7 Abraham Lincoln and the Triumph of Mercantilism Thomas J. DiLorenzo

I presume you all know who I am. I am humble Abraham Lincoln. I have been solicited by many friends to become a candidate for the legislature. My politics are short and sweet, like the old woman’s dance. I am in favor of a national bank . . . in favor of the internal improvements system and a high protective tariff.

—Abraham Lincoln, 1832

The Collected Works of Abraham Lincoln

This statement by Abraham Lincoln is a succinct summary of what he devoted virtually his entire political career to prior to being elected president in 1860. Lincoln was always a Whig and was almost single-mindedly devoted to the Whig agenda of protectionism, central banking, and corporate welfare for the railroad and shipping industries—euphemistically referred to as “internal improvements.”

Although he will forever be remembered as the “Great Emancipator,” Lincoln was not particularly concerned with the slavery issue prior to 1860. According to Roy Basler, the editor of Lincoln’s collected works, as of 1857, Lincoln “had no solution to the problem of slavery except the colonization idea which he had inherited from Henry Clay . . . when he spoke . . . of respecting the Negro as a human being, his words lacked effectiveness.”[1]

What did preoccupy Lincoln’s political mind throughout his career was the Whig Party’s mercantilist economic agenda, which was named “The American System” by Henry Clay, the undisputed leader of the Whigs and Lincoln’s professed political idol and role model. Lincoln spent nearly three decades preceding his election as president working tirelessly in the trenches of the Whig and (after 1856) Republican parties to organize voters in Illinois and other states on behalf of the Whigs’ mercantilist agenda. It is not surprising, therefore, that once he was elected president, he presided over the enactment of that agenda. Thus, Lincoln’s election as president signified the triumph of mercantilism—a set of economic policies that would become a permanent drag on the economy and a source of pervasive political corruption for decades to come.

Always a Whig

Mercantilism, which reached its height in the Europe of the seventeenth and eighteenth centuries, was a system of statism which employed economic fallacy to build up a structure of imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state.

—Murray N. Rothbard

The Logic of Action Two

In 1859 Lincoln declared that he was “always a whig in politics.”[2] And indeed he was. Both he and his wife were ardent admirers of Henry Clay, the leader of the Whigs. In his 1852 eulogy to Clay, Lincoln called him “the great parent of Whig principles” and “the fount from which my own political views flowed.”[3] Indeed, “one could hardly read any paragraph” in the eulogy, writes Roy Basler, “without feeling that Lincoln was, consciously or unconsciously, inviting comparison and contrast of himself with Clay.”[4] “From the moment Lincoln first entered political life as a candidate for the state legislature during the . . . 1832 presidential election,” writes historian Robert Johannsen, “he had demonstrated an unswerving fidelity to the party of Henry Clay and to Clay’s American System, the program of internal improvements, protective tariff, and centralized banking.”[5]

The Master Politician

Lincoln began a very active career in Illinois politics in 1832, but the citizens of that state never elected him to any major office, such as U.S. senator or governor. He only served one term in Congress and eight years in the state legislature, along with several more menial positions, such as county surveyor.

Nevertheless, Lincoln was a skilled politician, described by historian David Donald as “the master wirepuller who operated the state political organization first of the Whig Party and, after its decay, that of the Republicans.”[6] Lincoln made hundreds of “stump speeches” on behalf of the Whigs and was extraordinarily gifted in the use of rhetoric. (Of course, saying that a politician is gifted in the use of rhetoric is a polite way of saying he is a talented liar, deceiver, and manipulator.) Contrary to the impression one gets from reading popular historical accounts of Lincoln as statesman and constitutional philosopher, he spent virtually his entire political career prior to 1860 engulfed in the dirty work of party politics. For example, in the 1840 presidential election, Lincoln sent written instructions to party activists within the state informing them that “the whole state must be so well organized that every Whig can be brought to the polls.”[7] He then went on in great detail:

So divide your county into “small districts” and appoint in each a subcommittee; make a perfect list of all the voters, and ascertain with certainty for whom they will vote. Designate doubtful voters in separate lines, indicating their probable choice. Each subcommittee must keep a constant watch on the doubtful voters and have them talked to by those in whom they have the most confidence—also Whig documents must be given them . . . on election day see that every Whig is brought to the polls.[8]

By 1860, after nearly thirty years as a “party operative,” Lincoln “had maneuvered himself into a position where he controlled the party machinery, platform, and candidates of one of the pivotal states in the Union.”[9] One biographer described him as “the smartest parliamentarian and cunningest logroller” in the Illinois legislature.[10]

Lincoln was not a guileless, naive, and unsophisticated “backwoodsman” and “rail splitter.” He was a shrewd, cynical, manipulative politician who was not above playing dirty tricks, such as writing anonymous letters to the editor of newspapers denouncing his political opponents.[11] Perhaps his most successful political trick was to portray himself as an innocent babe-in-the-woods when it came to politics. One of the biggest lies he ever told was to a group of Pennsylvania politicians who had come to the White House to confer with him: “You know I never was a contriver,” the consummate political contriver and manipulator said; “I don’t know much about how things are done in politics.”[12] Lincoln was also fond of portraying himself as a friend of the “farmer and the mechanic,” although in reality the Whig Party championed tariffs, inflationary finance, and corporate welfare for the benefit of big business at the expense of farmers and mechanics.

The Central Bank Crusader

Lincoln was such a blind follower of the Whig Party line that many of his economic policy speeches were embarrassingly illogical and sounded dumb and foolish. In 1840 he made numerous speeches in favor of establishing a central bank even though he had no educational background at all in economics and merely mouthed slogans that may well have been written by someone else. Like all Whigs, Lincoln was in favor of inflationary finance through the printing of paper money by a central bank or, if need be, by state government banks, and was an ardent opponent of a monetary system based on gold or any other precious metal.

After Andrew Jackson destroyed the Second Bank of the United States in the early 1830s, Lincoln and the Whigs turned (for the moment) from advocating central banking to championing fiat currency issue by state government banks, ostensibly to pay for their “internal improvements” schemes. As a member of the Illinois legislature, Lincoln repeatedly opposed proposals by Democratic legislators to investigate the Illinois State Bank.[13] In December of 1840, the Democrats, who were in the majority in the legislature, wanted to force the bank to make payments in specie instead of paper. The bank was authorized to continue its suspension of specie payment through the end of the year, after which it would have to make specie payments.

