Old Ironsides

Economic Nationalism and the War of 1812

January 29, 2020

Economia, English, Interventi, Storia

In this time of renewed debate on protectionism, tariffs, and free trade, we publish an essay by Andrew Spannaus on the economic nationalism that helped drive the construction of the United States of America in the 1800s.

Economic Nationalism and the War of 1812

by Andrew Spannaus*

Essay originally published in War Hawks. Gli Stati Uniti e la guerra del 1812, edited by Prof. Marco Sioli, Milan, Italy, FrancoAngeli, 2019.

“Every manufacturer encouraged in a country makes part of a market for provisions within ourselves, and saves so much money to the country, as must otherwise be exported to pay for the manufactures he supplies…. [W]herever a manufacture is established which employs a number of hands, it raises the value of land in the neighboring country all around it. It seems, therefore, the interest of our farmers and owners of land to encourage our young manufacturers in preference to foreign ones.”

- Benjamin Franklin, 1771[1]

            In the years prior to the War of 1812 between the United States of America and Great Britain, the young republic faced a choice that would determine its future for centuries to come: attempt to manage political and commercial relations with the former colonial power as best as possible, avoiding another open conflict, or assert its full rights as a nation, once again embarking on the path of war, with all of the related risks.

            For a country born less than 30 years earlier, whose most prosperous areas depended significantly on trade with European powers, and with Great Britain in particular, returning to conflict certainly appeared daunting. So for years partial measures were taken in response to conduct that not only imposed considerable economic restrictions on the United States, but also represented an affront to national dignity.

            The country was not anxious to go to war, clearly having a preparedness deficit compared to the strongest empire in the world. For some factions, principally in New England, the desire was merely to reach an agreement to continue commercial relations, which provided wealth and stability. For others, the question was more complex. The Empire’s measures were viewed as part of an attempt to limit the role of the United States to that of a de facto colony, despite victory in the Revolution. Restrictions on trade were seen, together with British collusion with Indian tribes, as part of a strategy to block American expansion westwards. So not only was the country’s honor to be defended, but it was necessary to reaffirm the principles of the Revolution, and renew the dedication to the project of building a nation that was strong and independent from every point of view.

            While patriotic sentiment gradually came to the forefront as British vexations continued, it was the economic nationalists who led the battle in favor of the war, which was presented as the way to break the control that Great Britain still had over the former colonies. Men such as Mathew Carey and Henry Clay became strong supporters of the war, acting to unify their fellow citizens in the battle to guarantee the full independence of the United States.

The Nationalist Vision

            The vision that drove the nationalists was rooted in the tradition exemplified by Alexander Hamilton in the first years of the Republic: the use of the powers of the Federal Government to promote “internal improvements” – infrastructure such as roads and canals – and manufacturing activity.[2] The goal was to end dependence on European production, maintaining commercial relations with other countries, but with equal rights and without suffering the whims of the colonial powers from across the ocean.

            The immediate causes that led to the War of 1812 between the United States and Great Britain principally regarded trade: the forced enrollment, or “impressment,” of sailors, and the British “Orders in Council” that set harsh limits on the international economic relations of the young nation. These were problems that persisted for years, and were the subject of a series of diplomatic and legislative actions and responses.

            After the end of the Revolution and the adoption of the political system still used today, the young nation saw a period of great initial growth, leading to “unparalleled prosperity”[3] from the beginning of the 1790s until 1808. Growth was particularly strong in New England, in the states that managed trade with Europe and with the islands of the West Indies. In this period, there was a sustained rise in exports from domestic sources, and at the same time a larger increase of re-exports thanks to the “carrying trade,” in which products entered the United States from other areas of the Americas, and were then sent to Europe. Indeed, while the former doubled from 1790 to 1807, in the same period of time the latter increased 200-fold, reaching the level of almost 60 million dollars, 11 million more than the total of domestic exports.[4]

