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The Rise and Fall of the American System: Nationalism and the Development of the American Economy, 1800-1837

Author(s):Ha, Songho
Reviewer(s):Wahl, Jenny

Published by EH.NET (March 2010)

Songho Ha, The Rise and Fall of the American System: Nationalism and the Development of the American Economy, 1800-1837. London: Pickering and Chatto, 2009. xiii + 184 pp. $99 (hardcover), ISBN: 978-1-85196-999-9.

Reviewed for EH.NET by Jenny Wahl, Department of Economics, Carleton College.

This slim volume is part of a series on American financial history edited by Robert Wright. Although little new information or analysis appears in the monograph (a revision of the author?s dissertation), it is a compact summary of the concept and history of the American System that gathers together useful statistics on roll-call votes, obligations of the Second Bank of the United States, white and slave populations, federal expenditures for internal improvements, and land sales during the early Republic and antebellum periods. The thrust of the book is fairly conventional, although Ha does draw attention to one alleged feature of the American System ? its emphasis on cultural improvement ? more than most commentators. But he de-emphasizes what I consider a crucial factor that led away from the American System in the 1830s ? the underlying sectional tensions over slavery.

The book begins by exploring the phrase that gives rise to the title. Conceived by Alexander Hamilton and midwifed by Henry Clay (and, to a lesser extent, John Quincy Adams), the ?American System? began as a vision of a politically united, self-sustaining nation independent of Europe and especially England. The idea expanded over time to include specific programs designed to achieve this vision, such as high tariffs, federal spending on internal improvements, a national bank, and methods to disperse public lands.

The remainder of the book follows a historical timeline, touching upon Jeffersonian policies, the Missouri compromise, various tariff acts, controversies over the First and Second Banks of the United States, the nullification crisis, the Second Great Awakening, the financial panics of 1819 and 1837, and the Maysville Veto. Ha highlights one fascinating historical about-face: John C. Calhoun, father of the nullification doctrine and rabid states?-rights advocate by the 1830s, had earlier staunchly supported a national bank, urged federal spending on transportation to bind the union together more tightly, and aggressively pushed for high protective tariffs.

Arguably, the new spin in the book is its underscoring of the cultural dimension of the American System. Ha claims that John Adams supported education but only had time and energy during his administration to create the Library of Congress. Likewise, Jefferson, Madison, and Monroe apparently advocated establishing a national university but occupied themselves with other endeavors while in office. John Quincy Adams argued strenuously for ?social improvement,? although Henry Clay advised him that a national university was a hopeless proposition. The American System may have given lip service to the nation?s cultural betterment, but Ha?s book does not leave me convinced that this was really a key element of the program.

Ha, currently an assistant professor of American History at the University of Alaska-Anchorage, is clearly a champion of the American System and its supporters. At times, he seems almost starry-eyed: he states that the ?supporters of the American System … tried to push what they believed was good for the union, rather than what was popular with their constituents? (p. 93); they ?were forward-looking and progressive people [whose] main issue … was how to improve the United States? (p. 132). He characterizes the main issue for Jacksonians, on other hand, as ?how to stop the federal government from meddling in their lives and economics? (p. 132). The underlying subtext for the rival factions, however, was slavery. Although Ha acknowledges that slavery and the cotton economy tended to isolate the South, I think he could have gone farther with this theme ? states?-rights advocates, at bottom, worried most about federal ?meddling? with the peculiar institution.

What is more, Ha fails to grapple with the thorny question of whether the American System at its heart was necessarily ?good for the union.? He includes a striking quote from a speech by John Tyler, who argued that protective duties would actually operate as a tax on farmers by increasing the prices of necessities (p. 66). Yet Ha does not explore Tyler?s prescient statement. Tariffs impede free trade, impair the workings of comparative advantage, and indeed raise prices for domestic consumers, ceteris paribus. The main beneficiaries of tariffs are import-competing domestic producers (and, to some extent, the Treasury). Whether this result was truly ?good for the union? is not adequately examined in Ha?s book.

Ha?s epilogue claims that the American System died during Jackson?s reign but rose again, Lazarus-like, during the Civil War. He lists the Morrill Tariff, the National Bank Act, the Pacific Railroad Act, and the Morrill Land Grant Act as evidence, saying that ?George Washington, John Adams, Thomas Jefferson, James Madison, James Monroe, Henry Clay, and John Quincy Adams would have been pleased to know that their dream of national improvement was on its way towards implementation, despite the tumults of the Civil War? (p. 133). This seems a slight mischaracterization ? federalists and anti-federalists, like the poor, were and are always with us. The Whigs picked up the nationalist banner in Jackson?s time and maintained a strong political presence until the formation of the Republican Party. And the recent Tea Party movement and antics by Texas Governor Rick Perry (who fervently believes his state still has the right to secede) suggest that opponents of the American System are certainly alive and kicking as well.

Jenny Wahl?s recent publications include ?Give Lincoln Credit: How Paying for the Civil War Transformed the U.S. Financial System,? Albany Government Law Review (forthcoming June 2010) and ?Blacks, Whites, and Brown: Effects on the Earnings of Men and Their Sons,? Journal of African American Studies (2009) (with Nathan Grawe). She can be reached at jwahl@carleton.edu.

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):19th Century

What Hath God Wrought: The Transformation of America, 1815-1848

Author(s):Howe, Daniel Walker
Reviewer(s):Wahl, Jenny

Published by EH.NET (September 2008)

Daniel Walker Howe, What Hath God Wrought: The Transformation of America, 1815-1848. New York: Oxford University Press, 2007. xviii + 904 pp. $35 (cloth), ISBN: 978-0-19-507894-7.

Reviewed for EH.NET by Jenny Wahl, Department of Economics, Carleton College.

Innovations in transportation, improvements in communication, the fire of religion, and the rise of political parties: these are the themes of Daniel Walker Howe?s huge history of the period sandwiched by the War of 1812 and the Mexican War. The title?s initial clause replicates the earliest telegraphed message; like Samuel F.B. Morse, Howe deliberately eschews punctuation, leaving the reader to decide whether the phrase should end with a question mark or an exclamation point. Howe offers little original scholarship, but he has done his homework ? his footnotes display familiarity with virtually all of the major and many of the minor works of economic, political, cultural, and just plain history regarding the early republic. Part lively anecdote, part tedious generalization, this newest tome in the Oxford History of the United States provides a good overview for the general reader and a rich resource for scholars seeking citations to original research.

Howe casts the first half of the nineteenth century as a struggle between Democrats and Whigs over the future of America; he devotes more than half of the twenty chapters primarily to politics. Howe clearly favors the Whig emphasis on ?qualitative economic improvement? rather than the Democrats? pursuit of ?quantitative expansion of territory? (p. 706), calling the Whigs the ?party of America?s future? (p. 612). His admiration for John Quincy Adams is apparent, his disdain for Andrew Jackson palpable. He frequently laments what might have been had the Whigs prevailed politically. (See for example pp. 283, 689-90.) In a somewhat heavy-handed metaphor, Howe likens the Democrats to the mythical ?frontier marksman? while noting that the Whig-like artillery actually won wars (pp. 17-18, 65).

