Page Notes

Westward Expansion
I. In 1790 the combined white and black population of the US was 3.9 million, but only 200,000 Americans lived west of the
Appalachian Mountains. During the next 30 years the West grew at a much more rapid rate than the rest of the nation.
Native American Resistance
I. In the Treaty of Paris of 1783, Great Britain had relinquished its claims to the trans-Appalachian region and its peoples. A
few influential Americans advocated extermination of the native peoples.
A. Many other political leaders, including Henry Knox, favored assimilation of the Indians into American society. As a
first step towards this process, Knox advocated the redistribution of commonly owned tribal land to individual Indian
families as their private property.
B. Most Indians firmly rejected that idea, for they were not accustomed to possessing wealth as individuals; instead, their
custom was to circulate goods to fulfill social obligations.
Conflict over Land Rights
I. The first major struggle between Indians and whites arose over land rights. Invoking the terms of the Paris treaty and
claiming that pro-British Indians were conquered peoples, the new American republic asserted its ownership over all native
lands in the trans-Appalachian West. Native Americans rejected this claim, pointing out that they had not signed the treaty
and had never been conquered
II. The Confederation Congress and the state governments brushed aside those arguments. In 1784, US commissioners used
military threats to force pro-British Iroquois peoples to the sign the Treaty of Ford Stanwix, relinquishing much of their
land in New York and Pennsylvania.
A. Freely dispensing liquor, manufactured goods, and bribes, NY officials and land speculators secured other treaties that
gave them title to millions of acres of Iroquois lands in central and western NY. By 1800 the once-powerful Iroquois
peoples were confined to small reservations.
B. American negotiators used similar tactics to extract agreements from Indian peoples farther to the west.
C. Several tribes formed a Western Confederacy to defend their lands and lives from aggressive settlers from Kentucky.
Led by Little Turtle, a Miami chief, they defeated as American expeditionary force commanded by General Josiah
Hamar in 1790 and crushed an army led by General Arthur St. Clair in 1791.
III. Fearing an alliance between the Western Confederacy and the British in Canada, Washington doubled the size of the US
army and ordered General Wayne to lead a new expedition.
A. In August 1794 Wayne defeated the Indian allies in the Battle of Fallen Timbers. Despite his victory, the Confederacy
remained strong and forced the American negotiators to accept a compromise peace.
B. In the Treaty of Greenville in 1795, the US acknowledged Indian ownership of the trans-Appalachian West,
renouncing a claim to the land that had been based on conquest. However, the treaty also required native Americans to
cede the entire southeastern corner of the Northwest Territory as well as certain strategic areas along the Great Lakes.
This agreement had great diplomatic significance, for it diminished the prospect of an Indian alliance with Britain and
thus increased the likelihood that Britain would finally withdraw its military garrisons from American territory in the
West.
C. Recognizing the changed balance of power, Britain reaffirmed its obligation to remove its garrisons in Jay’s Treaty in
 1795.
IV. As the fighting ended, the pace of American westward expansion picked up.
Attempts at Assimilation
I. Until the 1820s the US government continued to pursue a twofold policy toward native Americans: the acquisition of their
lands and their assimilation into white society.
A. To provide land for American farmers, Governor William Henry Harrison of the Indiana Territory and other federal
officials used bribes, threats, and deceit to purchase millions of acres. At the same time government agents allowed—
and even encouraged—the Indians to settle in farming communities on adjacent lands, hoping that Christian
missionaries could persuade them to adopt white culture.
II. Most native Americans resisted attempts to confine them to farming and reshape their identity. Many Indian people drove
out the white missionaries and forced the converts to Christianity to participate in traditional tribal rites.
A. To explain their continuing respect for ancestral values, native American leaders devised dualistic cultural and
religious theories.
B. Many tribes broke up into hostile religious factions.
III. Traditionally, Indian women had been responsible for growing staple crops and had often controlled the inheritance of
cultivation rights. Their importance in the economic sphere gave Indian women some political power.
A. Most women insisted on retaining their role as cultivators, and even those Indians who embraced Christian teachings
retained many traditional values.
B. To view themselves as individuals, as the Europeans demanded, would have been to repudiate the clan, the essence of
Indian life. Most Indians therefore resisted assimilation into white culture, and most tribes resisted white attempts to
acquire their land.
Settlers, Speculators, and Slaves
I. Native American resistance did not deter the advance of American settlement, as migrants poured across the Appalachians
into the Ohio River Valley and moved along the costal plain of the Gulf of Mexico into the future states of Alabama and
Mississippi.
The Rush to Kentucky and Tennessee
I. The migrants who settled Kentucky and Tennessee between 1790 and 1820 were mostly tenant farmers and struggling
yeomen families fleeing the depleted soils and planter elite of the Chesapeake region. They were confident that they would
prosper by growing hemp and cotton.
A. They first had to gain title to the land. Migrants without ready cash based their claims for free land on the ancient
cultivation law governing frontier tracts. They argued that poor settlers had a right to occupy vacant lands.