Lincoln and the Whigs wanted desperately to avoid this move toward sound money based on gold so, in an attempt to stop the adjournment of the legislature, Lincoln and his fellow Whigs bolted for the door, which unfortunately was locked and guarded. Their objective was to leave the room so that there was no quorum to vote for adjournment. Blocked from the normal entrance, Lincoln then jumped out of the first-story window and was followed by his lemming-like Whig compatriots. The Democrats began calling them “Lincoln and his flying brethren.”[14]

The Lifelong Protectionist

In the 1844 elections, he championed the second plank of the Whig platform, protectionist tariffs, with the most absurd economic arguments. He argued that protectionist tariffs would not harm the average consumer at all because they would be collected only from “those whose pride, whose abundance of means, prompt them to spurn the manufactures of our own country, and to strut in British cloaks, and coats and pantaloons.”[15] He told a newspaper reporter that “he could not tell the reason,” but he was sure that protectionist tariffs would “make everything the farmers bought cheaper.”[16]

Like many other Whig politicians, Lincoln familiarized himself with the protectionist writings of Henry C. Carey, who apparently earned a living by popularizing protectionist myths on behalf of the Pennsylvania steel industry. One of these myths adopted and repeated by Lincoln was that free trade would supposedly increase costs and prices because so much “useless labor” would be employed transporting goods from one country to another.[17] According to this “logic,” the importation of goods to Illinois from Kentucky, Ohio, Indiana, and Pennsylvania would also have been undesirable, in Lincoln’s opinion, because of all the “useless labor” expended in transporting them across state lines. Mercantilism relies crucially on the spreading of economic fallacies.

Lincoln also believed in a crude version of the Marxian labor theory of value, announcing that free trade perpetuated a system whereby “some have laboured, and others have, without labour, enjoyed a large portion of the fruits. . . . To secure to each labourer the whole product of his labour, or as nearly as possible, is a most worthy object of any good government.”[18]

Champion of Corporate Welfare

By 1838, Lincoln had worked his way up to the position of leader of the Illinois Whig Party. In that capacity, he was influential in passing legislation with regard to the third major element of Whigism: corporate welfare, or “internal improvements.” At the time, the use of federal funds for so-called internal improvements, such as subsidies to the railroad industry, were widely believed to be unconstitutional. But thanks to Lincoln’s political skills, Illinois was a leader in using state tax revenues for such purposes.

The Illinois experience in government-funded “internal improvements” during the late 1830s, under Lincoln’s political leadership, provided a case study of why such uses of tax dollars were viewed with great suspicion. William H. Herndon, Lincoln’s law partner and one of his closest friends, described the Illinois “internal improvement” program in 1838 as

reckless and unwise. The gigantic and stupendous operations of the scheme dazzled the eyes of nearly everybody, but in the end it rolled up a debt so enormous as to impede the otherwise marvelous progress of Illinois. The burdens imposed by this Legislature under the guise of improvements became so monumental in size it is little wonder that at intervals for years afterward the monster of [debt] repudiation often showed its hideous face above the waves of popular indignation.[19]

George Nicolay and John Hay, who studied law in Lincoln’s Springfield law offices and later served as his personal secretaries in the White House, described the internal improvements debacle as follows:

The market was glutted with Illinois bonds; one banker and one broker after another, to whose hands they had been recklessly confided in New York and London, failed, or made away with the proceeds of sales. The [internal improvements] system had utterly failed; there was nothing to do but repeal it, stop work on the visionary roads, and endeavor to invent some means of paying the enormous debt. This work taxed the energies of the Legislature in 1839, and for some years after. It was a dismal and disheartening task. Blue Monday had come after these years of intoxication, and a crushing debt rested upon a people who had been deceiving themselves with the fallacy that it would somehow pay itself by acts of the legislature.[20]

The Illinois legislature allocated $12 million in 1838 for this “gigantic and stupendous” boondoggle. What Lincoln and the Whigs promised, but did not deliver upon (according to Herndon), was that

Every river and stream . . . was to be widened, deepened, and made navigable. A canal to connect the Illinois River and Lake Michigan was to be dug . . . cities were to spring up everywhere; capital from abroad was to come pouring in; attracted by the glowing reports of marvelous progress and great internal wealth, people were to come swarming in by colonies, until in the end Illinois was to outstrip all others, and herself become the Empire State of the Union.[21]

After spending the $12 million, observed Nicolay and Hay,

Nothing was left of the brilliant schemes of the historic Legislature of 1836 but a load of debt which crippled for many years the energies of the people, a few miles of embankments which the grass hastened to cover, and a few abutments which stood for years by the sides of leafy rivers, waiting for their long delaying bridges and trains.[22]

Herndon wrote that “The internal improvement system, the adoption of which Lincoln had played such a prominent part, had collapsed, with the result that Illinois was left with an enormous debt and an empty treasury.”[23]

Similar financial disasters were created by Whig politicians throughout the country. As described by John Bach McMaster in his History of the People of the United States,

In every State which had gone recklessly into internal improvements the financial situation was alarming. No works were finished; little or no income was derived from them; interest on the bonds increased day by day and no means of paying it save by taxation remained.[24]

The Illinois scheme was nevertheless a marvelous political success from the Whigs’ perspective, for they were able to take credit for having dispensed $12 million in patronage. This is what the Whigs really stood for: the acquisition of political power through the dispensation of patronage. They had no grand philosophy or ideology; they wanted political power and private riches and had no qualms about using the taxpayers’ money as the mechanism for acquiring these things.

