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The transfer of technology to the United States was made easier by the existence in the northern states of a population with a high level of basic literacy and mechanical skill.

In the first half of the nineteenth century, the United States lagged behind Britain and Western Europe in science and higher education. According to
Putnam’s Magazine
in 1854, “The genius of this new country is necessarily mechanical. Our greatest thinkers are not in the library, not the capitol, but in the machine shop. . . . Our education is no genial culture of letters, but simply learning the use of tools.”
²³
In the Northeast and Midwest, a society of craftsmen and tinkerers formed, in part because of public schools. By 1830, the United States was second only to Germany in the proportion of its population in school. If southerners, white and black, were factored out, the antebellum United States might have been the most educated nation in the world.
²⁴

As early as 1851, Colt’s firearm exhibit at the Great Exhibition in London impressed British observers with what became known as the American system of manufactures. The British government sent commissioners to study American manufacturing. Colt, who opened a factory in Britain, told a parliamentary committee: “There is nothing that cannot be produced by machinery.”
²⁵

Were the Americans, either by combination or by any other sort of violence, to stop the importation of European manufactures, and, by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they will retard instead of accelerating the further increase in the value of their annual produce, and would obstruct instead of promoting the progress of their country toward real wealth and greatness.

—Adam Smith, 1776
¹

Had our nation followed the lines of relative advantage advocated by free-traders, our country would be divided into three parallel belts, used for cotton, tobacco, and wheat.

—Simon Patten, 1890
²

I
n 1846–1849, Britain was so confident in its industrial supremacy that it adopted free trade and began preaching it to other countries.
³
During its rise to industrial primacy, Britain had carefully protected and subsidized its own infant industries and its leaders knew that if agrarian societies renounced similar protective policies then Britain’s own superior, inexpensive imports could kill the infant industries of its military and commercial rivals in the cradle. By the end of the Napoleonic Wars in 1815, Britain’s promotion of its own industries, at the expense of those of its colonies in Ireland and India and its former American colonies, had succeeded in making it the world’s leader in manufacturing. Britain sought to maintain its near-monopoly of steam-powered manufacturing by discouraging other countries from becoming its industrial competitors. In the colonial regions that it ruled directly or indirectly, such as Ireland, Canada, and the Indian subcontinent, it continued the mercantilist policies that it had imposed on its former North American colonies, destroying native industries that competed with British manufacturers and forcing the inhabitants to buy British goods while exporting raw materials to British factories and food to the British population.

Britain used diplomacy and even military force to compel many countries that were not formal colonies to accept a subordinate place in the global division of economic labor and to buy their manufactured goods from Britain. In return for British aid in gaining their independence from Spain, many Latin American republics became part of Britain’s informal commercial empire by signing “unequal treaties.” Among the other countries pressured by Britain into unequal treaties were Siam (Thailand), beginning in 1824, Persia (1836 and 1857), the Ottoman Empire (1838 and 1861), and Japan (between 1854 and 1911). Following the Opium Wars (1839–1842), in which Britain and France crippled the Chinese government, China was compelled by the British Empire to sign a number of unequal treaties, resulting in the appointment of a British official as the head of Chinese customs from 1863 to 1908.
⁴

Lacking the power to impose unequal treaties on the United States, Britain used incentives to try to persuade its former colonies to specialize in the export of raw materials and food, while importing British manufactured products. British free traders argued that Britain should abolish its own tariffs on such items, such as its Corn Laws (British “corn” is wheat, not American maize). The parliamentarian Robert Cobden, one of the major British proponents of free trade, argued that the policy would discourage other countries from trying to industrialize, the way that the United States and Germany had begun to do: “The factory system would, in all probability, not have taken place in America and Germany. It most certainly could not have flourished, as it has done, both in these states, and in France, Belgium, and Switzerland, through the fostering bounties which the high-priced food of the British artisan has offered to the cheaper fed manufacturer of those countries.”
⁵
British free trade advocates like Smith, Cobden, and others believed that global free trade would produce the same result as the British colonial legislation that condemned other countries to the role of resource colonies for British industry. In the nineteenth century, the British economist Stanley Jevons boasted: “Unfettered commerce . . . has made the several quarters of the globe our willing tributaries.”
⁶