II. The Virginia government, which administered the Kentucky Territory, had a much more elitist vision of the new
settlements. Consequently, when Kentucky became a state in 1792, a handful of speculators held title to ¼ of the state,
whereas half the adult white men owned no land.
The Spread of Slavery into the Southwest
I. As poor whites fled from Chesapeake states to Kentucky and Tennessee, wealthy planters and young men from the
Chesapeake and the Lower South set up new slave plantations in the Old Southwest. Consequently, the southwestern
frontier became a stronghold not of yeoman agriculture but of slavery.
II. As planters established new plantations, first in the interior of Georgia and South Carolina and then in the Old Southwest,
 they imported thousands of new slaves from Africa.
A. The black population also grew through reproduction.
B. Many of these Africans and African Americans still toiled in tobacco fields in the Chesapeake, but as soil depletion
caused a drop in output, white planters took the crop and the slaves who grew it into the Virginia Piedmont, North
Carolina, Kentucky, and Tennessee.
C. Rice planters in South Carolina and Georgia also expanded their plantations until the 1820s, when the overseas
markets were lost to less costly rice from Asia.
III. It was a new crop—cotton—that provided the impetus for the expansion of slavery into the Old Southwest.
A. After 1750, the European population explosion caused an increased demand for clothing. Simultaneously, the
technological breakthroughs of the Industrial Revolution boosted the production of textiles and lowered their prices.
B. The result was a seemingly insatiable demand for raw wool and cotton. Inventors helped to meet this demand by
developing machines that extracted the seeds from short-staple cotton, which grew easily in the South.
IV. Before long, thousands of white planters in South Carolina and Georgia were growing cotton; beginning in 1815, a vast
migration of planters—and their slaves—carried the production of cotton into Alabama and Mississippi, which entered the
union in 1817 and 1819, respectively.
Exodus from New England
I. As cotton planters moved Southwest, a northern wave of migrants flowed out of New England into New York state and
beyond, seeking to plant new yeoman farm communities.
A. The quest for land had already propelled New England farmers north into New Hampshire and Vermont and east along
the coast of Maine.
B. After 2 centuries of population growth, many New England communities were crowded and subdivided into small
farms, their rocky soil on the verge of depletion. Unable to provide farmsteads for their children, thousands of New
England parents moved to upstate New York.
II. The vast migration was organized by the people themselves. To lighten the burdens of migration, many settlers moved in
large groups linked by family and religion.
III. Much land in New York was snapped up by politically well-connected speculators.
A. Speculation drove up the price of farms, making it difficult for yeoman farmers to realize their dream of landed
independence. Moreover, wealthy eastern landlords established new estates in the West.
IV. Seeking freehold ownership, many New England yeomen shunned the idea of renting and signed lease-purchase
agreements with the Dutch-owned Holland Land Company, which allowed them to buy the land as they worked it.
A. Thousands of these yeomen became mired in debt because of high interest rates and the difficulty of transporting
goods to market.
B. Soon the number of tenants far surpassed the number of freeholders in the region west of the Genesee River. Having
fled declining prospects in the east, these farmers found themselves at the bottom of the economic ladder in the West.
Changes in Eastern Agriculture
I. The massive exodus drained eastern towns of money and workers, forcing established farmers to plant different crops and
upgrade their equipment.
A. In NE farmers turned to potatoes. In the Mid Atlantic states enterprising farmers replaced metal-tipped wooden plows
with cast-iron models that dug deeper furrows and required fewer oxen. By using cast-iron plows farmers could get by
 with fewer draft animals and workers, thereby maintaining production levels.
II. Eastern farmers also took advantage of the progressive farming methods advocated by British agricultural reformers.
Wealthy “improvers” rotated their crops to maintain the soil’s fertility, ordering workers or tenants to plant nitrogen-rich
clover and follow it wheat, corn, and then clover.
A. Yeomen were equally innovative, diversifying their output by raising sheep and selling the wool to textile
manufacturers.
B. Many farmers adopted a year-long planting cycle, sowing wheat in the winter and planting corn in the spring.
III. In the new agricultural economy families worked harder and longer, but their labor was rewarded by larger output and a
better standard of living.
A. Westward migration boosted the entire American economy, bringing new resources into production in the West and
increasing farm productively in the East.
The Transportation Bottleneck
I. The geography of the American continent threatened to cut short its economic advance. In America, the pattern of
settlement and trade had long been determined by water routes, the quickest and cheapest way to get goods to market.
A. Farmers and planters without access to rivers had to haul their crops by oxcart over dirt trails.
B. Without access to waterways, settlers—especially those west of the Appalachian Mountains—could not afford to send
goods to eastern markets or export them to Europe or the West Indies.
II. The enhancement of inland trade became a high priority for the new state governments, which actively encouraged
transportation ventures.
