The Commercial Republic Before the Civil War, 1815-1860

Between the War of 1812 and the Civil War, the federal government largely retreated from a program of national economic development, while the states stepped into the role of economic promotion, particularly in the banking and internal improvement fields.
The Jacksonian Democrats dominated American national politics in the decades before the Civil War, and opposed federal promotion of economic development. Congress enacted tariffs in 1816 and 1824 that provided modest protection to American manufacturers from foreign producers. These acts were justified on the basis of Congress’ power to raise revenue, to regulate commerce with foreign nations, and to develop American industry as part of national defense. American consumers had to pay higher prices to benefit domestic producers and often objected to the tariff. In 1828 Congress enacted an extremely high protective tariff that was soon attacked, especially in the South and West, as the “Tariff of Abominations.” This caused Vice President John C. Calhoun, formerly an ardent National Republican, to resign and lead South Carolina’s opposition to the act. Calhoun, and Democrats from much of the rest of the century, believed that the Constitution permitted Congress to tax imports “for revenue only,” not to benefit domestic manufacturers in some areas (the urban Northeast) at the expense of consumers in others (the agrarian South and West). Calhoun concocted a new theory by which states could “nullify” acts of Congress that any of them thought to be unconstitutional. The other states would have to amend the Constitution to give Congress the disputed power, in which case the nullifying state could secede from the Union as a last resort. Though he favored states rights and a lower tariff, President Andrew Jackson denounced nullification as treason, and Congress strengthened his power to use force to put down nullification. In the midst of this crisis Henry Clay, Senator from Kentucky and leader of the incipient Whig party opposed to Jackson, brokered a compromise in which Congress gradually lowered the tariff, and South Carolina rescinded its nullification. By 1846 the U.S. had become a virtually free-trade nation.
414px john c. calhoun
Calhoun concocted a new theory by which states could “nullify” acts of Congress that any of them thought to be unconstitutional.

The second Bank of the United States also did not survive the Jacksonian era. The Supreme Court upheld the constitutionality of the bank in the case of McCulloch v. Maryland (1819). Chief Justice John Marshall adopted Alexander Hamilton’s opinion in favor of Congress’ power to establish the bank under the Necessary and Proper Clause and the “implied powers” doctrine. The bank’s charter ran until 1836, but Jackson’s political opponents, the Whigs, tried to force him to renew the charter in 1832. If the president vetoed the recharter, the Whigs planned to use the veto against him in his re-election campaign. Jackson delivered a scalding veto message denying both the constitutionality and utility of the bank. After a decisive re-election, Jackson then removed the federal government’s deposits from the bank and deposited them in state banks. (This arguably illegal act led the Senate to censure the president. Jackson’s supporters, the Democrats, denied that there was any constitutional basis for such a reprimand and, when they won control of the Senate in 1834 “expunged” it from the record.)

Finally, in 1840 Congress established an independent treasury, keeping federal funds locked in its own vaults, removing the government completely from the banking business.
The states took over the banking system for the remainder of the period before the Civil War. Bank corporations, like other corporations, had originally been created by special acts of the legislature. In the late eighteenth century states had begun to enact general incorporation laws that permitted anybody who met certain standards to secure charters of incorporation. North Carolina was the first state to adopt such an act in 1795. The Supreme Court facilitated corporations by interpreting their charters as contracts, which under the Constitution could not be impaired by the state. The Court also allowed state banks to issue paper notes that were effectively legal as money, despite the Constitution’s prohibition on states emitting “bills of credit.”
In these years the U.S. had no uniform national currency. Its money consisted of gold and silver coin, some Treasury notes, and a variety of state bank notes.
The federal government also withdrew from the “internal improvements” of roads and canals. President James Madison’s last act in 1817 was to veto John C. Calhoun’s “bonus bill,” which would have used the bonus paid for the second Bank of the United States (some $2 million) as a fund for internal improvements. Some Democrats believed that Congress could subsidize, but not itself build or operate, roads, canals, and the like. President Jackson held that internal improvement disbursements must be for genuinely national purposes, and vetoed appropriations that did not meet this criterion. In 1836 Congress simply apportioned its budget surplus among the states for them to use. By the 1840s the Democrats opposed all federal involvement in internal improvements, until the movement for interstate and even transcontinental railroads in the 1850s revived the issue.