Much of the story is linear, although some chapters tackle specific topics. Chapters 5, 8, 12, and 16 largely concern religion, for example. Aside from politics and religion, the book is a kaleidoscope of well-worn subjects ? the Erie Canal, the Monroe Doctrine, the case of McCulloch v. Maryland, the Missouri Compromise, utopian societies, Cherokee removal, the Charles River Bridge case, the Bank War, the Amistad, Transcendentalism, the California gold rush, the Irish potato blight. Howe is at his best when depicting battles ? soldiers shivering in the chilly mist covering New Orleans (prologue), and Winfield Scott brilliantly advancing upon Veracruz, Chapultepec, and Cerro Gordo as Santa Anna hastily departs without his prosthetic leg (chapter 19). Vignettes of individuals well-known (Sojourner Truth, Eli Whitney) and obscure (John Ball, Anthony Trollope?s mother) work well as windows on wider subjects. His forays into demography and economics, in contrast, mostly generate yawns (chapter 14, for instance).

Still, the alert reader can enjoy numerous nuggets: 80 percent of New Englanders bathed at most once a year (p. 32), the anti-Masons held the first national political convention (p. 269), Methodists outnumbered Catholics in the U.S. before the Civil War (p. 201), more Americans read newspapers in 1822 than any other national group (p. 227), illegal immigration from the U.S. plagued Mexico in the nineteenth century (p. 660), long-distance chess games revealed the interactive capability of the telegraph (p. 696), Secretary of State James Monroe led a scouting party for redcoats during the War of 1812 (p. 64), the Liberty Bell cracked while tolling for Chief Justice John Marshall?s funeral (p. 439). I enjoyed the reminder of Andrew Jackson arriving at the White House on horseback and departing by train, and of the redundant Battle of New Orleans ? what a pity the Treaty of Ghent preceded the invention of the telegraph and the laying of the trans-Atlantic cable. Some statistics Howe tosses out deserve a little more commentary, however: is it really surprising that the desertion rate in the Mexican War doubled that for the Vietnam conflict, given geography (p. 751)? And is it possible that annual per capita alcohol consumption totaled 7 gallons in the early part of the nineteenth century (p. 167) simply because widespread water purification did not exist?

Howe occasionally draws apt modern-day comparisons. Andrew Jackson?s serial replacement of Treasury secretaries until Roger Taney did his bidding with banks indeed resembles Richard Nixon?s Saturday night massacre (pp. 387-88). At times the comparisons seem forced, however. Is Thomas Jefferson?s dying in debt really comparable to our current account deficit (pp. 60-61)? Can today?s developing countries truly count on democracy flourishing during transitions just because it did for America two centuries ago (pp. 849-50)?

Quirky statements and viewpoints appear periodically as well. ?The Americans forgot about Canada (as they usually do) … (p. 519).? The acquisition of California ?enabled a strong stand to be taken against the aggressions of Imperial Japan in the 1940s. God moves in mysterious ways, and He is certainly capable of bringing good out of evil (p. 811).? How does Howe know that ?[a] family farm worked best when husband and wife cooperated closely and accorded each other mutual respect (p. 36)?? If he considers the term ?Jacksonian democracy? ?inappropriate? (p. 4), why does he use it to title chapter 11? And, although the telegraph certainly conveyed ideas quickly so as to help unify political parties and to spread the word of abolitionists (pp. 242, 646), Howe misses the chance to point out that the lack of centralized, authoritarian control over the dissemination of information is what made this possible in America. Perhaps the Democrats? emphasis on individuality had its merits after all.

Ultimately, this sprawling book (winner of the 2008 Pulitzer Prize for History) is a worthwhile read, despite its uneven nature. Just don?t try it in one sitting.

Jenny Wahl, Professor of Economics at Carleton College (jwahl@carleton.edu) is the author of ?He Broke the Bank, but Did Andrew Jackson also Father the Fed?? in Congress and the Emergence of Sectionalism: From the Missouri Compromise to the Age of Jackson, eds. Paul Finkelman and Donald Kennon, Ohio University Press for the U.S. Capitol Historical Society (2008), pp. 188-220.

Subject(s):Economywide Country Studies and Comparative History
Geographic Area(s):North America
Time Period(s):19th Century

The Economy of Early America: Historical Perspectives and New Directions

Author(s):Matson, Cathy
Reviewer(s):Ryden, David B.

Published by EH.NET (January 2007)

Cathy Matson, editor, The Economy of Early America: Historical Perspectives and New Directions. University Park, PA: Pennsylvania State University Press, 2005. viii + 380 pp. $55 (hardcover), ISBN: 0-271-02711-8.

Reviewed for EH.NET by David B. Ryden, Department of History, University of Houston-Downtown.

In her lengthy overview of the intersection between economics and the field of history, Cathy Matson leads us to the conclusion that the New Economic history is all but fizzled out in Early American studies. Seventeenth and eighteenth century data are simply too thin to solve long-running regional income debates; to evaluate theories on economic growth (i.e. the staples model); or to conclude whether the colonials and early nationals were capitalists, proto-capitalists, or anti-capitalists. Furthermore, the cliometric approach has been unable to keep up with the non-quantifiable questions pursued by linguistic and cultural theorists. The point of this book, then, is to showcase new approaches that attempt to reframe social and cultural history into the field of economic history. While some economists might be initially suspicious of this agenda, it appears that the book is written for historians, with the hopes of persuading them to be more receptive to adopt economic themes in their research.

Eleven out of the twelve contributions to this volume were delivered at the inaugural Program in Early American Economy and Society (PEAES) Conference, in April 2001. As the subtitle suggests, this collection of essays is all about taking stock of the field and divining “new directions.” Much of the book is therefore historiographic and Matson has chosen John McCusker and Russell Menard’s The Economy of British America (1985) as a reference point (for full disclosure, Rus Menard was my graduate school advisor). Both Matson’s general survey and David Hancock’s “Rethinking The Economy of British America” mark the publication of the McCusker and Menard synthesis as a breaking point for the economic approach to colonial history. The problem with McCusker and Menard’s volume, according to Hancock, was that it “seem[ed]” (1) “to close more doors than it opens,” (2) “to be too ‘economic’ in its orientation” and (3) “to be insufficiently connected to historian’s emerging interest in cultural studies.” Thus, fashion and the apparent certitude of the conclusion mapped by McCusker and Menard cemented in many minds (particularly that of younger historians) that there are no longer exciting colonial-era avenues for statistical research. Echoing Matson’s call to fit more scholarship under the economic-history umbrella, Hancock laments the fact that cultural histories are absolutely bereft of economic history, calling this development to be just plain “weird.” While he doesn’t hold out high hopes for a resurgence of the statistical studies championed by McCusker and Menard, he sees the “boundaries of political-economic history … waiting to be pushed.”

The interloping contributors to this volume are Lorena Walsh and Russell Menard himself. In her review essay on recent trends in the demographic history of British America, Walsh sees continuity between the quantitative history of the 1970s through today. She points to the relatively recent migration studies by David Eltis and P.M.G. Harris. Added to these macro-studies are the quantitative regional work by Billy Smith, Daniel Vickers, and R.C. Nash. But Walsh emphasizes that there is still more statistical work to be done. She sees the greatest need in the areas of slave demography, material culture, and consumption patterns. Even the conclusions of The Economy of British America are suggested to be worth revisiting, for the “often tentative synthesis of the state of the art in 1985″ became “far more concrete and enduring … than the authors [McCusker and Menard] ever intended.” In the final sentence of her paper, Walsh’s uncompromising position is loud and clear: she proclaims the urgent need for senior researchers, such as those listed above, to “persuade younger scholars to roll up their sleeves and get on with the important tasks remaining” in the field of economic and quantitative history.