A. State governments and private entrepreneurs undertook the construction of inland waterways.
B. The great rivers of the interior represented the hope of the West. Western settlers paid premium prices for land along
navigable streams, and speculators bought up property in growing towns along the major rivers.
C. To take cotton and surplus grain and meat to market, western farmers and merchants built shallow barges and floated
them down this interconnected river system to the port of New Orleans.
III. The migrants in the interior of NY faced a more serious transformation problem, for no rivers connected their settlements
in the east. Only in 1819, when the first section of the Erie Canal connected the central counties of NY with the Hudson
River, could these inland farmers ship their crops to eastern markets.
IV. Despite these improvements, many settlers in the west remained isolated and made their own clothes, repaired old tools,
and bartered goods and labor with neighbors.
A. Self-sufficiency meant a low standard of living.
V. Despite these hardships and the transportation bottlenecks, white Americans continued to migrate west-ward. They knew it
would take a generation to clear land, build houses, and plant crops.
A. Even if the markets proved elusive, the settlers were confident that their sacrifices would yield future security—a
farmstead and an independent livelihood for themselves and their children.
The Republicans’ Political Revolution
I. Supported by voters in the new western states and by strong majorities in Congress, bw 1801 and 1825 three Republicans
from Virginia—Thomas Jefferson, James Madison, and James Monroe—each served 2 terms as president. This “Virginia
dynasty” of Republican presidents reversed many Federalist policies, completing what Jefferson called the Revolution of
1800.
 A. The west played a prominent role in Republican policy and, together with maritime disputes with Great Britain,
precipitated the War of 1812.
The Jefferson Presidency
I. On becoming president in 1801, Jefferson won over some of his Federalist opponents by appointing them to important
government posts.
Courts and Politics
I. After 12 years of Federalist presidents, the government was filled with Jefferson’s political opponents, especially in the
judiciary. Moreover, in 1801 the outgoing Federalist-controlled Congress passed a Judiciary Act creating 16 new
judgeships, 6 additional circuit courts, and a variety of patronage posts.
A. Republicans in Congress fought back by repealing the Judiciary Act of 1801 and impeaching two Federalist judges for
their partisan political activities, removing one.
B. For his part, James Madison refused to commission one of the midnight appointees, William Marbury, as a justice of
the peace in the District of Columbia. When Marbury asked the Supreme Court to issue a legal writ on his behalf,
Marshall ruled in Marbury vs. Madison that while Marbury had a right to his commission, the right was not
enforceable by the court. This was so, Marshall declared, because the Judiciary Act of 1789 had violated the
Constitution by expanding the powers given to the Supreme Court.
C. Jefferson pursued a conciliatory appointment policy, judging each Federalist bureaucrat on the basis of his ability.
The “Revolution of 1800”
I. Nonetheless Jefferson was determined to change the character of the national government. The Federalists, he charged, had
grossly expanded its size and power; Republicanism would shrink it back to its correct constitutional size.
A. When the Alien and Sedition Acts expired in 1801, Congress did not reenact them, charging that they were politically
motivated and unconstitutional. It also amended the Naturalization Act to permit resident aliens to become citizens
after 5 years.
II. Jefferson also modified many Federalist policies.
A. During the 1790s Federalist administrations had paid tribute to the Barbary States of North Africa—bribing them to
not attack American merchant ships in the Mediterranean Sea. In 1801 Jefferson stopped the payments and instead
ordered the US navy to attack.
B. But Jefferson wanted to avoid an expensive war, which would increase taxes and the national debt, and therefore he
accepted a diplomatic solution in which the US paid a small tribute.
III. In domestic affairs Jefferson set his own course—moderate but clearly Republican. He abolished all internal taxes,
including the excise tax that had sparked the Whiskey Rebellion of 1794.
A. Addressing his party’s fears of military takeover of the government, Jefferson reduced the size of the permanent army.
B. He came to accept the Bank of the United States, which he had condemned as unconstitutional in 1791, because of its
importance to the nation’s economy, but he continued to oppose large public debt.
Jefferson and the West
I. Long before he had become president, Jefferson had championed the settlement of the West. He had celebrated the yeoman
farmer, helped compose the Confederation’s western land ordinances, and strongly supported Pinckney’s Treaty of 1795,
 which allowed settlers to ship crops down the Mississippi River for export through the port of New Orleans.
The Northwest Territory
I. As president, Jefferson had a new opportunity to encourage western settlement. The ordinances of 1785 and 1787, which
had created the Northwest Territory, had divided it into uniform sections or townships. Despite Jefferson’s efforts, the
ordinances of 1785 had a class bias, favoring speculators over yeoman.
A. The poorer settlers demanded better terms, but the Federalist dominated Congress of the 1790s turned a deaf ear.
Many Federalist politicians were eastern landlords and had no desire to lose their tenants to cheap land in the West.
B. Most of the best land fell into the hands of the speculators, such as those in the Ohio and Scioto Land Companies, as
the authors of the ordinances had intended.
