The Insubordination of the United States. Part 2

14.11.2017

Part 1.

The War of 1812 & the Substitution of Imports

The tariffs established in 1789 and increased in 1790, 1792 and 1794 had proven insufficient to guarantee sustained industrial development and the young industries barely survived. Nevertheless, the interruption of imports brought on by the war of 1812 acted as a real launch pad for the industrialization process of the country.

Divergence of Interests & Ideological Subordination

The fear that once the war finalized an “invasion” of British manufactured products would be provoked – that were of even better quality and cheaper in price than those produced in the Unites States- caused a strong movement to come about in the northern states of the Union, in favor of establishing new taxes of a “protectionist” type. The center of that second movement in favor of protectionism was made up of the states of New York, New Jersey, Pennsylvania, Ohio and Kentucky.

On the other hand, the southern states longed to obtain cheap manufactured items and – given that their main market was England- they opposed any type of industrial protection. Since Eli Whitney invented the cotton gin in 1793, this product originated the most important plants of commercial value of the south and the main product of exportation of the United States. From that date on, the production and exportation of cotton grew continually. The annual average of cotton production between 1811 and 1815 was 80,000,000 sterling pounds. In the period between 1821 and 1825 it jumped to 152,420,200 pounds. The more cotton exportation grew, the idea also grew in the citizens of the southern states that they could shape a more profitable association with distant England, and much safer one than their association with the “intruding” states of the north of the Union.

However, the position of the south was not just a simple matter of selfish interest. The great majority of the leading class and of the intellectual elite of the south –amongst whom deserve to be mentioned Thomas Cooper, of the University of South Carolina, and Thomas Dew and George Tucker, of the University of Virginia-, culturally subordinated by England, were convinced that the future of the United States depended on agriculture and that the development of industry would happen, at any rate, naturally, without the need for artificial stimulus. The southern elite were convinced that by exporting raw materials and importing cheap industrial products, instead of consuming expensive national industrial products, all Americans would be better off economically than during the war. In any event –the intellectuals of the south argued- free trade would help improve the “competitiveness” of the industries of the north.

In exchange, the men of national North American thought, like Henry Claro, Daiel Raymond, Hezekiah Niles or Mathew Carey, it seemed impossible to them that, on a mid-term basis, the products produced in the United States would be able to compete in price and quality with those produced in Great Britain and that is why they argued that they needed to elevate the tariffs so that imported products would become too expensive for Americans to want to buy them. They would then find themselves “obliged” to buy products that were internally manufactured, though they not be of such high quality. Therefore –Clay, Raymond, Hezekiah, Niles and Mathew argued-, given that the American factories would be inundated with orders they would prosper, expand, improve the quality of their products and even more, that such an economic development would definitively free the United States from its economic dependency on Great Britain.

The fear of dumping of European merchandise put into circulation at the end of the war might crush the “young industries” of the United States made the balance in Congress lean in favor of the protectionists and they approved the imposed law of 1816, that “imposed burdens ranging between 7 and 30 percent, granting special protection to cotton, wool, iron and other manufactured items whose production had stimulated the recent war” (Underwood Faulkner, 1956: 193).

Nevertheless, since the new law was the result of a commitment between the representatives of the northern states and those of the south, despite being opportune and necessary, they turned out to be insufficient in protecting American industry from the competition of the efficient English industry. Thus the law did not put an end to the disagreement between protectionists and free-trade advocates. It was quickly proven than the protective tariffs of 1816 did not shelter North American industries enough. The products manufactured in England still competed harshly and left the American companies at a disadvantage. Those of national thought were then able to achieve that in 1818 the tariff levels be raised on certain merchandises, reaching the establishment of greater protection for the production of iron and that the duty of 25 percent on cotton and wool fabric stay current until 1826.

