Economy and Technology: 1801 ~ 1820 By: Amberley Bailey
Embargo Leads to War
The United States, in an effort to avert war, imposed an embargo on foreign trade in an attempt to coerce England and France into realizing U.S. neutrality. The Embargo Act of 1807 prohibited vessels from leaving American ports for foreign ones; in other words, it stopped exports. However, instead of hurting the economies of Great Britain and France, it truly hurt the American merchants depending on the global markets. Meanwhile, since Great Britain and France had no real connection to the United States, they found new markets elsewhere in the world (i.e. Great Britain trades with Egypt to get cotton). Smuggling flourished as Jefferson mobilized the army and navy to enforce blockades. Being pressured by the people to end the embargo, Congress repealed it in 1809. After the fall of the Embargo of 1807, Congress replaced the measure with the Non-Intercourse Act (1809), and opened trade to all nations excepting Great Britain and France. The act also authorized Congress to restore trade with them if they stopped violating neutral rights; neither complied. The Non-Intercourse Act was then replaced by Macon's Bill #2, which reopened trade with Great Britain and France, and offered each a bribe: if either repealed its restrictions on neutral shipping, the US would stop trading with the other. Napoleon announced a repeal of all French restrictions on American trade, and although they continued to seize American ships and cargo, Madison cut off trade with the British. On June 1, 1812, Congress approved Madison's request for a declaration of war: the War of 1812 had begun.
Another Panic Sweeps the Country: The Panic of 1819
The Panic of 1819 clearly stated when the post-War of 1812 economic expansion ended. Prices fell and unemployment mushroomed. Land values plummeted: in Pennsylvania, land went from $150 an acre in 1815 to $35 in 1819. Investments in many places collapsed. The Panic of 1819 was blamed on the market, contraction of credit, the requirement of hard-currency payments for land purchases, and the closing of many factories. When the Second Bank of the United States was rechartered in 1816, it ushered in a period of contraction of credit. It called in its loans and forced state banks to do the same. However, many banks had given easy loans which many people defaulted on, causing banks to fail and depositors to lose their investments. Conditions were made worse by the dramatic decline of cotton prices. In 1817, the government began requiring hard-currency payment for land purchases, which was made harder by the contraction of credit. Many factories closed due to foreign competition, causing unemployment to gradually increase. The severity of the Panic of 1819 caused many debtors to call for "stay laws" to provide relief for debts and abolition of debtors' prisons, as well as the reduction of the cost of government. The panic was blamed on the Second Bank of the United States and the governments' tight-money policies.
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Robert Fulton's Clermont
Robert Fulton's steamboat, the Clermont, became a reality when in 1807 it was introduced into the Hudson River. He made steamboats into reliable transportation, and soon gained a monopoly on the New York-New Jersey ferry services. At left is a depiction of the steamboat Clermont on a voyage.
Erie Canal: Eighth Wonder of the World
The Erie Canal was proposed to open the west up to settlers and offer cheap and safe transportation for market goods, connecting the Hudson River with Lake Erie. This engineering marvel was given the nickname "Eighth Wonder of the World" by some, and "Clinton's Big Ditch" by others, since Governor Dewitt Clinton broke the ground for construction of it in 1817. Four feet deep and forty feet wide, it was made to float boats carrying up to 30 tones of freight. It was a transportation revolution that allowed produce to be more easily and quickly shipped. The Erie Canal was the start of the canal boom.
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New Market Revolution Takes Hold of Society
The "Market Revolution" refers to the economic expansion in U.S. history between 1815 and 1840. This revolution transformed society in numerous ways. Although many of the pieces of this revolution were already around, the combining of these parts into a cohesive whole was what made it so much more potent. The Market Revolution combined technology, natural resources, investment, labor supply, and transportation all under a system of free enterprise. Technology included the cotton gin (1793) and the steam engine (1807); under natural resources, they had water--used as an energy source in factories in New England--and coal, which was burned to make steam engines. Bank loans were provided making it easier to invest, and companies began being invested in by New England shippers. There was a greater labor supply that included farm girls and immigrants, and better transportation. By the end of the Market Revolution they had both improved roads and railroads. These new--or, newly used--innovations combined with free enterprise encouraged the growth of industry, factories, which led to the growth of the cotton economy, or the plantation system, in the south, in the process strengthening slavery. It also increased the size of labor unions due to the poor working conditions in the factories, as well as the size of cities. Larger cities encouraged more food production and transportation improvements. As the Market Revolution took hold of society, it helped both industries and cities to prosper in the process.
Second Bank of the United States
In 1816, Congress chartered the Second Bank of the United States to battle inflation brought on by the War of 1812. It was chartered for 20 years, and was headquartered in Philadelphia. In 1819, the issue of whether or not Maryland had the power to tax a national corporation--the Second Bank of the United States--was brought to the Supreme Court. McCulloch v Maryland ruled that the chartering of the bank was under the federal government, and that Maryland's tax was therefore unconstitutional. Pictured above is the Second Bank of the United States, chartered in 1816.
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