Discussing his involvement in the Illinois internal improvements boondoggle of the late 1830s, Lincoln explained to a friend that his career ambition was to become known as “the DeWitt Clinton of Illinois.”[25] New York Governor DeWitt Clinton, explains historian Paul Johnson, “invented the ‘spoils system,’ whereby an incoming governor turned out all officeholders and rewarded his supporters with their jobs.”[26]

Thus, Lincoln aspired to be a midwestern “Boss Tweed,” a political string-puller and patronage-dispenser, the “Godfather” of Illinois politics. He understood that patronage was the route to political power and, potentially, to personal wealth. It is not just coincidental that while championing taxpayer-funded corporate welfare for the railroad industry as a politician, Lincoln was also one of the attorneys representing the Illinois Central Railroad and was paid as much as $5,000 for a single case in 1853.[27]

During the next several years, Lincoln honed his skills as a pork-barrel politician by guiding through the legislature a bill to move the state capitol from Vandalia to Springfield, Illinois. There was no particular reason why Springfield was necessarily a better location. As explained by Illinois Governor Thomas Ford in 1847, Lincoln and the Whigs in the state legislature simply solicited and received political and financial support from various interest groups in and around Springfield in return for their legislative efforts. As the governor explained:

Thus it was made to cost the State about six millions of dollars to remove the seat of government from Vandalia to Springfield, half which sum would have purchased all the real estate in that town at three prices; and thus . . . by multiplying railroads . . . by distributing money to some of the counties, to be wasted by the county commissioners, and by giving the seat of government to Springfield, was the whole State bought up and bribed, to approve the most senseless and disastrous policy which ever crippled the energies of a growing country.[28]

Who Were the Whigs?

To better understand Lincoln’s slavish devotion to Whig politics (which he declared to be identical to Republican Party politics as of 1856), it will be useful to present a brief overview of American Whigism.

The American Whig Party was founded in 1832 as a reaction to President Andrew Jackson’s abolition of the Second Bank of the United States. The name “Whig” was chosen to imply that these men were opposed to despotism and centralized governmental tyranny, as were the American Whigs of 1776 and, earlier, the British Whigs who advocated classical liberalism.

But the very name “Whig” was a cleverly-contrived deception. The nineteenth-century American Whigs were in fact the champions of centralized, consolidated government, and all students of political philosophy understood at the time (much better than they do today) that centralization of political power was destructive of liberty. They claimed to be opposed to “executive power” (as opposed to the power of Congress), but in reality they were only opposed to the kind of executive power that was exercised by President Jackson in destroying the central bank. If Jackson had been a supporter of central banking, it is doubtful that the Whigs would ever have given a second thought to the “dangers” of “executive power.” Indeed, they lusted after such power for themselves.

There were Northern Whigs, like Lincoln, and there were Southern Whigs, like John C. Calhoun, who opposed Jackson but for different reasons. Calhoun battled Jackson over the 1828 Tariff of Abominations, which a South Carolina political convention nullified. The nullification crisis was a battle between states’-rights Southerners, like Calhoun, and Jackson. The Northern Whigs were not in favor of Calhoun’s (and the Founding Fathers’) cherished system of limited, decentralized government; they merely found it to be politically convenient to form a coalition with the Southern Whigs, among others.

The Northerners dominated the Whig coalition, which was virtually defined by Henry Clay and Daniel Webster—especially Clay Edgar Lee Masters, the Illinois poet, playwright, and onetime law partner of Clarence Darrow, provided what I believe to be a perfect description of the nineteenth-century American Whigs:

Clay was the champion of that political system [the Whigs] which doles favors to the strong in order to win and to keep their adherence to the government. His system offered shelter to devious schemes and corrupt enterprises. . . . He was the beloved son [figuratively speaking] of Alexander Hamilton with his corrupt funding schemes, his superstitions concerning the advantage of a public debt, and a people taxed to make profits for enterprises that cannot stand alone. His example and his doctrines led to the creation of a party that had no platform to announce, because its principles were plunder and nothing else. . . . These Whigs adopted the tricks of the pickpocket who dresses himself like a farmer in order to move through a rural crowd unidentified while he gathers purses and watches.[29]

The battle with Andrew Jackson over the rechartering of the Second Bank of the United States is what ignited the creation of the Whig Party in the North. The Whig political strategy was as simple as it was corrupt: promise to plunder the taxpayers for the benefit of corporations and banks, in return for the everlasting financial support (and kickbacks) from those same entities, all the while drowning the public in the false rhetoric of opposing executive tyranny, championing the small family farm, etc.

A central bank and a high protectionist tariff were the keystones to the Whigs’ plan for political plunder, for that is how their massive “internal improvements” schemes were to be funded and monopolies created. Jackson was their mortal political enemy, for he regarded the bank as “dangerous to the liberty of the American people because it represented a fantastic centralization of economic and political power under private control.”[30] Jackson understood the implications of a politicized money supply as well as the Whigs did. The difference between them was that Jackson thought the results would be unequivocally bad for the country; the Whigs understood that a politicized money supply was a key to their personal political advancement and wealth accumulation. Jackson condemned the bank as “a vast electioneering engine” which had the “power to control the Government and change its character.”[31] That is exactly what the Whigs wanted to do.

Roger B. Taney, who was Jackson’s Treasury secretary, also complained of the bank’s “corrupting influence” with “its patronage greater than that of the Government” and its ability to “influence elections” by engineering what contemporary public choice scholars call a “political business cycle.”[32]

Whig politicians barely hid the fact that one of the reasons they were such fierce champions of central banking is that they could receive kickbacks in return for their support for the bank. While the Second Bank of the United States was still chartered, Henry Clay left Congress for two years in 1822, after having accumulated some $40,000 in personal debt, to become general counsel of the bank. Clay biographer Maurice Baxter explains that Clay’s

income from this business apparently amounted to what he needed: three thousand dollars a year from the bank as chief counsel; more for appearing in specific cases; and a sizable amount of real estate in Ohio and Kentucky in addition to the cash. . . . When he resigned to become Secretary of State in 1825, he was pleased with his compensation.[33]

Daniel Webster never bothered resigning; he just demanded a “retainer” from the bank while remaining in Congress. He once wrote to Nicholas Biddle, the bank’s president: “I believe my retainer has not been renewed or refreshed as usual. If it be wished that my relation to the Bank should be continued, it may be well to send me the usual retainer.”[34]

Most Lincoln biographers invent excuses for virtually every questionable decision or action he ever made. In the case of the disastrous $12 million internal improvements debacle of the late 1830s, the excuse given is that the spending projects were harmed by the panic of 1837. This may be true, but it is worth noting that the Second Bank of the United States had a lot to do with creating that panic. A case can be made that the panic was the result of the inevitable boom-and-bust cycle spawned by central-bank money creation. The stock of money (currency plus bank deposits) increased by 42 percent between 1834 and 1837, which must have contributed to a false sense of prosperity and the extension of credit for myriad uncreditworthy ventures, such as the ones financed by the Illinois Legislature.[35] By the end of Jackson’s two terms (January 1837), the Second Bank of the United States was dead.

