Lesson 3a: Northern Transformation

Major Questions

• What was economic nationalism?
• How did economic nationalism influence U.S. economic development?
• McCulloch vs. Maryland case and its impact on the industrial revolution.
• The federal government's role in spurring the industrial revolution.

Political Context of the Times

First Party System

• Federalist Party: Led by Alexander Hamilton
  • Favored powerful federal government
  • Loose interpretation of the Constitution
  • Traditional and conservative values
  • Politics of deference: believed elite ruling class should make decisions
  • Suspicious of democracy
• Democratic Republicans: Led by Thomas Jefferson & James Madison
  • Favored small central government, states' rights, and strict reading of the Constitution
  • Rejected deference, empowering the common man

Death of the First Party System

• Election of 1800: Victory for the common man; Jefferson's votes from western states & frontier areas
• War of 1812: New England states (Federalist stronghold) felt overburdened
  • Hartford Convention (1814): Discussed seceding from the U.S. to end the war
  • Andrew Jackson's victory at New Orleans and the Treaty of Ghent discredited the Federalist Party
• By 1820, the Federalists were no longer viable, leading to the Era of Good Feelings with only the Democratic Republicans.

American Economic Nationalism

• Embodiment of national politics during the Era of Good Feelings
• Belief that the federal government should actively boost the national economy
• Wide political support including notable figures like James Madison, Henry Clay, and John C. Calhoun

Key Elements

Second Bank of the United States (1816)

• Modeled after Alexander Hamilton's first bank
• Responsibilities: collecting federal taxes, holding government funds, making loans
• Aimed to stabilize the American economy

Tariff of 1816

• First protective tariff in U.S. history (20-25%) on imported manufactured goods
• Encouraged buying American products

Bonus Bill of 1817

• Proposed earmarking tariff revenue and $1.5 million for internal improvements (canals, roads)
• Popular in mid-Atlantic & western states but opposed in the South and East Coast
• Vetoed by James Madison due to concerns about constitutional power and pork barrel spending

Judicial Nationalism: McCulloch vs. Maryland (1819)

• Chief Justice John Marshall: Federalist, strong central government, and constitution as a living document
• Key Questions:
  • Is it constitutional for the U.S. to establish a national bank?
  • Can a state levy taxes on federal property?
  • Do states have sovereignty over the federal government?
• Ruling:
  • Federal government has the right to establish a national bank (Necessary and Proper Clause)
  • States cannot tax the federal government
  • Federal sovereignty upheld, preemptively making a case against nullification and interposition

Federal Government and the Market Revolution

Infrastructure and Investments

• Subsidies for canals, railroads, and national roads
• Support for monopolies around transportation

Corporate Boosterism

• Legal entity status for corporations; limited liability for investors
• Explosion of corporations: 20 in 1800 to 1800 by 1830
• Increase in the number of banks to meet the rising demand for capital

Contract Law

• Federal courts enforce all contracts, boosting business confidence
• Conflict between equity/fair value and contract enforcement

Labor Laws and Eminent Domain

• Formation of first trade unions; laws passed to prohibit strikes
• Increased use of eminent domain for public interest projects

Debt Law

• Supreme Court ruling (1819) prevented states from providing debt relief
• End of stay laws, making it easier to evict debtors

Conclusion

• Discussed the transformation during the Era of Good Feelings and the role of economic nationalism.
• Examined how the federal government supported infrastructure, corporations, and enforced laws to stimulate the market revolution.