Thesis presented to the Faculty of the Graduate School
of the University of Pennsylvania in partial
fulfilment of the requirements for
the degree of Ph.D.
BALTIMORE
WILLIAMS & WILKINS CO.
1913
AN OUTLINE OF THE DEVELOPMENT OF THE
INTERNAL COMMERCE OF THE
UNITED STATES, 1789-1900[1]
[1] In this paper, which is a brief abstract of a work to be
published later, an attempt is made to outline the history of the
development of the internal commerce of the United States after
the formation of the Union in 1789. The term "internal commerce,"
though in its fullest signification embracing every purchase,
sale, and exchange of commodities between the individuals of a
country together with the business of transmitting intelligence
and of transporting persons and things from place to place, is
here used primarily as applying to the interchanges of
commodities among the various sections of the United States
carried on over interior lines of transportation--the rivers,
highways, canals, lakes and railroads.
I
1789-1830
At the beginning of the national era the internal commerce of the
United States gave small promise of the tremendous development it was
to undergo during the ensuing century. There was as yet too little
differentiation of occupation to give rise to a large interstate trade
in native products, and the proximity of the greater part of the
population to the seacoast made it cheaper and more convenient to carry
on the small interstate trade that did exist by means of small sailing
vessels plying along the coast. Practically all the internal trade was
devoted to bringing the surplus agricultural produce of the interior to
the seaport towns where it was exchanged for imported wares that could
not be produced by the inhabitants of the inland region.
As is usual in a new country, the settlers who had first pushed into
the interior had founded their new homes close to the rivers, and these
natural highways had always been and still were the most important
means of transportation to and from the seacoast. At the mouths of the
larger streams flowing into the Atlantic Ocean were to be found large
and wealthy cities, where enterprising men were laying the foundations
of large fortunes in a rapidly growing trade in the agricultural and
forest products floated down from the interior.
Living close along the ocean where numerous excellent harbors and long
stretches of sheltered water gave ample facilities for the little
inter-colonial trade that existed, and where rivers afforded natural
means of transportation from the interior to towns on the coast, the
people of early colonial days had not found it necessary to give much
time to the construction of roads. The gradual inland movement of the
population had finally compelled them, however, to give some attention
to the means of land transportation and many rude earth roads were
built to replace the old Indian trails. These roads were unspeakably
poor, sloughs of mire during the thaws of winter and spring and thick
with dust in the summer, but bad as they were they carried considerable
traffic and their use was constantly growing. Inland towns were
beginning to grow up at the focusing points of the country roads, and
the owners of general stores at such places derived large profits out
of their position as middlemen between the farmers of the interior and
the merchants at the nearest seaports. Three great roads had been built
into the western country, one up the Mohawk Valley into western New
York, and two across the Alleghany Mountains, the Pennsylvania Road
from Philadelphia to Pittsburgh, and the Wilderness Road over which the
early settlers of Kentucky had threaded their way up the Shenandoah
Valley and through Cumberland Gap to the southern banks of the Ohio
River.
The transportation facilities of the times were, however, entirely
inadequate to the needs of the country, and the lack of better means of
getting products to market was a serious impediment to internal
development. Tench Coxe wrote in 1792: "To a nation inhabiting a great
continent not yet traversed by artificial roads and canals, the rivers
of which above their natural navigation have hitherto been very little
improved, many of whose people are at this moment closely settled upon
lands, which actually sink from one-fifth to one-half of the value of
their crops in the mere charges of transporting them to seaport towns,
and others, of whose inhabitants cannot at present send their produce
to a seaport for its _whole_ value, _a thorough sense of the truth of
the position_ is a matter of _unequalled_ magnitude and importance."
Especially was communication between the Ohio Valley and the outside
world difficult and expensive. The natural outlet for the surplus of
this valley was the Mississippi River. During the Revolutionary War,
the Spanish government had given the people of the colonies the right
of free navigation of the river and a brisk trade had sprung up between
the western settlements and New Orleans, but in 1784 Spain had put an
end to this trade by withdrawing the right of free navigation. The
people of the West, enraged at being deprived of what they considered
their natural right, protested furiously and appealed to Congress for
protection, but their appeals were unavailing and the river remained
closed for more than a decade. The only market left to the western
farmers was the cities on the eastern coast. Peltry, ginseng and
whiskey were almost the only products that would pay their cost of
transportation to Philadelphia, and the proceeds derived from the sale
of these were sufficient to purchase only a few things of prime
necessity such as salt, gunpowder, and some indispensable articles of
iron. Even this small trade of the West was crippled when the new
government placed an excise tax on whiskey, and the resentment felt
against the federal authorities for their apparent disregard of the
economic interests of the western people blazed forth in open
rebellion.
