A World by Themselves: Protectionism and the Political Economy of Trade in the Ohio Valley, 1816–1828

Abstract

This paper explores American tariff politics and the embrace of protectionism within the Ohio Valley in the two decades following the War of 1812. During these years, residents of the western states navigated the emergence of steam transportation, a growing number of state-chartered banks, and intense population growth. This fueled an economic boom that went bust during the Panic of 1819. Western farmers, merchants, and manufacturers blamed harmful patterns of trade for this economic crisis, which bolstered a distinct regional identity that embraced a properly constructed restrictive tariff as a “western” measure. Consequently, the decade of the 1820s featured the most sustained period of conflict over the tariff issue in the antebellum era. This article examines western participation in conflicts over commerce and roots the political economy of trade policy in changing economic conditions that inspired distinct northern, southern, and western perspectives on trade and economic development. I conclude that both protectionist claims to economic nationalism and free trade embrace of international exchange overlook the individual assessments of local and regional markets that set the terms on which participants in the tariff debates of the early republic imagined future development.

Nelson Nicholas was angry as he stood before the crowd gathered to hear his July 4^th oration in Lexington, Kentucky. The usual festivities of the occasion occurred under a pall in 1820 because the closures of shops and factories and the lingering depression of the Panic of 1819 dampened the celebratory mood with a “melancholy, lazy, and listless air.” Although some observers spoke generally of the “hard times,” Nicholas specifically blamed political leaders in Congress for the bleakness of the affair. A few months before the holiday, the Senate failed, by a single vote, to pass a higher tariff that featured explicit protection for western farmers and manufacturers who suffered from the financial crisis. These westerners had “appealed to Congress for that protection which had been so long promised, but most improvidently withheld.” Congressional rejection of these appeals encouraged manufacturers “to abandon the unprofitable employment of the loom, and engage in the still more unprofitable pursuit of the plough.” Deprived of an adequate domestic market, western farmers could only add to the already glutted “markets of the world” with little prospects for advancement or relief. Nicholas criticized the opponents of the tariff for their limited trust in the “genius of our government” and their embrace of the doctrine “that commerce should be left free as the chartered breeze of Heaven.” ¹ Panic convinced Nicholas and other advocates of protection that prosperity would not return from the putatively “natural” operations of abstract markets but required direct congressional action through trade legislation.

Support for restrictive tariffs in the Ohio Valley during the two decades after the War of 1812 reflected a particular regional economic geography that is often overlooked in the emphasis on sectional and economic division between North and South. ² Protectionist political economy in the early republic is typically discussed interchangeably with the Hamiltonian vision of an industrial policy that profited northeastern textile manufacturers who organized significant interest groups and lobbying efforts for trade legislation tailored to their interests. ³ This understanding of protectionism leaves little room for proponents of high tariffs in the Ohio Valley, where major industrial development did not occur until after the Civil War and distance from the nation’s legislative halls made organized lobbying far more difficult. Recent historical analysis has explained this seemingly anomalous support for protection through the lens of a “Greater Northeast” that considers the Ohio Valley as a rural “hinterland” for the urban industrial New England and mid-Atlantic. ⁴ Indeed, nationally minded politicians like Henry Clay envisioned an ambitious “American System” that linked an industrial north to an agricultural west and south through tariffs, internal improvements, and a central bank. However, this framework belies the distinct “western” regional identity that shaped political and policy discussions within the Ohio Valley and the anti-eastern hostility that motivated much of western political economy. The development of household manufactures and small mills, encouraged by trade restriction, appealed also for the reduced reliance on eastern industrialists and the possibility that the west could become a “China—a world by ourselves.” ⁵

Tariff conflicts in the two decades after the War of 1812 demonstrated the national implications of western engagement with protectionism. Throughout the first half of the nineteenth century, the success or failure of trade legislation hinged on the votes of western legislators that varyingly aligned with northern protectionists and southern free trade advocates. During the 1820s, this support consistently favored more restrictive legislation, culminating in the highly protective “Tariff of Abominations” in 1828. Sustained protectionist victories prompted political leaders in South Carolina to “nullify” the 1828 tariff and another compromise measure in 1832, which spiraled quickly into crisis and fears of disunion. Contrary to historical coverage that considers the Nullification Crisis as a “prelude” to the northern–southern conflict that precipitated the Civil War, supporters of nullification responded most viscerally to the persistent demands for protective tariffs from the western states. ⁶ Nullifiers understood northeastern industrialists’ demands for protective tariffs as an extension of material self-interest, but John Calhoun spoke for a number of southerners when he found it “difficult to conceive what real interest” westerners had in protectionism. ⁷ Despite mutual investment in slavery and commercial agriculture, westerners forged a seemingly indomitable coalition with northerners against southern demands for free trade, which encouraged the advancement of nullification as a remedy. ⁸ Whatever pretensions toward economic nationalism or internationalist cosmopolitanism, free trade advocates and protectionists rooted the political economy of trade policy in the prospects for regional economic development that broke along northern, southern, and western lines.

As settlers in the Ohio Valley navigated population growth, a rapid expansion in banking, competition with foreign imports, and eventually a modern financial collapse, many consolidated around a more defined embrace of protectionist policies through a positive elaboration of an American “home market.” During a period some historians have identified as a pivotal turning point in the transition toward an economically liberal market society in the United States, western protectionists embraced the logic and potential of a “self-regulating” market process while arguing in favor of restricting that process within the borders of the nation. ⁹ A domestically oriented market society combined the goals of innovative growth and protection of farm and wage laborers who, protectionists reasoned, proved most vulnerable to fluctuations in distant markets. I use the label “protective liberalism” to refer to the assertion that markets could both naturally foster economic growth and ensure socially desirable outcomes when confined to an identifiable place through legislative barriers. ¹⁰ Protective liberalism was not solely a western invention or ideology, nor did it define the entirety of western views on trade and tariffs, but the commitment to economic diversification and market integration that distinguished western support for high tariffs provides a cogent example of how, and why, individuals embraced congressional authority in defining the structure of markets and promoting certain economic activities through trade legislation. Illuminating why westerners aligned in favor of protection thus offers a more nuanced understanding of political conflicts over tariffs that places the tariff debates of the early American republic within enduring conversations regarding market capitalism, globalization, and governmental authority.

