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The American System (page 2)

By — McGraw-Hill Professional
Updated on Feb 4, 2012

The Tariff Acts

A tariff is a tax or duty on imported goods. The idea behind a protective tariff is to drive up the prices of imports so that people will purchase goods made in their own country. Buying locally, of course, benefits the local economy.

The Tariff Act of 1816 established a 25% tax on imported manufactured goods. This drove up the price of imports to such a degree that southern planters protested, afraid that European nations would retaliate by taxing American cotton. However, northerners were happy to avoid the tariff by purchasing goods from their own factories, thus increasing their own profits.

In 1828, a new Tariff Act doubled the rates set in the Tariff Act of 1816. Southerners had not supported the first act, and thus were furious over the new one. They began muttering about the infringement of the federal government on states’ rights. John C. Calhoun, who had originally supported the use of the import taxes to pay for the roads and canals, wrote an essay arguing that no state should be forced to obey any act of Congress that it believed to be unconstitutional. Since the states had created the federal government, the states should have greater power. The position Calhoun took in his essay became known as the doctrine of nullification.

Many voters agreed with Calhoun. Henry Clay, ever the compromiser, successfully urged Congress to pass a reduction in the new tariff. For southerners, this was not enough. South Carolina took the lead, passing resolutions declaring the Tariff Acts null and void and refusing to pay any tariffs to the federal government. If the government tried to collect tariffs, South Carolina would secede from the United States. Clay urged a further compromise one that lowered the tariff rates gradually over the course of ten years. Satisfied for the moment, South Carolina dropped its threats. The tension during this period is known as the Nullification Crisis.

Transportation

The national transportation system had three elements: paved interstate roads, canals, and the railroad. The idea behind the system was to link the agricultural and industrial regions, so that both would benefit economically.

Congress decided to use Tariff Act income to fund new roads and canals. The National Road was begun in 1815 and the Erie Canal in 1817. Within eight years, this 363-mile canal provided a direct and efficient trade route from the Hudson River to Lake Erie.

Railway locomotives came into use in the United States around 1830. The first steam-powered “iron horses” were slow and ponderous; one even lost a race to a flesh-and-blood horse. However, mechanical knowledge advanced quickly, and the train could soon move much faster than any animal. By 1850, American trains were running over thousands of miles of track; by 1869, the railroad reached from New York all the way to California.

The transportation boom created new markets for goods. Before the development of steamboats that could take goods upstream and canals that could carry goods inland from the ocean, most trade had been in local markets. Now sellers could expand into new territories and sell to thousands of new customers. This created a market revolution. As profits grew, so did the sizes of towns and the movement of settlers. Skilled artisans who manufactured items one at a time began to give way to mass production and factories.

Practice questions for these concepts can be found at:

American Economic Development Practice Test

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