            At the same time, the foundation was laid for the future internal development of the country, with the planning of canals and roads, principally to connect the coastal regions to the interior. As in all countries, networks for the transport of people and goods would play a fundamental role in economic growth; in the United States such projects were truly essential, as they opened the road towards scarcely populated areas that otherwise would have remained isolated. The view of the Founding Fathers was that the exchange between production in the interior and the urbanized areas along the coast was of great importance. A notable example of this thrust was the Potowmack Company led by George Washington himself, that aimed to make the Potomac river navigable and “bind these people [of the Ohio territories] to us with a chain that can never be broken.”[5]

Britain Asserts Its Power

           The growth of the young United States was countered by the actions of Great Britain, which evidently had no intention of giving up its supremacy on the seas, the sine qua non of its existence as a colonial empire. One of the most controversial practices was impressment, by which British captains searched American ships looking for British deserters, and forcibly removed sailors who were then conscripted into the Royal Navy. At times American citizens were also taken, with the justification that a person born in the territories of Great Britain – i.e. before the Revolution – could not change his loyalty. A deep clash developed on the difference between being subjects of the Empire, and citizens of the Republic.[6]

            Broader effects were produced by the Orders in Council, a series of trade restrictions passed by the British Privy Council in the context of England’s conflicts with Napoleon Bonaparte’s France. The most famous are the Orders of 1807, which decreed the seizure and confiscation of any non-English ship directed towards France or its protectorates. However, there had been numerous Orders in previous years as well, that, together with Napoleon’s decrees responding to the British measures in kind, led to the confiscation of hundreds of American ships at the beginning of the century. Between 1803 and 1807 alone, 528 American ships were seized by the British, and 289 by the French.[7]

            At this point, the situation seemed impossible for the United States. The country could have answered the actions against its trade by European countries with war, but the American army and navy were small and unprepared. The attempts to increase government spending for the armed forces were not looked on with approval, in particular by the Democratic-Republican Party of then-President Thomas Jefferson.

            The response devised was a trade embargo passed in December 1807, which prohibited trade with Europe, and recalled American merchant ships. The measure was not an economic success, as trading centers immediately felt the effects and fell into a deep depression.[8]

Mathew Carey Fights for Unity and Manufactures

            However, the nationalist faction, that advocated a strong response to the British actions, considered the embargo as necessary, and attributed its failure in part to divisions in the country. This was the argument made by a very important figure in the nationalist camp, Mathew Carey, an Irish publisher who had initially fled to France – where he met Benjamin Franklin – to avoid criminal charges for his criticism of the British Parliament, and then emigrated to the United States in 1784.

            In his book The Olive Branch,[9] published in 1814 during the war, Carey offers a detailed account of the events that led to the War of 1812, criticizing both of the major parties (the Federalists and the Democratic-Republicans), in an attempt to mobilize the population to the nationalist view. The book, which was subsequently expanded and re-printed ten times by 1820, was a bestseller, and allows us to get into the heart of the debate in those years, with political polemics, historical documents, and data presented in their original context.

            Carey appealed throughout to Washington’s Farewell Address, with its warnings against faction, and even potential break-up of the Union. He criticized the Democratic-Republicans for allowing the National Bank to lapse and failing to support national defense, among other things, but directed his greatest attack to the Federalists whose opposition to the war was leading them to sabotage national finances, and threaten secession.

            Carey had much to say on the embargo. He took aim principally at the Federalists in the Eastern states, where the embargo was opposed precisely to avoid the predictable effects on the lucrative trade that passed through the ports of New England. The author railed against those who, instead of concentrating on British offenses, looked with suspicion at other parts of the country: “It was almost universally believed in the Eastern States, that the embargo was the result of a combination between the Southern and Western States, to ruin the Eastern!”[10]

            Carey worked to expose the fallacy of this argument in economic terms, demonstrating that the blockage of trade also had negative effects for the farmers in the South and West who sent their products to the port cities. He also demonstrated that exports were not exclusive to New England; with a series of charts, Carey presented the statistics on products exported from states such as Pennsylvania, Maryland, and even South Carolina. He also stressed the importance of the goods sent from the states of the South to those of the North, in an attempt to counter the idea that different parts of the country have different interests.[11]