Partisan developments always influenced tariff debates, but individual interests and ideas about trade policy adapted to changing market conditions that existed outside partisan concerns. Even actors deeply engaged in political movements adopted what historian Ariel Ron terms a “nonpartisan anti-politics” form of advocacy in discussions of trade and tariffs. ¹¹ This posture embraced political action while arguing the imperative of securing proper trade legislation transcended loyalty to partisan considerations. The consistency of conflict over trade policy throughout the Ohio Valley even amid tremendous political change, such as the emergence of “Relief” and “Anti-Relief” parties in Kentucky organized around the issue of state debtor laws, suggests western interest in the free trade-protectionist debate did not always align with simplistic partisan calculation. ¹² Rather, changing economic conditions provoked deep interest in the structure, organization, and regulation of markets that filtered into partisan politics and throughout the activities of merchants, farmers, and manufacturers who attached enormous importance to tariffs in what they possessed, produced, and consumed. ¹³

The Tariff of 1816 and Postwar Development

Congress enacted the first explicitly protective tariff in 1816 as a response to the resumption of international trade after the War of 1812 and concerns about national security informed by the disastrous wartime experience. Despite the restrictive measure, transition to peace with European powers helped revive an American economy shaken by war. ¹⁴ Aided by the dispossession of Ohio Indians during and after the War of 1812, new settlers chased opportunities for landed independence in the Ohio Valley. Both easterners who faced diminishing access to available lands and southerners who encountered the degrading influence of plantation slavery, whether environmental or racial, viewed the western states and territories as an outlet for new settlement. ¹⁵ Although Article IX of the Treaty of Ghent promised the restoration of “all the possessions, rights, and privileges” to Natives, white settlers denied Native claims to lands beyond the Appalachian Mountains and east of the Mississippi River. ¹⁶ State and federal governments turned to treaties, land purchases, and further military action to move Native groups westward, an essential task for white settlement in the Ohio Valley. Calls for trade legislation that encouraged western economic development built on the logic of state intervention that facilitated western migration and catalyzed the invention of a market society dominated by white settlers. ¹⁷

Petitions offered a direct means for communicating desired trade legislation directly to Congress. Once hostilities with Britain ended, merchants and manufacturers throughout the United States flooded Congress with petitions for an increase in tariff rates that protected infant manufacturers founded during the war to fill the void of British imports. In truth, the disruptions in trade extended much further than the nearly three years between the declaration of war in 1812 and the ratification of the Treaty of Ghent in 1815. ¹⁸ Congress responded to French and British predation on American merchants during the Napoleonic Wars with a series of restrictive measures that culminated in a complete embargo on trade in 1807. ¹⁹ Hemp manufacturers in Kentucky petitioned Congress for a tariff on imported goods made from hemp to avoid competition with European imports when normal trade relations resumed. These manufacturers argued the legislative restrictions on trade forced changes in the employment of capital toward the production of hemp goods, including sail cloth desired by the Navy for military use. ²⁰ Disruptions in trade during the War of 1812 supported the emergence of new establishments that competed directly with British imports, which stimulated more petitions in favor of protection for infant industries and goods relevant to national security interests. ²¹

In February 1816, the Committee of Commerce and Manufactures, chaired by Virginian Thomas Newton, responded to the petitioners with a report that encouraged protective rates on cotton goods. Newton considered the postwar moment as the beginning of a “new epoch” in which Congress possessed “the intelligence and the art of improving the resources of the nation,” and could “increase its efficient powers, and, [enjoy] the confidence of those whom it has made happy.” Promoting development in the Ohio Valley through trade restriction exercised congressional power that sheltered the western market from foreign rivals and supported the extension of political control. Newton calculated that “the distance of most of the Western States from the ocean, the exuberant richness of the soil, and the variety of its products” practically ensured the growth of manufacturers across the Appalachian Mountains if not for the “jealous and monopolizing policy” of foreign governments who flooded American markets with finished goods and restricted American exports. A high tariff also aligned with the interests of westerners who viewed protection as the duty of a just and responsible government. Westerners pointed to their contributions to the wartime effort, which primarily included combat against Native groups allied with Britain, as evidence of their value to policymakers and the broader body politic. A properly constituted tariff offered both a reward for these efforts and laid the foundation for future development as Americans adjusted to the end of European war.

Treasury Secretary Alexander Dallas provided the basic framework for what became the Tariff of 1816 in his own report communicated to Congress. Dallas identified the difficulties of legislating a geographically broad and diverse nation with a developing economy and presented a vision of governmental authority that reconciled “many conflicting interests and prejudices.” The existence of diverse, and at times opposing, interests did not convince Dallas that “individuals should be left to pursue their own course untouched by the hand of Government, either to impel or to restrain.” Instead, he claimed the resumption of peace compelled government action toward the encouragement of private economic initiative. In contrast to Newton and his congressional allies, Dallas paid less attention to the spatial aspects of the tariff question. Rather, protection and “legislative care” belonged to manufacturers who could fully supply the domestic market if not crushed by foreign exports regardless of regional location. Practically, this meant laying the highest protective rates on coarse cotton and woolen goods as well as iron manufactured goods. Dallas placed many of the commodities produced in the western states—including hemp, silk, and other wool products—in the class least fit for legislative protection because of the almost total reliance on foreign sources for these products. ²²