The commercial isolation of the Ohio Valley ended, however, in 1795,
when the national government, spurred to action by the threats of
secession and clamor for protection coming from the western farmers,
secured a treaty with Spain opening the Mississippi River to
navigation. The successful conclusion of the negotiations was hailed
with great rejoicing in Tennessee, Kentucky, Pennsylvania and Ohio.
Fleets of flat-boats loaded with tobacco, pork, flour, grain and
whiskey began to move down the river. In 1799, more than a million
dollars worth of goods were received at New Orleans from the country up
the Mississippi. In October, 1802, the Spanish Intendant at New
Orleans, acting on his own responsibility, suddenly withdrew the "right
of deposit" at the city, and contrary to the provisions of the treaty,
he refused to assign an equivalent establishment at any other place on
the banks of the river. The western people were wild with rage. It was
necessary to send troops to Kentucky to prevent an armed expedition
against the Spanish province. Fortunately, the Spanish government
disavowed the action of the Intendant and in April, 1803, the river
trade was again restored. Desirous of avoiding such difficulties in the
future, Jefferson pushed the negotiations already begun with Napoleon,
to whom Spain had ceded her claims to Louisiana, for the purchase of
New Orleans and the territory through which the river flowed from the
possessions of the United States to the Gulf of Mexico. The
negotiations ended in October, 1803, with a wholly unexpected
result--the purchase of the entire Louisiana province. In December, the
United States took possession of the newly acquired territory and the
undisputed control of the Mississippi was secured forever.
The opening of the Mississippi marked the beginning of an active
internal commerce within the United States. The farmers of the Ohio
Valley, which was now being rapidly settled, found an outlet for their
heavy agricultural produce, and consequently secured a purchasing
power, enabling them to buy manufactured goods and merchandise, which,
notwithstanding the distance and the inferior roads, could be carried
to them in wagons from the East. Though the produce of the western
farmers was shipped down the Mississippi, very few of their supplies
were brought up the river, because of the difficulty of urging a
flat-boat against the powerful current of the stream. This triangular
trade of the Ohio Valley grew rapidly. The receipts at New Orleans, in
1807, including the cotton, sugar and molasses of Louisiana, which made
up a third of the total, amounted to $5,370,555. The money for which
the products of the West were exchanged at New Orleans was almost
invariably spent for manufactured and imported wares from eastern
cities. Large Conestoga freighters made regular trips from Philadelphia
to Pittsburgh bringing loads of hats, boots, powder, lead and clothing
which were distributed from the "Gateway of the West" among the towns
and villages down the river. Baltimore and New York also shared in the
western trade.
The internal commerce of the country in 1810, as in 1790, was greatly
handicapped by the high costs of transportation. Taking the country
over, the charges for transporting merchandise were $10 per ton per 100
miles and articles that could not stand this rate were shut from
market. Grain and flour could not bear transportation by wagon more
than 150 miles. The lack of commerce intercourse caused many sections
to develop local economic and political interests which endangered the
unity of the nation. "The question of the hour was plainly how to
counteract this tendency by a system of interstate commerce which
should unite them by a firm bond of self interest."[2] Gallatin's
report on internal improvements in 1808 reflects the plans and
ambitions that were in the minds of the commercial and political
leaders of the country, but unfortunately the foreign controversies in
which the United States became involved at that time prevented any
attempt to carry out his proposals.
[2] B. McMaster, _A History of the People of the United States_,
vol. iii, p. 465.
The war of 1812 brought a period of unsettled commercial conditions.
Domestic industry and trade were stimulated for a time, but a sharp
financial panic in 1814 caused a year of general depression. The return
of peace early in 1815 was followed by a quick revival of business, and
the next three years brought an era of prosperity to nearly everyone
except the manufacturers along the eastern coast, many of whom were
ruined on account of a deluge of importations from Europe.
Immigration to the West set in with renewed vigor after the close of
the war. The fertile soil of the Ohio Valley contributed an enormous
product of grain, tobacco, fruit and hemp which continued to find an
outlet down the Mississippi, and the farmers increased their purchases
of imports which flowed into Pittsburgh from the East. In 1811 Fulton's
invention was introduced in western waters, and in 1817 the first
steamboat voyage was made from New Orleans to Louisville. The effect of
this new engine of commerce on the Mississippi trade was almost
magical. In 1818-19, the first year after the steamboat became an
assured success, the receipts at New Orleans rose to 136,300 tons,
valued at $16,778,000, and the volume of exports of domestic products
from the southern port was greater than that from any other port of the
country.