II. Because Jefferson wanted to see the West populated with yeomen farm families, the Republicans in Congress won the
passage of laws in 1800 and 1804 that reduced the minimum allotment to 320 and then 160 acres and allowed payment in
installments over 4 years.
A. Eventually the Land Act of 1820 cut the minimum purchase to 80 acres and the price to $1.25/acre.
The Louisiana Purchase
I. Napoleon’s intention to reestablish a vast American empire prompted Jefferson to question his party’s traditionally pro-
French foreign policy.
A. To avoid fighting with Napoleon, Jefferson instructed Robert R. Livingston, the American minister in Paris, to
purchase New Orleans.
II. The importance of the Louisiana Purchase forced the president to reconsider his interpretation of the Constitution.
Jefferson had always been a strict constructionist, arguing that the national government possessed only the powers
expressly delegated to it in the Constitution.
A. However, there was no provision in the Constitution for adding new territory, so to fulfill his dreams for the West,
Jefferson adopted a pragmatic stance: accepting a loose interpretation of the national charter, he used the treaty-
making powers granted by the Constitution to complete the deal with France.
Threats to the Union
I. The Louisiana Purchase doubled the size of the nation, but it brought a new threat.
A. NE Federalists had long feared that western expansion would diminish their region’s power; and some of them now
talked openly of leaving the union.
B. When Alexander Hamilton refused to support their plan for a separate Northern Confederacy, the secessionists
enlisted the support of Aaron Burr, who was seeking election as governor of NY. When Hamilton accused Burr of
plotting to dismember the nation, Burr challenged him to a duel. Hamilton died from a gunshot wound, and Burr was
charged with murder.
C. This event propelled Burr into another secessionist scheme. After completing his term as vice president in 1805, he
moved west to avoid prosecution. There he conspired with General James Wilkinson, though their plan failed.
II. The Republicans’ expansionist policies had increased sectional tension and party conflict, giving new life to states’ rights
sentiment and secessionist schemes.
Conflict with Britain and France
I. The outbreak of the Napoleonic Wars in Europe threatened the interests of the American republic because Great Britain
 and France refused to respect the neutrality of its merchant vessels.
A. Long-simmering American resentment erupted in 1807, when a British warship attacked the US Navy vessel
Chesapeake. Jefferson demanded that Britain pay monetary reparations and put an end to impressment.
B. To demonstrate his resolve, he barred British warships from American ports, preventing their resupply.
C. The British government apologized and promised compensation but continued to seize French goods from American
ships and impress suspected deserters.
The Embargo of 1807
I. To protect American interests while avoiding war, Jefferson pursued a policy of peaceful coercion. Working closely with
Secretary of State James Madison, he devised the Embargo Act of 1807. This legislation prohibited American ships from
leaving their home ports until Britain and France repealed their restrictions on US trade.
A. Though the embargo was imaginative—an economic weapon similar to the nonimportation movements of 1765 and
1775—it was also naïve. Jefferson and Madison overestimated the belligerents’ dependence on American shipping and
underestimated resistance from NE merchants, who feared the embargo act would ruin them.
B. The Act crippled American exports, hurting farmers and merchants and prompting Federalists to demand its repeal.
C. Federalists became more alarmed when the Republican Congress passed a Force Act to prevent smuggling across the
border between NE and Canada. The act gave customs officials extraordinary legal powers, reviving fears of
government tyranny.
II. Despite public discontent with the embargo, voters elected James Madison as president in 1808. He promptly
acknowledges the embargo’s failure.
A. In 1809 he replaced it with the Nonintercourse Act, which permitted trade with all nations except France and Britain,
and offered the promise of normal commerce if the belligerents respected America’s neutral rights.
B. When Britain and France ignored this overture, in 1810 Madison bowed to pressure from Congress and accepted an
act—Macon’s Bill No.2—that reopened legal trade but threatened to cut off trade with any nation interfering with
American commerce.
Tecumseh’s Challenge and Republican Policy
I. Republican congressmen from the West accused Britain of arming the Indian tribes in the Ohio River Valley.
A. Since 1808 Governor General James Craig of Canada had quietly renewed military assistance to native Americans,
hoping that the Indians could defend their territory and continue to trade with the British.
B. In 1809, the Shawnee chief Tecumseh revived the Western Confederacy of the 1790s and tried to extent it to the
southern tribes, vowing to exclude whites from all lands west of the Appalachian Mountains.
II. Thousands of white settlers already lived in the West, and their concerns had a decisive impact on American policy.
Expansionists in congress condemned British support of Tecumseh and threatened to retaliate by invading Canada and
seizing Florida from Spain.
A. Urged by such talk, southern planters campaigned for the conquest of eastern Florida to prevent fugitive slaves from
taking refuge among the Seminole Indians.
B. Americans living near and in the western region of Florida did not wait; they took up arms and occupied this region,
hoping to annex it to the US.