Congress passed the Tariff of 1816 in April with relative ease, but the higher rates did not meet the most extreme demands of protectionists who considered the postwar period as the ideal moment for more substantive revisions in American trade policy. Goods central for manufacturers in the Ohio Valley received protection close to what Dallas recommended in his report. Hemp received a 20 percent tax, exactly what Dallas laid out, and woolen textiles received a 25 percent tax, less than the 33^1/3 percent prescribed by Dallas. The Tariff of 1816 also introduced the minimum valuation principle into American trade policy, which set a minimum price of value for an imported good. The new tariff placed a minimum valuation of twenty-five cents per yard on imported cotton goods, so cotton goods imported for less than the minimum price were valued at twenty-five cents and paid the ad valorem duty at that valuation. ²³ Southern politicians, for the only time in the antebellum era, supported a protective tariff in 1816 because they agreed that the national security circumstances of the postwar moment required a temporary increase in tariff rates. ²⁴

The moderate protection offered by the Tariff of 1816 motivated western economic actors to push for legislation that capitalized on the framework of the new tariff, including direct encouragement from local and state governments. Ohio wool manufacturer Thomas Rotch factored such legislative initiative directly into his industrial pursuits. Before establishing himself in the Ohio Valley, Rotch earned a small fortune during the 1790s while working for his family’s whaling and shipping firm in New Bedford, Massachusetts. In 1800, Rotch left his comfortable situation and pursued a variety of business ventures in Hartford, Connecticut, before he found his calling as a sheep farmer. Like other northern farmers and manufacturers, Rotch joined in the “merino mania” caused by the restrictions in trade prior to the War of 1812. Robert Livingston and David Humphreys introduced Americans to merino sheep—lauded for their superior wool—in the early 1800s, but demand for merinos skyrocketed as imports of British woolen goods plummeted. Rotch grew his flock to approximately 400 sheep and began his foray into manufacturing when he built a small wool factory on his farm. ²⁵ This flock made the 600-mile journey across the Alleghany Mountains after Thomas and his wife Charity again uprooted and set their course for Ohio. Rotch purchased a large tract of land in Stark County and founded the town Kendal, which he envisioned as a western hub for the manufacture and trade of wool. ²⁶ As his settlement grew, Rotch rented his sheep to farmers throughout the Ohio Valley and sustained a profitable wool factory even as British imports flooded American markets after the War of 1812. In addition to his interest in wool, Rotch grew fruit, manufactured pottery, and opened a general goods store stocked with valuable consumer products. These efforts reflected Rotch’s impressive commercial connections, primarily with eastern merchants, and his commitment to economic diversification as a means for financial stability. ²⁷

The inaction of politicians unaware or unconvinced of the essential role of manufacturers in the western states often frustrated Thomas Rotch. The “stagnation of business” caused by the dumping of foreign goods prompted specific demands for legislative action from Rotch. First, state-chartered banks in areas “where population & respectability of character is sufficient to gain the confidence of the Government” would “operate as a check to the redundancy of foreign goods.” Regulated banks, Rotch argued, supplied a convenient medium of exchange, which facilitated domestic trade between consumers and producers. Second, Rotch desired “the promotion of Manufactorys of every Kind where the raw materials are the product of the different neighborhoods.” Industrial development through both household production and small factories “convert[ed] a portion of agricultural productions into such articles of necessity” and channeled the labor of women and children to the production of woolen goods. ²⁸ Rotch recommended Ohio as a possible place of settlement to one correspondent and wrote positively of the domestic demand for western wool from farmers who were “fond of raising and clothing themselves with their own wool.” ²⁹ Similar to congressional analysis of western economic development and trade policy, Rotch thought the “peculiar situation” of Ohio “country manufacturers” favored the consumption of domestic goods because of the prohibitive distance to unsteady foreign markets. ³⁰ Still, the sudden influx of European imports presented a serious challenge, and Rotch identified a role for private and legislative encouragement for domestic manufactures that aligned with the western interest.

Rotch addressed his appeals for revised banking and trade policy directly to Ohio Governor Thomas Worthington, members of the Ohio state legislature, and congressional representatives. His efforts in banking focused on obtaining a state charter for a bank in Canton. Rotch recognized the “danger from too great an increase of banks” but contended the lack of a state bank deprived local citizens of an essential source of capital. ³¹ Failure to enact measures that “relieve[d] the distress of a numerous class of Industrious enterprising Citizens” would, Rotch warned, “expos[e] the imbecility of an Infantile Government and…unnerve its powers.” ³² Rotch also petitioned the state to revise its military requisition laws and exempt factory workers from military service, so he could avoid “the dissertion[sic] of a number of as good American Workman as can be procured in the United States.” Cumulatively, Rotch’s legislative demands presented the problem of competition—whether against foreign imports, eastern manufacturers, or even state laws—as an existential threat to his manufacturing pursuits. ³³

This petitioning activity extended to Congress but maintained its emphasis on western regional development. In a letter to Ohio Senator Benjamin Ruggles, which included a swatch of his manufactured cloth, Rotch detailed his disappointment with the lack of a sustained focus on protective legislation in President Monroe’s annual address, which the western states would “feel the effects of…more forcibly than our Sister States.” Without “a rigid protection to our Infant Manufactures,” Rotch warned that westerners “shall remain largely tributary to the support of foreign power & foreign influence & without Internal active Capital.” Rotch believed Congress could only legislate properly if equipped with “correct intelligence from every part of the Union,” so he purposely framed his petition within the economic geography of the Ohio Valley. The brief petition illuminated the “general pressure upon the Manufacturing establishments from the great quantity of foreign Woollen goods” imported into the United States, which justified “the interference of Congress for the protection of our infant manufactures who are ready to perish.” ³⁴ Ruggles confirmed he presented the petition to the Senate and showed the “specimens of manufactured cloth” to fellow senators “who seemed much surprised to see the manufacture of cloth carried to such perfection in the Western woods.” Ruggles even planned to show the samples to President Monroe in the hopes of forging a consensus in favor of encouraging western manufacturers. ³⁵

