How Did Tariffs Work?

[unionblue]

It has often been brought up that tariffs were a cause of the Civil War, or at least one of the causes.

How did tariffs work? And in what way did it effect the average citizen of the country?

I have read in some books concerning the impact of the national government on the average citizen at the time up to the war was only through the United States Post Office and little else.

Sincerely,
Unionblue

(Message edited by Unionblue on November 27, 2004)

[illreb]

Neil,
I not sure if this is what you are asking about but, Last semester in my history course, my instructor was asked about the reason the southerner fought the war. His answer was that the Tariffs the government placed on the export of cotton was cutting into the profits of the rich planter class of the south. These men in turn campaigned to the poorer common southerner that the Federal government was trying to destroy the southern way of life, when in fact, it only was a threat to the plantation owners way of life.So, the common man was tricked into the fight. a perfect argument for the statement of, "A rich man's war poor man's fight"
It got me to thinking ,I'm still not sold on such a cut and dry answer myself ,but it did get me thinking . Well, I hope this helps, at least a little.
Keith

[unionblue]

Keith,

Thanks for that bit of information. I had assumed the tariff would effect those rich enough to import something into the country, but I recently found out that the tariffs were NOT used if you exported something out of the country.

My main interest is how tariffs effected the average citizen and how they effected his life, but your information was an idea I had not considered before.

Thanks,
Unionblue

[unionblue]

An article on the effects of Tariffs in the 19th Century.

http://econ161.berkeley.edu/Econ_Art...eenthcent.html

And here is a good site called the Tax History Museum with a link concerning US tariffs from 1816-1860.

http://www.tax.org/Museum/1816-1860.htm

Unionblue

(Message edited by Unionblue on December 02, 2004)

[thea_447]

Although the actual war began with secession, this was not the only driving force. The Confederacy was heavily reliant on agriculture, and they used the profits made from the sale of such raw materials to purchase finished goods to use and enjoy. Their major export was cotton, which thrived on the warm river deltas and could easily be shipped to major ocean ports from towns on the Mississippi and numerous river cities. Slaves were the ones who harvested and planted the cotton. Being such an enormous unpaid work force, the profits made were extraordinarily high and the price for the unfinished goods drastically low in comparison; especially since the invention of the cotton gin in 1793 which made the work all that much easier and quicker.

In contrast, the economical structure of the Northern states, the Union, was vastly dependent on industry. Slavery did not exist in most of the Union, as there was no demand for it due to the type of industrial development taking place. As the Union had a paid work force, the profits made were lower and the cost of the finished manufactured item higher. In turn, the Union used the profits and purchased raw materials to use. This cycle is referred to as interdependency.

By 1860, ninety-five percent of the United States manufacturing occurred in states north of the 36’30º line conceived for the Missouri Compromise. Since the population in the Northern states was mostly free whites, and the population in the south mostly slaves, in the voting booths the South was greatly at a disadvantage. Also,added to this, the Democrats had split into two factions because they could not agree on a candidate. The Republican Party, formed only 4 years before the election of 1860, had Abraham Lincoln as candidate for president.

With the election of Lincoln Southerners were convinced that the North had put an abolitionist in the White House, and would proceed to abrogate slavery. Southern states proceeded to secede from the Union.

In Mississippi’s secession convention, they stated that, “Our position is thoroughly identified with the institution of slavery... A blow at slavery is a blow at commerce and civilization… There was no choice left to us but submission to the mandates of abolition or dissolution of the Union.” This quote forces us to consider that if slavery had been immediately abolished the wreckage and destruction that would have been rendered to the Southern economy.

At the beginning of the war, to make France and Europe recognize the Confederacy as a separate power, no attempt was made to export cotton to them. Before long, no cotton could be exported because of the invading Northern troops that were seizing and or blocking the ports. These effective sieges decimated the foreign trade for the Confederacy.