 C. Violence also broke out in the Ohio Valley. In 1811, responding to Indian raids against new settlements in the Indiana
Territory, Governor William Henry Harrison marched on Propherstown, fended off the confederation’s warriors at the
Battle of Tippecanoe, and burned the town to the ground.
III. Prompted by these events, Henry Clay of Kentucky, speaker of the House of Representatives, and John C. Calhoun, a
congressman from SC, pushed Madison toward war with GB. They eyed new territory in Florida and Canada and hoped
that war would discredit the Federalists.
A. With national elections coming up, Madison demanded that Britain recognize American sovereignty in the West and
neutral rights in the Atlantic. When the British failed to respond quickly, Madison abandoned the policy of economic
coercion and asked Congress for a declaration of war.
IV. Officially, the US went to war because of violations of its neutral rights: the seizure of its ships and the impressments of its
sailors. However, to resort to arms was opposed by the Federalist congressmen who represented merchants’ interests and
also by a majority of voters in NE and the Middle Atlantic States.
A. Western farmers feared Indian raids and were angry because the British blockade had caused the price of their crops to
fall.
B. Many Americans in all regions were enraged by British arrogance during the decade-long conflict over neutral rights
and Indian aid.
C. Demanding respect for America’s status as an independent nation, Republicans mobilized patriotic support for war.
The War of 1812
I. The War of 1812 was a near disaster for the US, both military and politically. Republican congressmen had predicted an
easy victory over British forces in Canada, but when General William Hull invaded western Canada, he was immediately
forced to retreat.
A. Nevertheless, American forces stayed on the offensive.
Political Conflict and Military Stalemate
I. Political divisions in the US prevented a major invasion of Canada. Federalist governors in NE opposed the war and
prohibited their militias from fighting outside their states.
A. Boston merchants and banks declined to lend money to the federal government, making war difficult to finance.
B. In Congress, Daniel Webster led Federalist opposition to higher taxes and tariffs. To force a negotiated peace, Webster
discouraged men from enlisting and successfully opposed the conscription of state militiamen into the national army.
C. Having led a divided nation into war, Madison and the Republicans were unable to strike the British in Canada, their
weakest point.
D. After 2 years of sporadic warfare, the US was stalemated in Canada and on the defensive along the Atlantic.
II. Sectional opposition to the war strengthened in 1814 as the MA legislature called for a convention to lay the foundation for
a radical reform in the National Compact.
A. In response NE Federalists met in December 1814 in CT. Some delegates to this Hartford Convention proposed
outright secession by their states, but the majority favored a revision of the Constitution in order to reverse the
declining role of the Federalist Party and NE in the expanding nation.
B. To end the Virginia Dynasty, the delegates proposed a constitutional amendment that would limit the presidency to a
single 4-year term and require the office to rotate among citizens from different states. Other delegates suggested
 amendments restricting a 2/3 majority in Congress to declare war, prohibit trade, or admit a new state into the union.
III. Being a minority in the nation and divided among themselves, the Federalists could hope to prevail only if the war
continued to go badly. However, the British ministry wanted peace.
A. In August 1814 the British entered into negotiations with an American delegation as Ghent, Belgium. The American
commissioners—John Quincy Adams, Albert Gallatin, and Henry Clay—at first demanded territory in Canada and
Florida while British diplomats insisted on a buffer state between the US and Canada to serve as a refuge for their
native American allies.
B. In the end both sides realized that the small concessions they might win at the bargaining table were not worth the cost
of prolonging the war.
C. The Treaty of Ghent restored prewar borders of the US and left unresolved disputes to future negotiations.
A Military Victory and Diplomatic Triumphs
I. From the American perspective, this compromise peace hardly justified 3 years of fighting.
II. Jackson’s victory at New Orleans made him a hero and a symbol of the emerging West. But Jackson dominated the
battlefields through a traditional deployment of regular troops, including a contingent of French-speaking black
Americans, the Corps d’Afrique.
A. His victory redeemed the nation’s battered pride and, together with the coming of peace, undercut the Hartford
Convention’s demands for a revised Constitution.
III. Just as Jackson emerged as a hero of the war, John Quincy Adams rose to national prominence for his diplomatic efforts at
Ghent and his subsequent success in resolving the boundary disputes intensified by the conflict. He also negotiated
important agreements with GB.
A. The Rush-Bagot Treaty of 1817 limited British and US naval forces in the Great Lakes. In 1818 the 2 countries agreed
to establish the border between the Louisiana Purchase and British Canada at the 49th parallel.
B. As a result of Adam’s efforts, the US gained undisputed possession of nearly all land south of the 49th parallel and
between the Great Lakes and the Rocky Mountains.
The Capitalist Commonwealth
I. The increase of geographic size of the US was paralleled by a growth of its economic institutions and wealth. Before 1790
the American republic was an agricultural society, dependent on GB for markets, credit, and manufactured goods. Over the
next generation the US gradually achieved a measure of economic independence, as rural Americans became
manufacturers, bankers supplied credit to expand industry and trade, merchants developed regional markets, and state
governments actively encouraged economic development.