Walsh briefly complies with the volume’s theme when she notes that material-culture topics offer the best opportunity for a dialogue between economists and those operating within the cultural approach. Menard’s chapter, on the other hand, ignores the book’s agenda altogether. Rather, his paper follows through with the same neoclassical themes he laid out with his coauthor in 1985. This time, however, Menard uses the opportunity to survey recent findings on colonial agricultural production in order to hammer away at Peter Mancall and Thomas Weiss’s contention that there was no colonial economic growth (1999). Menard coins the phrase “Mestizo agriculture” to catalogue a long list of on-the-spot farm innovations that integrated skills and methods from Europe, America, and Africa. For Menard, the widespread advances in productivity provide sufficient evidence that there were at least modest gains in real income.

With the exception of Christopher Tomlin’s summary of colonial servant migration and Brooke Hunter’s impressive research on the economic impact of the Hessian-fly infestation, the remaining chapters are indeed significantly different from the approach laid out by McCusker and Menard. These pieces are working within an entirely different historiographical framework, dealing with more political and social issues of the late colonial, early national, and Jacksonian periods. A repeated theme in these chapters is the debate over how Americans felt about the “Market Revolution” during the early nineteenth century. As mentioned in the book’s preface, there is not a consensus on many points, including this one. Seth Rockman, for example, emphasizes the exploitation that was at the heart of the “Unfree Origins of American Capitalism,” while Donna Rilling’s study of Philadelphia entrepreneurs focuses on a group that directly benefited from market integration during the early national period. Because this debate over attitudes toward the market is so prominent in these essays, it is no surprise that political economy reverberates throughout the second half of this volume.

Every essay included in this book is insightful and offers solid documentation on the current state of the field. Its fundamental limitation, however, is in its narrow geographic scope. Each author fits his or her work within the literature of United States history, but there is a marked concentration on Pennsylvania subjects. This is no surprise, given that the PEAES is located at the Library Company in Philadelphia. Nonetheless, with the rise in “Atlantic history” since the publication of The Economy of British America, one might expect that trade and mercantile connections would figure more prominently. Attitudes towards consumption of foreign goods and imperial restrictions on British West Indian commerce are mentioned several times, but never explored deeply by any of the contributors. This complaint, however, should not distract from the book’s contributions. Matson’s seventy page “Thoughts on the Field of Economic History” is a powerful introduction to the intersection of the two disciplines, while each individual essay offers an impressive survey of the literature. Economists and historians interested in early America will find this provocative collection to be a worthwhile read that might motivate them to challenge or endorse the PEAES-school approach.

Table of Contents:

Preface
1 A House of Many Mansions: Some Thoughts on the Field of Economic History by Cathy Matson
2 Rethinking the Economy of British America by David Hancock
3 Colonial America’s Mestizo Agriculture by Russell R. Menard
4 Peopling, Producing, and Consuming in Early British America by Lorena S. Walsh
5 Indentured Servitude in Perspective: European Migration into North America and the Composition of the Early American Labor Force, 1600/1775 by Christopher Tomlins
6 Capitalism, Slavery, and Benjamin Franklin’s American Revolution by David Waldstreicher
7 Moneyless in Pennsylvania: Privatization and the Depression of the 1780s by Terry Bouton
8 Creative Destruction: The Forgotten Legacy of the Hessian Fly by Brooke Hunter
9 The Panic of 1819 and the Political Economy of Sectionalism by Daniel S. Dupre
10 Toward a Social History of the Corporation: Shareholding in Pennsylvania, 1800/1840 by John Majewski
11 Small-Producer Capitalism in Early National Philadelphia by Donna J. Rilling
12 The Unfree Origins of America Capitalism by Seth Rockman

David B. Ryden is an assistant professor of history at the University of Houston-Downtown. His research focuses on the economy of British America. Most recently, he coauthored (with Russell R. Menard) “South Carolina’s Colonial Land Market: An Analysis of Rural Property Sales, 1720-1775,” Social Science History (2005). He is presently completing a book manuscript on the West India lobby and the abolition of the British slave trade.

Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):19th Century

God and Mammon: Protestants, Money, and the Market, 1790-1860

Author(s):Noll, Mark A.
Reviewer(s):Frey, Donald E.

Published by EH.NET (January 2004)

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Mark A. Noll, editor, God and Mammon: Protestants, Money, and the Market, 1790-1860. New York and Oxford: Oxford University Press, 2001. xii + 313 pp. $49.95 (hardback), ISBN: 0-19-514800-2; $22.95 (paperback), ISBN: 0-19-514801-0.

Reviewed for EH.NET by Donald E. Frey, Department of Economics, Wake Forest University

This book’s primary title, God and Mammon, evokes the scriptural injunction that one cannot serve God and Mammon, which suggests an either-or choice. Yet, the book is not about people torn over such a choice. On the contrary, the subjects of this book are portrayed generally as fully participating in the American economy, even shaping the economy, while holding to their faith with no sense of contradiction. Specifically, two chapters are devoted to refuting Charles Sellers’ thesis (The Market Revolution: Jacksonian America, 1815-1846) that a strain of American frontier religion aligned itself in a culture-war against expanding capitalism.

By default, the sub-title (Protestants, Money, and the Market, 1790-1860) bears the weight of describing the book’s content, but comes up wanting. Despite the title, the book is more narrowly focused on the era’s evangelical branch of American Protestantism, not Protestantism in general; going further, fully four out of thirteen chapters are devoted to early Methodism, as the exemplar of such evangelicalism. The title’s reference to “money and the market” leaves unanswered whether the book deals primarily with intellectual interaction of religion and economics or with practice. In fact, the various chapters deal with both ideas and practice and with cases where influence runs in either direction. The book generally finds that evangelical Protestantism remained true to its religious roots even while engaging the economic life of the era and utilizing its opportunities.

The chapter by David Paul Nord on the evangelical publishing societies, which loomed large in the publishing industry of the era, documents how these organizations grasped new economic methods and opportunities, while adhering to their religious goals. The Bible and tract societies built “truly national institutions (some of the first modern business firms, really) with national reach” (p. 164), while reaching people of all means with their literature. At the same time as these publishers developed and used the methods of capitalism, they rejected the secular, demand-driven publishing that resulted in “the literature of wickedness, sensation, dissipation and error” (p. 164).

Looking at doctrine, the book finds little deviation of the new evangelical thought from the historic Protestant traditions regarding economic life. Mark Noll concludes the “main developments” of the evangelical encounter with the burgeoning economy may be regarded “as a continuation of historic Christian, Protestant, and Reformed attitudes …” (emphasis added, p. 273). Although these principles were adapted better to fit the emerging market economy and the disestablishment of religion, “there is little evidence” that the evangelicals were “coopted by market reasoning,” which remained “subordinate to intrinsically religious convictions” (p. 273). Thus, Noll concludes, evangelicals interacted with the market without abandoning core principles. (Other authors conclude that evangelicals did not define their position by blind opposition to the market.)

