Splendid Exchange, A

by Bernstein, William L

  The act of 1832 lowered duties only slightly on some manufactured goods. Jackson had thought that these concessions would mollify the South, but they did not, since the act kept tariffs on imported textiles, particularly on negro cloths, at about 50 percent.13 On November 24, 1832, a state convention in South Carolina applied Calhoun’s secret legal strategy to pass the Ordinance of Nullification, which declared both the 1828 and 1832 tariffs illegal within its borders. By year’s end, Calhoun had resigned the vice presidency, returned home, and been elected senator. Jackson replied swiftly, first with words (declaring that the South Carolinians were “in a state of insanity”), then by sending a naval squadron to Charleston, and even by threatening to arrest the governor of Virginia should he be so foolish as to impede federal troops sent through his state to pacify South Carolina.14

  By this point, Jackson was brimming over with righteous anger against the South and seemed hell-bent on a violent confrontation. But the protectionist Henry Clay, “the Great Compromiser,” saved the president from himself. Clay realized two things: first, that only a further reduction in import duties would prevent South Carolina from nullifying the previous tariff acts and precipitating a showdown; and second, that Jackson desired the authority to bring an increasingly radicalized South Carolina to heel.15

  Clay accomplished both aims, and thereby postponed the Civil War for a generation. On March 1, 1833, the “Compromise Tariff,” under which rates fell slowly over the next several years, passed Congress. This cleaved rabid South Carolina, petrified of her growing slave majority and committed to nullification, away from the rest of the South. On the same day, the “Force Bill,” which authorized the president to take whatever action he saw fit to collect tariffs and maintain the Union, passed as well. Outmaneuvered, Calhoun had no choice but to go along, and on March 3 he raced in an open mail cart through freezing rain to Columbia, South Carolina, to prevent the state convention from passing the nullification decree.

  Eight days later, having been convinced by Calhoun that the Compromise Tariff had stripped away the support of the other southern states, the convention backed down. It did nullify the Force Bill, but this was an empty gesture: its acceptance of the Compromise Tariff meant that there was now no need to invoke the Force Bill.

  Thanks to the adroit political maneuvering of Jackson and Clay, South Carolina found itself alone in its power struggle with the federal government over the nullification of the tariff acts. In all fairness, Calhoun still believed strongly in the Union, even if many of his fellow South Carolinians did not. He saw nullification as a way to defuse secession and keep his native state within the national system, where it indeed remained for another generation.16

  Two decades later, in 1856, the poor showing by the abolitionist John C. Frémont, the first Republican presidential candidate, against James Buchanan convinced the new party that its antislavery platform alone was inadequate. Pennsylvania, the most protectionist state in the Union, had been a pivotal one in the election, and it would remain pivotal in the election of 1860. Already under the spell of the arch-protectionist Henry Carey, Abraham Lincoln took up the cry for higher tariffs and won the Keystone State and the White House. Carey would become his chief economic advisor.17

  When South Carolina again incited conflict in 1861, the secessionists had gained the upper hand in the entire South, and the North would not be as understanding as it had been a generation earlier. According to Confederate mythology, a Virginia Unionist, Colonel John Baldwin, offered Lincoln the adjournment of his state’s secession convention in return for the evacuation of Fort Sumter. Lincoln is supposed to have replied, “What will become of my tariff?”18

  By 1861, the balance of economic power and military potential had shifted in favor of the North. Had Jackson, Clay, and Madison acted less wisely, the tariff controversy of the 1830s and the subsequent nullification crisis could quite possibly have ended in the defeat of the Union.