Long before the creation of the Whig Party, Henry Clay, Daniel Webster, and other like-minded politicians promoted the idea of government-funded “internal improvements,” but such schemes were routinely vetoed by presidents who uniformly believed that such expenditures of tax dollars were unconstitutional. “Internal improvements” bills sponsored by Henry Clay were vetoed by President James Madison, the acknowledged “father” of the Constitution, as well as his successor, James Monroe.

But by 1840, Clay and the Whigs thought they finally had a chance to break the constitutional logjam with the election of their candidate, William Henry Harrison, to the presidency. Clay was an extraordinarily powerful force in Congress. He was such a natural politician that after just one year in the House of Representatives (1811), he was elected Speaker of the House. By 1840, he and his followers were sure they could get much of his “American System” through Congress and have it rubber-stamped by Harrison. Lincoln did his part by organizing the Illinois Whigs, as was his forte, and tirelessly campaigning for Harrison.

Unfortunately for the Whigs, however, Harrison dropped dead after only one month in the White House, placing the burden of the presidency on his vice president, the Virginian John Tyler. Tyler was a Southern Whig, and little attention was paid to the contest for the vice presidency. Tyler biographer Oliver Chitwood writes that “what little attention was paid to Tyler’s role in the campaign was due mainly to the fact that ‘Tyler too’ rhymed with ‘Tippecanoe.’”[36]

The Whigs controlled both houses of Congress, and Henry Clay immediately proposed establishing a new central bank and a sharp increase in tariffs without even consulting with Tyler.[37] These proposals were never mentioned by the national Whig Party during the campaign and for good reason—they were wildly unpopular with the citizens.

Clay was like a shark with the smell of blood in the water. Believing that he was “in perfect control” of the entire government he “predominated over the Whig Party in a despotic way,” according to the New York Herald.[38]

Much to Clay’s chagrin, however, Tyler was not a pushover and considered himself a philosophical heir to his Virginia predecessors in the highest office in the land—Jefferson, Madison, and Monroe. He was a strong believer in states’ rights and thought that a national bank was unconstitutional. He vetoed the bank bill by saying, “The power of Congress to create a national bank to operate per se over the Union has been a question of dispute from the origin of the Government . . . my own opinion has been uniformly proclaimed to be against the exercise of any such power by this Government.”[39] Like most other Southern statesmen, Tyler was also highly suspicious of protectionist tariffs and internal improvement boondoggles.

The Whigs went berserk. They organized a mob that appeared in front of the White House “with blunderbusses, drums, and trumpets,” shouting “A Bank! A Bank!” and “Down with the veto” while burning Tyler in effigy.[40] The Whigs expelled President Tyler from their party. The central bank idea was dead for another twenty years—until Lincoln’s election.

There was never much public support for the Whig economic agenda. Nevertheless, this band of unscrupulous and imperious politicians continued promoting it in national elections by nominating a succession of former military generals—General William Henry Harrison, General Zachary Taylor, and General Winfield Scott, for example—as their presidential candidates. Taylor was elected president in 1848 but died two years later. Neither he nor his vice president and successor, Millard Fillmore, succeeded in implementing the American System. By 1856, Clay, Webster, and the Whig Party were dead; its Northern element had become part of the Republican Party.

The Triumph of Mercantilism

The tariff was the centerpiece of the Republican program.

—Richard Bensel

Yankee Leviathan

The Northern industrialists and bankers who, for decades, had been lobbying for a central bank, for monopolistic privileges via protectionism, and for corporate welfare in the form of federally-funded “internal improvements,” were defeated at every step along the way by American presidents who believed in and enforced the Constitution. Nowhere in Article 1, Section 8, is there mention of subsidies for railroads or any other private corporation, and so presidents typically vetoed internal improvements bills on constitutional grounds.

A central bank was also opposed on constitutional grounds by Jackson, Tyler, and others, who believed it was an unconstitutional imposition on state sovereignty. These men understood, as James Madison said, that whatever authority the Constitution had was derived from the states, for it was the state conventions which adopted the Constitution in the first place.

Protectionist tariffs were also viewed by defenders of the Constitution as an unconstitutional plundering of one segment of the population for the benefit of another which violated the clause in the Constitution that mandates uniformity in taxation.

Thus by 1860, the Whigs—and their successors, the Republicans—had been waging political war on the Constitution for nearly three decades. The purpose of this “war” was to adopt mercantilism—a system of centralized state power and special-interest subsidies and monopolistic privileges for individuals and groups favored by the state at the expense of the general public. That is why Lincoln was just their man in 1860. He quickly demonstrated that he had little regard—if not outright contempt—for constitutional restrictions on governmental power.

Samuel Morison and Henry Steele Commager described Lincoln as “a dictator from the standpoint of American Constitutional law and practice.”[41] The political scientist Clinton Rossiter made the “Lincoln dictatorship” a major case study in his book, Constitutional Dictatorship.[42] As long ago as 1897, the historian William Archibald Dunning referred to the Lincoln administration as a “temporary dictatorship.”[43] Even Lincoln’s defenders and idolaters have called him a “dictator,” but one who “was a benevolent dictator,” writes James G. Randall.[44] James Ford Rhodes called Lincoln a “dictator” but, as is typical of the history profession, which seems to be completely incapable of objective analysis of Lincoln, he added that “never had the power of a dictator fallen into safer and nobler hands.”[45]

Among the reasons these commentators all labeled Lincoln a “dictator” are his initiating and conducting a war by decree for months without the consent of Congress; suspending habeas corpus; conscripting the railroads and censoring telegraph lines; imprisoning without trial as many as thirty thousand Northern citizens for voicing opposition to war; deporting a member of Congress—Clement L. Vallandigham of Ohio, a fierce opponent of the Morrill Tariff and the central bank—for merely opposing Lincoln’s income tax at a Democratic Party rally in Ohio; and shutting down hundreds of Northern newspapers and imprisoning some of their editors for simply disagreeing in print with his war policies.[46]

Lincoln only exercised his veto power on two occasions while president, and both of them were with regard to minor and relatively inconsequential bills. Many historians have interpreted this as evidence that Lincoln delegated virtually all domestic legislation to Congress and showed little interest in it. This is not the case. Vetoing the Whig-Republican mercantilist schemes was exactly the problem this political coalition had faced for nearly fifty years. With Lincoln they finally got a president who shared their disdain for the Constitution and would not veto their tariff, internal improvement, and central banking schemes.