Richard Pointer authors a chapter on Presbyterians, the only chapter covering a denomination other than the Methodists. Presbyterians, if the Sellers thesis is correct, would be an interesting study in contrasting attitudes toward the market, between the Old School Calvinists and the more evangelical New School Presbyterians. And, yet, Pointer argues that the New and Old School pulpits of Philadelphia sounded very similar when teaching about the economic virtues. He speaks of “the sweeping convergence of Old School and New School thought, not only on work values, but also on economic ethics in general” (p. 178). If this is so, then whatever the evangelicals’ adaptations to the emerging market, their core values remained comparable to earlier Protestants. Such continuity raises the question why the book chooses to concentrate on the evangelical era at all, for it was apparently not unique, at least in terms of doctrine. The answer may be that the book is at least in part a rejoinder to Sellers, who argued that the era was unique.

Richard Cardwine’s chapter explains that evangelical Methodism was compatible with capitalism despite its earliest membership being from the poor: “… although the early Methodists were poor, they were far from hostile to enterprise and the capitalist ethic. The movement was indeed a radical, egalitarian counterculture … [but it was] not against industrious effort and self-improvement” (p. 80). With the decline of colonial established churches, Methodists learned to compete for converts: “Methodism was both a perfect metaphor for the emergent capitalist market … and the principal beneficiary of the free spiritual market that superseded the colonial system …” (p. 82). Methodism also was congruent with the market in “its stress on individual responsibility, and its stimulus to self-improvement and enterprise” (p. 85).

If refuting Sellers requires emphasizing how well Methodist methods and ethics fit the market environment of the new republic, Cardwine nevertheless resists economic determinism. He holds that Methodists’ partisan allegiances “were to a considerable degree shaped by meaningful ideological conflict between competing religious groups.” Methodists’ underlying concerns “were shaped as much by the religious as by economic marketplace” (p. 92). The primary religious conflict, of course, was between the Methodist theology that attributed more to human agency in salvation than did orthodox Calvinism.

Nevertheless, it would be erroneous to equate orthodox Calvinism with anti-market views, and Cardwine does not make this error. For example, the Calvinistic Old School Presbyterians (as shown by Pointer) were surely open to capitalism. Indeed, there is a century-long literature documenting the compatibility of Calvinistic Puritanism and the market. If there is a single criticism I would make of this book it is its failure to elaborate these colonial roots of the evangelical tradition, even while simultaneously arguing that evangelicalism did not abandon those roots.

Noll summarizes the dominant Protestant view of economics, a view that earlier Puritans would have recognized: it drew “a fine line between accepting the legitimacy of wealth (also the means to gain wealth) and denouncing the abusive use of wealth for selfish ends” (p. 272). The Protestants took commerce for granted but “were more concerned to surround economic life with injunctions about using wealth wisely, benevolently, and for the good of others” (p. 272). In the era of utilitarian economic doctrines, Protestant ethics featured obligations that existed independent of self-interested motives: “Protestants were simply urged, without consideration of reward, to give for the general spread of Christianity” (emphasis added, p. 274). Finally, “Antebellum Protestants were also traditional in ascribing to God most of the responsibility for the presence or absence of wealth” (p. 274). “Even in an age of expanding markets, God still ruled …” (p. 274). Colonial preachers could have sounded these themes.

Most of the contributors to the volume are historians, but two economists are included. Chapter two, by Robin Klay and John Lunn, documents the important role, not only of individual Protestants, but of Protestant organizations, in the economy of the 1790-1860 era. Other chapters that I have not covered in this review include one on the marketing of revivals and the differing religious perceptions of economic life in the North and South.

This book contains a wealth of information and interpretation, and is carefully documented with a host of references. The volume demonstrates that the religious beliefs and commitments of historical actors should be taken seriously when attempting to explain their actions.

Donald E. Frey is author of “Francis Wayland’s 1830s Textbooks: Evangelical Ethics and Political Economy,” Journal of the History of Economic Thought (Summer 2002).

Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):19th Century

State Banking in Early America: A New Economic History

Author(s):Bodenhorn, Howard
Reviewer(s):Rousseau, Peter L.

Published by EH.NET (November 2003)

Howard Bodenhorn, State Banking in Early America: A New Economic History. New York: Oxford University Press, 2003. ix + 355 pp. $45 (cloth), ISBN: 0-19-514776-6.

Reviewed for EH.NET by Peter L. Rousseau, Department of Economics, Vanderbilt University.

The antebellum period in U.S. history is fertile ground for economists and economic historians seeking to understand the linkages between financial factors and macroeconomic performance. This is especially so because the topic has not, until recently, attracted much attention among scholars of the period. I suspect that this is for two reasons. First, developments in agriculture, commercial trade, and internal improvements in the first sixty years of the nation’s history appear, to many, to have had a more direct link with the nation’s early growth, diverting attention from the capital markets that made these advances possible. Second, the preoccupation of financial history with banks rather than with financial systems more generally leads inevitably to an over-emphasis on the rather checkered record of antebellum banking. Nowhere is this more apparent than in the traditional view that problems in the nation’s early banks usually began with deviations from the real bills doctrine, in which self-liquidating commercial paper was to be a bank’s primary asset, and backed by as much specie and as little real estate as possible. More recent scholarship recognizes the potential for missed investment opportunities and for a perverse elasticity of money that can follow from conservative practices such as these, and has contributed to the view that state banks — even those managed under real-bills principles — could not have added much punch to early U.S. growth.

Howard Bodenhorn’s second book, titled State Banking in Early America: A New Economic History, takes on the challenge of explaining how banks did contribute to the growth of the antebellum economy. The task is formidable because an enormous body of research on early U.S. banking has, if anything, shown that successful banks did not conform to simple principles that worked universally. This means that idiosyncratic practices in various states and at various times must be placed in the context of regional growth, piece by piece. The case might have been more convincing had federal banks, state banks, and markets been considered together, as Robert Wright does in The Wealth of Nations Rediscovered (Cambridge University Press, 2002), but Bodenhorn still does a respectable job of synthesizing the literature on early U.S. banking and placing it in a broader context.

The early chapters (2 and 3) consider difficulties faced by banks in navigating the often-politicized process of obtaining charters, compensating states for them, and serving the varied lending needs of the communities in which they operated. Emphasis is on just how well banks were able to develop governance structures under difficult circumstances that reduced informational asymmetries along the corporate chain of command. Bodenhorn then asserts that it was deviations from the real-bills doctrine that, when not leading to non-performing loans and bank failure, were most effective in promoting entrepreneurship and growth. In terms of impact, however, this may be an instance of seeing the glass as 1/4 full rather than 3/4 empty. This is not to say that banks never made loans to entrepreneurs, and that these loans did not improve economic conditions, but it is likely that the effects of state banks on economic growth in the early United States were more a result of growth in their numbers and in the resources that became available to them, than the quality of their allocation decisions.

Bodenhorn then considers banking systems region-by-region, starting with New England (chapters 4 and 5). In revisiting how kinship ties affected the allocation of credit (i.e., the so-called “insider-lending” hypothesis), he raises the important question of why uninformed outsiders would choose to hold minority shares or lodge deposits with banks that might divert returns from them while advancing the interests of a core group of insiders. Bodenhorn contributes the insight that minority insiders, related by kinship to the majority shareholders, held similar interests to outsiders, and could thus monitor the bank’s practices for them. This augments the simpler view that capital scarcity was at the heart of insider lending with a plausible story of its advantages in reducing the severity of problems in firm governance.

