The Economics of the Erie Canal Would Lead to War

The Erie Canal
I. N. Phelps Stokes Collection, Miriam and Ira D. Wallach Division of Art, Prints and Photographs. The New York Public Library. Astor, Lenox and Tilden Foundations.

     The Erie Canal was the central economic event of the first half of the nineteenth century; however, this revolution in transportation would cost the American people more than it bargained for. The economic policies derived from the building of this canal would set a precedent for “internal improvements,” a system that would lead to America’s bloodiest war.

     As Americans moved west deeper into the frontier, projects were springing up to connect the eastern port towns of New England with the new settlements emerging out west. Roadways and turnpikes were being constructed to assist in this process; but “even on well-built gravel roads, travel over land was slow and expensive.”¹ To solve this problem, American engineers turned to waterways and looked to the building of canals.

     The legislature of New York decided to invest into the construction of a canal unlike any America had seen before. This complex project would create a canal that spanned 364 miles from the Hudson River to Lake Erie. Prior to the construction of the Erie Canal, “the longest artificial waterway in the United States was just 28 miles long.”² De Witt Clinton, the Governor of New York, was the “architect” who convinced the State legislature to “finance the waterway from tax revenues, tolls, and bond sales to foreign investors.”³

     The Erie Canal would be a “success” in that it did boost the economy and increased the trade between the east and west. Transportation costs dropped and profits for farmers and merchants increased. Even the construction costs for the canal were paid off quickly. “By 1825, when the Erie was completed, toll revenues already exceeded a half million dollars a year. Soon the canal’s entire $7 million cost had been recovered.”⁴

     Governor Clinton would become a model for Hamiltonians in political office across the states to the north, which would create similar internal improvement projects in order to increase the influence and power of the central government. This push for internal improvements (corporate welfare)—with all its financial failures—would lead to government waste, fraud, and abuse, which ultimately would create a war between the states.

     Internal improvement projects such as the building of canals, railroads, highways etc., through government subsidies were riddled with failure throughout the states. These projects would become the key point of contention between the two political parties raised up around the philosophies of Alexander Hamilton and Thomas Jefferson. Hamilton’s disciples, Henry Clay and Abraham Lincoln, would continually push for British-style mercantilism and a strong central government. “Lincoln confessed to a friend early in his political career that his ambition was to become ‘the DeWitt Clinton of Illinois.’”⁵

     Despite the success of the Erie Canal, other internal improvement projects that followed, especially those in the 1830s, were complete and utter failures. So horrific were the problems created by these government sponsored projects that all but two states, Missouri and Massachusetts, amended their state constitutions to prohibit further such internal improvements. John Bach McMaster, a historian, wrote, “In every state which had gone recklessly into internal improvements the financial situation was alarming. No works were finished; little or no income was derived from them; interest on the bonds increased day by day and no means of paying it save by taxation remained.”⁶

     The taxation—tariffs—to pay for these economically catastrophic failed internal improvements lead the Southern States to secede from the Federal government. The South, who relied heavily on manufactured goods, paid for the majority of the Federal revenue accrued through the high tariffs during the early 19th century, which ultimately would be spent on internal improvements. Not only did they believe these internal improvements were unconstitutional, they could not stand seeing their income being wasted in the states to the north. The South hated these internal improvements so much that they would prohibit them when they wrote their new Confederate Constitution. In Article I, Section 8, Clause 3, it reads that

the Congress shall have power to regulate commerce with foreign nations, and among the several States, and with the Indian tribes; but neither this, nor any other clause contained in the constitution, shall ever be construed to delegate the power to Congress to appropriate money for any internal improvement intended to facilitate commerce….⁷

     When Abraham Lincoln was elected as the sixteenth president, the South knew that they would be further enslaved to the “American System” or British-style mercantilism. The South was fully aware of Lincoln’s true motivations and political position. They remembered what he had said in 1832:

I presume you all know who I am. I am humble Abraham Lincoln. I have been solicited by many friends to become a candidate for the legislature. My politics are short and sweet, like the old woman’s dance. I am in favor of a national bank…in favor of the internal improvements system and a high protective tariff.”⁸

     Rather than submit to the same tyrannical economic system that was inflicted upon the colonies in the 17th and 18th centuries, the South set out to fight their Second War for Independence. Government sponsored internal improvements—like the massive economic event in the building of the Erie Canal—culminated into America’s bloodiest war that took the lives of over 800,000 souls.