Lincoln was not a political “outsider.” He had been laboring mightily for thirty years for the same mercantilist schemes that the Republicans who controlled the Congress had been working for. He was their man, and he proved it by virtually giving up his presidential veto power.

This was all explained by Senator John Sherman, who was a powerful figure in the Republican Party (and brother of General William Tecumseh Sherman).

[T]hose who elected Mr. Lincoln expect him . . . to secure to free labor its just right to the Territories of the United States; to protect . . . by wise revenue laws, the labor of our people; to secure the public lands to actual settlers . . .; to develop the internal resources of the country by opening new means of communication between the Atlantic and Pacific.[47]

Pulitzer Prize-winning Lincoln biographer David Donald interprets this statement as meaning that Lincoln and the Republicans “intended to enact a high protective tariff that mothered monopoly, to pass a homestead law that invited speculators to loot the public domain, and to subsidize a transcontinental railroad that afforded infinite opportunities for jobbery.”[48] This is exactly what they did.

The Tariff

In his classic 1931 book, The Tariff History of the United States, Frank Taussig observed that as of 1857

the level of duties on the whole line of manufactured articles was brought down to the lowest point which has been reached in this country since 1815. It is not likely that we shall see, for a great many years to come, a nearer approach to the free-trade ideal.[49]

Once the Republicans were confident that Lincoln would win the 1860 election, and especially once the Southern Democrats began leaving the U.S. Congress, the Republicans did what they had been dreaming of doing for decades: They went on a protectionist frenzy that lasted for decades after the war.

The Morrill Tariff was passed by the House of Representatives in May 1860 and by the Senate in March 1861, just prior to Lincoln’s inauguration. Thus, the apparatus of protectionism was initiated before Fort Sumter and before the war. The Morrill Tariff was not passed to finance the war; it was passed because the old Whigs, who were now Republicans, finally had the power to do it. Even though it was passed before Lincoln officially took office, it is important to note that, as the Republicans’ presidential candidate, he was the leader of the party and, as such, most likely had a great deal to do with the political maneuvering on behalf of the tariff.

As Murray Rothbard noted, mercantilism always relied on the espousal of economic fallacies. To support the Morrill Tariff, Lincoln and the Republicans relied on the hoary, mercantilist notion, long since disproved by economic scholars, that “that country is most independent, and consequently most prosperous, which produces within her own borders all articles needful for the use of her citizens.”[50]

Taussig further explains that “in the next regular [congressional] session, in December 1861, a still further increase of duties was made. From that time until 1865, no session, indeed, hardly a month of any session, passed in which some increase of duties on imports was not made.”[51] By 1862, the average tariff rate had crept up to 47.06 percent which “established protective duties more extreme than had been ventured on in any previous tariff act in our country’s history.”[52]

The Republicans openly admitted that the purpose of their protectionist policy was not necessarily to raise money to finance the war but to pay off Northern manufacturers for their political support. The manufacturers were being taxed explicitly (through excise taxes) to help finance the war, and the tariff was a way to offset those losses. Congress enacted and Lincoln signed into law tariff legislation “whose chief effect was to bring money into the pockets of private individuals.”[53] Long after the war, Taussig concluded, “almost any increase in duties demanded by domestic producers was readily made” and “great fortunes were made by changes in legislation urged and brought about by those who were benefited by them.”[54]

In his First Inaugural Address, Lincoln promised over and over again that he had no intention to disturb Southern slavery and that, even if he did, it would be unconstitutional to do so in light of the 1857 Dred Scott decision. But he also issued a promise that he would launch an invasion of any state that failed to collect its share of tariff revenues. To Lincoln, Southern slavery was perfectly tolerable; free trade was not. “The power confided in me will be used to hold, occupy, and possess the property, and places belonging to the government,” Lincoln announced, “and to collect the duties and imposts; but beyond what may be necessary for these objects, there will be no invasion.”[55]

If he was to succeed politically Lincoln had to start a war (by maneuvering the South into firing the first shot), for the Confederate Constitution outlawed protective tariffs altogether, as the British government did in 1850 and as France was in the process of doing as well. A high protectionist tariff in the Northern United States, coupled with free trade in the South, would have guaranteed that most international commerce would have entered Southern rather than Northern ports and would have ruined the Republican dream of a highly centralized, patronage-based superstate that could keep them in power indefinitely.

Ever since the nullification crisis of the 1820s, Southerners had been threatening nullification and secession because they viewed protectionist tariffs as a tool of political plunder whereby Southerners paid the lion’s share of the tariff (because they relied so heavily on Northern and European manufacturers for their manufactured goods), but the bulk of the tariff revenues were spent in the North. Free trade would put an end to this plunder, which was simply intolerable to the Republicans.

Newspapers in the 1860s were generally affiliated with one political party or another. As such, they tended to espouse a strict party line. The Daily Chicago Times, a Republican Party mouthpiece, explained the strategy of plundering the South with the tariff on December 10, 1860:

The South has furnished near three-fourths of the entire exports of the country. Last year she furnished seventy-two percent of the whole . . . we have a tariff that protects our manufacturers from thirty to fifty percent, and enables us to consume large quantities of Southern cotton, and to compete in our whole home market with the skilled labor of Europe. This operates to compel the South to pay an indirect bounty to our skilled labor, of millions annually.[56]

“Let the South adopt the free-trade system,” the paper warned, and the North’s “commerce must be reduced to less than half what it now is,” a “large portion of our shipping interest would pass into the hands of the South,” and “these revulsions will bring in their train very general bankruptcy and ruin.”[57]

The New York Post advocated on March 12, 1861, that the U.S. Navy “abolish all ports of entry” in the South.[58] The Newark Daily Advertiser warned ominously on April 2, 1861, that Southerners had apparently “taken to their bosoms the liberal and popular doctrine of free trade” and that free trade with Europe “must operate to the serious disadvantage of the North” as “commerce will be largely diverted to the Southern cities.”[59] The “chief instigator” of “the present troubles”—South Carolina—has all along been “preparing the way for the adoption of free trade” and must be stopped at any cost by “the closing of the ports” by military force.[60]

The war was just what was needed to break the logjam behind which the Whigs’ mercantilist agenda had languished for decades.

