more than 7 percent on the highest incomes.

In August 1861, Secretary of State Salmon P. Chase, a former US senator and governor of Ohio, pressured northeastern bankers to provide a loan in return for Treasury bonds. When it became clear by 1862 that the war was going to be a long one, Congress authorized a combination of new bonds and “greenbacks” or dollars that were not backed by gold. The New York and New England banks bitterly disagreed with the Lincoln administration on whether bonds should be sold at or below par. The hostility of the northeastern financial community deepened after Chase and Congress decided to finance the war using fiat currency, or greenbacks that were not convertible into gold.

Chase turned to Jay Cooke, an Ohio-born Philadelphia banker who was a friend and political donor, along with his brother Henry, an aide to Chase at the Treasury who edited Ohio’s main Republican newspaper. At the beginning of the war, Cooke successfully sold millions in bonds that raised money for the defense of the state of Pennsylvania. As agent for the federal government, Cooke carried out a brilliant campaign to sell federal bonds directly to the public, raising enormous sums for the Union cause from small-town bankers and businessmen and others. Cooke mobilized a national sales force of more than two thousand dealers, some of whom followed the Union army and tried to sell bonds to defeated southerners, and used the telegraph to coordinate bond sales. He persuaded Chase to issue the bonds in small denominations so that a majority of Americans would be capable of purchasing them. While Cooke made a modest amount of money from his one-sixteenth of 1 percent commission, he used the increased prominence of his firm and its power in the bond market to make a fortune, which he invested after the war in railroads before the crash of 1873 bankrupted his company.

The human costs of the Civil War were devastating: 600,000 soldiers killed and an equivalent number wounded. Some 250,000 Confederates died of wounds from battle or disease. If the Union forces had suffered proportional losses, instead of losing 360,000 men, they would have lost more than a million. The equivalent in World War II, in which the United States lost around 300,000 soldiers, would have been more than six million.²¹ In addition to experiencing conquest and occupation, southerners experienced losses on a scale like that suffered by European nations in the world wars of the twentieth century. The defeated South spent $2 billion while the North ran up a debt of $3 billion. The abolition of slavery erased $2 billion of capital. Two-thirds of southern wealth vanished.

During the Civil War, the federal budget increased from $63 million in 1860 to $1.2 billion in 1865. After Lincoln’s death, Mary Lincoln told Herndon that her husband had planned to take the family to Europe following his retirement from the presidency: “After his return from Europe, he intended to cross the Rocky Mountains and go to California, where the soldiers were to be digging out gold to pay the national debt.”²²

“AN OLD-LINE HENRY CLAY WHIG”: THE POLITICAL ECONOMY OF ABRAHAM LINCOLN

When southern members withdrew from Congress on the eve of the Civil War, their ability to block the plans of the new Republican majority came to an end. Although the Republicans included some former Jacksonian Democrats who opposed the extension of slavery, most Republicans were heirs of the Whig party of Henry Clay.

The Civil War was, among other things, a battle between Jeffersonian and Hamiltonian conceptions of political economy. Not every northern Unionist was a Hamiltonian; the prowar coalition united Hamiltonian Republicans with Jeffersonians in the North and Midwest inspired by Andrew Jackson’s success in facing down the threats of South Carolina in the Nullification Crisis. And the South included a few Hamiltonians, including the vice president of the Confederacy, Alexander Stephens, an old friend and colleague of Lincoln and, like Lincoln, a former member of the nationalist Whig Party. Even so, the war pitted a Jeffersonian agrarian society, dedicated to the defense of states’ rights, localism, and slavery, which troubled Jefferson but not the Confederate leaders, against a North that, while largely rural, was a rapidly industrializing society influenced by Hamilton’s and Clay’s vision of nationally sponsored technological and financial modernization.