Merchants helped alleviate the fears of western manufacturers of overdependence on foreign markets. After the War of 1812, western and eastern merchants established closer commercial connections through the Ohio River, where they exchanged a growing amount of domestically manufactured goods. Eastern merchants and manufacturers viewed the western states as an integral part of their operations and declared it was their duty to “clothe the western people” who “feed us in return.” If this system faltered, then “all [would] be compelled to turn planters or starve.” ³⁶ Western manufacturers resented this paternalist sentiment and relied on merchants to also stimulate economic development within the Ohio Valley by facilitating trade between western hubs like Louisville and Cincinnati. These connections encouraged the westward movement of goods and peoples and bolstered some manufacturing industries. A recognizable “western country” emerged from the interregional activities of these merchants and manufacturers who connected settlers in the trans-Appalachian West to a growing array of markets. ³⁷

The establishment of communities dominated by white settlers, an expansion in the number of banks, improvements in commercial networks, and the pursuit of economic diversification elevated western demands for legislative promotion of development in the consideration of policymakers. Individuals like Thomas Rotch helped legislators view the Ohio Valley as a defined “western” interest within the broader national political economy rather than a site of hostility to territorial control and governmental authority. This process of economic integration ensured policy discussions could not occur entirely along a North–South sectionalist axis but instead had to consider an array of local and regional interests to craft putatively “nationalist” policies. Residents of the Ohio Valley exerted significant influence especially in tariff and trade debates when the postwar economic boom that shaped the western interest crashed suddenly.

The Panic of 1819 and the Baldwin Tariff

The flurry of economic activity that took place in the period after the War of 1812 came to a halt in 1818, as crisis spread from Atlantic hubs along the eastern coast throughout the entire United States. The Panic of 1819 resulted from a mixture of foreign and domestic realities that fueled a speculative land boom, an explosion in the number of state-chartered banks, and unsteadiness in the prices of commodities abroad. The bottom fell out when purchasers in England offered only fifteen cents per pound for cotton, which cut the price of cotton in half. Historians trace the origins of the Panic of 1819 as far back as the Louisiana Purchase, which stipulated that the American government make its first payment for the Louisiana Territory, in specie, in 1818. At the same time, revolutions in Mexico and Spain disrupted the global supply of silver and gold and restricted the ability of the United States to meet these financial payments. Additionally, prices for cotton, grain, flour, and wheat rose steadily during the Napoleonic Wars as a result of restrictions in trade that accompanied European warfare, cold weather that ruined harvests in Europe, and England’s willingness to pay high prices for southern cotton. Domestically, land was cheap and readily available, and state banks provided the capital and loans for purchasing land in place of the First Bank of the United States, whose charter expired in 1811. These factors fueled a land boom that began in Ohio and Indiana and spread throughout the trans-Appalachian West. Between 1796 and 1816 average annual land sales equaled 350,000 acres. In 1818 alone, 2.5 million acres were sold as Americans sought to capitalize on high commodity prices and attain their own landed independence. ³⁸

The land bubble burst as demand for commodities collapsed. Favorable weather provided plentiful harvests in Europe and reduced the purchases of American grain and flour. Additionally, England bought cheaper cotton from India and banned the import of foreign grain with the infamous “corn laws.” In domestic politics, Congress chartered the Second Bank of the United States in response to the explosion of state-chartered banks that issued notes without even the pretense of resumption in specie. As payment for the Louisiana Purchase loomed, the Bank of the United States curtailed loans to state banks, demanded immediate payment for outstanding debts, and restricted the ability of state banks to pay loans in notes not redeemable in specie. This contractionary policy reversed the traditionally loose regulation of state and commercial banks, and while historians have argued the circumstances justified the shift in policy, they nevertheless accept that it resulted in the failure of many banks and businesses. For the first time in American history unemployment swept through urban markets, including western cities such as Lexington, Louisville, and Cincinnati. The collapse of commodity prices also slowed westward migration and land sales, which compounded the problems with trade and manufacturing. In the Panic of 1819, Americans experienced the first in a series of booms and busts associated with the development of market capitalism. While prior bubbles and busts concentrated almost entirely in specific areas or among a defined group of speculators, the Panic of 1819 exposed all Americans to the process of creative destruction central to modern economic development. ³⁹

The Panic of 1819 hit the emerging urban hubs in the Ohio Valley especially hard. Cincinnati, Lexington, Louisville, and Steubenville all experienced tremendous disruption that included a sharp reduction in imports, and, in the case of manufacturing-oriented towns like Lexington, the closure of mills and factories. ⁴⁰ Wool and hemp manufacturers in Ohio and Kentucky suddenly found themselves without employment, farmers in rural areas of Indiana struggled to find a suitable market for their wheat, and cotton growers in Tennessee were devastated when prices for cotton plummeted. The rapid expansion in state-chartered banks after the War of 1812 made financial conditions in the western states especially precarious. According to economic historian Howard Bodenhorn, state legislatures in the trans-Appalachian West played an exceptional role in their banking institutions. ⁴¹ Both Kentucky and Tennessee had complete ownership of a state bank and Indiana owned a significant stake in the Indiana State Bank chartered in 1817. These institutions provided a significant source of capital that encouraged economic growth, increased the monetization of assets, and financed internal improvement projects. At the same time, state-chartered banks exposed the state to possible liabilities, as relatively inexperienced bankers faced contradictory demands for responsible lending and access to generous credit terms. No state jumped into the postwar banking expansion more enthusiastically than Kentucky, which chartered forty-six banks in 1818 alone. The dominance of commercial exchange, the fragile state of manufacturing, and the rapid expansion of banking all contributed to a particularly severe collapse in the western states and a depression that lingered longer than in many other regions of the country. ⁴²