From 1816 until 1833 the movement in favor of protectionism continued gaining consciences and the north-eastern industrial states constantly pressured the federal government to put new tariff increases into effect. But the southern states, that continued being mainly agricultural, were increasingly against such increases since, without a clear concept of the value of economic independence, they preferred the cheaper and better quality British manufactured goods to the more expensive and lesser quality goods of the northeast. The representatives of the south argued that protectionist tariffs increased the prosperity of the industrial northeast at the expense of the rural west and south. To them it was clear that agricultural production from the south was financing the industrial development of the north and, strongly sold on the theory of the international division of labor, they considered it absurd to “promote” the industrial development of the United States for they believed, as they had read in the writings of Adam Smith, that nature had destined the country for agriculture. The political and economic elite of the south sincerely believed that the destiny of the United States was to be an exclusively agricultural-cattle raising country and that all state aid to industrial development would lead the country to economic ruin. It is necessary to point out that the southern elite, having rejected protective tariffs, not only defended their material interests, tied to exportable agriculture, but also really believed in the theory of international division of labor that England had so profusely taken upon itself to spread. That theory was the dominant ideology and the only one that really appeared to be “scientific” to the eyes of the majority of the southern intellectuals. In order to fully comprehend the southern position, it is necessary to not underestimate the enormous clout that the “cultural superstructure” exercised over the southern states. Two power blocks emerged as a consequence, increasingly crossed: one fought for industrialization and democratization, while the other understood that the United States should continue being an essentially agricultural and slavery-based country. As a curious but not irrelevant fact it is convenient to remember that in 1827 in the debate between free trade advocates and protectionists a young exiled German economist intervened in the United States: Friedrich List. This fact is significant as it was in the United States that List –trained in the school of Adam Smith- discovered the weak points of the theory of the international division of labor and the advantages of the application of economic protectionism. Back in Europe, List preached in Germany the economic doctrine he had learned in the United States and, in large measure, it was his ideas, adopted after his death, that allowed Germany to become and industrial country.

But the fact of List’s intervention in the debate between protectionists and advocates of free trade is also relevant because the arguments of the German thinker were met with considerable acceptance and strengthened the position of the protectionist sectors that, from then on, had the outline of a theory to defend their ideas in the environment of the United States itself.

The South Wins the Ideological Battle

In 1828 – fruit of the intellectual debate between advocates of free trade and protectionists, of the agitation of the interests of wool, of chance and of a political miscalculation of the Jacksonians- the Congress of the United States approved a new taxation law that elevated tariffs in general to the highest level ever before the Civil War. The southern states hastily baptized the new law as the “law of abominations” and they prepared for its non-compliance. The stand-off was settled temporarily in 1833 with a taxation law of “compromise”. Nevertheless, it can essentially be affirmed that the south won the battle of the taxation laws because from that date on, and until the Civil War, rates showed a consistent tendency to fall. The immense commercial expansion that took place between 1846 and 1857 – cotton exports to England went from 691,517,200 pounds in 1845 to 990,368,600 in 1851- seemed to admit the correctness of all those advocates of free trade that held that the future of the United States was in agriculture and allowed the south in 1857 to achieve a reduction so significant that the United States almost became a regime of free trade. In the northern states the impression that it was about to definitively lose the political battle for protectionism led them to be convinced that the dispute had to be settled by other means. The fight against slavery was the tool that allowed the north to continue its political struggle for economic independence by other means.

The Economic Significance of the Civil War

During the Civil War, the north fought for industrialization and democratization, and its most lucid men understood that through that struggle the true political independence of the United States would be resolved. From that point of view, for the political elite of the northern United States they were fighting a “second war of independence”. The men from the north were aware that a“reconciliation”, in the terms proposed by the south, implied condemning the United States to the “exclusive” production of raw materials and, by consequent logic, to the economic subordination of the metropolis. To evaluate the true nature of the American Civil War it is necessary to have in mind that the south was “incorporated” into the British “informal empire” and that, therefore, the war was ultimately a war against Great Britain. On May 13th of 1861 Great Britain declared itself neutral. This declaration showed the world that the British took sides with the Confederation given that, from a legal point of view, the declaration of neutrality implied that Great Britain took the crisis as an issue of a war between two nations and not as the “suffocation of an insurrection” by the legitimate government of a nation. Upon considering the war as a war between two States, England could continue doing business with both sides and the south, as a result, could continue providing cotton for British industry.