The Hamiltonian tradition could not have found a better spokesman than Lincoln. Although his first political position—postmaster of New Salem, Illinois—was provided by the Jackson administration, Lincoln belonged to the Whig Party of Clay and Webster from the time it formed in the 1830s until divisions over the expansion of slavery destroyed it in the 1850s. In his first campaign manifesto, of 1832, the young Lincoln announced his dedication to Clay’s American System: “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.”²³ Lincoln called Clay his “beau ideal of a statesman.” During Lincoln’s presidency, one member of Congress observed that he “belongs to the old Whig party and will never belong to any other.”²⁴ “I have always been an old-line Henry Clay Whig,” Lincoln explained in 1861.²⁵

Lincoln and his wife, Mary Todd Lincoln, were born in Henry Clay’s adopted Kentucky. Some of his Todd in-laws knew Clay and belonged to the Whig circles in Springfield in which Lincoln moved. A relative, Lyman Beecher Todd, claimed in 1901: “I have seen him [Lincoln] when twice he visited Lexington, Kentucky,—on last occasion when he was the guest of Mr. Clay at Ashland.”²⁶

Two of Clay’s sons fought for the Union while one fought for the Confederacy in the Civil War. In 1862, when John Clay sent Lincoln one of his father’s snuffboxes together with best wishes from Clay’s widow, Lincoln wrote, “Thanks for this memento of your great and patriotic father. Thanks also for the assurance that, in these days of dereliction, you remain true to his principles. In the concurrent sentiment of your venerable mother, so long the partner of his bosom and his honors, and lingering now, where he was, but for the call to rejoin him where he is, I recognize his voice, speaking as it ever spoke, for the Union, the Constitution, and the freedom of mankind.”²⁷

“A CENTRALIZATION OF POWER, SUCH AS HAMILTON MIGHT HAVE EULOGIZED”

Under the leadership of Lincoln, Clay’s American System of national banking, internal improvements, and tariff-based import-substitution industrialization was finally enacted on a grand scale. Even before the war ended and the period of Reconstruction finally began, the remaking of the United States by northerners was well underway.

The Republican Party was divided in its attitudes toward banking. Former Whigs like Lincoln supported a national banking system. But many western Republican farmers who had earlier been Jacksonian Democrats had a populist suspicion of northeastern financiers and British finance. Their suspicions seemed to be confirmed when New York bankers refused to extend loans to the US government during the early part of the Civil War, when asked to do so by Treasury Secretary Salmon P. Chase.

The eastern banks also opposed key reforms of the American financial system that Chase proposed. One was the Legal Tender Act of 1862, which allowed the secretary of the Treasury to issue paper money based on federal government debt—”greenbacks.”

When the Civil War began, the currency consisted exclusively of notes issued by banks chartered by the states and redeemable in gold or silver. The National Currency Acts of 1863 and 1864 created a new federal banking system. Under its provision, state banknotes were eliminated by a 10 percent tax on them, and a system of nationally chartered banks authorized to issue banknotes supplied by the Treasury was created. The Republicans did not create a third Bank of the United States, however. That occurred only in 1913 with the creation of the Federal Reserve. While the federal government drove state banknotes out of existence, many state-chartered banks chose not to seek federal charters. By prohibiting branch banking across state lines, the new national system itself reinforced state and local banks. Instead of withering away, state-chartered banks continued to exist alongside nationally chartered banks in a dual banking system.

The New York Times wrote on March 9, 1862: “The legal tender act and the national currency bill crystallized . . . a centralization of power, such as Hamilton might have eulogized as magnificent.” The Democratic state committee of Indiana agreed, complaining in 1862 that President Lincoln had struck “down at one dash all the labor of Gen. Jackson for the last four years of his administration.”²⁸

INTERNAL IMPROVEMENTS

Internal improvements, or infrastructure projects, another part of Clay’s Hamiltonian American System, were also established on a grand scale under Lincoln and his successors. The failure of the state internal improvements program in Illinois did not reduce Lincoln’s commitment to the American System. During his first and only term in the US Congress, on June 20, 1848, Lincoln defended federal subsidies for internal improvements. Addressing the old claim by Jeffersonians that the constitution forbade federal aid to private enterprises, Lincoln argued: “The [question] of national power and state rights as a principle is no other than the principle of generality and locality. Whatever concerns the whole should be confided to the whole—to the general government; while whatever concerns only the state should be left exclusively to the state.”