Erie canal lockport c1855
Some Democrats believed that Congress could subsidize, but not itself build or operate, roads, canals, and the like.

The federal judiciary was especially important in facilitating economic exchange throughout the nineteenth century, primarily by protecting individual property rights against state interference. Congress did not do much under its power “to regulate commerce among the states,” but the federal courts used the Constitutional clause to prevent state interference with interstate commerce—to stop state efforts, prevalent before the Constitution, to protect state businesses from “foreign” competition and thus inhibit a national market. New York, for example, granted a monopoly to Robert Fulton to operate steamboats across the Hudson River. The Supreme Court overturned this grant in Gibbons v. Ogden (1824), technically because it conflicted with an act of Congress regulating the costal trade. But even in the absence of explicit congressional acts the Court often struck down state laws affecting interstate commerce. The Court’s basic principle was that if Congress had not acted to regulate interstate commerce, it should remain unhindered by the states (known as the “dormant commerce power”). Thus it held that states could not impose taxes on wholesale goods from other states. At the same time, the Court recognized that legitimate exercises of the state “police power” (the power to legislate for the public safety, health, welfare, and morals) might have an incidental effect on interstate commerce. For example, draining a malarial swamp might impede a navigable waterway.

The Court devised no hard-and-fast rule to define the commerce and police powers but judged whether matters were national or local on a case-by-case basis.
The Contract Clause of the Constitution was the most important judicial means to protect individual rights. While the Bill of Rights was understood to limit only the national government, the Contract Clause amounted to “a bill of rights for the people of every state,” Chief Justice Marshall said. In addition to the protection that it afforded to corporations, the Clause prevented the kind of debtor-relief laws that plagued the economy under the Articles of Confederation. State interference in contractual rights tended to “destroy the confidence of man in man,” he said, on which a free economy depended. Developing nations need above all a system of contract and property rights, and in the nineteenth century the U.S. was a developing nation.
The idea of contract was also central to the democratic to the spirit of antebellum America. The nineteenth century became “the golden age of contract law” as the great English legal historian Henry Maine called it. He defined the whole transformation of modern society as a movement “from status to contract.”
Individuals were no longer defined by status—by birth, class, or race—but were equal persons before the law. Defined by the ability to make a voluntary contract, individuals were equal and democratic.
The federal courts also extended their own jurisdiction for the sake of economic freedom. The Supreme Court widened the old definition of “admiralty and maritime” jurisdiction from tidal to all navigable waterways. It recognized that corporations were “citizens” with access to federal courts and many, if not all, of the constitutional rights of natural persons. It also developed a federal common law for suits between citizens of different states, which protected the rights of out-of-state corporations. And the common law—the set of legal principles developed by judges in particular cases in the absence of legislative acts—in both federal and state courts developed along with the economy. Judges adapted legal principles concerning property, contracts, and torts to encourage new enterprises but also to ensure that they did not unjustly harm established or vulnerable interests.
By the mid-nineteenth century the U.S. economy had reached the point where it could rival the most prosperous and powerful nations of the world. But the nation had to survive a critical civil war in order to maintain that status. And the war and its aftermath introduced important changes to its political economy.

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Law of Demand
As prices decrease, the quantity demanded increases or as prices increase, the quantity demanded decreases.
Natural rights
Rights which belong to us by nature and can only be justly taken away through due process.
Inalienable rights
Rights which belong to us by nature and can only be justly taken away through due process.
Except where authorized by people through the Constitution, government does not have the authority to limit freedom.
Popular sovereignty
The power of government flows from the people.
Separation of powers
A system of distinct powers built into the constitution, to prevent an accumulation of power in one branch.
Checks and balances
Powers distributed among the branches of government allowing each to limit the application of power of the other branches and to prevent expansion of power of any branch.
The people delegate certain powers to the national government, while the states retain other powers; and the people, who authorize the states and national government, retain all freedoms not delegated to the governing bodies.