            Carey’s main goal in The Olive Branch was to unify the population in opposition to the British measures, and thus his strongest criticism was reserved for the commercial interests that sidestepped the embargo and contributed to the removal of specie (metal currency) from the country, for example by selling to the Canadians. In essence, Carey’s position was that the embargo failed due to “the factious, and disorganizing, and jacobinical opposition it met with, and partly from the imbecility of Mr. Jefferson’s administration, in not duly enforcing it.”[12]

            One interesting effect of the embargo, and of the subsequent Non-Intercourse Act that in 1809 reduced the prohibition to cover trade only with Great Britain and France, was the relative increase of domestic manufactures. From the viewpoint of the nationalists, this was a fortunate side-effect, unexpected by the country’s enemies. We find many citations and references on how the previous situation, with considerable wealth created by the carrying trade in particular, had in reality blocked the preferred economic path of the young nation.

            Writing in 1818, Adam Seybert, a member of the House of Representatives from Philadelphia, stated:

“The brilliant prospects held out by commerce, caused our citizens to neglect the mechanical and manufacturing branches of industry; fallacious views, founded on temporary circumstances, carried us from these pursuits, which must ultimately constitute the resources, wealth and power of this nation.”[13]

            In his analysis of the economic growth of the United States, Douglass C. North explains that the carry trade did have beneficial effects on the domestic economy; it provoked an increase of organization with a consequent growth of all of the economic activities necessary to sustain the population and the areas involved. Yet North recalls that the sectors of American manufactures were limited, and that most finished goods came from Europe, “and from England in particular.” With a series of figures, North demonstrates that the interruption of foreign trade caused significant growth in domestic manufactures, since the capital that was invested in foreign trade before, was then shifted towards the growth of industry.[14]

            This trend is also confirmed by a figure who cannot be counted among the ranks of the economic nationalists, having often clashed with them over federal investment: Albert Gallatin. Gallatin served as Secretary of the Treasury from 1801 to 1814, during the presidential terms of Thomas Jefferson and James Madison. In 1810, Gallatin wrote: “the injurious violations of the Neutral commerce of the United States, by forcing industry and capital into other channels, have broken inveterate habits, and given a general impulse, to which must be ascribed the great increase of manufactures during the last two years.”[15]

            The nationalist point of view was summarized by Carey in The Olive Branch. The Irish-born publisher believed that the young United States essentially remained a colony of Great Britain. To maintain their supremacy the British had adopted the Orders in Council, even at the cost of hurting their domestic economy. In the end – according to Carey – the system wielded by the British Monarchy led to unforeseen results: “It promoted our manufactures more completely in five or six years than they would have been in thirty…”[16]

Was the War Necessary?

           The more general question raised by this analysis is whether the promotion of industry within the United States required limiting trade with European countries, i.e., whether war, either open military conflict or only a trade war, and the associated protectionist measures, represented a necessary path for the country’s economic growth.

             In this author’s view, the question must be considered in the historical context: the United States of America was founded to be an independent republic, with the goal of freeing itself not only of the formal bonds with the former colonial power, but also to demonstrate the superiority of a society free of the aristocratic structures present in European countries. A precondition for this vision was the development of a productive economy, able to provide a solid and lasting basis for independence, without exposing the young nation to the conflicts and whims of the European monarchs.

          The dominant vision among the Founding Fathers, from Benjamin Franklin to George Washington to Alexander Hamilton, was that of a manufacturing nation, that would develop both agriculture and industry, creating an economy not only able to provide for the wellbeing of its own citizens, but also to surpass the colonial model of the European powers. This did not mean breaking all economic and financial ties with Europe, but guaranteeing the country’s ability to implement its own decisions. Thus a clear direction was established for the country through the promotion of an economy with a considerable emphasis on manufacturing, that in that period required protectionist tools to ensure its growth.

            This was not a unanimous vision, but the representatives of the pro-industry view saw the War of 1812 as necessary for pursuing their goal. This was the motivation clearly expressed by Mathew Carey, and also by the political giant of the nationalist movement in that period, Henry Clay.