  The roots of southerners’ discontent spread far beyond trade policy, of course; in 1833, moderates in Congress had accused the nullification forces, bent on states’ rights and the survival of slavery, of using the tariff laws as a convenient excuse for tearing the Union apart.19 Calhoun admitted as much. Speaking to a northerner friend, he explained, “The tariff is the occasion, rather than the real cause of the unhappy state of things.”20 Nonetheless, there can be no doubting the importance of the split between free-traders and protectionists as a cause of the Civil War. After Lincoln’s election, an editorial in the appropriately named Natchez (Mississippi) Free Trader stated:

  Ere the 4th of March next [Inauguration Day] the signs of the times are that a Southern Confederacy will be formed and the principle of free trade will be established. Then will the North, prostrate in the dust, too keenly feel what a precious jewel they have parted with, never to be regained. The South needs no Custom House and will thrive on free trade as she never can without it.21

  In 1861, secession and war left the North with the need to fund its army, and later, pensions and Reconstruction; paying for all this would require billions in import duties. The Union, now shorn of Southern opposition, was free to erect one of the world’s highest tariff walls. For more than a half century after the Civil War, this formidable barrier shielded American industries from British competition.

  As much as the debate over protection roiled the United States and Europe at the beginning of the nineteenth century, this issue would be trumped by the dramatic fall in shipping costs. After 1830, cheap freight would create a revolutionary new global market for the world’s most important bulk product, grain.

  The economic historian Paul Bairoch calculates that in 1830, wheat sold for approximately $95 per ton in Europe, and the cost of transport per ton per thousand miles was $4.62 by ocean, $28 by canal or river, and $174 by road. (Prices have been converted into 2007 dollars.) America’s fertile new lands could produce grain at roughly half the cost of that in Europe—$47.50 per ton, giving a price advantage of $47.50 over European-grown grain. It cost $17 to transport a ton of New World wheat 3,600 miles across the ocean; this left a $30 advantage over wheat grown in Europe. However, once the costs of transshipment, spoilage, and insurance were taken into account, the breakeven point was probably no more than a few dozen miles inland from American ports.22

  These numbers demonstrate that in the mid-nineteenth century, transport costs were so high that grain and other bulk products from America could not compete in Europe. In other words, land transport costs for bulk goods were so high that the tariff rates levied on them were irrelevant.

  The Erie Canal and Saint Lawrence Systems in 1846

  Neither the Mississippi nor the Great Lakes system provided transportation that was cheap or efficient enough to fill the bill. The solution would be the Erie Canal, a 364-mile channel that cut through unsettled wilderness from just south of Niagara Falls to the Hudson River at Albany, traversing several hundred feet of elevation along the way.

  At its opening in 1825, the canal carried 185,000 tons per year of eastbound cargo. Traffic on the new waterway grew so rapidly that it was soon widened and double-locked; in 1845, it carried one million tons; in 1852, two million; and in 1880, its peak year, 4.6 million. The success of the Erie set off a canal boom that provided America with 3,326 miles of artificial waterways by 1840.

  Historians have long wondered how traffic on the Erie Canal continued to increase for fifty-five years in the face of competition from the railroads.23 The canal’s tonnage grew so prodigiously for more than half a century precisely because of the iron horse. Before the railroad, canal transport suffered from the same shortcoming as maritime shipping: because of the astronomic expense of road carriage, a load of grain grown more than twenty or thirty miles from a port might just as well have been sitting on the far side of the moon. The primitive steam and iron rail technology of the mid-nineteenth century was not capable of getting crops to the ports and efficiently powering them across the ocean. More advanced metallu
rgical technology was needed to make the new inland supply chain practicable.

  The major stumbling block was the mechanical properties of iron. Wrought iron rails were too soft to bear the weight of heavy railcars, and wore out quickly; steam boilers made of iron were not strong enough to bear high pressures.

  Strong, flexible steel was needed for both rails and boilers, but before Henry Bessemer invented his blast process in the mid-1850s, it was far too expensive for either application. After his technique was perfected by Charles William Siemens and Pierre Martin, the price of steel fell to just a few pounds sterling per ton, about one-tenth of what it had been.24

  The switch from iron to stronger and more flexible steel for boilers and pistons allowed finer engine machining and, most importantly, higher pressures and greater fuel efficiency. However, new improvements usually create new problems: wooden hulls could not tolerate the stress of the new propulsion system. Steel plates allowed for stronger and lighter hulls, and steel propellers and shafts bore high rotation speeds better than those of iron. The stage was now set for the triumph of steam on the oceans.