Notes

1. Henretta, James A. and David Brody. America: A Concise History, Volume I: To 1877, 4th ed. Boston: Bedford/St. Martin's, 2010, 271.
2. Ibid, 271
3. Ibid, 271
4. David Burner, Virginia Bernhard, and Stanley I. Kutler. Firsthand America: A History of the United States, Volume I, 4th ed. St. James: Brandywine Press, 1996, 251
5. DiLorenzo, Thomas J. Ludwig von Mises Institute, n.d. http://mises.org/journals/scholar/internal.pdf (accessed October 28, 2013).
6. Ibid
7. Constitution of the Confederate States of America, University of Georgia Special Collections Libraries. October 25, 2012. http://www.libs.uga.edu/hargrett/selections/confed/trans.html (accessed October 30, 2013).
8. DiLorenzo, Thomas J. The Real Lincoln: A New Look at Abraham Lincoln, His Agenda, and an Unnecessary War. New York: Three Rivers Press, 2002, 54.

Natural Law in America

 

The most influential principle that shaped the destiny of America was Natural Law. It would shape the minds of the Founding Fathers and would be the driving force for the writing of the Declaration of Independence and the Revolutionary War. The Declaration of Independence declared to the world that man would not be governed by birthright or monetary power, but “that all men are created equal.” This document was a culmination of great wisdom and philosophy that spanned hundreds of years and would "set in stone" collectively the principles of Natural Law and unalienable rights to guide future governments in the way of liberty and freedom for two hundred thirty-seven years.

In the summer of 1776, Thomas Jefferson sat down in his rented suite on the second-floor of a building on the corners of Seventh and Market streets in Philadelphia, Pennsylvania, with the sole task of drafting up a document that would be sent to King George III declaring the reasons for colonies separation from Great Britain. The colonies had felt that their common rights as Englishmen had been trampled for years. This tyrannical rule could no longer be tolerated by the displaced English in the new world. With the portable writing desk that Jefferson designed himself, he put quill to paper and proceeded to write down the wisdom of old defenders of liberty and freedom from modern and ancient history.

Jefferson was not instructed to develop any new ideas in the war against tyranny, but to articulate and defend in writing how these Englishmen felt toward their oppressive king. According to Jefferson,

The object of the Declaration of Independence was not to find out new principles or new arguments never before thought of, not merely to say things which had never been said before; but to place before mankind the common sense of the subject, in terms so plain and firm as to command their assent, and to justify ourselves in the independent stand we [were] compelled to take.

Neither aiming at originality of principle or sentiment, nor yet copied from any particular and previous writing, it was intended to be an expression of the American mind, and to give to that expression the proper tone and spirit called for by the occasion. All its authority rest then, on the harmonizing sentiments of the day, whether expressed in conversation, in letters, printed essays, or in the elementary books of public right, as Aristotle, Cicero, Locke, Sidney, etc. (Maxfield 1983).

            

The principle common on the minds’ the founding generation (yet lost to many Americans), which can be found throughout their writings, was that of “Natural Law.” Educated men of the day were familiar with the histories of the ancient world. As our leaders were attempting to reestablish common law, they were looking to governmental example of the Romans and Greeks. Jefferson was very familiar with the Roman political writer, Cicero (106-43 B.C.). Cicero said that “The only reliable basis for sound government and just human relations is Natural Law” (Skousen 1981).