Residents of the Ohio Valley identified a number of internal and external causes for the Panic of 1819. Three explanations emerged as the most salient: the irresponsible behavior of nefarious bankers who operated through state-charted banks as well as the Second Bank of the United States, predation by eastern and British merchants, and a negative balance of trade pushed by the consumption of foreign “luxury” goods. These explanations overlapped at times, but each contributed to significant developments within the western states. Controversies over banking precipitated a debtor relief crisis in Kentucky and a serious challenge to the authority of the BUS in Ohio resolved eventually by the Supreme Court in Osborn v. Bank of the United States. Antipathy toward eastern merchants and a broader dissatisfaction with the political and economic balance of power fueled a renewed sectionalist hostility toward the eastern states. ⁴³ Finally, concerns about consumption and the balance of trade motivated a push for higher tariff rates that resulted in significant western support for new trade legislation proposed by Henry Baldwin in 1820. Considered together, these narratives emboldened mobilization in support of policies tailored to western interests. Most importantly, the identification of a restrictive tariff as integral for a western regional interest portended the next decade of conflict over trade policy that consistently saw westerners favor protective legislation. ⁴⁴ Understanding western alignment in the tariff wars of the 1820s thus requires a close examination of how westerners explained panic in 1819.

Panic became real for many western settlers once state-chartered banks stopped redeeming their notes in specie, which made these banks, and the seemingly magical operations of banking in general, primary targets of blame for the financial crisis. Concern over the value of the notes people held in their hands or traded with their neighbors was central to the experience of panic. Alpheus Lewis portrayed the chaos of “hard times together with broken banks” when he described the fluctuating value of bank notes that kept “the people in suspense and [made] them lay out their money for something they do not want for fear of it laying on their hands.” Lewis noted that people hurriedly rid themselves of their banknotes because they lacked a circulating medium they “could put confidence in,” in which case “they would lay it bye.” ⁴⁵ Indiana lawyer Samuel Merrill traced disruptions in confidence to the contractionary policy of the BUS, which made it “probable that all of the Banks west of the mountains will suspend the payment of specie.” However, Merrill argued the original fault lay with state bankers, who he predicted would “raise a general prejudice against [the BUS] by imparting to it all the evils that have originated with themselves.” ⁴⁶ The expansion of banks in the western states reflected desperate demand for access to capital, and westerners loudly objected when they felt bankers were not extending credit liberally enough, but these same institutions became targets of scorn when the gears of exchange stopped. ⁴⁷

Merchant John Corlis saw the possibility of financial collapse well before it arrived and blamed western consumers for their own irresponsible actions once hard times ensued. Corlis informed his partners in the Rhode Island based firm Brown & Ives of the possibility of a downturn caused by “excessive importations into the Western Country,” and the inability of “the legislature…to relieve that embarrassment.” As the crisis unfolded these eastern merchants concluded the panic “must work its own cure & time is necessary.” ⁴⁸ Corlis warned as early as March 1818—about four months before the first wave of banking failures in Kentucky— of the consequences of overconsumption and the speculative bubble in banking. Corlis criticized Kentucky planters for looking to markets “more governd by the prices of Virginia…& New Orleans” when selling their goods, which led them to ignore prices offered by Kentucky merchants. He also recognized that debtors in Kentucky struggled “to keep their heads above water with the banks who are pressing them very hard.” Although Kentucky currency was “always cheaper” and more available, Corlis advised his partners against purchasing paper notes from Kentucky banks because he could “not see how the mother bank & branches of K[entuck]y can get along & pay specie and I very much fear they will all stop specie paym[en]t.” ⁴⁹ Despite these concerns, Corlis could not fully halt his commercial activities on behalf of Brown & Ives, which forced him to draw on the Lexington branch bank at a time when “the best inform[e]d merchants” expected “the most distressing times, that was ever experienced here.” ⁵⁰ Corlis also had little hope of meaningful legislation that addressed the crisis because of the power of the “banking influence in the legislature.” ⁵¹ Fears of a speculative craze undermined trust in the private habits of consumers and the public efforts of elected officials.

Emphasis on the power of state legislatures accompanied renewed sectionalist sentiment among residents of the Ohio Valley. Western sectionalism constituted a serious threat to the longevity and future prospects of the United States in the first two decades of American independence. ⁵² Postwar nationalist sentiments, combined with the ability of the federal government to placate western interests, dampened talks of disunion in the western states and strengthened the legitimacy of the federal government throughout the United States. The Panic of 1819 disrupted this process of integration and fostered antipathy both to the federal government and the eastern states within a renewed western sectionalism. The hard times “fully convinced” some westerners “that many of our embarrassments spring from the ungenerous policy of the General Government, towards the Western country,” which not only ignored western interests, but “operated most severely against” them. Eastern merchants supposedly preyed on western consumers through the introduction of luxury goods in western markets, which drained specie from the western states. Public papers also cited inadequate support for infrastructure projects, limited investment in western courts and judges, and the small number of western settlers that received political patronage, as they pushed the idea of an eastern conspiracy against the western states. ⁵³ Blame reserved for eastern policymakers, bankers, and merchants solidified a narrative of victimization among westerners who carried the experience of the crisis into the next decade of heightened conflict over trade policy.