  Figure 12-1. Break-Even Point between Sail and Steam

  The victory of steam would not come easily on the deep seas. At the same time that the new steel engine and hull designs made oceangoing steamships possible, radical improvements were also being made in the designs of sails and of wooden hulls, particularly for the clipper ships described in Chapter 11. The steamship’s need for refueling meant that the longer the route, the less price-competitive steam became. By the late nineteenth century “extreme clipper” designs, epitomized by the Cutty Sark, sustained speeds in excess of fifteen knots and dominated the long-haul routes.25 In the roaring forties, a well-trimmed clipper could sustain runs of up to twenty knots, a speed no steamship of the era could match.26

  Economic historians have calculated how the carrying capacity of steamships (the tonnage not used for coal, and thus available for cargo) fell off with distance, as shown in Figure 12-1. Below a carrying capacity of approximately 75 percent (that is, using more than one-fourth of displacement for coal), steam could not compete with sail. Over the course of the nineteenth century, this “steam-sail boundary” gradually lengthened as more efficient engines consumed less fuel. In 1850, steam lost out to sail beyond three thousand miles, but by 1890 the boundary had lengthened to ten thousand miles. The epic competition between steam and sail that raged throughout the nineteenth century had nearly ended. By the beginning of the twentieth century, steam propulsion was economical on all but the very longest ocean routes.27

  Steam-driven metal ships suffered from other disadvantages. A steamship cost about 50 percent more than a wooden vessel of the same size and required 50 percent more crew. The steamship companies spent enormous sums cleaning iron bottoms, since metal hulls fouled easily with barnacles and seaweed. (Copper resists these pests much more effectively. A thin sheet of it could easily be nailed over a wooden hull but would rapidly corrode an iron or steel hull.) If a dockworker or shipping clerk did not know whether a scheduled arrival was sail- or steam-powered, all doubt was removed when the vessel became overdue. Joseph Conrad, again:

  The sailing ship, when I knew her in her days of perfection, was a sensible creature. . . . No iron ship of yesterday ever attained the marvels of speed which the seamanship of men famous in their time had obtained from their wooden, copper-sheeted predecessors. Everything had been done to make the iron ship perfect, but no wit of man had managed to devise an efficient coating composition to keep her bottom clean with the smooth cleanliness of yellow metal sheeting. After a spell of a few weeks at sea, an iron ship begins to lag as if she had grown tired too soon.28

  Two other factors helped keep sail alive. The first was cheap American timber; in the mid-nineteenth century, the United States briefly surpassed England as the world’s leading shipbuilder (although most of the American-built clipper ships sailed under the Union Jack). The second factor was improvements in meteorological observation. Beginning with the eighteenth-century voyages of Captain James Cook, both British and American mariners and geographers systematically mapped the world’s winds and ocean currents. Sailing ships no longer groped their way through the seas using vague seasonal rules of thumb, but rather could maintain the most advantageous routing for the precise time of year. During the nineteenth century, these advances shortened the 11,000-mile voyage from England around the Cape to Australia from 125 days to 92 days.

  Gradually, the improved efficiency of steam engines overwhelmed the valiant rearguard action of sail. By 1855, steamships carried one-third of England’s trade with the western Mediterranean and almost all of its trade with northern Europe, and by 1865, steam powered cargoes to and from Alexandria as well. In 1865, the steamship Halley carried a load of coffee from Rio de Janeiro to New York, demolishing the myth that only wooden ships preserved the beans’ flavor, and iron ships came to dominate the North and South American East Coast trade.29

  The opening of the Suez Canal on November 17, 1869 shortened the distance between London and Bombay from 11,500 to 6,200 miles. This cut the heart out of the long-range advantage of sail. Since the steam-sail boundary (shown in Figure 12-1) for 1870 was about seven thousand miles, this meant that the canal’s opening abruptly rendered sail uneconomical between Europe and Asia. Worse, sailing ships could not travel north up the Red Sea against its prevailing headwinds, and they had to be towed in both directions through the canal. During the first five years of the canal’s operation, not even one in twenty craft transiting it was a sailing vessel.