 

The concept of unalienable rights and “that all men created equal” would stem from Cicero’s philospophy of Natural Law. No king or mortal leader’s law on Earth was higher than that of Natural Law. Let us study the main concepts of Natural Law, a law well understood by our Founding Fathers. Cicero defines Natural Law in the following way:

True law is right reason in agreement with nature; it is of universal application, unchanging and everlasting; it summons to duty by its commands and averts from wrongdoing by its prohibitions…. It is a sin to try to alter this law, nor is it allowable to repeal any part of it, and it is impossible to ablolish it entirely. We cannot be freed from its obligations by senate or people, and we need not look outside ourselves for an expounder or interpreter of it. And there will not be different laws at Rome and Athens, or different laws now and in the future, but one eternal and unchangeable law will be valid for all nations and all times, and there will be one master and ruler, that is God over us all, for he is the author of this law, its promulgator, and its enforcing judge. Whoever is disobedient in fleeing from himself and denying his human nature, and by reason of this very fact he will suffer the worst punishment” (Wood 1991).  

The Declaration of Independence states that “We hold these truths [Natural Laws] to be self-evident” (Jefferson n.d.). These truths or Natural Law would be the basis for our Constitution and the American way of life. Our “certain unalienable rights, that among them are life, liberty, and the pursuit of happiness” were also based off Cicero’s philosophy. Not all of the unalienable rights are listed in the Declaration of Independence, but they should be recognizable to all Americans today. In W. Cleon Skousen’s book, The Five Thousand Year Leap, he describes and lists the twenty-two unalienable rights that are “among” those rights hinted at in the document (Skousen 1981):

The right of self-government.

The right to bear arms for self-defense.

The right to to own, develop, and dispose of property.

The right to make personal choices.

The right to free conscience. 

The right to choose a profession.

The right to choose a mate.

The right to beget one's kind.

The right to assemble.

The right to petition.

The right to free speech.

The right to a free press.

The right to enjoy the fruits of one's labor.

The right to improve one's position through barter and sale.

The right to contrive and invent. 

The right to explore the natural resources of the earth.

The right to privacy.

The right to provide personal security.

The right to provide nature's necessities -- air, food, water, clothing and shelter.

The right to a fair trial.

The right to free association.

The right to contract. 

With review of these unalienable rights, it is easy to discern additional concepts inherent to our American ideals for republican government. The concepts of habeas corpus, limited government, separation of powers, checks and balances, and definitely the principle of no taxation without representation can be derived from Natural Law. 

Taxation and the striping away of one’s property without one’s consent was the violation against Natural Law that was the catalyst to the revolution and the drafting of the Declaration of Independence. The principle of one’s right to property was paramount in the eyes of the Founding Fathers. After all, Providence was the author of Natural Law, and one of His laws commanded, “Neither shalt thou steal” (Moses 2012).

John Locke’s ideals on government and of the right of property would also be an influencing factor to Jefferson’s intention of what “pursuit of happiness” meant. Locke would write about such matters in The Second Treatise of Civil Government (1690) and said,  

IF man in the state of nature be so free, as has been said; if he be absolute lord of his own person and possessions, equal to the greatest, and subject to no body, why will he part with his freedom? why will he give up this empire, and subject himself to the dominion and controul of any other power? To which it is obvious to answer, that though in the state of nature he hath such a right, yet the enjoyment of it is very uncertain, and constantly exposed to the invasion of others: for all being kings as much as he, every man his equal, and the greater part no strict observers of equity and justice, the enjoyment of the property he has in this state is very unsafe, very unsecure. This makes him willing to quit a condition, which, however free, is full of fears and continual dangers: and it is not without reason, that he seeks out, and is willing to join in society with others, who are already united, or have a mind to unite, for the mutual preservation of their lives, liberties and estates, which I call by the general name, property (Locke n.d.).

The principle of Natural Law, which Thomas Jefferson relied upon to justify the American Revolution, spanned over one thousand eight hundred years from Cicero’s time; however, it can be said that since God is the author of Natural Law (according to Cicero) that these eternal truths were the most influential principles to shape the destiny of America. The concepts of the natural rights of man and unalienable rights would create a nation of immense freedom and liberty. The Declaration of Independence would go on to inspire similar declarations of independence from over one hundred countries in the world since 1776. Without these ideals of Natural Law, the world would not be the place it is today.