Henry Clay and the American System

            Henry Clay is a figure who probably does not receive the attention he deserves based on his role in American history in the first half of the 19th century. A lawyer and state legislator in Kentucky, Clay arrived in Washington for the first time in 1806 when he was elected as a temporary substitute after the resignation of Kentucky’s U.S. Senator at the time. After two brief stints in the capitol as a substitute in the Senate, he returned in 1811 as an elected member of the House of Representatives, where he was elected Speaker of the House immediately after being sworn in. Years later, Clay was among the founders of the Whig Party – in opposition to Andrew Jackson – secretary of state during the presidency of John Quincy Adams, and a prominent supporter of a strong federal government to promote internal improvements and manufactures through public finance and tariffs.

            During his first period of work in Washington, despite being just a substitute and without having even reached the age required by the Constitution to be a senator, Clay did not hesitate to introduce proposals in line with this vision for the nation. In February 1807, he succeeded in obtaining approval of a resolution that directed the Treasury Secretary to prepare a plan for a national network of canals and highways. While Gallatin did produce a detailed Report on Roads, Canals, Harbors and Rivers, Jefferson refused to back the plan. It was not until the 1820s that the Federal government moved to support such an “internal improvements”  plan, which, together with the Second National Bank and the protective tariff, led to a major spurt of economic growth. This program was carried forward by Clay and his allies for decades under the name of the “American System,” and made the statesman from Kentucky one of Abraham Lincoln’s idols.

            Returning to the issue at hand, Henry Clay – according to Josiah Quincy of Boston, a member of the House of Representatives from 1805 to 1813 and later president of Harvard University – was “the man whose influence and power more than that of any other produced the war of 1812 between the United States and Great Britain.”[17] In the House, Clay immediately took the lead among the “War Hawks” faction, who were “bent on arousing the country from its lethargy,” as the historian Reginald Horsman put it.[18]

            Clay was very active in promoting the conflict with Great Britain. He spoke of the need to defend the maritime rights of the United States and to defend American territory against Indian attacks, encouraged and supplied by Canada, a territory of the British crown. He argued in favor of the construction of a navy, and of the financial measures necessary for all of these initiatives, including new taxes and loans to support the public finances.

            The goal for Clay and the other hawks was clear: war with Great Britain, to mark the next step in the construction of the nation. As noted above, action against France would also have been justified, as that country also seized America’s ships and blocked her trade. However, “It was against England that the War Hawks wanted war,”[19] for reasons that are clear: the nationalist faction wanted to seize the opportunity to break the country’s dependence on the former mother country, and advance their program for economic development. It was not only to guarantee freedom of trade, but also to grow manufactures, build infrastructure, and expand towards the west. The War of 1812 would allow for important steps forward in all of these sectors.

The Treaty of Ghent

            Clay himself played an essential role in the efforts to reach these goals, as he was one of the five commissioners appointed by President Madison to negotiate peace with Great Britain, that would be established in the Treaty of Ghent, signed on December 24, 1814 in the then-Dutch city (now part of Belgium). One of the issues discussed most during the negotiations, recounted in detail in the recent book by Quentin Scott King Henry Clay and the War of 1812, was that of the northwestern borders of the United States. The British wanted to draw a line of demarcation between the United States and the Indian territories beyond which the Americans would not be able to expand, for example by buying lands from native Americans. The line would have excluded much of what today forms the industrial Midwest: Ohio, Indiana, Illinois, Wisconsin, and Michigan.

            In hindsight, it is obvious how such a provision would have blocked the growth of the United States, and it is notable to see that the commissioners already had a clear idea of this perspective when they were negotiating peace in 1814. In response to the British request to recognize a buffer state populated by the Indians, the commissioner James A. Bayard pointed out that the Americans would have had to give up almost one-third of their territory. The conditions posed would have called into question the very existence of the nation, “by arresting their natural growth and increase of population, and by leaving their northern and western frontier equally exposed to British invasion and to Indian aggression.”[20]

            For Clay, it became evident that the American people had “to conquer again their independence,”[21] since by then the original problems of impressment and the Orders in Council had faded to the background. In the eyes of the nationalist faction, the true stakes were the survival and expansion of the United States as an independent nation. John Quincy Adams, another commissioner present in Ghent, posed the question in the same terms. For the future secretary of state and president, Britain’s request for a border with the Indians demonstrated a “profound and rankling jealousy at the rapid increase of population and of settlements in the United States, and important longing to thwart their progress and stunt their growth.”[22]

            In the end, the American delegation’s resistance was successful, and the articles of the final treaty did not govern the questions of the Indians and the borders in the area of the Great Lakes. The treaty also did not deal with the issues of impressment and the blockage of trade, which were to be worked out subsequently in separate negotiations. The agreement principally regarded the return of territories, ships, and prisoners, without setting new borders and without resolving the issues that had apparently triggered the war.