Fairness or reasonableness in the way people are treated or decisions are made.
private property
The natural right of all individuals to create, obtain, and control their possessions, beliefs, faculties, and opinions, as well as the fruits of their labor.
limited government
Citizens are best able to pursue happiness when government is confined to those powers which protect their life, liberty, and property.
representative government
(or republican government) Form of government in which the people are sovereign (ultimate source of power) and authorize representatives to make and carry out laws.
republican government
(or representative government)Form of government in which the people are sovereign (ultimate source of power) and authorize representatives to make and carry out laws.
civil discourse
Reasoned and respectful sharing of ideas between individuals is the primary way people influence change in society/government, and is essential to maintain self-government.
The fundamental principles by which a state or nation is governed. The United States Constitution, written in 1787, lays out the roles and powers of each of the three branches of government (legislative, executive, and judicial), the protections of due process and rule of law in the states, a republican form of government, and the manner in which to amend the document.
Thomas Jefferson
Jefferson was a Virginia plantation owner who was the principle author of the Declaration of Independence. Jefferson served as a legislator and governor in Virginia, as well as an ambassador to France, Secretary of State under George Washington, Vice President under John Adams, and the third President of the United States. During his political career, Jefferson founded the Democratic-Republican Party with James Madison, and he bought the Louisiana Purchase from France. After his presidency, Jefferson started the University of Virginia near his home, Monticello.
Bill of Rights
The first ten amendments to the Constitution, ratified in 1791, which limit government power and protect individual liberties, including the freedoms of speech, press, religion, petition, and assembly, as well as protections against cruel and unusual punishment, unreasonable search and seizure, and other due process rights.
Second Amendment
Ratified in 1791, it protects citizens’ rights to create a militia and to bear arms. “A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.”
Due Process
The government must interact with all persons according to the duly-enacted laws; applying these rules equally among all persons.
Every individual is equal to every other person with respect to natural rights and treatment before the law.
Consent of the governed
The authority of the government must come from the people through elections and through the people’s interaction with government.
Individual responsibility
Individuals must take care of themselves and their families, and be vigilant to preserve their liberty and the liberty of others.
Rule of law
Government officials and citizens all abide by the same laws regardless of political power.
Declaration of Independence
The document written in 1776 by the Founders to send to Britain’s King George III in which independence from Britain was declared and the reasons for the separation were explained.
Articles of Confederation
The first national government document developed in 1781 by the Founders. The Articles created a federal legislative branch, but there was no executive or judiciary. The states retained most of the governmental powers.
The group of people who wrote and influenced the Declaration of Independence, the Articles of Confederation, the United States Constitution, and the United States Bill of Rights. These men were instrumental in establishing the nation and its governmental documents and practices.
Federalist Papers
A series of 85 essays written to convince the people of New York to ratify the Constitution. The authors were James Madison, Alexander Hamilton, and John Jay. These documents are considered to be the most authoritative explanation of the political theory of the Constitution.
First Amendment
Ratified in 1791, it protects the freedom of speech, the freedom of religion, freedom of the press, freedom to assemble, and freedom to petition the government. “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.”
Law of Supply
As the price drops, the quantity supplied also drops.
Fourth Amendment
Ratified in 1791, it protects citizens’ rights against unreasonable searches and seizures of property and explains that warrants must be issued with probable cause. “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”
Fifth Amendment
Ratified in 1791, it protects the right indictment by a jury, against double jeopardy, self-incrimination, loss of life, liberty, or property without due process, and just compensation for private property taken for public use. “No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”
Tenth Amendment
Ratified in 1791, it states that the powers not enumerated or delegated in the Constitution are reserved for the states and the people. “The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.”
Eighth Amendment
Ratified in 1791, it protects against excessive bail and fines and cruel and unusual punishments. “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.”
Ninth Amendment
Ratified in 1791, the listing of certain rights protected by the Constitution cannot be used to deny rights not enumerated in the document. “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.”
Alexander Hamilton
One of the Founding Fathers of the United States, Alexander Hamilton served as General Washington’s chief of staff, promoted the ratification of the Constitution in the Federalist Papers, and founded the nation’s financial system and first political party.