Attention then turns to the Suffolk System, which allowed for the clearance of New England bank notes at par. The system should have been an improvement over gross clearings, but had one serious flaw, namely that costs fell primarily on country banks that saw their notes redeemed more rapidly under the Suffolk system than would have otherwise occurred. By inverting the logical cost structure to favor those Boston bankers who had the most to gain from the system, the Suffolk Bank created a structure which, though working for years, collapsed when the Bank of Mutual Redemption emerged as a viable alternative to its coercive practices. Bodenhorn submits the Suffolk Bank as an example of how an innovation, however flawed, worked in a particular place and time to improve the flow of credit and make a rapidly monetizing economy more efficient.

The next three chapters (6, 7, and 8) focus on the Mid-Atlantic States. After describing how the state interfered with the free allocation of bank credit in New York, Pennsylvania, and Maryland early on, Bodenhorn considers the relative success of New York’s Safety Fund in establishing confidence among holders of bank notes, and the system’s fatal inability to maintain this confidence by winding up troubled banks in a timely manner when faced with the depression of the 1840s. The experience showed that liability insurance could be used effectively, but that some form of central banking would be needed to administer the system and to serve as a lender of last resort. This was not to be, of course, for nearly another century. Instead, New York turned to free banking. The ability to issue notes based on holdings of government bonds was an attractive feature of the free banking legislation, and allowed the number of banks to expand rapidly. And while it is easy to focus on the problems associated with free banking, Bodenhorn takes a more balanced stance, reiterating Richard Sylla’s point that the real contribution of free banking was to introduce the notion of free incorporation, which encouraged entrepreneurship.

When considering the South and West in chapter 9, Bodenhorn describes a set of banking systems that drew eclectically upon the experiences of other regions to serve the credit needs of agriculture. As the South and West have received relatively less scholarly attention than banking in other regions, the account here is particularly useful.

Overall, I would recommend the book to scholars interested in a fresh discussion of antebellum banking. It is, however, largely a synthesis of older research in the area, and Bodenhorn’s ready adoption of the “accepted views” of various historical events gives the impression that little has been done recently to sharpen our views of them. Nonetheless, the book does provide answers to several questions about finance and growth in early America that had interested this reader for some time. How much did state-level banking practices contribute to growth? Perhaps not all that much in general, but the interaction of these practices with other institutional characteristics of the regions in which they were implemented had important local effects. Were particular institutional structures clearly superior to others? Probably not, since states both succeeded and failed with a myriad of approaches that cannot be reduced to a simple set of rules.

These questions and answers relate closely to the modern debate on banks vs. markets, or Anglo-American vs. German-style financial systems. The conclusion of this literature seems to be that financial development matters for the agglomeration of capital, and that the methods by which this finance is administered are of secondary importance. The early United States saw rapid expansion of banks and bond, stock, and insurance markets, starting almost immediately from the adoption of the Federal Constitution. By 1825 it had a financial system that was world-class. It is difficult to make the case that state banks, or any one component of the system, was the prime mover — all were crucial. Bodenhorn’s book aptly fills in the details of the emergence and meteoric growth of one of these components, and describes how lessons learned in the period of early state banking have gone on to shape the institutional forms that remain with us today.

Peter L. Rousseau is an Associate Professor of Economics at Vanderbilt University and a Research Associate of the NBER. He is the author of “The Permanent Effects of Innovation on Financial Depth: Theory and U.S. Historical Evidence from Unobservable Components Models,” Journal of Monetary Economics (October 1998), “Jacksonian Monetary Policy, Specie Flows, and the Panic of 1837,” Journal of Economic History (June 2002), and “Historical Perspectives on Financial Development and Economic Growth,” Review, Federal Reserve Bank of St. Louis (July/August 2003).

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):North America
Time Period(s):19th Century

The Anti-Rent Era in New York Law and Politics, 1839-1865

Author(s):McCurdy, Charles W.
Reviewer(s):Wallis, John Joseph

Published by EH.NET (September 2002)

Charles W. McCurdy, The Anti-Rent Era in New York Law and Politics,

1839-1865. Chapel Hill: University of North Carolina Press, 2001. xvii +

408 pp. $49.95 (hardcover), ISBN: 0-8078-2590-5.

Reviewed for EH.NET by John J. Wallis, Department of Economics, University of

Maryland.

In 1629, Kilaen Van Rennselaer, received by grant from the Dutch government a

manor on the North River of New Netherland. After conquest by the British, Van

Rennselaer’s title to his fiefdom was confirmed by the English colonial

governors, and served as a model for units of local government in the colony.

“With few exceptions, the great proprietors agreed that land should never be

alienated in fee simple.” Instead, the manors were peopled with settlers

farming under life or perpetual leases, on land encumbered by what

revolutionary America recognized as “feudal” obligations. Tenants typically

owed one day of labor service a year, the payment of “four fat fowls” on rent

day, an annual rent fixed in bushels of wheat, and were subject to the reentry

of the landlord should any obligations go unfulfilled. On the 720,000-acre

Manor of Rennselaerwyck, most tenants held perpetual leases, which could be

passed to succeeding generations or sold. Sales, however, were subject to a

quarter sale, which required payment of one-quarter of the sale price to the

landlord. The creation of such land tenures had been prohibited in England

since the passage of Quia Emptores in 1290; colonial America had, in effect,

taken a 400-year step backwards along the banks of the Hudson River.

Charles McCurdy has written a fascinating account of the “Anti-Rent” movement

that formed in New York in 1839 in opposition to these manorial tenures. By the

early 1840s, thousands of tenants spread through the great estates refused to

pay their rents. New York politicians, both Whig and Democrat, denounced the

land contracts as anti-republican, blamed the contracts for the failure of

agriculture practice and productivity to improve on the estates, yet generally

agreed that the property rights vested in the proprietors by their original

charters enjoyed the legitimate protection of the contract clause. For the next

thirty years the anti-rent issue was never far from the center of New York

politics, most prominently in the early 1840s. In the 1840s, organized into a

political party, the Anti-renters held the balance of power between the Whigs

and the Democrats and so were able to demand concessions from both parties.

Ultimately, their power went for naught, as the anti-renters never fashioned a

politically and constitutionally acceptable way to extinguish the land

contracts, compensate the land owners, and give tenant farmers free and clear

title to their lands.

McCurdy is a professor of Law and History at the University of Virginia. His

book blends legal and political history to trace out the course of a

fundamental conflict in American democracy: how, in a country where the people

are sovereign, are the property rights of private individuals to be protected

when the community at large agrees that those rights work grievous harm to the

community? Are all vested rights to be protected by the commerce clause? There

is no absolute answer to this question, as McCurdy neatly explicates, although

ideologues and actors on both sides of the question articulated absolute

beliefs. In New York, vested rights ultimately triumphed after a long and

tortuous attempt to craft an active policy of state intervention that would not

violate the constitutional belief in the sanctity of contract.