II. The emerging American economic order had a capitalist character both because it was based on private property and
market exchanges and because those had capital, such as financiers, bankers, and wealthy entrepreneurs, shaped its
political and economic policies.
A. The new system of political economy was also influenced by the ideology of the republican commonwealth, which
meant that some policies sought the public good.
A Merchant-Based Economy: Banks, Manufacturing, and Markets
Banking and Credit
I. To finance the expansion of mercantile enterprises, Americans had to devise an entirely new banking system.
 A. Before 1776 colonists had found it difficult to secure loans. Farmers had relied on government-sponsored land banks,
pledging their land as security, while merchants had arranged partnerships, borrowed from other merchants, or got
credit from British suppliers.
B. In 1781, several Philadelphia merchants persuaded the Confederation Congress to charter the Bank of North America
to provide short-term commercial loans; traders in Boston and NY founded similar banks in 1784. Those institutions
provided merchants with the credit they needed to finance their transactions.
II. In 1791, on Hamilton’s initiative, Congress chartered the Bank of the United States. The bank had the power to issue notes
and make commercial loans, and although the bank’s managers used their lending powers cautiously, profits were still
high.
A. By 1805 the bank had set up branches in 8 different cities, but it did not survive due to political issues.
B. Jeffersonians had long condemned the idea of a national bank, so when the bank’s charter expired in 1811 Madison
did not seek to renew it, a decision that forced merchants, artisans, and farmers to ask their legislatures to create new
banks.
III. Many state banks issued notes without adequate reserves of specie, a shortsighted policy that inhibited commercial growth
by undermining the notes’ value.
A. Poorly run state banks were one of the causes of the Panic of 1819, a credit crisis sparked by a sharp drop in world
agriculture prices. With farm income cut by 1/3, many American farmers were unable to pay their creditors, setting in
motion successive bankruptcies among local storekeepers, wholesale merchants, and overextended state banks.
B. The economic recession continued for 2 years, giving many Americans their first taste of the business cycle—the
periodic expansion and contraction of profits and employment that is an inherent part of a market economy.
Rural Manufacturing
I. The Panic of 1819 revealed that more and more Americans depended on regional or national markets.
II. During the Revolutionary war, merchants financed the expansion of other enterprises, encouraging rural men and women
to make cheese, paper, textiles, and gunpowder. Later, national pride prompted calls for the expansion of all domestic
handicrafts.
A. With peace restored, many Americans stopped investing in domestic manufacturing for they could amass greater
profits by selling low-priced British goods.
B. But a small group of dynamic merchant-entrepreneurs continued to develop a rural-based manufacturing system in a
manner similar to the European putting-out system. Merchants stood at the center of this system, buying the raw
materials, organizing workers, and selling finished products.
C. The putting-out system achieved its greatest success in the shoe and boot trade. When the Embargo of 1807 cut off
competition from British-made shoes, merchants in Lynn and over 30 other MA towns expanded their output.
III. By the 1820s entrepreneurs had mobilized an enormous work force in the NE countryside. Farm families produced shoes,
brooms, palm-leaf hats, and tinware. Merchants shipped these products to cities and slave plantations while NE peddlers
blanketed the South.
A. The commercial success of these peddlers and merchants extended the size of the capitalist sector of the American
domestic economy. This economic advance stemmed primarily from innovations in organization and marketing rather
than in techonology.
IV. Power-driven machines were adopted slowly in America, beginning in the textile industry. In the 1780s merchants built
 scores of small mills along the creeks and rivers of NE and the Middle Atlantic states. For the next several decades, the
next steps in the manufacturing process were accomplished under the outwork system rather than in factories.
A. Thus, even before textile production was centralized in factories, the nation had a profitable and expanding
preindustrial outwork system of manufacturing.
Toward a Market Economy
I. The rise of rural manufacturing transformed agriculture by motivating farmers to produce more goods for market sale.
II. Rising prices for raw materials brought prosperity and new businesses to many farming towns.
III. At first, barter transactions were a central figure of the emergent market system. Gradually a cash economy replaced this
complex barter system.
A. As farm families joined the outwork system, they stopped producing all their own food, clothing, and bedding. Instead
they supplied merchants with specialized goods in return for cash or store credit.
IV. The new capitalist-run market economy had some drawbacks. Rural parents and their children now worked harder and lost
some of their economic independence.
A. Instead of working solely for themselves as yeomen farmers, they toiled as part-time wage earners for merchants and
manufacturers.
B. The new market system decreased the self-sufficiency of families and communities even as it made them more
productive.
Public Policy: The Commonwealth System
I. Throughout the 19th century, state governments were the most important political institutions in the US. Beginning in the
1810s, many states rewrote their constitutions to make them more democratic, decreasing the property requirements for
voting, reapportioning legislatures, and increasing the number of elected officials.