  Figure 12-2 plots the dramatic falloff in the construction of wooden ships caused by the Suez Canal. Over the next twenty years, the remaining old wooden sailing vessels wore out and were replaced with iron ships; in 1890, total global steam tonnage permanently surpassed that of sail.30

  Figure 12-2. Annual World Ship Construction

  Theoretically, sail should have competed well with steam over the very long distances of the China trade. But since China’s exports consisted mainly of high-value tea, shippers happily paid the higher steam freight after the Suez Canal opened. The last of the fabled clippers departed Canton in the late 1870s.

  Since the canal cut only one hundred miles off the Cape route between Sydney and London, most Australian traffic remained open to sail. Even so, high-value carriage—passengers and luxury goods—went by steam, leaving only low-value ores and nitrates to go by sail.31 In 1914, the opening of the Panama Canal, which eliminated the long leg around the Horn, rang down the final curtain on the age of sail.

  Steam and steel wrought a trade revolution not only on the world’s oceans, but also on its rivers, canals, and land. These changes were particularly important in the vast open spaces of the New World unreachable by boat, and they return our narrative to the Erie Canal.

  When it opened in 1825, the Canal dramatically decreased the price of inland waterborne transport, but the land barrier remained. Without efficient rail transport, the Great Lakes system gave access to only a thin crescent of territory within a few dozen miles of the shores of lakes Erie, Huron, and Michigan.

  Strong, cheap steel rails and high-pressure steel boilers brought the American cornucopia to the rest of the world. In 1830, it cost $173.82 (in today’s dollars) to move a ton of goods a thousand miles by wagon; in 1910, the price of the same haulage by rail was only $22.43, one-eighth as expensive as, and several times faster than it had been in 1830.32

  No point in England lies more than seventy miles over relatively tame countryside from the sea. For centuries, this geographical fact combined with the prohibitive expense of overland carriage to give England an incalculable advantage over its continental neighbors. With the advent of cheap canal and rail transport, that edge vanished; for the world’s farmers, the world became flat in a hurry after Bessemer poured the first steel out of his crucibles.

  When the Mary’s Fall Canal locks connected Lake Superior to the Great Lakes system and the Erie Canal
in 1855, they gave access not only to the agricultural produce of the Great Plains, but also to Minnesota’s huge iron ore deposits, from which yet more steel rails, boilers, and ship’s plates could be made.

  Because the laws of physics dictate that water transport is inherently more efficient than land transport, canal shipment remained cheaper than rail shipment. With time, however, shippers increasingly valued the speed and reliability of rail. Grain sent direct by freight car to the East Coast arrived more quickly, was less likely to spoil in summer, and did not require the two expensive and risky transshipments of the lake system: from rail to lake steamer and from lake steamer to canal barge. Shippers paid high insurance premiums for cargoes in the lake system, whereas the railroads wisely assumed direct responsibility for the contents of freight cars. In addition, the railroads could be kept running in all but the worst weather in winter, when the lakes froze over.

  During the nineteenth century, the advantages of rail grew. Before about 1873, wheat sent east through Chicago went by train only if the lakes were frozen; after that date, almost all wheat traveled directly by rail; the changeover for less valuable corn came in 1884. Chicago’s rise to prominence as a rail hub was not accidental. From the southern shores of Lake Michigan, rail held a decided advantage over the lake route east, since a train journey from Chicago to the East Coast was much more direct than steaming the semicircular route around lakes Michigan and Huron. Although tonnage on the Erie Canal grew for over half a century after its opening in 1825, not peaking until 1885, the value of cargo carried began falling long before that, in 1853, because the railroads siphoned off high-cost goods and left the lakes and canals with cheap, bulky commodities such as iron ore.33