A protectionist solution to the Panic of 1819 emerged from a determination that the vulnerability of consumers to the whims of “unnatural” foreign predation precipitated the crisis. Protectionists focused on limiting the importation of foreign goods, encouraging the production and consumption of American products, and stabilizing markets by preventing foreign manipulation of American trade. Concerns about the harmful effects of foreign importations naturally encouraged westerners to focus on the deficit in trade caused by excessive consumption, which often accompanied anti-eastern sectionalist hostility. As one writer stated, the dangers facing settlers in the western states came from both domestic and foreign rivals:

From the west the money is always going to the east and never is returning. The congress prefers encouraging the Russian and British manufactures, to our own, and peace abroad has put an end to most of our foreign markets, and lessened the price of all our productions. We have now arrived at the age of manhood and must act.—We must make known our case at Washington; and tell our brethren there that they must give as well as take; and no longer consider us as colonies, as inferior appendages of their empire, but as principal and equal members of our great and growing confederacy that if they must have large fleets to protect their trade, dock yards, harbors fortified, light houses, and other good things we too must have roads and canals, and find markets for our home manufactures and other productions.” ⁵⁴

Protectionist hopes for a new tariff appeared promising in 1820 when Pennsylvania Representative Henry Baldwin introduced new trade legislation on the House floor. Baldwin framed the depression years as the ideal time to fundamentally change America’s revenue structure through an adjustment to trade policy. Revenue tariffs, Baldwin asserted, naturally focused the “internal industry” of the United States on the production of raw staple goods for export in exchange for foreign manufactured cloths. As the Panic of 1819 demonstrated, this system struggled during financial downturns because reduced demand for foreign goods precipitated a severe contraction of government revenue. Baldwin warned of a popular uprising by the “voice of the people” in favor of a new system if Congress failed to provide some relief for the crisis. Congress willingly passed legislation in favor of commerce and “other interests…endangered by foreign powers or regulation,” and Baldwin saw no legitimate reason for the sudden embrace of laissez-faire ideals when discussing the protection of manufacturers. ⁵⁵ Henry Clay more exhaustively detailed the protection of commercial interests “by consuls, by foreign Ministers, by embargoes, by non-intercourse, by fortifications, by squadrons constantly acting abroad, by war, and by a variety of commercial regulations in our statute books.” ⁵⁶ Protectionists claimed Baldwin’s tariff bill balanced this inequity in government protection, provided necessary relief, and offered a path for economic independence.

Western protectionists embraced Baldwin’s tariff bill because it was an emphatically western-oriented measure. Much of the congressional debate focused on the rates placed on hemp, which mattered most to Kentucky planters and manufacturers devastated by the Panic of 1819. Henry Clay voiced the distress of western hemp manufacturers and described how “villages, and parts of villages, which sprung up but yesterday in the Western country…are perishing and abandoned.” ⁵⁷ Henry Baldwin defended these higher rates by stressing the national security importance of hemp made into cordage for naval use. Westerners struggled to make a profit on hemp, Baldwin contended, in part because of exclusion and discrimination in foreign markets, which made protection necessary to “enable [hemp] to compete with foreign productions.” ⁵⁸ In opposition to Baldwin, Massachusetts Representative John Holmes bemoaned that protectionism was “the future policy of the West.” Despite the natural advantage of agriculture for westerners, the embrace of protectionism meant “the children of the West, with bodies sprightly, vigorous, and elegant, and minds free and elastic as the air they breathe, are to be caged and cooped up in a dismal dungeon.” ⁵⁹ Holmes, and other opponents of the new tariff, argued that the economic development of the western states lay in agriculture, and as an ideal hub for finished goods from eastern states.

The defeat of Baldwin’s tariff bill, by a single vote, ushered in a period of mourning for western advocates of protection. Residents embroiled in the economic crisis believed that the “western country, particularly, would have soon exhibited the delightful scene of flourishing prosperity” had Congress enacted the new legislation. Most troubling was that “a portion of the western representatives…neglected the dearest interests of their constituents” and voted against the higher tariff. ⁶⁰ Hezekiah Niles, famed editor of the Niles’ Weekly Register, offered solace to the writers of the Lexington based Public Advertiser, who adorned their paper in black as a lament for the loss of the tariff, with the “homely consolation” that if this Congress did not eventually enact protective legislation then the Congress “chosen after the next census” would. ⁶¹ The western states stood to gain a significant number of seats in Congress because of the rapid population growth since the last apportionment, and Niles and other political commentators anticipated that a stronger western interest in Congress benefitted the movement for a higher tariff.

Protectionism Entrenched: The 1820s

These optimistic expectations proved prescient during the 1820s, a decade of sustained protectionist success made possible through western support for higher tariffs. Petitions both in favor and opposition to new, more restrictive, trade legislation flooded into Congress even after the failure of the Baldwin Tariff in 1820, but actual legislation made little progress until Pennsylvania Representative John Tod reported a new tariff bill in 1824. As domestic producers faced competition with foreign rivals, Tod hoped Congress would provide them with “the assurance of a market” through a new tariff. ⁶² Tod proposed two sets of rates in his bill. The first set applied to goods that were not produced domestically, including silk and spices. Higher rates on these goods would replace revenue lost by protective rates placed on wool products, raw wool, iron, hemp, and lead. The duties on cotton bagging were explicitly “intended to be protective and prohibitory” in favor of western manufacturers. ⁶³ Connecticut Representative Gideon Tomlinson opposed these higher rates and condemned such flagrant “encouragement of the interests of the West.” ⁶⁴ Tod responded that Congress possessed legitimate authority and power to compel “different sections of the country to do justice…to one another,” and did not need to distribute benefits equally. ⁶⁵ Rather, governmental authority in trade regulation promised to redress inequitable economic conditions that existed among regional markets.