A. State legislatures also took the lead in regulating social life. They abolished slavery in the North but retained it in the
South, enacted laws governing criminal and civil affairs, established taxation systems, and oversaw officials.
B. Consequently, state governments had a much greater impact on the day-to-day lives of Americans than the national
government.
II. Beginning in the 1790s, many state legislatures attempted to enhance their states’ prosperity by devising an American plan
of mercantilism, known as the “commonwealth” system.
A. State legislatures enacted measures to stimulate commerce and economic development.
B. They granted hundreds of corporate charters to private businesses. Chartered companies were not new, though under
English law colonial governments had been discouraged from creating corporations. As a result, American merchants
had financed their mills, shipyards, and trading ventures through private partnerships which lacked some the economic
advantages of government-charted corporations, such as tax exemptions and monopoly privileges.
C. Private partnerships also lacked the funds required to build the large-scale transportation projects—the economic
infrastructure—that had become a high priority. State legislatures therefore issued numerous charters of incorporation
to promote investment in roads, bridges, and canals.
III. By 1800 state governments had issued more than 300 corporate charters. Incorporations enhanced the status of private
companies in 2 ways. First, some charters protected investors by granting them limited liability; in the event of a business
failure, shareholders’ personal assets could not be seized to pay the corporation’s debts. Second, most transportation
charters included the power of eminent domain, which enabled construction corporations to use the judicial system to force
 the sale of land.
A. This power-previously available only to the government—permitted private corporations to take land from property
owners for a reasonable price, even if the owners did not want to sell. In granting corporations the power of eminent
domain, state legislatures promoted the good of the commonwealth at the expense of the property rights of private
citizens.
B. Such uses of state power by private companies was controversial and in the eyes of some contrary to republicanism.
Nonetheless, state courts consistently upheld the validity of corporate charters.
IV. State mercantilism soon encompassed much more than transportation. In the years immediately following the Embargo of
1807, which cut off goods and credit from Europe, NE state governments awarded charters to 200 iron-mining, textile-
manufacturing, and banking firms.
A. Corporations—whether in the form of incorporated towns and cities, incorporated charitable institutions, or chartered
private businesses—were becoming a central institution in American society.
V. Thus, by 1820 the innovative policies of state governments had created a new political economy: the commonwealth
system. This system elevated the good of the public above that of private individuals.
A. Because state legislatures relied on private corporations, this system also enhanced the economic and political power
of capitalist entrepreneurs.
B. The instrumental use of state incentives to encourage business enterprise and improve the general welfare would
continue for another generation.
Law and the Commonwealth: Republicans versus Federalists
I. Both Federalists and Republicans endorsed the idea of the commonwealth, but in different ways. Federalists looked to the
national government for economic leadership and supported Hamilton’s plan of national mercantilism: a funded debt,
tariffs, and a central bank. Jeffersonian Republicans generally opposed such policies, relying instead on state legislatures to
promote economic development.
II. After the War of 1812, some Republicans, led by Henry Clay of Kentucky, began to support national economic initiatives.
A. Clay supported the creation of the Second Bank of the United States in 1816. The following year he won passage of
the Bonus Bill, which would have established a national fund for roads and other internal improvements.
B. Most Republicans still opposed national mercantilist policies: they agreed with President Madison, who vetoed the
Bonus Bill because he felt it exceeded the powers delegated to the national government by the Constitution.
Common Law vs. State Law
I. Differing conceptions of law also separated Federalists and Republicans.
II. Beginning in 1776, the revolutionary republican doctrine of popular sovereignty undermined the intellectual foundations of
the old legal order. In the debate over constitutional principles, many Americans recognized that law was a human
invention, the product of politics rather than a sacred body of timeless truths.
A. During the 1790s Thomas Jefferson and other Republican Party leaders attacked the common-law system, maintaining
that law made by judges following common-law precedent was inferior to the statute law enacted by representatives of
the people.
B. In response, Federalist judges and politicians warned that popular sovereignty had to be curbed. Without safeguards,
representative government would result in the tyranny of the majority—the passage of statutes that would infringe on
 the property rights of individual citizens.
C. To prevent state legislatures from overriding property rights, Federalist lawyers asserted that judges had the power to
void laws that violated traditional common-law principles or were contradictory to natural rights.
Common Law vs. Economic Development
I. Because common-law precedents had evolved in a relatively static agricultural economy, they often discouraged new
forms of enterprise.
II. When it became clear that decisions against business would harm the economy, state legislatures enacted statutes that
overrode common law.
A. In MA, the Mill Dam Act of 1795 allowed mill proprietors to flood adjacent farmland and required farmers to accept
compensation for their lost acreage.
B. Prodevelopment legislators justified the taking of private property by asserting the superior rights of those who made
dynamic use of their property.
III. State judges with Republican leanings accepted the doctrines of popular sovereignty and legislative power and tended to
uphold mill acts, just as they supported legislative statutes that granted eminent domain to private turnpike and canal
corporations.