Corporate Welfare

The fifty-year debate over the constitutionality of spending federal tax revenues on “internal improvements” or corporate welfare was ended once and for all by force of arms. What virtually every president since Jefferson had believed to be unconstitutional was now acceptable to the unprincipled Republicans, led by Lincoln. That the Confederate Constitution outlawed the use of tax dollars for “internal improvements” and deleted the “General Welfare” clause of the U.S. Constitution was another reason why the Republicans had to go to war if they were to finally implement the Whig agenda.[61]

The military-industrial-congressional complex was invented during the War Between the States as hundreds of Northern businesses developed “partnerships” with the federal government and fleeced the taxpayers in the process. As historian Leonard Curry observed, “Throughout the remainder of the nineteenth century [and beyond], corporate interests—apparently insatiable—returned again and again to demand direct and indirect federal subsidies.”[62]

Lincoln and the Whig-Republicans had been promising taxpayer-funded subsidies to the railroad industry for so long, and were under such pressure to deliver once they controlled the entire federal government, that during the dark days of 1862, when the Confederates were clearly winning the war, they passed legislation and allocated millions of dollars to begin building a subsidized transcontinental railroad from the Midwest to California—far removed from the war in the East and of no military significance.

Railroad lobbyists descended on Washington in early 1862, the result of which was the creation of the federally-funded Union Pacific (UP) and Central Pacific (CP) Railroad Companies. Each company was given sections of land for each mile of track completed and $16,000 in loans for each mile of track on flat prairie land, $32,000 for hilly terrain, and $48,000 per mile in the mountains.[63]

The chief engineer of the Union Pacific was Grenville Dodge, a close friend of Lincoln’s who had also been appointed as a general in the Union army despite his lack of military training. Dodge and other federal officers organized federal armies to massacre American Indians whose property was “in the way” of their grandiose plans for a socialized railroad industry. Thus, the killing of the Indians was another form of indirect corporate welfare for the railroad businesses.

The only thing that was “efficient” about the construction of the Union Pacific was the way in which Dodge and Thomas Durant, the vice president of the company, bilked the taxpayers. Since they were being paid by the mile, they built wastefully circuitous routes to collect for more mileage. They used the cheapest construction materials and stressed speed, not workmanship. Not only Indians, but also white farmers were evicted from their land, which led to violence and bloodshed as the farmers tried to protect their property with firearms.[64]

Dodge laid track on the ice and snow during the winters, and when the line had to be rebuilt in the spring, the railroad company pocketed even more federal subsidies. The officers of the two companies set up their own supply companies and used their government funds to purchase supplies from themselves on a noncompetitive-bid basis, thereby making money from both building and running the railroads. This practice was the source of the Credit Mobilier scandal which was aired during the Grant administration. (Credit Mobilier was the name of one of the construction companies).

Republican legislators accepted bribes in return for appointing railroad commissioners who were political appointees with no experience in the railroad business. By the time the line was completed in May 1869, the UP and CP were bankrupt. And the root cause of the corruption and bankruptcy was the fact that the railroads were not built on the free market but were part of a “partnership” with government. Government-subsidized industries will inevitably become corrupt and inefficient. Surely the Whig-Republicans understood this, in light of their previous experiences with government-subsidized “internal improvements” by state governments in earlier years. To these politicians, what mattered most was not the efficient operation of a railroad “in the public interest,” but all the patronage opportunities such an undertaking presented to them. Their emphasis was never on efficiency and was always on politics. For example, in 1866:

Thomas Durant wined and dined 150 “prominent citizens” (including Senators, an ambassador, and government bureaucrats) along a completed section of the railroad. He hired an orchestra, a caterer, six cooks, a magician, . . . and a photographer. For those with ecumenical palates, he served Chinese duck and Roman goose; the more adventurous were offered roast ox and antelope. All could have expensive wine and, for dessert, strawberries, peaches, and cherries. After dinner some of the men hunted buffalo from their coaches. Durant hoped that all would go back to Washington inclined to repay the UP for its hospitality.[65]

Credit Mobilier stock was given out to congressmen as a form of bribery, and General William Tecumseh Sherman who, after the war, was in charge of “clearing” the American Indians away from the areas in which the railroad lines were being built, was allowed to purchase land near Omaha at less than one-third of the going market rate ($2.50 per acre versus $8).[66]

Once the floodgates of corporate welfare were open, graft and corruption inevitably became commonplace during the Grant administrations (1869–1877). The Speaker of the House of Representatives, Schueler Colfax, who was later President Grant’s vice president, was a beneficiary of the Credit Mobilier scandal, as were over a dozen prominent Republican congressmen. Grant’s war secretary, W.W. Belknap, was forced to resign for having taken bribes; his private secretary, Orville Babcock, was involved with a ring of swindlers; his Treasury secretary, W.W. Richardson, was implicated in a tax swindle; and even Grant’s ambassador to England, Robert Schenck, had to plead diplomatic immunity to avoid being arrested for selling Londoners worthless stock in American mining companies.[67]

All of these scandals were the inevitable consequence of the “partnership” between business and government that had been championed by Lincoln during his entire political career and put more fully into place by his fellow Republicans after his death. As Leonard Curry remarked, “the railway interests of the country . . . sustained and encouraged by federal funds, mushroomed into one of the most powerful and ruthless lobbies that the republic had ever known.”[68] Following the cue of the railroad lobbyists, many other industries aspired to bilk the taxpayers as well. “Other interests, desirous of demonstrating that they, too, were powerful, and hence deserving of preference, hastened to the feast [of corporate welfare].”[69] Timber and mining companies essentially “captured” the 1862 Homestead Act for themselves by bribing politicians to give them a majority share of all the free land; and the U.S. Department of Agriculture was created in 1862 to dispense farm welfare, as it has done ever since.