            The commissioners in Ghent were surprised by the conduct of their counterparts, that had changed suddenly. In his book, Quentin Scott King offers a possible explanation for this course of events, that regards the advice given to the British Prime Minister Liverpool by the Duke of Wellington to conclude the peace quickly, for reasons not directly linked to the North American situation, but to the internal political conditions of Great Britain and the European negotiations then underway in Vienna.[23] For the Americans, it was in any event a success to have repulsed the more aggressive requests from their adversaries, validating their position and opening the road to the future of the United States as conceived by individuals such as John Quincy Adams and Henry Clay.

Laying the Basis for Economic Independence

            The start and the end of the War of 1812 both entailed moments of confusion, due principally to the period of weeks required to receive information and communicate decisions from one shore of the Atlantic Ocean to the other. For example, when the United States passed its declaration of war, the British had already decided to revoke the Orders in Council, one of the principal justifications for the conflict; and at the end of the war, the British still hoped for a victory in New Orleans, in a battle that took place after the conclusion of the Treaty of Ghent.

            In the historical analysis of the war, there is a risk of concentrating on the particulars, thinking what would have happened if there had been better communications, or if the parties had better understood the internal situations of their respective adversaries. Consider the first example provided above, that of the Orders in Council. The measures actually had a depressive effect within Great Britain, a factor that, if fully understood, could have significantly impacted the political calculations of the other side. For the American nationalists, though, each of the factors which we have cited, from impressment to free trade,[24] from the Indians to the borders between the American and Canadian territories, were part of a broader picture, one to be considered as part of the progress of the United States towards the condition of a free nation with an economic base able to guarantee its full independence.

            This essay has focused attention on the faction that advocated for war with Great Britain, to explain the vision that drove its representatives. We have seen that this approach played a significant role in moving the country towards war, as it provided the impetus for some of the most publicly active and effective supporters of the conflict. In addition to Henry Clay and Mathew Carey, there were many other hawks – such as John Calhoun,[25] to cite just one – whose actions contributed to the campaign. What is clear, however, is that the work of this group around the War of 1812 represent an essential moment of passage between the Founding Fathers of our republic and the national leaders who would open the path to the great industrial growth of the country in the second half of the 1800s.

            In the years following the War, the two individuals on whom we have concentrated here worked constantly to promote the growth of the United States. They called for governmental intervention to protect and expand American manufactures, with tariffs, infrastructure such as canals and railroads, and the promotion of investments in the fields of energy and machines. Mathew Carey published numerous pamphlets and essays in favor of these measures, and sent many communications to Congress on them. Henry Clay led the battle in Congress for tariffs and for the allocation of federal resources to public works. In the words of Quentin Scott King, as the Speaker of the House, Clay “would champion legislation for the American System, the Missouri Compromise, and internal improvements such as roads and canals.”[26]

            The creation of the Second National Bank played an important role in this process of development, and became one of the principal points of friction between the two factions that dominated American politics in the years that led to the Civil War. The role of the federal government in collecting investment and providing the credit necessary for industrial growth represented a key divide between the vision associated with Andrew Jackson and the Democrats, and that which would become the basis of the program of the Republican Party, that elected its first president in 1860: Abraham Lincoln.

            It was Mathew Carey’s son, Henry C. Carey, who shaped the new party’s economic program, and became its champion in the second half of the nineteenth century. In his 1851 book The Harmony of Interests,[27] through statistics and historical examples, political and moral arguments, Carey presents the vision of a nation in which farmers and manufacturers are united by the goal of development for the country, in a mutual relationship that breaks down the divisions between classes and areas of the country. He extends his vision internationally as well, arguing against the imperial policy of forcing the free American producer to compete with the slave in imperial colonies and thus drive down the value of human beings around the world. This theoretical presentation was followed in the late decades of the 1800s with a series of activities aimed at finding allies among other nations, to achieve the international expansion of what was defined as the “American System.”