A. To these judges, social utility—the greatest good for the greatest number of people—justified the government’s
intrusion into individual citizens’ property rights.
B. Although both parties favored economic development, Federalists gave a higher priority to national mercantilism,
common law, and a static theory of property rights; Republicans emphasized state activism, statute law, and a dynamic
concept of property.
Federalist Law: John Marshall and the Supreme Court
I. When Thomas Jefferson became president in 1801, he warned that his Federalist opponents still controlled the judiciary
and would use its power to thwart Republican policies. The legal career of John Marshall confirmed his prediction.
A. Marshall upheld Federalist principles until his death. His success stemmed not from a mastery of legal principles and
doctrines but from the power of logic and force of his personality.
B. 3 principles shaped his jurisprudence: a commitment to judicial authority, the supremacy of national over state
legislation, and a traditional, static view of property rights.
Judicial Authority: Marbury vs. Madison
I. In 1789, during the dispute over the Alien and Sedition Acts, Republican-dominated legislatures in Kentucky and Virginia
had asserted the authority of the state legislatures to determine the constitutionality of the national laws.
II. Before 1803, when Marshall rendered the decision in the case Marbury v. Madison, the Supreme Court had never
overturned a national law or explicitly claimed the power of judicial reviews.
A. In deciding that the Judiciary Act of 1789 violated the constitution, Marshall did both.
B. Thereafter, the doctrine of judicial review evolved slowly. During the 1st ½ of the 19th century, the Supreme Court and
the state courts used it only to overturn state laws that conflicted with constitutional principles.
Nationalism: McCulloch v. Maryland
I. Marshall’s 2nd principle—the supremacy of national over state legislation—was most eloquently expressed in the case
McCulloch v. Maryland (1819).
 A. When Congress created the Second Bank of the United States in 1816, it gave that bank the authority to handle the
notes of state-charted banks and thus to monitor their financial reserves.
B. To preserve the independence and competitive position of its state banks, the Maryland legislature passed a statute
imposing an annual tax of $15000 on notes issued by the Second Bank’s Baltimore branch.
C. The Second Bank contested the constitutionally of that action, claiming that it infringed on the powers of the national
government. In response, lawyers from the state of ML adopted Jefferson’s argument against the First Bank of the
United States, maintaining that Congress lacked the authority to charter a national bank. Even if such a bank could be
created, the lawyers argued, Maryland had a right to tax its activities within the state.
II. Marshall firmly rejected both arguments. The Second Bank was constitutional, he declared, because its existence was
‘necessary and proper,’ given the national government’s responsibility to control currency and credit.
A. Marshall believed in a loose interpretation of the constitution.
B. He also embraced the nationalist position advanced by Daniel Webster, a fellow Federalist and the legal counsel to the
Second Bank.
C. Marshall asserted the dominance of national statutes over state legislation again in Gibbons v. Ogden, which struck
down a monopoly the NY legislature had granted to Aaron Ogden for steamboat passenger service across the Hudson
River. Asserting that the Constitution gave federal government the authority to regulate interstate commerce, the Chief
Justice upheld the claim of Thomas Gibbons, who held a federal license to transport people and goods.
Property Rights: Fletcher v. Peck
I. Marshall also turned to the Constitution to uphold his 3rd principle: property rights. To prevent individuals from
government interference with their property, Marshall seized on the contract clause of the Constitution, which prohibits the
states from passing any law “impairing the obligations of contracts.” He used this clause to defend property rights against
legislative challenge.
A. To do this, Marshall gave a broad definition to the term contract, extending it to embrace state grants and charters. He
maintained that purchasers held valid contracts that could not be violated by the state.
B. This decision was far-reaching. It not only gave constitutional protection against subsequent legislation to those who
purchased state-owned lands but, by upholding rights of out-of-state speculators, also promoted the development of a
national capitalist economy.
II. Marshall had difficulty persuading his colleagues to accept this position. Most of the other judges were Republicans. Some
of those judges embraced the commonwealth ideal. Other republican judges hesitated to restrict the powers of state
legislatures or expand the broad protection for property rights set forth in Fletcher v. Peck.
The Decline of Federalism
I. Even as Marshall announced the decisions in Dartmouth and McCulloch in 1819, the Federalist cause for which he labored
was in severe decline, in part because of the expansion of the nation in the west.
A. In a growing and increasingly democratic nation, the Federalists’ eastern-oriented and elitist policies received little
popular support.
II. The attack on Federalism and its principles gradually extended into the judiciary as Republican presidents and state
legislatures appointed new judges.
A. Jurists who valued the rights of states began to limit Marshall’s nationalist vision, and state legislators evaded the
restrictions of the Dartmouth decision by granting charters that included clauses allowing the state to alter their terms.
B. In law as in politics, the transformation in America government begun by Jefferson’s Revolution of 1800 finally
moved toward completion, bringing the era Federalist-Republican conflict to end.