The major economic fallacy that was employed to “justify” corporate welfare for the railroads was the assertion that private capital markets in particular, and free enterprise in general, could not be relied upon to build a transcontinental railroad. But railroad entrepreneur James J. Hill proved what a lie that was by building what was by far the most efficient transcontinental railroad—the Great Northern—without a penny of government subsidies or land grants.[70] “Our own line in the North,” Hill proudly boasted, “was built without any government aid, even the right of way, through hundreds of miles of public lands, being paid for in cash.”[71]

If it were not for the massive amounts of corporate welfare that were ladled out to railroad companies, there would certainly have been more companies like Hill’s Great Northern that would have built transcontinental railroads faster, better, and cheaper. To make matters worse, the corruption that accompanied the federally-funded railroads led angry taxpayers to demand regulation of the railroads, which made a truly free market in railroading an impossibility.

The Bank! The Bank!

The Whig dream of a central bank was also realized during the war. The National Currency Acts of 1863 and 1864 created a network of nationally chartered banks that issued national bank notes supplied to them by the comptroller of the Currency. The national banks were required to hold federal government bonds as backing for their note issues, thereby artificially increasing the demand for the Treasury’s bonds.

State banks were driven into bankruptcy by a prohibitive 10 percent federal tax on the issuance of their bank notes. The Secret Service was created to police counterfeiting, thereby assuring that the federal government would have a monopoly in the counterfeiting business.

The nation’s monetary system was finally nationalized, as the constitutional roadblocks that had previously been laid in place by Jacksonian Democrats were removed when the Southern Democrats left the Congress during the war (and for years thereafter). One lone dissenter was Representative Lazarus Powell of Kentucky, who presciently forecast that central banking “would enable the national Congress to destroy every institution of the States and cause all power to be consolidated and concentrated here [in Washington, D.C.].”[72] The Clay-Lincoln “American System” was complete.

Lincoln’s Mercantilist Legacy

Lincoln’s economic legacy is the fraud, waste, abuse, economic inefficiency, and corruption of mercantilism which Lincoln’s idol, Henry Clay, referred to as “The American System.” The massive corruption of the notorious Grant administrations was the direct and inevitable consequence of the political triumph of Abraham Lincoln and the Whigs’ mercantilist agenda.

Lincoln always maintained that his goal in life was to be “the DeWitt Clinton of Illinois”—the king of the patronage politicians. As such, he was the perfect front man for the collection of special interests that had been lobbying for protectionism, mercantilism, corporate welfare, and inflationism for the previous half century.

Like many prominent figures of his time—such as Robert E. Lee, who freed the slaves he had inherited—Lincoln was bothered by slavery and wished that it would disappear from the face of the earth. But he admittedly viewed his own emancipation policy as a means to an end, with the end being to “save the union” or, more precisely, to establish federal supremacy over the states and the citizens in order to implement the Whig economic agenda. “My paramount object in this struggle,” Lincoln wrote in his famous August 22, 1862, letter to Horace Greeley, “is to save the Union, and is not either to save or destroy slavery. If I could save the Union without freeing any slave I would do it.”[73]

During a debate with Stephen Douglas on September 18, 1858, Lincoln stated that he was never “in favor of bringing about in any way the social and political equality of the white and black races.”[74] He was opposed to ever making voters or jurors of black people or ever allowing them to hold office or intermarry with white people.[75] He was “in favor of having the superior position assigned to the white race” and proposed sending all ex-slaves back to Africa.[76] In his December 1, 1862, message to Congress, Lincoln said, “I cannot make it better known than it already is, that I strongly favor colonization” back to Africa.[77]

Whenever Lincoln and the Republicans did propose doing something about slavery prior to 1861, it was only in the new territories, not in the South. But even then, the main reason for objecting to the extension of slavery into the new territories was not always a moral one. As William Seward explained: “The motive of those who protested against the extension of slavery had always really been concern for the welfare of the white man, and not an unnatural sympathy for the Negro.”[78] That is, the opponents of the extension of slavery into the new territories opposed it because they didn’t want the slaves or ex-slaves to compete for jobs with white men. As Pennsylvania Representative David Wilmot stated when he introduced his famous proviso that forbade slavery in the new territories acquired after the Mexican War, he “had no morbid sympathy for the slave,” but would “lead the cause and the rights of white freedmen.”[79]

There was also a political concern. Because of the three-fifths clause of the Constitution, which counted each five slaves as three citizens for purposes of congressional representation, the extension of slavery into the new territories would artificially inflate Democratic Party representation there, and this was intolerable to the Republicans.

Even the vaunted Emancipation Proclamation failed to free a single slave. It only applied to rebel territory, and specifically exempted those parts of the South that were at the time (January 1863) occupied by federal armies. The president “has proclaimed emancipation only where he has notoriously no power to execute it,” observed the New York World, while the London Spectator cynically noted that “the principle [embodied in the Emancipation Proclamation] is not that a human being cannot justly own another, but that he cannot own him unless he is loyal to the United States.”[80] Indeed, federal troops who occupied Southern territory often enslaved the slaves for their own uses.[81]

The purpose of the Emancipation Proclamation may have been to attempt to make a statement to other countries—especially Britain and France—that they should not support the slave-holding South in the war. If that was its purpose, however, it was a failure. Most British opinion-makers were Southern sympathizers who believed the war was being fought against governmental tyranny by the United States, not over slavery.[82]

After the war, many Southern whites were prohibited from voting during Reconstruction, while Republican Party activists made sure that the uneducated and propertyless ex-slaves voted for tax increase after tax increase at the state and local levels of government, ostensibly to pay for “internal improvements.” All too often, however, the improvements never materialized, while the Republican Party hacks lined their personal bank accounts with confiscated tax dollars.

This, of course, spawned even greater resentment toward Northerners, with the resentment frequently vented in a violent way against the ex-slaves. Most countries in the Western Hemisphere that ended slavery during the first half of the nineteenth century (and there were dozens of them) did so peacefully through compensated emancipation, something that was never seriously attempted in the U.S.[83] The economic destruction of the South during the war and the continued looting of Southern citizens for many years thereafter, wherein the ex-slaves were used as political pawns by the Republicans, guaranteed that a tremendous amount of racial animosity would exist in the South long after the war ended.

Thus, in a way, Lincoln’s mercantilist legacy is also a root cause of many of the race relations problems that plague America to this day.

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[1] Roy Basler, Abraham Lincoln: His Speeches and Writings (New York: Da Capo, 1946), p. 23.

[2] David Herbert Donald, Lincoln (New York: Simon and Schuster, 1996).

[3] Basler, Abraham Lincoln, p. 264.

[4] Ibid., p. 18.