Bibliography

Jefferson, Thomas. Transcript of Declaration of Independence (Final). n.d. http://www.monticello.org/site/jefferson/transcript-declaration-independence-final (accessed October 23, 2013).

Locke, John. The Second Treatise of Civil Government. n.d. http://oregonstate.edu/instruct/phl302/texts/locke/locke2/locke2nd-c.html (accessed 10 27, 2013).

Maxfield, M. Richard. "The Real Thomas Jefferson." 71. Washington D.C.: National Center for Constitutional Studies, 1983.

Moses. The Fifth Book of Moses Called Deuteronomy. 2 21, 2012. http://www.lds.org/scriptures/ot/deut/5.19?lang=eng#18 (accessed 10 27, 2013).

Skousen, W. Cleon. "The Five Thousand Year Leap: 28 Great Ideas That Changed the World." 33.95. Franklin: American Documuent Publishing, LLC, 1981.

Wood, Neal. "Cicero's Social and Political Thought." 71-72. Los Angeles: University of California Press, 1991.

Alexander Hamiton, Traitor to the Revolution

Alexander Hamilton was an enemy to the spirit of the American Revolution and turned his back on the cause like Benedict Arnold. His “American Dream” was contrary to the vision of many of the other founding fathers, especially that of Thomas Jefferson. His financial agenda would change the political vision of the new American government and re-embrace the economic policies that the colonies had just fought a war to break free from.
  
At the constitutional convention in 1787, his true agenda would unfold as the founding generation was attempting to secure the natural rights of men. With careful review of Hamilton’s agenda and his view on government, it is easy to conclude that he “favored British tradition and believed that some sort of monarchist government would be best for the United States” (Whipple 1991).

This traitor to the revolution 

proposed an alternative constitution that concentrated all political power in the central government, especially the executive branch, with virtually no role at all for the states. He also proposed a “permanent president” who would have absolute veto power over all legislation and who would also have the power to appoint all state governors. He did not believe in the divided sovereignty of federalism that was adopted by the other founding fathers (DiLorenzo, The Real Lincoln 2002).

In order to centralize the power of government, Hamilton also proposed a financial plan that would create a national debt, public credit, a central bank, and government sponsored projects. The credit that would come from a national debt would be established through government buy backs of the securities issued by the Continental Congress during the war with Great Britain. He also suggested that the newly proposed government develop its credit by taking upon the war debts encored by the states.  With the creation of a national bank the powers of the centralized government would implement “national mercantilism—in other words, government-assisted economic development” (James A. Henretta 2009).

Senator John Sherman, a member of the Republican Party (which was formed in 1854 on Hamiltonian principles) and a Senator from Ohio, explained what this agenda really meant for the nation when he said that their party’s objective was “to nationalize as much as possible, even the currency, so as to make men love their country before their states. All private interests, all local interests, all banking interests, the interests of individuals, everything, should be subordinate now to the interest of the Government” (DiLorenzo, Lincoln Unmasked 2006).

These economic principles and centralized government policies of the Hamiltonians horrified many of the founding generation. Patrick Henry warned that power corrupts even good men and voiced is concerns for Hamilton and his follower’s push for central government.

Show me that age and country where the rights and liberties of the people were placed on the sole chance of their rulers being good men without a consequent loss of liberty! I say that the loss of that dearest privilege has ever followed, with absolute certainty, every such mad attempt (Wootton 2003).

 
Thomas Jefferson spoke volumes contrary to Hamilton’s agenda. His attacks on central government would elevate him to the status of Hamilton’s nemesis. Not only would President Washington notice the stark difference of opinion between his two cabinet ministers, the Secretary of State (Thomas Jefferson) and the Secretary of Treasury (Alexander Hamilton), but the entire world through the media of the time. Washington respected both men for their knowledge and wisdom. The President would admit that he was unfamiliar with financial matters, so he relied on Hamilton’s “expertise” on the issue. He would offer the same respect to Jefferson’s knowledge in foreign affairs.
  