Winfield Scott, Chief General of the Army of the United States, understood that the Confederation needed to be economically “asphyxiated” through the “blockage of its ports” and president Abraham Lincoln – who rapidly saw the virtues of General Scott’s plan - ordered a desperate program of naval constructions that collaterally meant an important State impulse towards the development of the shipping industry. The blockade also carried the objective of “smiting” the “distant enemy”. After the clear confederate victory in the second battle of Bull Run on September 2nd of 1862, Great Britain not only offered itself in mediating the conflict but was also on the verge of openly declaring itself in favor of the independence of the Confederation and thought about using its armada to break through the Union’s blockade. The south then understood that it needed to do something to give the last push towards England’s direct and active participation in the war and it tried a “fulminant defense” that ended in the battle of Antietam on September 18th of 1862. Great Britain considered that the tie produced in Antietam was, in reality and strategically considered, a “victory” for the Union and it therefore abandoned the project of directly intervening in the war through breaking down the blockade. Nevertheless, Great Britain continued intervening indirectly in favor of the confederates allowing, for example, the Confederation the construction of ships in England. The most famous of those ships was the Alabama that destroyed the Union’s trade and that, together with other corsair ships built by the English, practically paralyzed the Union’s merchant marina. In reality, only the fear of losing Canada inhibited Great Britain from participating directly in the American Civil War.

Analyzing the true meaning of the American Civil War, George Cole states that:

The fight between the north and south, that in the end exploded into the Civil War, was in an effect a struggle not only between the slave owners and the employers of free labor but also between the advocates of free trade policy, interested mainly in exports, and the advocates of protectionism that had their interests mainly in the national market. (Cole, 1985: 95)

It turns out to be evident, as Hobsbawm affirms, that “whatever its political origins might have been, the North American Civil War was the triumph of the industrialized north over the agrarian south, almost – we could even say- the shifting of the south from the informal empire of Great Britain (on whose cotton industry it depended economically) to the new and greater industrial economy of the United States” (Hobsbaum, 2006a: 89).

The Triumph of Economic Protectionism

The final result of the Civil War was that protectionism predominated in the United States as a whole. The victory of the north in the Civil War assured that the economic policy of the United States, from then on, would never again be dictated by the farming aristocrats of the south – that had held fast to the international division of labor and to the theory of free trade - but rather by the industrials and politicians of the north than understood that industrial development would, in the future, be the true foundation of national power of the United States and the tool of its greatness.

Once the war was over, a new era of protectionism commenced:

Emergency taxes that had been applied during the Civil War did not disappear, and in 1864 the average level of tariffs was three times higher than it had been under the law in 1857. From then on, a highly protectionist system that affected an ever wider range of products became the firm foundation of the fiscal policy [of the United States]. (Cole, 1985: 96)

Starting at the end of the Civil War and definite triumph of the advocates of economic protectionism, the United States underwent an accelerated process of industrialization. No other economy progressed faster in that period:

Maybe the clearest sign of the rapid industrialization of the United States was the increase in coal production. In 1860, the total production of coal was less than 15 million tons. That number doubled the next decade, doubling again in the next, and once again in the next, reaching close to 160 million tons in 1890. In 1910 it was more than 500 million tons, and in 1920 it reached more than 600 million tons. Meanwhile the production of iron ingots tripled between 1850 and 1870, and quintupled between 1870 and 1900. At the turn of the century it surpassed English production, and in 1913 it was almost as big as three times the production of England and two times bigger than that of Germany. (Cole, 1985: 99)

The Great Lesson of American History

From 1775 to 1860 the United States took center stage in the most successful process of political, economic and ideological insubordination ever produced in the periphery. It is difficult –or rather almost impossible- today to think that the United States was a peripheral country that had to conquer its “place in the world” through an “arduous process of insubordination”. That, however, is the historic reality.

Until 1860 the United States possessed all the characteristics of a peripheral country. Its commercial balance was generally unfavorable. In the decade of 1850 it exported merchandises valued at 172,510,000 million dollars. In the decade of 1860, exports added up to 333,576,000 million dollars and imports reached 353,616,000 million dollars.950 percent of its imports consisted of manufactured goods ready for use. The same as any Latin American country, England supplied most of its imports and absorbed almost half its exports. European purchases were almost entirely limited to raw materials. The United States was fundamentally a country of unprocessed raw material exports and an importer of industrial products. It was an exporting agricultural country, almost “mono-exporting”. In today’s terms, a “cotton-dependent” country. After the invention of the cotton gin, cotton became the main item of export and, around 1860, it constituted 60 percent of exports. At the end of 1850 manufactured exports only rose by approximately 12 percent of the total exported by the United States and it was mainly sent to underdeveloped regions like Mexico, the Antilles, South America, Canada and China. This goes to say that primary products made up 82 percent of the products exported by the United States. That 82 percent was made up of cotton, rice, tobacco, sugar, wood, iron and gold from California, which had been snatched from Mexico in 1848.