But even more important to the commercial prosperity of the West than
the introduction of the steamboat was the spread of cotton culture into
the Southern States west of the Appalachian highland. Cotton culture
had been found exceedingly profitable in Georgia and South Carolina,
and when it was discovered that the rich bottom lands of Alabama,
Mississippi and Louisiana produced even better cotton than the upland
districts of South Carolina, there was a rush of settlers to the river
valleys of the new region. In 1811, fifteen-sixteenths of the cotton
raised in the United States was grown in Virginia, North Carolina,
South Carolina, and Georgia; in 1820, one-third of the total crop of
600,000 bales was raised in Alabama, Louisiana, Mississippi and
Tennessee. In the western part of the cotton belt, as in the eastern,
the planters directed practically all their capital and labor to the
production of cotton, relying on the region north of them for
provisions and live stock. The market for the grain, pork and flour of
the Ohio Valley was greatly enlarged. Flat-boat men disposed of their
cargoes of food products at the wharves of the plantations along the
Mississippi River; flat-boat stores peddled clothing, boots and shoes,
household furniture and agricultural implements from village to village
and from plantation to plantation; great droves of horses and mules
were driven into the Southern States in response to the demand for
draught animals for use in the cultivation of cotton.
As the western farmers enlarged the volume of their sales to the
southern planters they increased their purchases from eastern
merchants. A large part of the foreign imports of the United States,
which in 1816 reached the unprecedented amount of $155,000,000, was
sold in the West. Attracted by the cheapness of the goods offered and
full of confidence in their ability to meet all debts with the proceeds
of the lucrative southern trade, the people indulged in extravagant
overtrading. Purchases far exceeded sales and the specie coming from
the South was drained away as fast as it was received, but dozens of
banks furnished a supply of currency by means of copious issues of
paper money, and the career of extravagance proceeded. The internal
trade of the country had never been so prosperous.
The era of good times came to a sudden end in 1819 when the nation was
visited by a disastrous money panic. Nearly all the specie had been
shipped abroad, and large sums of paper money had been issued, much of
it on credit of a questionable nature. The general commercial expansion
following the war had led to extensive speculation all over the
country. When the new United States Bank suddenly began a vicious and
relentless campaign against all other banks of issue in an ill-advised
effort to force them immediately to a specie basis, loans were called
in everywhere, the circulation was greatly contracted, prices fell,
manufacturers and merchants were unable to meet their obligations,
factories shut down, mercantile firms went into bankruptcy, banks
closed their doors, and business everywhere was completely prostrated.
To make matters worse, the export price of the great "money crop,"
cotton, fell from 32 cents in 1818 to 17-1/2 cents in 1820. The
provision market of the western farmers was greatly injured and thus
planter, farmer, merchant, manufacturer and banker all succumbed before
the general catastrophe.
The panic gave a sharp check to extravagance and speculation,
importations declined, prices were readjusted and business soon began
to recover. By 1823, the country seemed to have been restored to its
former prosperous state and manufacturing in particular was more active
than it had been at any time since the war.
Notwithstanding the revival of manufacturing and domestic trade, the
farmers of the grain states found themselves in distressing
circumstances. The Ohio Valley was yielding a product far in excess of
the demands that existed and each year found a large amount of
unmarketable grain left in the fields and granaries. Many foreign
nations refused admittance to American food products and though the
grain-growing capacity of the United States had increased sixfold since
1790, the annual exports of grain, meat and flour were but little more
than the average for the five years from 1790 to 1795. The plantations
of the South were drawing much of their subsistence from the northern
farms, but they were unable to absorb more than a small fraction of the
tremendous surplus that was seeking a market.
Agricultural interests sought urgently for relief. Since there was no
foreign market for their surplus, they resolved to _create_ a home
market. If England would not buy food products from the United States,
the United States must refuse to buy manufactures from England, and
must, by the establishment of manufacturing industries at home, give
rise to a non-agricultural population that would consume the redundant
supplies of meat and grain. The problem of attracting capital to
manufacturing enterprises, the farmers proposed to solve by the
creation of a system of protective tariffs that would check
importations and encourage investment in mills and factories at home.
Manufacturing industries already in existence were in no apparent need
of protection and the shipping interests of Boston and New York and the
cotton planters of the South strenuously opposed the protective policy.
But the agricultural interests were not to be denied. Under the
leadership of Henry Clay, the tariff of 1824 was enacted and the
"American System" was inaugurated. In 1828, in response to an appeal,
emanating from the woolen manufacturers and seconded by the
agricultural interests, still further encouragement was given to home
manufactures.