With the gulf between the two ministers widening, Washington asked the two to account for their great opposition. Jefferson wrote the President that “from the moment at which history can stoop to notice him [Hamilton], is a tissue of machinations against the liberty of the country which has not only received and give him bread but heaped its honors on his head” (Randall 1993). These ministers would be so completely opposed to each other’s thoughts on government that the two party system would be created as a result of it.

Thomas Jefferson’s vision for the new republic was dramatically different from that of Hamilton’s scheme. Government powers were to be limited by the constitution and Bill of Rights in order to protect the people from the abuses of tyranny. History and examples of government abuse from the “Old World” was what motivated the colonies to declare their independence in 1776. The author of that Declaration of Independence was extremely familiar with the atrocities imposed by a tyrannical government drenched in economic principles of mercantilism. The Revolutionary War was fought to overthrow the financial burdens imposed by a strong centralized government. Just four years since the war’s conclusion, the same theoretical principles were being fought over at the constitutional convention.

The great man from Monticello would write of Hamilton’s attempts to corrupt Congress through his financial agenda.

Hamilton's financial system had…two objects. First, as a puzzle to exclude popular understanding and inquiry. Second, as a machine for the corruption of the [Congress]; for he avowed the opinion that man could be governed by one of two motives only, force or interest. Force, he observed, in this country, was out of the question, and the interests, therefore, of the members, must be laid hold of, to keep the [Congress] in unison with the executive. And with grief and shame it must be acknowledged that his machine was not without effect; that even in this, the birth of our government, some members were found sordid enough to bend their duty to their interests, and to look after personal rather than public good....[Hamilton’s financial system] added to the number of votaries to the Treasury, and made its chief the master of very vote in the [Congress] which might give to the government the directions suited to his political views (Maxfield 1983).

On March 4, 1801, Thomas Jefferson offered his first inaugural address to the people. After Hamilton had pushed forth his financial agenda and the Adam’s administration would also do much to twist the Constitution to their central government plans and attack the Bill of Rights, Jefferson would attempt to restore the republic during his admiration. He expressed his views on “good government” in his address.

Let us, then, with courage and confidence pursue our own Federal and Republican principles… a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government, and this is necessary to close the circle of our felicities (Yale 2008).

If the vision of the revolution was to remove a king from our government and to have no taxation without representation, then Hamilton’s plan was contrary to that goal. It is clear by the examples of today’s “American System” (a phrased coined based on Hamilton’s agenda) and the application of it (through the help of men like Henry Clay and Abraham Lincoln) that Thomas Jefferson and many of the founders were right in being concerned for his plan. It is clear today that the people’s rights are not being protected from corruptible public servants, who are caving to their personal interests over the public good. With the national debt at 17 trillion dollars and with ever increasing government regulations and taxes that are chocking the economic prosperity of the American people, we can easily see how Hamilton betrayed the people and the revolution.   

Bibliography

DiLorenzo, Thomas J. "Lincoln Unmasked." 138. New York: Crown Forum, 2006.

DiLorenzo, Thomas J. "The Real Lincoln." 77. New York: Three Rivers Press, 2002.

James A. Henretta. "The Creation of American Society." By David Brody, 195. Boston: Bedford/St. Martin's, 2009.

Maxfield, M. Richard. "The Real Thomas Jefferson." 469. Washington D.C.: National Center for Constitutional Studies, 1983.

Randall, Willard Sterne. "Thomas Jefferson." 503. New York: Henry Holt and Company, 1993.

Whipple, A. B. C. "To the Shores of Tripoli." 29. Annapolis: Naval Institute Press, 1991.

"The essential Federalist and anti-Federalist papers." By David Wootton, 37. Indianapolis: Hackett Publishing Company, 2003.

Yale. Thomas Jefferson First Inaugural Address. 2008. http://avalon.law.yale.edu/19th_century/jefinau1.asp (accessed October 23, 2013).

The Little Government that Could

Our little government is all grown up. Are you proud of it?