This book has much to recommend it. The scholarship is impressive, no stone

related to the anti-rent movement goes unturned. The legal issues are clearly

explained and developed. McCurdy ably describes the evolution of legal ideas as

lawyers and lawmakers struggled to find a solution to the crisis. But it is

also a somewhat difficult book. I have been reading Jean Edward Smith’s

biography of Grant. By focusing exclusively on Grant’s story, Smith tells a

history of the Civil War simultaneously more organized and purposeful than any

I have read. Too neat for reality, but wonderfully informing as a way to keep

who, what, when, and where in a coherent picture. There was, of course, a logic

to Grant’s participation in the war and as the war drew to a close, Grant’s

perspective became increasingly integral to the war’s conclusion.

The Anti-rent movement was not nearly so central to New York politics, and

certainly not to national politics, as Grant to the Union war effort. As

McCurdy realizes, one cannot understand politics in Jacksonian New York simply

through the lens of the anti-renters. Much of the book is devoted to explaining

the politics of New York, which were enormously complicated in the 1840s. New

York Democrats had two distinct branches, the Hunkers and the Barnburners,

whose divisions were as deep and lasting as the Democratic differences with New

York Whigs. The shifting balance of numbers between the two/three major

political parties created opportunities for the anti-renters to play a pivotal

role in state politics in the mid-1840s. Moreover, the importance of New York

in national politics meant that New York politicians were always constrained by

the impact of national issues, such as the Bank War, annexation of Texas, and

slavery.

McCurdy does an excellent job with political events, but his focus on the

anti-rent movement occasionally produces an uneven political history. For

example, at the peak of the Anti-renter’s political power between 1844 and 1846

(the Anti-rent party determined the outcome of statewide elections in 1846 and

delivered the governorship to John Young, the Whig candidate), the central

issue in New York politics was calling a state constitutional convention and

implementing a series of constitutional amendments dealing with state debt,

taxation, internal improvement spending, and corporations that arose out of the

near brush with financial default in 1842. We are treated to an excellent

discussion of the negotiations leading up to the decision to call a new

convention, but then nothing about the convention and precious little about the

constitution.

The larger story that McCurdy tells about the course of the anti-rent movement,

and the ultimate failure of the anti-rent strike, is embedded in the larger

political history. As the economy headed into a deep depression in 1839,

tenants on Van Rennselaerwyck began the rent strike, which spread to other

manors. Whig Governor Seward accepted the challenge that the “lease in fee”

contracts posed, promising both to come to the aid of the tenants without

trampling the rights of the landlords. What emerged from the mind of William

Duer, was scheme to use the eminent domain power of the state to condemn the

landlords’ titles, compensate the landlords for their losses, and transfer

clear fee simple titles to the tenants. McCurdy makes a strong case that some

form of “compensated emancipation” was the only scheme that stood a chance of

solving the rent crisis. But politically it proved impossible or impractical to

implement.

The reasons were complicated. Three alternatives to compensated emancipation

were advanced. One was to challenge the titles of the existing landlords. In

this approach, the state would suspend payment of tenant rents temporarily

until the courts were able to determine whether the landlords actually

possessed clear and legal title to their lands. This appealed to the tenants,

who would immediately stop building up obligations for back rents. Legally,

however, the option was doomed, as acts of New York in 1788 and 1805 made it

clear that the titles to the manor lands vested in the landlords by right of

adverse possession regardless of the way in which the titles originated. The

second solution was to tax rents, which had previously enjoyed an exemption. A

third proposal would have worked through the state power to regulate

inheritance, and eliminate manorial tenures through “devise and descent,”

gradually eliminating manorial tenures as tenants and landlords expired.

All four proposals offered different incentives to different groups. The

political complications were periodically magnified by the outbreak of violence

on the manors themselves. The anti-renters actively resisted the attempts of

landlords to evict tenants both through the weight of community opinion and,

when necessary, through violence. Anti-renters disguised as Indians threatened

sheriffs, occasionally tarred and feathered them, and in one critical instance,

shot and killed a deputy to prevent them from carrying out their duties. Just

as no politician in either political party was willing to approve feudal rents,

no politician was willing to sanction violence as a means of protesting the

rents. Every instance of violent resistance polarized the political debate and

made it more difficult to reach an agreement over which policy to pursue.

At the peak of its powers, the Anti-rent party faced its own paradox: solve the

rent crisis and eliminate its reason for existence. The Whig and Democratic

politicians who used the rent crisis for their own partisan ends faced much the

same problem: advocating a solution to the rent crisis obtained the support of

the anti-renters, solving the problem destroyed the reason for their support.

In the end, the politicians put most of their weight behind a legal challenge

to the titles of the landlords, a policy that perceptive observers had noted

early in the 1840s would only succeed if the original titles were defective and

the legislature could convince the courts to reverse the blessing that the

state had earlier given to all titles of long standing in the “Quiet Title”

legislation of 1788. Active anti-rent agitation died down in the late 1840s as

a series of court cases went forward. In the 1850s, as the court cases made

their way to the New York Court of Appeals, it became clear that the state

could not find the titles defective. The tenants were stuck. In the end, the

rent crisis ended with the eviction of those tenants who refused to pay back

rents, the transfer of fee simple title to tenants willing to pay the prices

asked by the landlords, or in a few properties on Rennselaerwyck, annual rents

that persist to this day.

This is a wonderful episode in the history of American political and legal

economic history, and McCurdy has done a marvelous job of telling the story in

all its detail.

John Wallis is a Professor of Economics at the University of Maryland and a

Research Associate at the NBER. His recent research interests include the

development of state constitutions (his web site on state constitutional texts

can be found at http://www.bsos.umd.edu/constitution) and the development of

economic institutions, development policies, and infrastructure investment in

the early nineteenth-century United States. Recent publications include “Market

Augmenting Government? States and Corporations in Nineteenth Century America,”

in Omar Azfar and Charles Cadwell, editors, Market Augmenting Government:

The Institutional Foundations for Prosperity, University of Michigan Press,

2002 (forthcoming); “What Caused the Crisis of 1839?” NBER Working Paper, HO

133; and “The Property Tax as a Coordinating Device: Financing Indiana’s

Mammoth Internal Improvement System, 1835 to 1842,” NBER Working Paper, HO 136.

Subject(s):Government, Law and Regulation, Public Finance
Geographic Area(s):North America
Time Period(s):19th Century

Bonds of Enterprise: John Murray Forbes and Western Development in America’s Railway Age

Author(s):Larson, John Lauritz
Reviewer(s):Churella, Albert J.

Published by EH.Net and H-Business (June 2002)

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John Lauritz Larson, Bonds of Enterprise: John Murray Forbes and Western Development in America’s Railway Age. Iowa City: University of Iowa Press, 2001. xxiii + 257 pp. $17.95 (paper), ISBN: 0-87745-764-6.

Reviewed for H-BUSINESS and EH.NET by Albert J. Churella, Social and International Studies Program, Southern Polytechnic State University.

Perhaps no other economic change has so consumed Americans than the emergence of big business in the 19th century. As the invisible hand of the marketplace gave way to the visible hand of management, output rose, prices fell, and the United States became an economic powerhouse. This process also fundamentally changed the nature of the relationship between business, businessmen, individual citizens, and their democratic system of governance. Big business concentrated wealth and power, and manipulated the streams of commerce in ways that seemed antithetical to the political rhetoric of Jacksonian Democracy. Technical discussions associated with the management of large, vertically integrated enterprises were thus matched with a passionate debate regarding the equitable relationship between capitalism and democracy. Railroads, the nation’s first big business, were at the center of these debates since they embodied massive concentrations of capital and constituted the lifeblood of many communities. While many scholars have studied parts of the railroad revolution, few have attempted to integrate all of the multifaceted effects of this process.