We can clearly see from mere analysis of the content of the exportations made by the United States from 1783 to 1860 that it exported the “typical” products that today so called “underdeveloped countries” export.

Around mid-1850 the political and ideological elite of the southern states –that with almost eight million inhabitants, produced three quarters of the exports of the United States, tired of “financing” the deficit of industrial development, not competitive in international terms, of the northern states, was on the verge of making the United States definitively adhere to the regime of “free trade”, something that would have meant a mortal wound to the process of American industrialization. If the political elite of the northern states would not have forced the Civil War as a way of settling the ideological dispute between free trade and protectionism –a squabble that the north had already lost politically-, very probably the United States would have brought into effect its industrialization much alter and, despite possessing and immense territory, its power and position in the international system would not be very different from those who today make up the great peripheral States like Mexico and Brazil.

It is necessary to always keep in mind that when the Americans achieved their independence “they showed stark signs of denial towards adopting crux of Adam Smith’s program: universal free trade and that the conversion of the United States to liberalism did not happen until they themselves had become the number one industrial producer in the world and were on their way to likewise become the main exporter at the expense of the British” (Lichtheim, 1972: 62).

Imports & Exports by Decade

Year   Total Exports ($)      Total Imports ($)

1790   20,200,000    23,000,000

1800   70,972,000    91,253,000

1810   66,758,000    85,400,000

1820   69,692,000    74,450,000

1830   71,671,000    62,721,000

1840   123,609,000             98,259,000

1850   144,376,000             172,510,000

1860   333,576,000             353,616,000

In that aspect, the American elite did nothing more than repeat the development process followed by Great Britain. When General Ulises Grant –here of the war of secession- attended the Manchester conference in 1897, after leaving the presidency of the United States, he expressed in his speech that his country followed the English “example” and not the English “preaching”:

During centuries England has used protectionism, has taken it to its extremes and it has given satisfactory results. There is no doubt that to that system they owe their current power. After those two centuries England has thought it convenient to adopt free trade by considering that protection can no longer giver her anything. Well then, gentlemen, the knowledge of my country makes me believe that within two-hundred years, when North America has achieved from the protecting regimen what it can offer her, it will adopt, freely, free trade. (Quoted by Jauretche, 1984: 205)

In contrast with the process of Hispanic American “rebellion”, the process of Independence of the thirteen colonies not only results in “unity” of the revolted colonies but also that the new State expanded its borders to the Pacific Ocean. Thus it constituted a State that, due to its enormous surface area, qualifies as a continental State.

The process of territorial expansion, that began in 1803 with the purchase of Louisiana and continued in 1848 with the Guadalupe Hidalgo Treaty, by which Mexico found itself forced to give up the wide patch of territory that stretched from Texas to California, made the surface area of the United States become almost four times greater than the territory that it had when it obtained formal independence. After the Guadalupe Hidalgo Treaty the span of the United States reached seven and a half million square kilometers. The United States was a gigantic nation, almost the same in surface area as all of Europe: it was a continental State.

A continental State that, with the victory of the protectionist north over the free trade south, quickly became an industrial powerhouse, meaning it became the first “industrial continental State-nation” in history, and thus raising – just as England had done at one point-, the threshold of power once again.

One of the intellectuals that had earlier warned that the United States would drastically raise the threshold of power was the German economist List, who, in 1832, states that:
Within a few years, [the United States] will have reached the first degree of naval and commercial power. The same causes that have taken Great Britain to its elevated state of current power will most likely take, throughout the duration of next century, the whole of America to a degree of riches, of power and of industrial development that will surpass that in which England today finds itself, in the same proportion in which it finds itself in comparison to little Holland now. (List, 1955: 74)

Therefore, from the full-fledged industrial revolution of the United States on, it began to become clear that the other political units of the international system would only be able to maintain its full autonomic capacity if they were able to become industrial State-nations – of equal surface area and population as the United States, meaning, continental surface areas. The future of the first years of the 20th century and particularly the outcome of the World War I would leave it clear that List’s analysis had become a tangible reality on the new international stage at a level beyond what the other actors of the system had presumed.

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