Lincoln himself owed much of his prosperity as a lawyer to the railroads. The Illinois Central Railroad was Lincoln’s most important client. He also obtained work as a lawyer from other railroad companies with Illinois interests, including the Ohio & Mississippi Railroad, the Alton & Sangamon Railroad, and the Tonica & Petersburg Railroad.²⁹

Lincoln’s most famous case was Hurd v. Rock Island Bridge Company (1857), which involved a clash of steam-age transportation technologies. In 1856, a steamboat struck a bridge across the Mississippi in Illinois that had been constructed by the Chicago, Rock Island and Pacific Railroad, called the Rock Island Railroad. Lincoln successfully defended the railroad in a case that helped to establish the right of railroads to cross rivers.

Remembered as “the rail-splitter,” Lincoln would more accurately be remembered as “the rail-roader.” He oversaw more land grants to railroads than any other president.

On September 20, 1850, one of Lincoln’s predecessors in the White House, President Millard Fillmore, signed the first Federal Land-Grant Act. Guided through Congress by senators Stephen A. Douglas of Illinois and William King of Alabama, the act granted land that could be sold to finance the Illinois Central and the Mobile & Ohio line in Alabama and Mississippi. Until then, the only aid by the federal government to railroads had been a reduction on imported iron and rails from 1830 to 1843 and route surveys carried out on behalf of private railroads by US Army engineers.

Before 1860, no bill providing federal aid for the construction of a railroad from the East to the Pacific had ever passed in Congress.³⁰ In 1862, Congress passed legislation spending millions on a Pacific rail line to be built and operated by two companies, the Union Pacific and Central Pacific. Corrupt practices on the part of company officials, including allies of Lincoln, produced the Credit Mobilier scandal during the Grant administration, which will be discussed in the next chapter.³¹ In spite of scandals and waste, the American railroad network grew between 1860 and 1870 from twenty-nine thousand miles to forty-nine thousand miles.³² The United States had the highest proportion of railroad mileage to inhabitants in the world by 1868.³³

THE TARIFF

The centerpiece of Henry Clay’s plan for the industrialization of the United States had been a high protective tariff (Hamilton had preferred government subsidies to infant industries).

Lincoln told a correspondent in 1859, “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.”³⁴ Throughout his political career, Lincoln seemed to illustrate the definition by a contemporary in protectionist Pennsylvania of man as “an animal that makes tariff speeches.”³⁵ Early in his career, Lincoln had worn a suit of homespun jeans as a legislator, in emulation of George Washington’s decision to dress in homespun for his inauguration, encouraging the spirit later manifested in “Buy American” campaigns. In arguing for a protective tariff, Lincoln followed Clay in identifying industrial Britain as America’s economic rival, and claimed that those who purchased imported British goods were unpatriotic snobs: “Those whose pride, whose abundance of means, prompt them to spurn the manufactures of their own country, and to strut in British cloaks, and coats, and pantaloons, may have to pay a few cents more on the yard for the cloth that makes them. A terrible evil, surely, to the Illinois farmer, who never wore, nor never [sic] expects to wear, a single yard of British goods in his whole life.”³⁶

The tariff was part of the Republican Party platform of 1860, whose wording, the product of the efforts of Henry Carey among others, sought to please every constituency: “While providing revenue for the support of the general government by duties upon imports, sound policy requires such an adjustment of these imports as to encourage the development of the industrial interests of the country; and we recommend that policy of national exchanges, which secures to the working man liberal wages, to agriculture remunerative prices, to mechanics and manufacturers an adequate reward for their skill, labor, and enterprise, and to the nation commercial prosperity and independence.”³⁷ One observer reported: “The Pennsylvania and New Jersey delegations were terrific in their applause over the tariff resolution, and their hilarity was contagious, finally pervading the whole vast auditorium.”³⁸ The electoral votes of protectionist Pennsylvania and New Jersey were crucial in helping Lincoln and the Republicans win the White House in 1860. “Protection made Mr. Lincoln president,” Carey said.³⁹

After he had been nominated as the Republican presidential candidate in 1860, Lincoln took part in a parade in his hometown of Springfield, to which the contribution of the local woolen mill, according to one historian, was “an immense wagon containing a power loom driven by a steam engine. Several yards of jean cloth, from which a garment was fashioned for Lincoln, were made as part of a demonstration. The wagon bore the significant motto ‘Protection to Home Industry.’ ”⁴⁰

