One of the four causes of the Southern secession and the War Between the States was economic impoverishment of the South. While it was not their main complaint, they believed that the North had pillaged them. In the Declaration of the Causes which Impel the State of Texas to Secede from the Federal Union, they said:
They have impoverished the slave-holding States by unequal and partial legislation, thereby enriching themselves by draining our substance.1The roots of the economic disagreements went all the way back to the United States Constitution. In the writing of the Constitution the founders had to consider how to raise money for the federal government. Rather than modern taxes such as the income tax, they chose only two, the head tax and the tariff.2 A tariff is a tax on imports or exports. The federal government was not intended to have any jurisdiction inside a state. It was only allowed to regulate commerce that crossed state borders. Therefore it was only given the right to tax goods that crossed the national border. The problem with a tariff is that the government can easily use it to give advantages or punishments to particular industries or states. The Constitution specifically forbade different tariff rates for different states,3 but as we will see it still can be unfair even while charging the same rate.
ExportsThe first type of tariff is on exports, where the merchant has to pay a tax to export products from the nation. Exports are rarely used because they have a direct and visible hit on a specific industry. If a Representative from North Carolina votes for a tariff on tobacco, the tobacco producers from his home state will not re-elect him because he raised their taxes.
ImportsTaxes on imports charge foreign producers to bring the product into your country. This helps in the home industry because they can raise their prices, or be less efficient. If a government charges a 20% tariff on imports of cars, when a foreign company makes a $10,000 car, in the United States they will have to sell it for $12,000 to over the import tariff. But this means that the American car manufactures will be be able to raise the prices on their cars, say 15%, and still be cheaper than the foreign car manufacturers. Their manufacturing costs can be the same, but one is $12,000 and the other $11,500. A tariff raises the price of domestic goods because the government has inflated the cost of foreign goods.
Wealth DiscrepancyBefore the War for Independence, America primarily produced raw materials and shipped them to the manufacturers in England, so once they separated from England, Washington and the subsequent presidents wanted to encourage Americans to start manufacturing. To do this tariffs were placed on manufactured imports. But this created a wealth discrepancy between the Northern and the Southern states. The North was primarily manufacturing and the South mostly produced raw materials. The North were able to get more profit by raising their prices because the foreign competition had to pay the tariffs. This economic situation caused a discrepancy in wealth between the Southern and the Northern states.
SecessionThe issue caused by protective tariffs was not the main cause of the war. It was less important than other issues, but it did play into the decision by the Southern States to leave the Union.
1. Declaration of the Causes which Impel the State of Texas to Secede from the Federal Union, 1861. Source.
2. “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;” Constitution, article 1, section 8. Source.
3. “No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another: nor shall Vessels bound to, or from, one State, be obliged to enter, clear, or pay Duties in another.” Constitution, article 1, section 9. Source.