Economics through History

The United States has fought in 12 major wars, beginning with the American Revolution. The country has been left with a staggering amount of debt after each war. The United States had a poor economy during its first years as a republic because of war debt. An examination of the economic causes of the Civil War offers insight into the multifactor justification for war.

Although slavery was the dominant issue that divided the North and the South, other issues like the federal tariff and internal improvements fueled animosity between the two regions.

• A tariff is a list of taxes on specified imported goods. Tariffs are used to raise revenue.
• Internal improvements are major domestic transportation projects paid for by Congress. These projects include canals, roads, and ports.

In theory, the tariff would raise the money needed to pay for the internal improvements. Therefore, the tariff would finance the infrastructure in a nationally linked market, making it easy to transport goods. The U.S. economy would prosper independent of foreign trade.

Most Northern businesses supported the American System, while most Southern businesses did not. The North thought the federal tariff would allow young American industry to grow, protected from mature English competition. The South believed the federal tariff was an unconstitutional system that enhanced the power of the North.

KEEP IN MIND . . .
Tariffs + National Bank + Infrastructure development = American System

The South was not exempt from the tariff. But eventually, tariff rates were lowered for buyers from the South, and tensions between the two regions eased. However, the South was economically dependent on slavery, while abolitionists in the North were trying to end slavery. This conflict led to the Civil War.

Economic reasoning can be used to make sense of any war. It is important to remember that peace and free trade reinforce each other. The more specialized people in different regions become, the more they grow to depend upon each other. This makes them more vulnerable to interruptions in market activities. Therefore, people in different regions have reason to cooperate with each other peacefully. Regardless of the reasons for a war, there is almost always an economic motive underlying the conflict.