            These initiatives, that laid the basis for the global role of the United States in the next century, were the result of the vision of the economic nationalists of the United States in the nineteenth century. For men such as Henry Clay, Mathew Carey, and John Quincy Adams, the goal was to fully realize the aims of the American Revolution, that were to be defended and carried forward by any means possible, including with war against Great Britain in 1812.

* Andrew Spannaus is a Lecturer in the Master in Economics and International Policies at the Graduate School ASERI of the Catholic University of Milan, where he teaches a seminar on Protectionism and Free Trade in the history of the United States of America. A political analyst and commentator, he is the Chairman of the Milan Foreign Press Association.

[1] Benjamin Franklin, in: Robert Ellis Thompson, Elements of political economy, with special reference to the industrial history of nations, Porter & Coates, Philadelphia, 1882, § 243.

[2] For an in-depth treatment of Hamilton’s influence on the economic foundations of the United States, see Nancy Bradeen Spannaus, Hamilton Versus Wall Street, iUniverse, 2019.

[3] Douglass C. North, The Economic Growth of the United States, W.W. Norton & Company Inc., New York, 1966, p. 53.

[4] North, op.cit., p. 25.

[5]The writings of George Washington from the original manuscript sources, 1745-1799, Washington, U.S. Govt. Print. Off. [1931-44], p. 489. The canal and locks from the project can still be seen in sites such as Great Falls, near Washington, D.C., and Harper’s Ferry, West Virginia.

[6] Much has been written on this subject. See, for example, Alan Taylor, The Civil War of 1812, Vintage Books, 2011.

[7] North, op.cit. p. 37.

[8] Ibid., p. 55.

[9] Mathew Carey, The Olive Branch or Faults on Both Sides, Federal and Democratic. A serious appeal on the necessity of mutual forgiveness and harmony, Ninth Edition, J. Foster, Winchester, Va. 1817.

[10] Carey, op.cit., p. 108.

[11] Carey, op.cit., pp. 248-263.

[12] Carey, op.cit., p. 140.

[13] Adam Seybert, Statistical Annals: Embracing Views of the Population, Commerce, navigation … of the United States of America, Philadelphia, Thomas Dobson & Son, 1818, p. 59.

[14] North, op.cit., p. 51-56.

[15] Albert Gallatin, in American State Papers, Finance (Washington, Gales and Seaton, 1832.61), II, 426, in North, op.cit., p. 57.

[16] Carey, op.cit., p. 338.

[17] Quote of Josiah Quincy included in: Quentin Scott King, Henry Clay and the War of 1812, Jefferson, North Carolina, McFarland & Company, Inc., Publishers, 2014, p. 148.

[18] Reginald Horsman, The Causes of the War of 1812, New York, A.S. Barnes and Company, 1962, p. 225.

[19] Horsman, op.cit., p. 243.

[20] King, op.cit., pp. 312, 317.

[21] Ibid., p. 313.

[22] Ibid., p. 326.

[23] Ibid., p. 394.

[24] The subject of “free trade” is a complex one, that would require a separate treatment, considering the connotations of the term in the present time, and the fundamental differences between the view associated with Adam Smith and the British Empire, and that advanced by the nationalists in the United States.

[25] In the early part of his career, the famous South Carolina politician was a nationalist, counted among the War Hawks. In 1812 he declared: “This is the second struggle for our liberty; […] a war just and necessary in its origin, wisely and vigorously carried on, and honorably terminated, would establish the integrity and prosperity of our country for centuries.” Declaration of John C. Calhoun to the House of Representatives, May 6 1812, in The Essential Calhoun, edited by Clyde N. Wilson, Transaction Publishers, New Brunswick, N.J., 1991, p. 156. Later, Calhoun would embrace the cause of the South, opposing nationalist economic policies and defending slavery.

[26] King, op.cit., p. 425.

[27] Henry C. Carey, The Harmony of Interests, agricultural, manufacturing & commercial, J.S. Skinner, Philadelphia, 1851.

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