No westerner in Congress spoke more forcefully in favor of protection than Kentuckian Henry Clay. Amid the debate on the Tariff of 1824 Clay delivered a comprehensive defense of the American System that earned immediate notoriety and was reprinted in newspapers throughout the United States. ⁶⁶ Historians rightly emphasize the positive prescriptions for government embedded in Clay’s support of a protective tariff and internal improvements, but they have given less attention to Clay’s analysis of markets and the market process. ⁶⁷ “The greatest want of a civilized society,” Clay argued, “is a market for the sale and exchange of the surplus of the produce of the labor of its members.” ⁶⁸ Industrial development aided by federal tariffs established a stable and productive market at home, which also fostered political unity among consumers and producers in the western, northern, and southern states. Clay assumed that the threat of foreign imports prevented the emergence of a suitable industrial base necessary for a dynamic home market, which placed the authority for economic development in the hands of Congress.

Although most southerners feared the implications of expanded governmental authority for the future prospects of slavery, including especially the enactment of more restrictive tariffs, Clay’s legislative program actually included a vital role for enslaved labor. Historian Andrew Shankman recognized that protectionists like Henry Clay and political economist Mathew Carey considered slavery as “neither infinite wretchedness nor positive good.” ⁶⁹ Supporters of the American System sought the exchange of commodities produced by enslaved laborers on southern plantations for manufactured goods and foodstuffs from northern and western producers. This accommodation of slavery placed some public critics of the institution, including Henry Clay, in an uncomfortable position; nevertheless, advocates of the American System did not view the positive exercise of governmental authority in economic affairs as hostile to slavery, but included enslaved labor within their vision of a diversified and dynamic national market economy.

Shortly after debate began on the Tariff of 1824, Henry Clay described legislating on trade policy as “an affair of mutual concessions” in which “perfection in matters of detail, if ever attainable, must be left to the future.” ⁷⁰ After strenuous efforts at achieving perfection in detail, the House of Representatives finally passed the Tariff of 1824 by a slim margin of 107–102. The combined votes of Ohio, Indiana, Kentucky, and Tennessee went overwhelmingly in favor of the tariff. ⁷¹ Members of the Senate approved the new tariff by a similarly narrow margin of 25–21, with all eight votes from the western states in favor. ⁷² Overall average rates on imported goods increased from 25 percent to 33 percent. For western producers, rates on raw wool went up from 15 to 30 percent while hemp and manufactured wool received more modest increases of 20 to 25 percent and 25 to 33^1/3 percent, respectively.

Response to the Tariff of 1824 mixed optimism, disappointment, and conflict. Bezaleel Wells, operator of an extensive wool factory in Steubenville, Ohio, hoped the tariff “may have some influence in promoting the sale” of manufactured woolen goods from the Steubenville factory, so he issued an advertisement that offered generous payment for raw wool, a pristine example of the stimulus to both farmers and manufacturers that proponents of the tariff desired. ⁷³ Westerners did not universally share the tepid optimism expressed by Wells. “A Kentuckian” agreed that “sound national policy” encouraged domestic industries, but he contended that westerners could not reap the benefits of protection because they still relied on foreign markets as an outlet for household production. Therefore, he dismissed the new legislation as “a measure of eastern and not western policy” that “should not be favored by the western states, until they are in a condition to supply themselves.” ⁷⁴ Regional concerns, and the prospects for economic integration within the Ohio Valley, set the terms by which both supporters and opponents of the new tariff considered its merits.

These competing assessments of the need for trade restriction came at a critical moment in the economic development of the Ohio Valley. The combined consequences of steamboats and internal improvement projects in the 1820s aided transportation developments and made westerners optimistic that economic expansion and growing market access improved their prospects of becoming a dynamic hub of agricultural and industrial production. ⁷⁵ However, greater market integration did not stymie the political emergence of an influential, and successful, protectionist bloc from the western states in tariff politics that built on the connection between access to regional markets and enthusiasm with industrial development. The career of Kentucky merchant John Corlis offers an example of the opportunity westerners saw in their internal development. After suffering the misery of the Panic of 1819 Corlis began the decade intent on “embarking in the manufacturing business.” ⁷⁶ Naturally, he traveled eastward throughout New York and Providence, Rhode Island to determine the best location for his factory. Even when informed by eastern manufacturers that “business in the east is very dull,” Corlis “did not believe them” and considered manufacturing “a saveing [sic] business.” ⁷⁷ By 1824 Corlis decided he could spin hemp “to much greater advantage” in the eastern states than in Kentucky. ⁷⁸ The relatively low cost of labor, adequate access to water and navigable roads, and proximity to the “largest & best market in America” convinced Corlis that Connecticut offered the greatest prospect for success in manufacturing. ⁷⁹

Existing correspondence does not illuminate why Corlis’ plan to establish a factory in the Connecticut River Valley failed. Shortly after stating his favorable assessment of eastern settlement, Corlis hurriedly returned to Kentucky when he learned that his wife had fallen ill. ⁸⁰ By 1827, Corlis was back in New York, but he advised his son Charles against selling his Kentucky farm for want of “a better situation.” ⁸¹ On his way back to his farm Corlis stopped in Cincinnati, where he formulated a plan to establish a factory to spin yarn from southern cotton. Corlis attempted to procure capital for this factory from the Rhode Island shipping firm Brown & Ives, so he touted Cincinnati’s future prospects as a “great manufacturing place.” The proximity to cotton produced in Tennessee and the surprisingly low cost of labor convinced Corlis that “a cotton factory can be carried on [in Cincinnati] to more profit than in New England.” ⁸² After he began the decade traversing the eastern states in search of an ideal location for a new factory, Corlis now argued to eastern merchants that “the day will come…when the people west of the mountains will furnish themselves with all the articles required for their own consumption cheaper than you can furnish them from N[ew] England.” Consequently, westerners would secure for themselves “the advantage by a home market.” ⁸³ Brown & Ives ultimately rejected the plan, but the shift in perspective from Corlis throughout the 1820s reflected a growing optimism in the future development of the western states that motivated support for new protective legislation aligned with the regional interest in securing a western home market.