John Lauritz Larson, an associate professor of history at Purdue University, provides just such an integrated account in Bonds of Enterprise. Larson examines the career of John Murray Forbes (1813-1898), whose life spanned the very different worlds of personal, market capitalism and “visible-hand” big-business management. Like a spider at the center of a web (although Larson would probably eschew such a malevolent analogy) Forbes touched all of the varied aspects of the “railroad question.” As Larson points out, this book is not so much a biography as it is a selective depiction of Forbes’ role in developing the “bonds of enterprise” that linked both cities and competing interest groups to each other. Thomas McCraw used a similar approach in Prophets of Regulation, linking four notable individuals to the regulatory mechanisms that they hoped to create. While Bonds of Enterprise may not garner the same degree of notoriety, it is still a fascinating and important work. While still a young man, John Murray Forbes earned his fortune in the China trade. He relied heavily on the standard pillars of long-distance capitalism in the early 1800s; family connections and trust backed by an impeccable reputation. By the 1840s, Forbes settled into what he believed would be a respectable semi-retirement and he invested heavily in railroad securities.

Perhaps the pivotal moment in Forbes’ career occurred in 1846 when he acquired control of the moribund Michigan Central Railroad, a state-owned project that typified the internal improvement mania that had arisen before the Panic of 1837. Like most such rail and canal projects, the state initially envisioned the Michigan Central to be solely a trunk line designed to encourage general commercial development. Private entrepreneurs would then construct feeders to the mainline, allowing, in a very Jacksonian fashion, all of the common men equal access to the economic potential of the railway.

Forbes increasingly saw the economic function of the railroad in quite a different light. He realized that only a combined branch-and-trunkline railroad could earn a satisfactory profit, and he felt that railroad development should proceed gradually and sequentially, allowing each region of the frontier to develop before proceeding to the next. In the process, the railroad must inevitably change transportation patterns in the region that it served causing some regions-and some individuals-to prosper, and others to fail. Like many 19th century entrepreneurs, Forbes had only the haziest idea of the competitive forces that America’s first big business had unleashed. He was, however, deeply troubled by his role in this process. He had grown up in, and attained wealth by, a system of personal capitalism. He professed a life-long belief in the limitless potential of a virtuous citizen in a democratic society. Yet, like Henry Ford nearly a century later, he helped to bring about massive economic and social transformations that, within his lifetime, helped to shatter the moral principles that he held dear.

Forbes and his associates plunged into the “system-building” phase of railroading during the 1850s. No longer advocating a sequential approach to railroad expansion, Forbes increasingly saw railroads as essential to the economic development of the West. As he pieced together the Chicago, Burlington, and Quincy system, Forbes preferred to maintain the fiction of local control as long as possible, relying heavily on home-grown investors and managers. While this method allowed local entrepreneurs to assume many of the risks and enabling the Boston capitalists to expropriate all of the rewards, Larson does not see this as a stain on Forbes’ exemplary business ethics. Nor does he blame Forbes for any of the relatively mild financial machinations associated with the Burlington; these he lays at the feet of James F. Joy and other unscrupulous financiers who abused Forbes’ trust.

As farm prices fell after the Civil War, farmers in Iowa protested rate differentials and other types of “unfair” competition. They believed that a lack of competition had caused these problems, while Forbes and other system-builders increasingly understood that overbuilding and excess competition were to blame. Forbes believed that he was advancing the cause of progress by opening up the West and by increasing the general welfare through his business enterprises. He seemed genuinely astonished that the seemingly ungrateful beneficiaries of his efforts depicted him as a profit-hungry robber baron. Perhaps because Forbes’ “style of business was paternalistic, and his patient efforts to develop the Iowa country had been met with hostility,” (p. 142) he responded with a stubbornness that seemed to veer between puzzlement and outrage. For example, the Burlington deliberately inflamed the passions of westerners by raising long-haul rates to conform to Iowa rate-equalization-legislation. Forbes thought that grandstanding populist politicians like Iowa governor William Larrabee were ignorant of the fundamentals of railroad economics; Larrabee was determined to fight “a war against the arrogance of ‘experts’ who scorned the authority of popular government.” (p. 187) Forbes believed that, in the end, only railroad officials could adequately understand the complexities of rate-making, and could thus capture, or at least reduce, the deleterious effects of state and federal regulation.

Ultimately, Larson’s biographical approach strikes very near his target, but it is not quite a bullseye. The reader is left with a thorough knowledge of Forbes’ career, of the railroads that Forbes controlled, and of the regulatory problems that affected those railroads. Clearly, Forbes brought together many of the disparate threads that connected all of the institutions and all of the historical actors associated with the transformative effects of railroads on American life. But there were also many currents that swirled and eddied far from the gaze of that Boston-based Midwestern railroader. There is no doubt that Forbes was a pioneer; whether or not he was typical is another matter.

Portions of Larson’s analysis seem rather quaint and outdated. Bonds of Enterprise originally appeared in 1984, and has now been reprinted with a short additional introduction and amended bibliography. Still, this book employs scholarship that is nearly two decades old. Scholars such as Gabriel Kolko figure prominently in the original bibliography, even though their findings have been superseded by more balanced research efforts. Larson seems needlessly stereotypical in his descriptions of “the squalid poverty of the Chinese” (p. 11) and “that exquisite pride of Oriental leisure.” (p. 17-18) Nor can we be positive that “Forbes seemed to thrive on tension.” (p. 23) And, it may be giving Forbes too much credit to suggest that, “He generated a model for developing the vast interior of the United States, and he adapted or invented many of those instruments of corporate enterprise with which industrialists and financiers revolutionized American life.” (p. 169)

Larson’s obvious enthusiasm for his subject does not detract from the value of this book, however. On the contrary, Bonds of Enterprise is a beautifully written and superbly organized account of a pivotal time, and a pivotal person, in the history of American business. Historians of the 19th-century railroad industry, of business-government relations, and of entrepreneurship will not discover any startling revelations here. Certainly the work of scholars such as Naomi Lamoreaux and Colleen Dunlavy has done more to advance our knowledge of these issues. What the reader will find is an excellent overview of these issues in a form that is readily accessible to people lacking expertise in these areas, as well as to students in graduate-level, or even advanced undergraduate classes. At a time when the history profession seems inevitably destined for fragmentation, compartmentalization, and the study of minutiae, Larson is to be commended for this synthetic work.

Albert J. Churella is an assistant professor in the Social and International Studies Program at Southern Polytechnic State University in Marietta, Georgia. He is the author of From Steam to Diesel: Managerial Customs and Organizational Capabilities in the Twentieth-Century American Locomotive Industry (Princeton: The Princeton University Press, 1998).

Subject(s):Business History
Geographic Area(s):North America
Time Period(s):19th Century

Internal Improvement: National Public Works and the Promise of Popular Government in the Early United States

Author(s):Larson, John Lauritz
Reviewer(s):Majewski, John

Published by EH.NET (July 2001)

John Lauritz Larson, Internal Improvement: National Public Works and the

Promise of Popular Government in the Early United States. Chapel Hill:

University of North Carolina Press, 2001. xv + 324 pp. $19.95 (paper): ISBN:

0-8078-4911-1; $55 (cloth), ISBN: 0-8078-2595-6.