The Civil War augmented the nation greatly, and one of these changes was the routine use of paper currency. In 1861, Congress issued Demand Notes to finance the civil war. It was the first paper money issued since Continentals, which were first issued in 1775. In 1862, Congress discontinued the issuance of Demand Notes and instead circulated Legal Tender notes. Confidence in these notes waned when the Treasury stopped redeeming them during the war to save gold and silver. People followed this example, as the need for money was great, hence coin-hoarding. This in turn led to the exchange of small change substitutes, everything from bills and tickets to postage stamps.

From 1862 to 1876, 368 million dollars in fractional currency was being distributed. This currency was often called “paper coins”, or even “shinplasters” as during the hardships of war troops were often forced to line their worn out boots with them.

Between 1861 and 1865, Confederate currency was being distributed to millions of Southerners on the assurance that the south would win and the bank notes would be redeemable. In an effort to debase this currency, the Union printed counterfeit money and circulated it in the South. Inflation became rampant in both the North and the South, yet it was far worse in the Confederacy. By the end of the war, Confederates lost complete confidence in this money, which became totally worthless. They then relied on bartering or black market greenbacks to sustain themselves. In more than a few cases, Southern troupes were even paid in Union money.

The North financed the war through printing money and borrowing also, yet they further increased funds by levying a direct tax, instituting the nation’s first income tax, and raising tariffs, which were taxes on imports. Still, the Union financed only 20% of the war through taxation. With the absence of 11 southern states, Democratic representation was greatly reduced, enabling the Republicans to raise tariffs to high protective levels.

In 1863 Congress established the National Banking System to facilitate borrowing. The way this functioned: how much money an independent bank could create was based directly on the amount of money they loaned the government. Also provided for was the elimination of the circulation of banknotes by state chartered banks. This was done by levying a prohibitively high tax on them based on the size of the note’s circulation.

Tax structure in the Union during the war also encouraged businesses to consolidate because taxes were levied at each stage of production. Furthermore, the government usually placed its orders with large firms, finding they provided better service. Consequently, this promoted organization of labor.

Producers of arms and munitions prospered and so did canneries and meat packers. The farm machine industry was also stimulated due to the loss of farmers to the army and the simultaneous demand for farm products. In the north, farm prices advanced during the war, and farmers did well. Afterwards, they declined sharply due to the newly cultivated land that came to be during the war. Subsequently, farmers had trouble paying off debts they incurred during the war to increase product outturn. They developed a deep distrust of paper money and lost much of their former independence.

The negative impact on the Northern textile mills was somewhat relieved by the fact that they held a large stock of cotton obtained from captured territory in the south, and some mills began producing woolen goods instead. Several bad crop years in Europe increased the demand for American wheat, and this took up some of the slack developed by the loss of the cotton trade. The only Northern industry to suffer greatly and permanently was the Merchant marines, which began their decline with the obsoletion of clipper ships.

In 1927, noted historians Charles and Mary Beard claimed that although it wiped out the assets of slave owners, this war assured the triumph of the business enterprise. They believed the huge profits amassed during the war by some Northerners were subsequently used to exploit the nation’s natural resources. Furthermore, they believed, the war changed political and social arrangements in a way that favored industrialization.

The Union experienced only a brief pause in economic growth, whereas the Confederacy suffered severe retrogression. The Confederacy financed the war through printing money and borrowing, and the combination of rising money supply and decreasing product supply ended in runaway inflation. The Civil war also destroyed the Confederacy’s banking system, and its recovery was handicapped by lack of funds.

The North also had a stable government and economy. Confederate President Davis not only had a war to fight but also a new government to run. One of the main reasons the South seceded from the Union was because they wanted to run their states as they saw fit without intervention from the Federal Government in Washington. When the Confederate States of America was formed, many of the states still wanted to run their states without intervention from the Confederate government in Richmond. This caused constant arguments and took a great deal of time away from running the war.

The Southern economy also eventually fell into ruin. There were bread riots in Richmond, and on one occasion President Davis went out to meet the angry people, and when he could not calm them, he reached into his pockets and threw whatever money he had to the angry crowd to try and appease them. Towards the end of the war, one stick of firewood cost $5.00, and it was almost impossible to buy food and clothing.