Western Development and the Nullification Crisis

Southern proponents of free trade feared western alignment with protectionism ensured direct harm to the cotton-slavery economy. South Carolina planter Robert J. Turnbull clearly outlined the combatants in the 1820s tariff debates in his series of essays later published as a pamphlet titled The Crisis. Historian William K. Bolt identifies this pamphlet as “the most important southern pamphlet before the Civil War,” and situates it within the broader story of a growing North-South sectional divide exacerbated by the tariff issue. ⁸⁴ However, Turnbull’s screed did not just warn of a growing northern hostility toward the South, but of a broader “conspiracy” in which “the interests of the North and West, are diametrically opposed to the interests of the South.” Turnbull considered the tariff issue outside of the lens of party politics and framed the conflict as a consequence of market patterns. Rather than ambitious politicians who sought favor or power, it was the “movement of people in the Northern, Middle, and Western States,” in support of a higher tariff who demanded “an adequate market…for their grain, wool, iron, and other products of their soil, regardless of the evil to us in the South.” ⁸⁵ This grassroots pressure for protectionism, according to Turnbull, pushed political leaders in the western states toward support for high tariffs and limited the prospects of party movements and elections for stemming the protectionist tide. Southerners saw a broad coalition in support of greater governmental authority, especially in the tariff issue, that eventually plunged the nation into crisis when political leaders in South Carolina attempted to nullify the Tariff of 1828 and a later compromise measure in 1832.

Southerners who pushed toward nullification actually overlooked fractures and fluctuations in western support for protection that appeared toward the end of the decade. Improvements in transportation networks and the realization of the potential of steam throughout the 1820s aided the emergence of subregional hubs, which provided closer outlets for goods manufactured within the Ohio Valley and made local industrial production less imperative. The beginnings of the transportation revolution appeared as a catalyst for creating closer linkages to distant markets rather than setting up tariff barriers, which motivated less experimentation with protectionism. However, greater access to distant markets could also sustain commitments to protectionist political economy. Ohioan John C. Wright declared himself “an internal improvement man in almost any shape,” but was not “satisfied” with projects that “increase[d] the facility of introducing foreign goods with which we are already inundated and to afford no reasonable prospect at facilitating the transportation of our products to markets.” ⁸⁶ Free trade advocates highlighted the growing market linkages between the eastern, western, and southern states as a favorable development for encouraging western support of tariff reduction, but westerners also observed the changes in transportation presented opportunities for manufacturing and protection.

Amid this weakening consensus, congressional leaders tested western commitments with a new tariff in 1827 that exclusively raised rates on woolen goods. By extending protection to one singularly defined interest, the woolens bill did not align with the positive view of a self-regulating market process that defined protective liberalism, which created divisions among western and northern supporters of protection. Even typically staunch supporters of protective tariffs in the Ohio Valley criticized the woolens bill as “a project to enable a few men to make enormous profits when every other species of industry is uncommonly depressed.” ⁸⁷ This opposition placed more westerners alongside Vice President John Calhoun, who broke a tie vote in the Senate on the woolens bill and defeated the narrowly tailored legislation. However, Robert Turnbull argued southerners were “deceived if we think because Northern and Western members opposed the ‘woollens’ bill’ that they are opposed to the great principle of the Tariff.” Opposition to this partial tariff, Turnbull argued, emanated not from any desire to appease southerners, but from a disagreement over the “mode in which the South ought to be taxed for their emolument.” ⁸⁸ Western support for the more restrictive Tariff of 1828 vindicated Turnbull’s warning in the minds of southerners, and diminished hopes of stemming the protectionist tide even as residents within the Ohio Valley questioned the tactics of eastern industrialists.

Political crisis laid bare the competing ideas of trade, tariffs and markets shaped by the economic adjustments after the War of 1812 and Panic of 1819. Enthusiasm for market-oriented growth coordinated through trade restriction dampened sympathy for southern nullifiers in the Ohio Valley. Distance to eastern and southern ports and the unique support for developing a dynamic market that incorporated both commodity production and manufacturing defined a distinctly western perspective of trade policy and provoked a decade of sustained political struggle over tariffs. The infrastructure of the emergent Whig and Democratic Parties and expressions of ideological division offered influential channels for mobilizing perspectives on trade policy. However, conflicts over commerce broke along northern, southern, and western interests dictated by evolving market patterns. When divisions over tariffs placed the nation on the brink of disunion, it was the specific western experience with trade and industrial development that, in the words of Indiana Senator John Tipton, made it the role of westerners to “bring the extremes nearer each other and save the Country.” ⁸⁹

Conclusion

The political economy of trade policy in the early American republic rooted the persistent controversies over tariffs in the uneven development of market capitalism that created identifiably northern, western, and southern perspectives on trade and tariffs. Although protectionists claimed the ideological and material tenets of economic nationalism, merchants, farmers, and manufacturers in the Ohio Valley considered how nationalist legislation fit within their local and regional political economy. The postwar cycle of boom and bust both emboldened a western interest and pushed that interest toward policies that aligned with the concerns for economic development and social stability within protective liberalism. Despite historical tendency to collapse western perspectives within the northeastern industrialist fold, antebellum southerners rightly considered the puzzling, if not downright strange, support of protective legislation from residents in the agriculturally-dominated western states as distinct from northern industrial protectionism. Political crisis manifested as southern planters feared the consequences of western regionalism for their own ambitions toward integration in a global market saturated with cotton produced by the labor of enslaved persons. Whether the protectionist vision of an insulated national polity or the free trade emphasis on international exchange, individual assessments of local and regional markets set the terms on which participants in the tariff debates of the early republic imagined future development.