Seven Events That Made America America (10 page)

When the worst of the Panic was over and stocks began to rise, as one Wall Street veteran noted, “Wizened bank cashiers, having recovered from their fright, sallied out from their fortresses to take a turn in the street. Merchants, weary with brooding over piles of protested notes, came down to try to repair their losses. . . .”
⁶⁷
It took until January 1859 for most banks to reach their pre-crash levels. Contemporaries disagreed on the causes of the Panic of 1857, and virtually none of the observers of the day pinned the blame on the U.S. Supreme Court. Nathan Appleton, a Massachusetts textile magnate and banker writing in
Hunt’s Merchant Magazine
, blamed New York City’s banks for contracting loans; James S. Gibbons criticized the so-called country banks for their part in a credit contraction.
⁶⁸
New York’s banking superintendent was stumped, finding it “without apparent reason derived from past experience.”
⁶⁹
Wall Street insider William Fowler attributed the panic to overexpansion of credit due to the new gold finds in 1849, then to the failure of the Ohio Life and Trust.
⁷⁰
Historians subsequently blamed the failure of the Ohio Life Insurance and Trust Co. (Ohio Life) for triggering a bank run, or looked to a long-term decline in railroad investment that began in 1854.
⁷¹
Still others claimed that a rapid reversal in the profitability of western grains, related to the decline of foreign demand after the Crimean War, was the culprit.
⁷²

Most—North, South, merchant, laborer—blamed “the banks.” Nathan Appleton complained that the New York banks had brought about the contraction without “the slightest necessity.”
⁷³
In fact, the culprit was the Supreme Court, and most observers had missed the immediate causes and thus had poor remedies often grounded in sectional partisanship.

Historian James Huston, in his analysis of the panic, got the causes wrong but the impact right.
⁷⁴
Immediately, discontent in the North swung large numbers of previously Democratic voters over to the new Republicans. At the same time, political and financial analysts in both sections erroneously concluded that the South had been insulated because of “King Cotton.” Southerners misinterpreted that as evidence that they could sustain an independent economy that sold primarily to Europe, and that in any event the preeminence of cotton was such that the North would never “make war” on King Cotton. In reality, the southern branch banking system had protected it from the worst of the runs—but in a war, that system would be quickly “nationalized” by the Confederate States of America and would become impotent.
⁷⁵

An appreciation for
Dred Scott
’s true impact on the national economy cannot be understood outside of an analysis of what both sides in the slavery debate saw as the dominant (and, increasingly,
only
) issue, namely, the definition of property. As Huston explained:

If property rights rested in government, it became vital that government not fall into the “wrong” hands. Assurances of goodwill were no longer enough: “Northerners could not afford to let the South win control over defining property rights in slaves because it meant the possible extension of slavery into the North and the ruination of their society.”
⁷⁷

This reality was contrary to the conclusion of many historians, including the great Allan Nevins who wrote, “it was plain that
if
the country held together, every step forward would strengthen the free society as against the slave society.”
⁷⁸
Stephen Douglas argued in 1849 that “the cause of freedom has steadily and firmly advanced, while slavery has receded with the same ratio.”
⁷⁹
That was only true if, in fact, the nation could arrive at some definition of a “person” versus property. Even then, however, two factors militated against an inexorable march to freedom: first, slave values themselves—as all economists agree—continued to escalate; and second, the value of slave labor over free labor (certainly in the short term) was obvious. While the slave South may have trailed the North in innovation, patents, and inventions, on the playing field that mattered—direct competition between slaves and free laborers—little question existed in anyone’s mind as to which was more cost-efficient.
⁸⁰
Even Douglas, in 1858, rested his argument about slavery on profitability, in that while Illinois was still a territory, residents “
had no scruples about its being right
[i.e., about slavery being legal], but they said, ‘we cannot make any money by it. . . . [emphasis his].”
⁸¹
He repeated this position in 1860: “We in Illinois tried slavery while we were a Territory, and found it was not profitable; and
hence
we turned philanthropists and abolished it.”
⁸²
Douglas thereby twice affirmed that which Lincoln charged him with, namely, not caring about the morality of slavery, only its profitability. Even the superiority of free labor was a moot point if slave values as property were appreciating faster than the differential of their labor earnings compared to free laborers. Such was not the case.

To appreciate the significance of slavery as
property
in antebellum America, no less than Alabama Fire-Eater William Lowndes Yancey, in 1860, said southern slaves “are worth, according to Virginia prices $2,800,000,000—an amount easy to pronounce, but how difficult to conceive.”
⁸³
As early as the 1830s, Thomas R. Dew found that Virginia slaves constituted almost one-third of all asset values in Virginia. By 1859, the pressure on the South to force permanent constitutional definitions of slavery into the halls of government was apparent: in the eleven states of the Confederacy lived 5.4 million whites and 3.5 million slaves, and even when including the border states, one-third of people below the Mason-Dixon line were slaves. As property, these people constituted $3 billion (1860 dollars) in wealth, or approximately 18.75 percent of U.S. wealth. This was more than railroads and manufacturing
combined
.
⁸⁴
Sliced yet another way, when ranking the wealth of the states based on a per capita (not gross) measurement, an astonishing picture emerges. Traditional measures put New York, Pennsylvania, and Ohio at the top of the list of wealthiest states in 1860, but when adjusted for population, South Carolina, Mississippi, Louisiana, and Georgia are at the top, followed by Connecticut, then Alabama, Florida, and Texas, interrupted by Rhode Island, with Virginia, Maryland, and Kentucky rounding out the top twelve. Put another way, except for Connecticut and Rhode Island, the Union’s ten richest states were all slaveholding states.
⁸⁵

It would not be an exaggeration to say that the single most important asset in the American economy in 1860 was a slave. Protecting rights in those slaves became paramount, for economically the only possibility of slavery ending was if or when slaves themselves became worthless. Just the opposite was happening: slave values were increasing on the eve of the Civil War.
⁸⁶
At the same time, the “free soil” movement had swept the North, and it had a well-grounded fear of direct competition with slavery. What changed by the 1850s, though, was that due to the railroad and steamship networks, slavery for the first time came into proximity to, and direct competition with, free labor.
Dred Scott
meant that free labor and slave labor would be in direct competition with each other not only across borders but even
within states
—and within
northern
states.