In order to ensure that the United States would specialize in supplying commodities rather than compete with it for industrial markets, Britain did not limit itself to practicing and promoting free trade. It practiced economic warfare against the United States. American manufacturers had long suspected that British manufacturers engaged in “dumping,” or selling below cost for a time, in order to destroy the fledgling American industries that had grown up in the period of reduced US trade with Britain and Europe during the Napoleonic Wars. John Adams wrote in 1819: “I am old enough to remember the war of 1745, and its end; the war of 1755, and its close; the war of 1775, and its termination; the war of 1812, and its pacification. . . . The British manufacturers, immediately after the peace, disgorged upon us all their stores of merchandise and manufactures, not only without profit, but at certain loss for a time, with the express purpose of annihilating all our manufacturers, and ruining all our manufactories.”
⁷
The suspicions of Americans like Adams were vindicated in 1816, when Henry Brougham in a speech in Parliament observed that “it was well worthwhile to incur a glut upon the first exportation, in order, by the glut, to stifle, in the cradle, those rising manufactures in the United States, which the war had forced into existence, contrary to the natural course of things.” Several decades later, a parliamentary report referred to the practice of voluntary losses by British employers during depressions and recessions “in order to destroy foreign competition and to gain and keep possession of foreign markets.”
⁸

THE SOUTH, NEW ENGLAND, AND FREE TRADE

Between the end of the Napoleonic Wars and the Civil War, the question of America’s relationship to Britain underlay many seemingly unrelated disputes in American economic debates. Americans were divided between those who were content for the United States to be an agrarian resource colony in an international division of labor centered on industrial Britain, supplying raw materials to British factories and cheap food to British workers, and those who wanted the United States to catch up with and ultimately surpass Britain as an industrial power. Would the American economy complement the British industrial economy—or compete with it?

Then as now, academic economists and journalists tended to reflect the views of the economic elites in their cities and regions who subsidized their employment. In the antebellum years, there were two regional schools of free-market orthodoxy. One was in the export-oriented South and the other was centered in Boston and New England, where merchants opposed tariffs and where textile mill owners tended to identify their interests with those of their southern suppliers.

The planters opposed government-sponsored introduction of industrial capitalism into the United States for both economic and social reasons. If tariffs were used to keep out British and European manufactured goods, then agrarians would be forced either to pay tariffs on imports or to pay a higher price for American manufactured goods than they would have done, at least for a time, in the absence of tariffs. The same objection applied to other government efforts to promote American industries, such as bounties, or subsidies; these, like tariffs, would redistribute wealth from the agrarian sector to the manufacturing sector of the US economy. Because alternate ways of financing the federal government, such as federal income, wealth, or property taxes, were even less palatable to them, the southern oligarchs supported a tariff for revenue while opposing a tariff for protection—and were determined to keep both the tariff and the size of the federal government small.

An aversion to being taxed, directly or indirectly, to subsidize northern manufacturers was not the only reason that the southern planters opposed government-sponsored industrial capitalism in the United States. Neither the climate nor the population of the South was incompatible with an industrial society, as the industrialization of the Sun Belt in the twentieth century proved. But the hierarchical social order that the great slave-owning families had created in the South would be threatened by an urban, industrial economy based on free labor.

