US Economic History 4 — Economic Causes of the Civil War

Release Date
April 27, 2017


Economics History Taxing

Federal tariffs and slavery caused tensions that led to the Civil War. Video created with the Bill of Rights Institute to help students ace their exams.
This is the fourth video in a series of nine with Professor Brian Domitrovic, which aim to be a  resource for students studying for US History exams and to provide a survey of different (and sometimes opposing) viewpoints on key episodes in U.S. economic history. How do you think we did?

    1. The Economic Costs of the Civil War (article): You’ve learned about the economic causes of the Civil War, but what were the economic consequences? Burton Fulsom explains the impact of the war on the economy. 
    2. The bell curve of anti-slavery (blog post): Professor Michael Douma explains that there was a lot of diversity of ideas in the abolitionist movement.  
    3. What should libertarians think about the Civil War? (blog post): There is a lot of debate over whether libertarians should see themselves as pro-Union or pro-Confederacy in discussions about the Civil War. Dr. Phil Magness explains why both positions are flawed and advocates for a middle ground. 

Brian Domitrovich:
Well, slavery was the dominant issue that led to the Civil War. Tensions between the North and the South had begun due to other issues, such as bitter debates about federal tariffs and infrastructure.
Infrastructure, or internal improvements, as they were called in the early and mid 19th century, were the major domestic transportation projects paid for by Congress, which included canals, turnpikes, and ports placed particularly in the western portion of the country, stretching out to the Great Lakes and the Mississippi River.
The flip side of the internal improvements was the tariff, the list of taxes on specified imported goods. In theory, the tariff would raise the revenue to pay for the internal improvements. The tariff would finance the infrastructure for goods and services to travel in a nationally linked market and the economy would prosper independent of foreign trade. In general, northern business interests and shop owners supported this arrangement along with northern statesmen, such as Kentucky’s Henry Clay, John Quincy Adams of Massachusetts, and Abraham Lincoln of Illinois.
This arrangement of tariffs on the one hand and infrastructure development on the other was called the American System. However, the South and the developing democratic party were against the American System, both the internal improvements and the tariff. President James Madison vetoed an early internal improvements bill as did Andrew Jackson because they believed it was unconstitutional for the federal government to fund such projects. John Calhoun, the South Carolina senator and, for a time, Vice President, reversed his earlier support of internal improvements and became a leading opponent.
The tariff was the most hotly contested issue from 1815 to 1835. Given that the tariff appeared to be permitted by the Constitution, in Article 1, Section 8, supporters argued that it was useful in helping young American industry to grow, protected from mature British competition. Calhoun and other tariff opponents, many from the South, argued that a protective tariff was actually a violation of the Constitution. They argued that to be protective, a tariff had to curtail imports from flowing into the country. This was inconsistent with the Constitutional mandate to raise revenue through the tax. If imports trailed off because of the tariff, then the government would not raise revenue and the tariff would not qualify as a tax.
Given that the North had a larger industrial base than the South, the South was also concerned that the American System enhanced the power of the North at the expense of the agrarian South and that tariffs meant the South would pay more for protective goods they bought from the industrial North. The politics of the tariff became most heated with the great bitterness over the protective tariff that southerners called the Tariff of Abominations of 1828.
John Calhoun wrote a treatise denouncing the tariff called the South Carolina Exposition and a convention was held in South Carolina that claimed to nullify the federal law. Officials in South Carolina based this power of nullification on Thomas Jefferson’s 1798 Kentucky Resolution for states to declare federal laws null and void. In response to this challenge, Congress passed a Force Bill to enforce federal law and compel tariff collections in South Carolina. President Jackson threatened to execute it. Nonetheless, a Compromise Tariff with lower rates came in 1833, brokered by Henry Clay in Congress, and the crisis passed.
At this point, in the mid 1830s, slavery became the dominant political issue dividing the North and the South. Slavery had just about died out in the North in the 1830s, but in the South, given the rising demand for gin cotton, it had expanded substantially. This made the South economically dependent on slavery and fearful of the growing efforts of northern abolitionists to end it. By 1860, there were over 3.5 million slaves in the United States. As the nation expanded west, the question of whether new states would permit slavery caused great tension as southern slave-holding states feared being outnumbered by free states in Congress. This led to the Missouri Compromise of 1820 and the Compromise of 1850. But these compromises were only temporary solutions for the growing tensions. Other proposed solutions included plans to compensate slave owners in order to convince them to accept abolition. But those plans were far too costly. In the end, it was the question of slavery more than anything else, even the tariff, that drove the South to secede as was made clear in the Southern Secession Convention Statements of 1860 and 1861.