[unionblue]

Thea,

Excellent post and for once, I am at a loss to find anything wrong or debateable with it! Must be losing my grip or I need new glasses.

What I would really like to find out is how the tariff effected the average citizen in both the North and the South. Did the tariff add so much to the cost of a plow, a bolt of cloth, food, canned goods, needles and thread, or other goods? How did it impact at the local town and village level?

Unionblue

[thea_447]

Gee, Neil, I don't know what to say. My vote would be: go to the eye doctor immediately. REALLY! It's been a LONG time since you found anything to approve of in what I write.

Thanks for the kind words. I know what you're looking for, but I just wanted to put in something on this thread. I will look around and try to find the info you're really after, as I'm sure you're scouring everything in your path too.

[unionblue]

Thea,

Not to worry, I am sure we willing be back to letting the fur fly in a short while!

On this angle of the tariff, Thea, I am really trying to learn as I have no information on this aspect of it. I want to know if the tariff at the local level was really a huge source of discontent or was this at a higher level with wealthy planters and such.

Talk at you soon,
Unionblue

[thea_447]

Oh don't worry, I won't give any quarter either. I'm sure we'll be back with gnashing teeth soon enough.

And I do understand what you're after. I'm looking..

[thea_447]

Am still looking for actual figures on the costs of items and how the tariff effected both North and South.

In the meantime here is another site that offers another point of view.
http://www.civilwarhistory.com/slavetrade/causes.htm

Just reading through this (it is long), I found some interesting paragraphs:

Congress had raised duties in 1816 and again in 1824. The tariff of 1824 included high duties on imported agricultural goods such as hemp, wheat and liquor to protect western farmers; imported textiles to protect New England interests; and iron to protect mining and forging industries of Pennsylvania. South Carolina had been particularly hard hit by the depression of 1819. The tariffs increased the prices of their imported goods by as much as 50 percent. South Carolina asserted that the tariffs were unfair as a tax on Southern agriculture for the benefit of Northern industry.

Or these paragraphs:
The central government was not a separate sovereignty, but simply an agent of the several States. Thus the people of each State, acting in special conventions, had the right to nullify federal law that exceeded the powers granted to Congress through the Constitution. If a popular convention declared a law unconstitutional, it would become null and void in a State. Congress could then either yield and repeal the law or propose a constitutional amendment expressly giving it the power in question. If the amendment was ratified by three-fourths of the States and added to the Constitution, the nullifying State could then either accept the decision or exercise its ultimate right as a sovereign state and secede from the Union.

When Senator Robert Hayne of South Carolina explained Calhoun's theory on the floor of the Senate, Senator Daniel Webster of Massachusetts replied that the Union was not a compact of sovereign states.

When Congress passed another tariff in 1832, moderating some of the duties of the prior act but continuing the protective system, South Carolina's legislature called for the election of delegates to a popular convention on November 10 to decide whether the State would nullify the new tariff according to Calhoun's formula. The convention overwhelmingly adopted an ordinance of nullification drawn by Chacellor William Harper by a vote of 136 to 26. The ordinance declared the tariffs of 1828 and 1832 "unauthorized by the Constitution" and "null, void, and no law, nor binding upon this State, its officers or its citizens" after February 1, 1833. The convention also established legal penalties for any State or federal officer who attempted to collect the tariff duties. It declared that in no case at law or equity in the courts of the State could the validity of the ordinance or implementing legislation be questioned and that no appeal could be taken to the Supreme Court of the United States.

The legislature further enacted a replevin act authorizing the owner of imported goods that were seized by customs officials for nonpayment of duties to recover them (or twice their value) from customs officials. The law also authorized the governor to call out the militia to enforce the laws of the State. The nullifiers declared that any effort of the federal government to employ naval or military force to coerce the State, close its ports, destroy or harass its commerce, or enforce the tariff acts, would impel the people of South Carolina to secede from the Union and organize a separate independent government.