"Topher tells a bed time story to the American people, from the perspective of the American government. The poor American government just wanted to grow up to be big and strong like the governments in Europe, but his mean Fathers wouldn't let him. Follow this happy tale of how a little government made his dreams come true..."

 

Mercantilism, What is it Good For? Abosolutely Nothing!

Economist Murray Rothbard defined the system of mercantilism as “a system of statism which employed economic fallacy to build up a structure of imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state.” (Rothbard 1997)

One example of “monopolistic privilege to individuals or groups favored by the state” can be witnessed in the history between Great Britain  and her colonies from the 1500s to 1700s. They imposed many regulations like the Navigation Acts, which brought restrictions upon British citizens living in the British colonies. If mercantilism was to benefit the British economy as a whole, like some scholars would claim, the colonies should have seen an increase in their wealth as well. However, these regulations and imposed tariffs forced the colonies to purchase goods at a much higher price through England, like sugar and molasses. They were also forced to buy manufactured goods from only England at inflated prices. These manufacturers in England had little to no competition thanks to these trade restrictions, so they could set their own prices.  

Mercantilism is the opposite of free trade, which benefits everyone. Protectionist tariffs imposed by a government only help special interest groups and these trade restrictions destroy competition. Competition in the market place is good for two reasons, 1) it drives market prices down for the consumer, and 2) it promotes innovation and development in new technologies.

The economic system of mercantilism promoted by the British Empire crisscrossed with the system of Imperialism for centuries. Today it is common for many people to mistakenly think that the system of capitalism and imperialism is one and the same. This couldn’t be further from the truth. Professor Stephen Davies, historian at the Institute of Economic Affairs, defined the two systems thusly 

Capitalism is a system of the free exchange of goods and services between individuals on a voluntary basis under the rule of law and in a system of private property rights. In other words, it is a system of voluntary exchange in which all parties to the exchange are better off. Now imperialism, by contrast, is a system of relations based upon power. Essentially, it’s a system in which certain groups of privileged people in one part of the world are able to extract unearned income from people in other parts of the world through the use of exploitative power relations, usually with the help of local collaborators. (LearnLiberty.org 2013)

            It is clear that the British were trying to create a “favorable balance of trade,” but in the favor of a few “privileged people” in England. By today’s standard we would call these privileged few by the title of “special interests groups.” It requires a special system of propaganda to persuade a people that such economic tactics which only benefit the special interests groups are for the best interest of the nation. According to Dr. Tom DiLorenzo (a professor of economics in the Sellinger School of Business and Management at Loyola College in Maryland) , when he was discussing the history of mercantilism, he said, “The public must be intentionally miseducated in economics in order for mercantilism to survive.”  (DiLorenzo 2002)

The public would not stay misinformed for too long. Well educated men like Thomas Paine, Samuel Adams, and Thomas Jefferson in the colonies would dispel the fallacies of the mercantilist system. A great revolution would free the colonies from this economic burdens and unfair taxes. 

Unfortunately for all their sacrifices, it would not take long for that same system of mercantilism to creep back into American government. Men like Alexander Hamilton, Henry Clay, and Abraham Lincoln would rename mercantilism as the “American System.” They would set up a a system with a central bank, promote corporate welfare, and push for internal improvement subsidies. Protectionist tariffs would manifest themselves again in our land. Government regulations and high taxes would once again destroy our economic wealth as a whole. The American Empire is growing as our individual freedoms and unalienable rights are dying.  

There is still hope for us. We just need to educate ourselves to see through the lies of the intellectuals and publicists who have been hired to confuse the public of their actual intentions. The plan is simple and has already been laid out for us. We just need to look back to the Constitution and restore our republic. 

Works Cited

DiLorenzo, Thomas J. "The Real Lincoln." 57. New York: Three Rivers Press, 2002.

LearnLiberty.org. Capitalism Is NOT Imperialism. June 3, 2013. http://www.learnliberty.org/videos/capitalism-not-imperialism (accessed October 19, 2013).

Rothbard, Murray N. "The Logic of Action II." 43. Cheltenham: Edward Elgar Pub, 1997.