James Madison
Madison was a Framer who was instrumental in writing the Constitution and Bill of Rights. He is known as the “Father of the Constitution.” Madison partnered with Alexander Hamilton and John Jay to write the Federalist Papers in support of the ratification of the Constitution. He also served as a member of the Virginia House of Delegates, the United States House of Representatives, Secretary of State under Thomas Jefferson, and the fourth president of the United States.
George Washington
First President of the United States, George Washington served as commander-in-chief of the Continental Army during the American Revolution and was one of the Founding Fathers of the United States.
John Locke
An English philosopher and physician, John Locke was one of the most influential Enlightenment thinkers and is known today as the Father of Classical Liberalism.
Continental Congress
The Continental Congress, comprised of delegates from 12 of the 13 American colonies, represented the colonists during and after the American Revolution. The Continental Congress issued the Declaration of Independence and ratified the Articles of Confederation.
King George III
King George III was the King of Great Britain at the time of the American Revolution. His actions towards the American colonies, outlined in the Declaration of Independence, spurred the American Revolution.
Great Depression
Spanning ten years from 1929 to 1939, the Great Depression was one of the longest-lasting economic downturns in the history of the United States affecting the U.S. and most of the world.
An introductory statement, preface, or introduction.
Cruel and unfair treatment by people with power over others.
Using power over people in a way that is cruel and unfair.
John Adams
Before becoming the second President of the United States, John Adams served as the country’s first Vice President under George Washington. Adams was an advocate of American independence from Britain and a Federalist.
John Jay
Founding Father John Jay was one of the signers of the Treaty of Paris and served as the first Chief Justice of the United States. He was also one of the authors of the Federalist Papers.
Third Amendment
Ratified in 1791, it protects citizens against the quartering of soldiers in private homes without their approval. “No soldier shall, in time of peace be quartered in any house, without the consent of the owner, nor in time of war, but in a manner to be prescribed by law.”
Sixth Amendment
Ratified in 1791, it protects the rights of impartial jury trials, the right to be informed of the accusations against you, the right to be confronted by witness, and the right to be assisted by counsel. “In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the state and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the assistance of counsel for his defense.”
Seventh Amendment
Ratified in 1791, it protects the right of jury trials in law suits dealing with more than twenty dollars and protects against reexamination of the trial in any court if decided by a jury. “In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any court of the United States, than according to the rules of the common law.”
Alexis de Tocqueville
French political thinker and historian, Alexis de Tocqueville is best known for his works Democracy in America and The Old Regime and the Revolution. He visited the U.S. in the 1830s and wrote admiringly about many aspects of American law and society.
Democracy in America
Written by Alexis de Tocqueville after visiting the United States, Democracy in America contains de Tocqueville’s analysis of and reflections on the United States’ democratic system and society. The first volume was published in 1835 and the second in 1840.
Magna Carta
Written in 1215, it is the oldest document in the British and American heritage of rights. Contributed to the adoption of the First, Third, Fourth, Fifth, Sixth, and Eighth Amendments of the Bill of Rights, and speaks of these rights as ancient.
Two Treatises of Civil Government
Written by John Locke in 1690, the Two Treatises of Civil Government criticize absolute power for kings and outline Locke’s suggestions for a more civilized society based on natural rights and the social contract.
Thirteenth Amendment
The Thirteenth Amendment to the Constitution abolished slavery and involuntary servitude, except as punishment for a crime. “Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction. Section 2. Congress shall have power to enforce this article by appropriate legislation.”
The group of people who actually attended the Constitutional Convention and participated in writing the Constitution.
Fourteenth Amendment
Ratified in 1868, it states that all people born or naturalized in the United States are citizens and ensures that “No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”
Sixteenth Amendment
Ratified in 1913, the Sixteenth Amendment gave Congress the ability to collect income taxes. “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census of enumeration.”