[5] Robert Johannsen, Lincoln, the South, and Slavery: The Political Dimension (Baton Rouge: Louisiana State University Press, 1991), p. 14.

[6] Donald, Lincoln, p. 66.

[7] Ibid., p. 104.

[8] Ibid.

[9] Ibid., pp. 66–67.

[10] Paul M. Angle, ed., The Lincoln Reader (New York: Da Capo Press, 1947), p. 83.

[11] Edgar Lee Masters, Lincoln, The Man (Columbia, S.C.: Foundation for American Education, 1997), p. 77.

[12] Donald, Lincoln, p. 66.

[13] Ibid., p. 77.

[14] Ibid.

[15] Ibid., p. 110.

[16] Ibid.

[17] Ibid.

[18] Ibid.

[19] Paul M. Angle, The Lincoln Reader, p. 82.

[20] Ibid., pp. 100–01.

[21] Ibid., pp. 83.

[22] Ibid., p. 102.

[23] William H. Herndon and Jesse W. Weik, Life of Lincoln (New York: Da Capo, 1983), p. 161.

[24] John Bach McMaster, A History of the People of the United States, vol. 6, 1830–1842 (New York: D. Appleton, 1914), p. 628.

[25] Ibid.

[26] Paul Johnson, A History of the American People (New York: HarperCollins, 1997), p. 336.

[27] Masters, Lincoln, The Man, p. 123.

[28] Angle, The Lincoln Reader, pp. 87–88.

[29] Masters, Lincoln, The Man, p. 27.

[30] Robert V. Remini, Andrew Jackson (New York: Harper and Row, 1966), p. 141.

[31] Ibid., p. 142

[32] Ibid., p. 144

[33] Maurice Baxter, Henry Clay and the American System (Lexington: University Press of Kentucky, 1995), p. 75.

[34] Remini, Andrew Jackson, p. 145.

[35] Richard H. Timberlake, Monetary Policy in the United States: An Intellectual and Institutional History (Chicago: University of Chicago Press, 1993), p. 47.

[36] Oliver Perry Chitwood, John Tyler: Champion of the Old South (New York: Russell and Russell, 1964), p. 184.

[37] Ibid., p. 213.

[38] Ibid., p. 217.

[39] Ibid., pp. 226–27.

[40] Ibid., pp. 228–29.

[41] Samuel E. Morison and Henry Steele Commager, The Growth of the American Republic (New York: Oxford University Press, 1942), pp. 699–700.

[42] Clinton Rossiter, Constitutional Dictatorship: Crisis Government in the Modern Democracies (Princeton, N.J.: Princeton University Press, 1948).

[43] William Archibald Dunning, Essays on the Civil War and Reconstruction (New York: Macmillan, 1897).

[44] James G. Randall, Constitutional Problems Under Lincoln (Urbana: University of Illinois Press, 1951), p. 30.

[45] James Ford Rhodes, History of the United States from the Compromise of 1850 to the Final Restoration of Home Rule at the South in 1877 (New York: Macmillan, 1900), p. 441.

[46] See Randall, Constitutional Problems Under Lincoln.

[47] Quoted in David Donald, Lincoln Reconsidered (New York: Vintage, 1961), pp. 105–06.

[48] Ibid., p. 106.

[49] Frank Taussig, The Tariff History of the United States (New York: Putnam, 1931), p. 157.

[50] Heather Cox Richardson, The Greatest Nation of the Earth: Republican Economic Policies During the Civil War (Cambridge, Mass.: Harvard University Press, 1997), p. 108.

[51] Taussig, The Tariff History of the United States, p. 160.

[52] Ibid., p. 167.

[53] Ibid.

[54] Ibid., p. 166.

[55] “Lincoln’s First Inaugural Address,” in Basler, Abraham Lincoln, p. 583.

[56] Howard Perkins, Northern Editorials on Secession (Gloucester, Mass.: Peter Smith, 1964), p. 573 (emphasis added).

[57] Ibid.

[58] Ibid., p. 600.

[59] Ibid., p. 601.

[60] Ibid., p. 602.

[61] Marshall DeRosa, The Confederate Constitution of 1861: An Inquiry into American Constitutionalism (Columbia: University of Missouri Press, 1992).

[62] Leonard Curry, Blueprint for Modern America: Nonmilitary Legislation of the First Civil War Congress (Nashville, Tenn.: Vanderbilt University Press, 1968), p. 247.

[63] Richardson, p. 178.

[64] Burton W. Folsom, Jr., The Myth of the Robber Barons (Herndon, Va.: Young America’s Foundation, 1991), pp. 18–19.

[65] Ibid., pp. 20–21.

[66] Ibid., p. 21.

[67] Johnson, A History of the American People, p. 544.

[68] Curry, Blueprint for Modern America, p. 134.

[69] Ibid., p. 148.

[70] Folsom, The Myth of the Robber Barons, pp. 26–36; James J. Hill, Highways of Progress (New York: Doubleday, 1910); and Albro Martin, James J. Hill and the Opening of the Northwest (New York: Oxford University Press, 1976).

[71] Ibid., pp. 410–11.

[72] Cited in Richardson, The Greatest Nation of Earth, p. 90.

[73] Basler, Abraham Lincoln, p. 652.

[74] Roy Basler, The Collected Works of Abraham Lincoln (New Brunswick, N.J.: Rutgers University Press, 1953), pp. 145–46.

[75] Ibid.

[76] Ibid.

[77] Ibid., p. 685.

[78] Cited in James McPherson, The Struggle for Equality: Abolitionists and the Negro in the Civil War and Reconstruction (Princeton, N.J.: Princeton University Press, 1966), p. 24.

[79] Leon Litwack, North of Slavery: The Negro in the Free States, 1790–1860 (Chicago: University of Chicago Press, 1961), p. 47.

[80] Shelby Foote, The Civil War: A Narrative (New York: Random House, 1986), pp. 707–08.

[81] Barnes McPherson, For Cause and Comrades: Why Men Fought the Civil War (New York: Oxford University Press, 1997), p. 119.

[82] Sheldon Vanauken, The Glittering Illusion: English Sympathy for the Southern Confederacy (Washington, D.C.: Regnery, 1989).

[83] Thomas J. DiLorenzo, “The Great Centralizer: Abraham Lincoln and the War Between the States,” The Independent Review (Fall 1998).