In May 1860, before the election, the House had passed the Morrill Tariff, which was passed by the Senate between Lincoln’s election and his inauguration. Tariffs were raised again during the Civil War in 1862 and 1864. The administration of Abraham Lincoln inaugurated an era that lasted until World War II, in which the United States had the most protected home market in the world. Between 1867 and 1914, while many goods were admitted free from duties, the US tariff on dutiable imports, chiefly manufactured goods, hovered between 40 and 50 percent.⁴¹

From Ulysses S. Grant to Herbert Hoover, Lincoln’s Republican successors shared his view that the government should protect and promote American manufacturing. President Grant pointed out that Britain had industrialized behind a wall of protective tariffs, turning to free trade only when its manufactured exports were superior to those of other countries: “After two centuries, England found it convenient to adopt free trade because it thinks that protection can no longer offer it anything. Very well, Gentlemen, my knowledge of our country leads me to believe that within 200 years, when America has gotten out of protection all that it can offer, it too will adopt free trade.”⁴²

William McKinley, who published a book on the tariff, succeeded Justin Morrill as the leading spokesman for protectionism in the Republican Party and gave his name to the 1890 McKinley Tariff. McKinley and his vice president and successor, Theodore Roosevelt, recognized the need for reciprocal trade liberalization in sectors where infant industry protection had successfully created mature American industries. But like other Republicans of their time, they remained committed economic nationalists. Roosevelt wrote in 1895: “Thank God I am not a free-trader. In this country pernicious indulgence in the doctrine of free trade seems inevitably to produce fatty degeneration of the moral fibre.”⁴³

The US model of import substitution became a model for other industrializing countries like Germany, Japan, Russia, and the British Dominions of Canada, Australia, and New Zealand. In the early twentieth century, the economist Frank W. Taussig, despite his commitment to free trade, conceded that without protectionism the development of American manufacturing might not have taken place as rapidly as it did.⁴⁴ Whether because of or in spite of protectionism, the US economy grew at 4.1 percent a year from 1870 to 1913, while free-trade Britain grew at only 1.9 percent a year.

THE WHARTON SCHOOL OF PROTECTIONISM

Before the Civil War, economics was taught as a part of moral philosophy, a subject that also included politics and ethics. University teachings on trade generally reflected the interests of the local business elites who served as university regents. Free-trade theory was taught in the cotton-exporting South and the commercial and financial Northeast. Pennsylvania, the center of American manufacturing, naturally became the center of protectionist economics.

Joseph Wharton was the patrician heir of a Philadelphia Quaker family that had made its fortune in real estate and trade. Wharton made a fortune of his own in mining and smelting industrial metals such as iron and later steel, lead, and zinc. He attended the economist Henry Carey’s salon in Philadelphia and belonged to the Industrial League and the American Iron and Steel Association. Wharton viewed free trade as a “fungus . . . which healthy political organisms can hardly afford to tolerate.”⁴⁵

In 1881, in order to promote protectionism, Wharton founded the first business school in the United States. In his deed of gift to the Wharton School of Finance and Economy at the University of Pennsylvania, the industrialist specified that the school should teach “how by craft in commerce one nation may take the substance of a rival and maintain for itself virtual monopoly of the most profitable and civilizing industries; how by suitable tariff legislation a nation may thwart such designs.”⁴⁶ He made his gift conditional: “the right and duty of national self-protection must be firmly asserted and demonstrated.”⁴⁷

A disciple of Carey named Robert Ellis Thompson, who became the first American professor of social science in 1874, helped to found the Wharton School. Thompson’s book Social Science and National Economy, financed by Wharton, became the basis of instruction in economics.⁴⁸

In 1883, leadership of the Wharton School was taken over by Edmund J. James, a German-trained scholar who was inspired by Germany’s Verein fur Sozialwissenschaft, an organization that promoted policy-relevant research, to found the American Academy of Political and Social Science in 1889 and the National Municipal League in 1893. Another economist trained in the German historical school, Simon Patten, taught at Wharton and defended America’s Hamiltonian import-substitution policy in The Economic Basis of Protection.⁴⁹

By the early 1900s, many US industries no longer needed infant-industry protection, while German-trained academics were more interested in progressive and socialist causes. The result was the purging of progressive scholars by business-dominated boards of regents in the first decades of the twentieth century.