Eighteenth Amendment
atified in 1919, the Eighteenth Amendment introduced Prohibition, the period of United States history when the manufacture, sale, and transportation of alcohol was made illegal throughout the country. “Section 1. After one year from the ratification of this article the manufacture, sale, or transportation of intoxicating liquors within, the importation thereof into, or the exportation thereof from the United States and all territory subject to the jurisdiction thereof for beverage purposes is hereby prohibited. Section 2. The Congress and the several states shall have concurrent power to enforce this article by appropriate legislation. Section 3. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by the legislatures of the several states, as provided in the Constitution, within seven years from the date of the submission hereof to the states by the Congress.”
Twentieth Amendment
The Twentieth Amendment was ratified in 1933, and it establishes procedures for presidential succession and the start and end of federal officials’ terms of office. “Section 1. The terms of the President and Vice President shall end at noon on the 20th day of January, and the terms of Senators and Representatives at noon on the 3rd day of January, of the years in which such terms would have ended if this article had not been ratified; and the terms of their successors shall then begin.
Twenty-First Amendment
In 1933, the Twenty-First Amendment repealed the Eighteenth Amendment, ending Prohibition. “Section 1. The eighteenth article of amendment to the Constitution of the United States is hereby repealed. Section 2. The transportation or importation into any state, territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited. Section 3. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by conventions in the several states, as provided in the Constitution, within seven years from the date of the submission hereof to the states by the Congress.”
English Bill of Rights
Passed by the British Parliament in 1689, the English Bill of Rights limited the power of the British monarch, outlined the rights of the Parliament, and guaranteed Protestants the right to bear arms.
The legislative body of the United Kingdom (known as Great Britain or England during the Founding era).
Benjamin Franklin
One of the Founding Fathers of the United States, Benjamin Franklin was a statesman, author, publisher, scientist, inventor and diplomat. He served in the Second Continental Congress during the American Revolution and helped draft the Declaration of Independence. In addition, Franklin helped negotiated the Treaty of Paris which ended the Revolutionary War and later served as a delegate to the convention that produced the U.S. Constitution.
The right to vote.
A government in which the power belongs to citizens through the right to vote.
Fifteenth Amendment
Ratified in 1870, it states that the right could not be restricted based on “race, color, or previous condition of servitude.” “Section 1. The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any state on account of race, color, or previous condition of servitude. Section 2. The Congress shall have power to enforce this article by appropriate legislation.”
Seventeenth Amendment
Ratified in 1913, the Seventeenth Amendment introduced direct election of Senators. “The Senate of the United States shall be composed of two Senators from each state, elected by the people thereof, for six years; and each Senator shall have one vote. The electors in each state shall have the qualifications requisite for electors of the most numerous branch of the state legislatures. When vacancies happen in the representation of any state in the Senate, the executive authority of such state shall issue writs of election to fill such vacancies: Provided, that the legislature of any state may empower the executive thereof to make temporary appointments until the people fill the vacancies by election as the legislature may direct. This amendment shall not be so construed as to affect the election or term of any Senator chosen before it becomes valid as part of the Constitution.”
Nineteenth Amendment
Ratified in 1920, the amendment stated that a citizen’s right to vote must not be restricted based on gender. “The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any state on account of sex. Congress shall have power to enforce this article by appropriate legislation.”
Direct Democracy
Direct democracy is a political system in which the people vote directly on policies or laws, as opposed to voting for representatives who enact laws on their behalf.
Not planned or chosen for a particular reason; done without concern for what is fair or right.
Judicial Review
The process by which courts analyze the constitutionality of an act of government.
Majority rule/minority rights
laws may be made with the consent of the majority, but only to the point where they do not infringe on the inalienable rights of the minority.
An arbitrary order or decree.
Something that is owned by a person, business, etc. This includes possessions, beliefs, faculties, and opinions, and the fruits of one's labor.
A government in which the power is held by the people.
Electoral College
A body of electors chosen by each state to vote for the president and vice president of the United States.
Conduct that reflects universal principles of moral and ethical excellence essential to leading a worthwhile life and to effective self-government. For many leading Founders, attributes of character such as justice, responsibility, perseverance, etc., were thought to flow from an understanding of the rights and obligations of men. Virtue is compatible with, but does not require, religious belief.