The southern planters and the professors whom they subsidized in southern universities cited the authority of the British classical economists who argued that the United States should specialize as a source of commodities for Britain’s industrial economy. The favorite economist of America’s agrarians, Adam Smith, in
The Wealth of Nations
, wrote: “It has been the principal cause of the rapid progress of our American colonies toward wealth and greatness that almost their whole capitals have hitherto been employed in agriculture. They have no manufactures, those household and coarser manufactures excepted which necessarily accompany the progress of agriculture, and which are the work of the women and children in every private family. The greater part both of the exportation and coasting trade of America is carried on by the capitals of merchants who reside in Great Britain. Even the stores and warehouses from which goods are retailed in some provinces, particularly in Virginia and Maryland, belong many of them to merchants who reside in the mother country, and afford one of the few instances of the retail trade of a society being carried on by the capitals of those who are not resident members of it. Were the Americans, either by combination or by any other sort of violence, to stop the importation of European manufactures, and, by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they would retard instead of accelerating the further increase in the value of their annual produce, and would obstruct instead of promoting the progress of their country towards real wealth and greatness.”
⁹

If Americans had paid attention to Adam Smith, the United States never would have become the world’s greatest industrial economy—because it never would have become an industrial economy at all. Along with most countries in the Americas, Europe, Asia, and the Middle East, the United States, according to Adam Smith, should have forever remained a supplier of foodstuffs and raw materials to industrialized Britain.

THE AMERICAN SCHOOL

In every country during the steam era, manufacturing facilities were located near sources of coal and iron—the West Midlands in Britain, the Ruhr in Germany, and Appalachia in the United States. For this reason, the factory owners of Pennsylvania and other Midatlantic states became the chief advocates of high protective tariffs. With the support of its local industrialists, who viewed themselves as competitors of British industry, Pennsylvania became the center of the developmental, protectionist “American School” that contrasted itself with the “British School” of free trade and laissez-faire economics. According to the American School, the United States, having won its political independence from the British Empire, now needed to win its economic independence from the British System.

The rationale for import substitution, or infant-industry protection, in the United States was set out by Alexander Hamilton in his Report of the Secretary of the Treasury on the Subject of Manufactures (1791). In the report, Hamilton pointed out that “the United States cannot exchange with Europe on equal terms; and the want of reciprocity would render them the victim of a system, which should induce them to confine their views to Agriculture and refrain from Manufactures.”
¹⁰
The leading writers of the American School were two Baltimore intellectuals, Hezekiah Niles and Daniel Raymond, the economists Francis Wayland and Mathew and Henry C. Carey of Philadelphia, and Friedrich List, a German American émigré.

The most important member of the American school of economic nationalism was Carey, author of
Principles of Political Economy
(1837) and many other books. Karl Marx and Ralph Waldo Emerson believed that Carey was the most important economist the United States had produced.
¹¹
From his father, an Irish immigrant, Carey derived his Anglophobia and protectionism, along with a publishing empire closely allied with Pennsylvania iron and coal interests. Carey viewed free trade as the economic corollary of British imperialism: “By adopting the ‘free trade,’ or British, system we place ourselves side by side with the men who have ruined Ireland and India, and are now poisoning and enslaving the Chinese people.”
¹²

In the view of Carey and other American School thinkers and politicians, the industrializing North was opposed by a combination of the British Empire and its allies in the southern planter class, who shared an interest in a system in which the South would supply cheap cotton to British mills, in return for providing a market for British factory goods. Following the Civil War, Carey wrote in 1867: “Slavery did not make the rebellion. British free trade gave us sectionalism, and promoted the growth of slavery, and thus led to rebellion.”
¹³

HARRY OF THE WEST

In politics, the unlikely champion of the policy of American economic development on the basis of import substitution was a Virginia-born Kentucky slaveowner named Henry Clay. Over six feet tall, Clay became one of antebellum America’s best-known orators, with the use of a broad mouth described by a historian in 1857: “In his old days, when the men crowded around him for a shake of his hand, and the women beset him for a kiss of his patriarchal lips it was remarked that his capacity of gratifying this latter demand was unlimited, for the ample dimensions of his kissing apparatus enabled him completely to
rest
one side of it, while the other side upon active duty.”
¹⁴
Clay coined the phrase “self-made man” and considered himself one, though he owed his fortune not to business but to his marriage into the influential landholding family of his wife, Lucretia Hart, and lived at Ashland, a plantation worked by hundreds of slaves.