Reviewed for EH.NET by John Majewski, Department of History, University of

California-Santa Barbara.

John Larson, professor of history at Purdue University and co-editor of the

Journal of the Early Republic, asks an important question in this

engaging and lucid narrative: why did the national government leave internal

improvements — roads, canals, bridges, and railroads — to states,

localities, and private companies? The question is an important one. The

voluminous literature on internal improvements, including classics such as

George Rogers Taylor’s Transportation Revolution, has too often glossed

over the small role of the federal government without fully analyzing the

political, economic, and ideological roadblocks to national planning. In

filling this historiographical gap, Larson provocatively argues that the

United States would have been much better off if it had established a strong

tradition of national planning of internal improvements. National planning in

the antebellum era, he suggests, might have established traditions and

precedents to temper the capitalistic excesses of the Gilded Age. While

ultimately unconvinced of Larson’s claims on behalf of national planning, I

nevertheless found Internal Improvement a pleasurable and enlightening

read.

Larson’s starting point is the republican origins of the American Revolution.

The republicanism of the American Revolution, he argues, was quite consistent

with what might be called an American planning tradition that stressed the

ability of responsible statesmen to rationally discern the public good and use

the power of government to promote it. Larson traces how this form of

republicanism influenced a wide range of politicians in the early republic

period, include George Washington, Albert Gallatin, John Quincy Adams, and

Henry Clay. This diverse group of statesmen all shared the same abiding faith

that the federal government should shape the new nation’s transportation

network. On the other side of the debate stood a starkly different vision of

American republicanism, one fearful and hostile to any federal encroachment on

local and private power. Mostly identified with southerners such as Andrew

Jackson, this type of republicanism served as a convenient language for

opponents of national improvements, who, according to Larson, were motivated

by “a zealous hatred of modernization . . . selfish protection of local

advantages, investment in rival projects, sincere concern for the balance of

power between state and federal governments, or simply expedient partisan

gain” (p. 5).

The heart of Internal Improvement is a detailed narrative of the

national political debates between these two differing visions of

republicanism. The outcome was often in doubt. The proponents of planning

might well have won if only Madison and Monroe — both of whom supported some

from of national involvement — had not vetoed key bills because of the lack

of explicit constitutional authorization. The election of Andrew Jackson

spelled the beginning of the end of this long debate. Accordingto Larson, the

Jacksonian hostility to government planning — rooted in republican fears of

centralization — unintentionally fostered a devotion to free enterprise that

would characterize American economic policy well into the Gilded Age. “By

withdrawing the government from policy making,” Larson concludes, “Jacksonians

empowered markets, perhaps by default, both in politics and enterprise, as

arbiters of conflict in American society” (p. 192).

Interspersed within this political narrative are two chapters that highlight

the many problems of state-level policy. With the exception of the Erie Canal

– more the product of fortuitous geography than wise planning — Larson

argues that these state initiatives suffered “from problems of scale, clashing

local interests, and the lack of an overall national design” (p. 73). These

failures had important ideological consequences. For many Americans, the

failure of state-wide action highlighted the failure of all government

action, calling into question the efficacy of national planning. When state

planning finally collapsed (at least in the North and West) in the aftermath

of the Panic of 1837, Americans had one more reason to embrace capitalism as

the driving force behind their emerging railroad network.

The result of Larson’s national political narrative and overview of

state-level initiatives is an important and much-needed synthetic study. It

successfully integrates a wide range of new evidence with scores of older

works on internal improvements. Filled with detail, it nevertheless

steadfastly keeps the bigger picture clearly in view. The writing is elegant,

even polemical at times — a welcome break from the dry monographic tone that

characterizes much of the internal improvement literature.

The polemical side of Internal Improvement, however, sometimes gets

Larson into trouble, especially when analyzing the opponents of national

planning. Larson frequently blames the opposition of southern slaveholders.

Fearing the loss of control over a large federal government and the moral

consequences of modernization, southern planters consistently opposed federal

planning. Larson minces no words when evaluating southern fears of

centralization — at one point, he writes that many of these men “envisioned

no society more complex than the tidewater plantations on which they were

called ‘master'” (p. 115). Larson’s own tables, however, show a much more

complicated story. An overwhelming majority of New Englanders joined the South

Atlantic states in opposing federal improvements. In four separate votes in

1818 and one important vote 1824, 71 to 82 percent of New England’s

representatives opposed national internal improvements, a degree of opposition

equal to or great than the South Atlantic’s (pp. 118, 146.) New England’s

voting patterns changed during the presidency of John Quincy Adams, but even

then 30 to 50 percent of New England’s senators voted against federal

expenditures for several key canals (p. 168). Larson, alas, does not explain

the motivations behinds this important regional bloc against national

improvements.

Larson is also unduly hard on local interests that did so much to subvert

planning on both the national and state levels. Larson portrays local

interests in decidedly negative terms; greedy and jealous, they constantly

poisoned the spirit of compromise and accommodation needed to develop a

long-term national plan. Larson is certainly right in that antebellum

politicians strongly opposed plans that did not favor their own localities,

but he slights the economic dynamic that underscored such opposition. The

developmental impact of any one canal or railroad was quite narrow in

geographic scope, which meant that a bypassed town or area would see

population and trade migrate to rivals more successful in securing an

improvement. Since the location of a road or canal often meant the difference

between prosperity and stagnation, a single vote in Congress or the state

legislature could determine a town’s economic fate. In downplaying the local

impact of internal improvements — or dismissing it as localism or selfishness

– Larson misses an opportunity to add even more nuance to his analysis.

Given that the benefits of particular projects were quite local, one wonders

if national planning could really have worked as well as Larson makes out.

Larson is quite right to point out that leaving planning to states and

localities often led to duplication and endless political wrangling, but

precisely what foresight or knowledge did federal planners possess to avoid

these problems? Larson is surprisingly vague is spelling out the advantages of

federal planning. He keeps his argument on behalf of federal planning at a

fairly abstract level — it would have prevented the excesses of laissez-faire

capitalism and kept alive the ideal of republican self-government and a

commonwealth planning tradition (pp. 263-264). Yet one could just as easily

argue that the same local demands that overwhelmed states and localities would

have consumed the national government as well.

What little federal involvement that took place in the antebellum decades,

Larson admits, could not avoid intractable fights between rival projects. The

Chesapeake and Ohio Canal, for example, built a canal along the Potomac to the

Ohio River that was the “crown jewel of national public works” (p. 178). The

company that built the project, in fact, was one of the few to receive direct

investment from the federal government. Yet the canal would soon compete with

the Baltimore and Ohio Railroad, one of the most important enterprises in

American history. No wonder, as Larson explains in the next chapter, “the C&O

never flourished as an interregional artery and repaid almost nothing to the

company that built it” (p. 222). Larson’s impassioned arguments about the loss

of our “republican birthright” notwithstanding (p. 264), it remains unclear

how federal planning would have avoided the local rivalries and fierce

competition that shaped the polices of state and local governments.

John Majewski is the author of A House Dividing: Economic Development in

Pennsylvania and Virginia before the Civil War (Cambridge University

Press, 2000).

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):19th Century