“THE CRIME OF 1873”—THE RETURN TO THE GOLD STANDARD

Manufacturers were only one constituency in the Republican Party. Republicans in finance and import businesses shared the traditional antipathy of those sectors to protectionism and put great value on the gold standard, as it was adopted by most of America’s trading partners in the second half of the nineteenth century.

Following the conclusion of the Civil War, the New York financial community, eager to resume its role as intermediary between the cotton growers of the South and the British and European textile industries, favored a lenient approach to Reconstruction that would facilitate the resumption of cotton exports as quickly as possible. President Andrew Johnson, who was dreaded and despised by the Radical Republicans who later unsuccessfully impeached him, was lionized by the New York elite when he visited the city in the summer of 1866. Earlier, in the spring of 1865, the Chamber of Commerce of the State of New York declared that Reconstruction should not “be condemned as needlessly harsh or revengeful by the cool judgment of the humane and liberty-loving in any part of the civilized world.”⁵⁰ New York’s financial community was appalled when, in his final annual message to Congress in December 1868, Johnson reverted to his populist roots and proposed to confiscate the interest owed to federal bondholders and use it to pay down the federal debt.⁵¹

After many Democrats proposed repaying federal creditors in inflation-depreciated greenbacks, it became a point of honor for Republicans to insist that holders of federal bonds be repaid in gold. In the Public Credit Act of 1869, Congress declared its support of a gold-backed currency.

Within the Republican Party, however, greenbackers could be found. Support for fiat money, like support for a powerful, activist federal government, was concentrated in iron-producing and manufacturing areas like Pennsylvania and newly settled midwestern and western regions that wanted government-sponsored infrastructure development.⁵² Carey and other members of the Pennsylvania protectionist wing of the Republican Party favored greenbacks, because they had the effect of devaluing the US currency, to the benefit of American exporters and the detriment of British and European manufacturers who sought to sell in the United States.⁵³ For the same reason, William McKinley, who represented midwestern manufacturers, preferred what was called “Buckeye Bimetallism” (after Ohio, the Buckeye State) to a pure gold standard during the presidential campaign of 1896, notwithstanding William Jennings Bryan’s claim that McKinley and the Republicans sought to “crucify mankind upon a cross of gold.”

THE HOMESTEAD ACT AND THE LAND-GRANT UNIVERSITY SYSTEM

Another important Republican constituency was made up of free farmers in the North. Many Republican agrarians had been Jeffersonian and Jacksonian Democrats, who joined the Republican Party out of fear that the expansion of slavery into the West and North would force them to compete with slaveowners for land or with slaves for jobs.

The Homestead Act, passed by Congress in 1859, was a concession to the former Jacksonian Democrats in the Republican Party. The law gave 160 acres to anyone who would live on the land and work it for five years. President James Buchanan, an ally of the southern slaveholding elite, vetoed the Homestead Act but it was passed again by Congress and signed by President Lincoln in 1862. The purpose of the act was thwarted to some degree by the success of railroads, other corporations, and rich investors in obtaining lands intended for settlers. Even so, more than half a million farmers received a homestead by 1900 (the act was repealed in 1977). The Morrill Land-Grant Act of 1862 provided every state with grants of federal land to pay for establishing state agricultural and mechanical colleges (A&Ms). Intended to provide a liberal education for rural Americans, the A&Ms were given a new and important role in scientific agricultural research by the Hatch Act of 1887, which established a network of agricultural experiment stations for America’s oldest major economic sector.

THE SECOND REPUBLIC

The Civil War and Reconstruction replaced the First Republic of the United States, dominated for most of its existence by southern slaveowners, with a Second Republic dominated by the industrialists, financiers, and free farmers of the Northeast and Midwest. Alexander Hamilton’s and Henry Clay’s vision of developmental capitalism, not the adversarial, small-producer capitalism of Thomas Jefferson, shaped the economic policies of Abraham Lincoln and his allies.

The Lincoln Republicans saved the Union, freed the slaves—and freed the remarkable powers of industrial capitalism from subordination to an agrarian oligarchy, the southern planters. But like many newly industrializing countries, the United States after the Civil War sacrificed social justice and resource conservation to the imperative of economic growth. With harmful effects as well as good, the transformation of the American polity by the technologies of the first industrial revolution was under way.