While the country was being agitated by the tariff controversy and
exceptionally bitter political contests, the New York canals were
opened for traffic throughout their entire length (October, 1825). No
other single work in the United States has ever had a more beneficial
effect on the prosperity of internal trade. The opening of the canals
brought to an end what had been the bane of internal commerce for half
a century--the excessive cost of freight transportation. Freight rates
between Albany and Buffalo were at once reduced 90 per cent and the day
of the freighter on the Genesee road was ended. The new canal wrought a
complete change in all the rural districts of western New York. Lumber,
staves, ashes, grain and vegetables, hitherto unmarketable, were now
shipped to the markets of the East; farm values doubted and quadrupled;
a stream of people poured into the fertile farming regions around Lake
Erie. Not less valuable was the new waterway to the district at its
eastern terminus. The laboring population of the growing manufacturing
towns reaped immense benefits from the cheaper and better means of
subsistence they could now secure, while the shipments of merchandise
westward on the canal exceeded in value the receipts of raw produce at
tide-water. New York had achieved economic unity at a single stroke.
The success of the Erie Canal and the rapid growth of internal trade
which followed the adoption of the "American System" caused a demand
everywhere for more roads and canals and a widespread agitation in
favor of government aid to internal improvements. The federal
government gave extensive aid to private and state enterprises in the
way of land grants and stock subscriptions, though it did not engage
directly in the construction of commercial highways. The individual
states embarked in schemes of canal and turnpike building which
involved them in debts of millions of dollars. Ohio and Indiana began
to construct canals joining the Ohio River to Lake Erie in order to
secure the advantage of the new outlet to the East. Pennsylvania,
awakened to the danger of the total loss of western trade through the
state by the fact that shipments of merchandise to the West were
abandoning the wagon roads from Philadelphia, Baltimore, and New York
in favor of the cheaper route by way of the Erie Canal, began, in 1826,
an extensive system of canals to connect the Delaware River with the
Ohio River and the Great Lakes. Not to be outdone by their rival
states, Maryland and Virginia agreed upon the construction of a canal
from Chesapeake Bay to the Ohio River, and on July 4, 1828, President
Adams dug the first spadeful of earth to signalize the beginning of the
undertaking. Some financiers of Baltimore, dubious of the success of an
effort to build a waterway over the difficult route adopted by the
promoters of the Chesapeake and Ohio Canal, withdrew their support from
that enterprise, and putting their confidence in a new and almost
untried transportation device, which they believed would prove superior
to canals, just as canals had proved superior to turnpikes, they boldly
inaugurated the plan of a railroad from their city across the mountains
to the Ohio, and Charles Carroll, of Carrollton, placed the stone that
commemorated the beginning of its construction on the same day that
President Adams officiated at the rival celebration that marked the
beginning of the canal.
Thus by 1830, the future of the internal commerce of the United States
was assured. The adoption of the "American System" could have but one
result--a tremendous expansion of domestic trade. That this expansion
had already commenced was evident from the fact that notwithstanding
the vast growth in wealth and population from 1820 to 1830, the imports
of the United States had exhibited but little increase. "The nation was
building an empire of its own with sections which took the place of
kingdoms."[3] New England, New York and Pennsylvania were manufacturing
the clothing and iron utensils for the West and South. The people of
the South were absorbed in cotton raising. They relied upon the West
for much of their food and live stock; they bought their clothing and
machinery from the North Atlantic States; and their exports brought in
the specie which facilitated the commerce of all sections. The West was
becoming a vast granary. Its new factories were drawing artisans from
the East and taking laborers from the country to swell the demand for
flour and grain that had recently been seeking in vain for a market.
The volume of shipments of food and merchandise down the Mississippi
was larger than ever and the manufacturing population of the East,
already too large to be fed by the agricultural produce of New England,
New York and Pennsylvania, was beginning to draw subsistence from the
western farms.
[3] F. J. Turner, _Rise of the New West_, p. 297.
Means of cheap transportation, the lack of which had been so great an
obstacle to internal development, had been or were being supplied to
meet the requirements of the new conditions. The steamboat arrivals at
New Orleans numbered a thousand each year. Water communication between
the Atlantic Ocean and the very center of the United States was
established when the Erie Canal connected the Hudson River to the
waterway afforded by the series of great inland seas. There were 1,343
miles of canals in operation in all the United States, and 1,828 miles
more were in the process of construction. Louisville was rejoicing in
the completion of a canal around the falls of the Ohio; Ohio and
Indiana were rapidly pushing the work on the canals that were to tap
the regions hitherto tributary only to the Mississippi; the
construction of the Pennsylvania Canal was being hurried forward to
enable Philadelphia to recover the trade lost to the Erie; Maryland and
Virginia were persistently going on with the building of the waterway
westward from Chesapeake Bay. And meanwhile 44 miles of railway had
been completed and were in operation, and to show that confidence in
the new device was not lacking, 422 miles were in the process of
construction and 697 miles more were already projected.