Outside of the South, small farmers dominated the American scene, with 70 percent of the farms of more than five hundred acres located in the South. For those who did not own slaves, “wealth meant land, buildings, carriages, and tangible objects, not people; for southerners . . . ownership of slaves revealed success at worldly endeavors.”
⁸⁷
More important than the different views of property was the approach to labor, which in the North meant a means of advancing economically, while in the South labor was equated with servility. Until the 1840s, travel between the sections was so difficult that few Northerners ever had to witness the dangers to free soil that slavery presented. (In the Civil War, most of the soldiers on either side had never been far outside their hometowns until they served.) As late as 1830, a coach ride from Cincinnati to New York could cost several days’ wages and the stagecoach itself could be expected to be overturned at least once—one rider on a New York-Cincinnati trip had the misfortune of having his coach overturned nine times!
⁸⁸

But while the transportation revolution brought the sections together in a sense, the so-called market revolution—despite the claims (or wishes) of some economists and historians—was not having any impact on liberating slaves. Virtually all of the market instruments and practices already existed in the South, including the sanctity of contract, free markets, competition, impartial government “referees,” and so on. Indeed, while the South trailed the North in manufacturing, invention, patents, and innovation, the southern banking system was far superior to that of the North because of its preference for branch banking. Simply exposing Southerners to northern free farms generated no incentive whatsoever to emancipate slaves, and every inducement to keep them (and increase their number). Lincoln, Henry Clay, and others had bought into the flawed solution of “compensated emancipation” without realizing that with every slave purchased and freed, the value of all remaining slaves
would rise
. And that was if the slave owners agreed to sell in the first place, which proved illusory. Despite profits in the manufacturing sector some four or five times that of plantation agriculture, southern slave owners clung to slavery out of economic comfort, for reasons of racial superiority, and because of fears of social upheaval in a society where half the population consisted of free blacks.
⁸⁹

Lincoln, while ostensibly referring to “Bleeding Kansas” in his speeches, constantly broadened the debate to slavery itself, particularly the morality of slavery. It was “not only the greatest question, but very nearly the sole question of the day,” he said.
⁹⁰
Failure to resolve the issue of slavery, he argued, and not just
slavery in the territories
, would doom the republican experiment, for political liberty could not last alongside human slavery. The natural right to eat the bread of one’s own hands—one of Lincoln’s most repeated examples—was a universal right stated in the Declaration, and the fact that Lincoln himself cited
political
equality of blacks in some northern states prior to the war is clear evidence that he thought full equality, if not present in 1857, was attainable. Slavery for some, however, meant inevitable slavery for all—precisely what George Fitzhugh, a Virginia socialist and admirer of Karl Marx, had been advocating.
⁹¹

The
Dred Scott
decision only increased sectional tensions, while at the same time providing Abraham Lincoln the noose to slip around the political neck of Stephen Douglas and shattering the Democratic Party as a national entity. It did not spark any immediate political upheaval, but did trigger a national panic that, in turn, affected the politics of secession. It marked the next-to-last event in a long series of seesaw moves in which each section temporarily had the edge. The Missouri Compromise had seemingly skewed the sectional balance in favor of the North, resulting in an inevitable legislative attack on slavery; but that was nullified, it seemed, by the appearance of the national party, the Jacksonian Democrats, whose avowed goal was to eliminate slavery as a political issue. That party discipline immediately broke down because the very dynamics of party success demanded an ever-growing government at every level, but with power increasingly flowing to the federal government. Moreover, in the Webster-Hayne debate, in other land and tariff debates, and in the ongoing fight over the gag rule in Congress, slavery was becoming
more frequently discussed than ever.
With the annexation of Texas, the South seemed to gain a vast new extension of slavery, only to have the Mexican War, the Wilmot Proviso, and the Compromise of 1850 swing the pendulum back in the other direction toward free soil.

The South’s great victory within the Compromise of 1850, the Fugitive Slave Law, was undone by the publication of
Uncle Tom’s Cabin
and the mass civil disobedience of Northerners unwilling to enforce the law. Yet the South seemed to gain in the initial Kansas-Nebraska Act, only to see the slave state of Kansas yanked away from them in an influx of free-soilers and political intrigue. Then came
Dred Scott
, which seemed to ensure the survival of slavery permanently, only to have the new Republican Party, under Lincoln, force Douglas into the “Freeport Heresy” and negate the decision. Lincoln’s election in 1860 constituted the final, inevitable swing of the pendulum against slave property rights. Despite the new president’s assurances, it was bountifully evident to all that slavery’s clock was ticking, and that the time would soon come when the concept of people as property would no longer be tolerated.

On the road to that political end point, the
Dred Scott
decision produced another, unintended consequence: it generated a brief depression whose “lessons” were badly misinterpreted. That flawed analysis of the causes of the Panic of 1857 was piled on top of the other disastrous fruits of
Dred Scott
to push the nation to war. Thus,
Dred Scott
yielded not one, but two separate paths to the Civil War.