Napoleonic Wars, Impact on the U.S. Economy (Issue)
NAPOLEONIC WARS, IMPACT ON THE U.S. ECONOMY (ISSUE)
The French Revolution (1789–1793) was a watershed in European history. It destroyed the French monarchy and established a republic, but it also divided France and threw much of Europe into turmoil. From the chaos of the Revolution, a general, Napoleon Bonaparte (1769–1821) emerged to lead the nation, first as a republican magistrate and finally as an emperor. He brought domestic tranquility to France, but his ambition and military genius embroiled Europe in a long and bloody conflict, the Napoleonic Wars (1803–1815), which only ended with Napoleon's defeat at Waterloo in 1815.
The strife disrupted both French and European trade, and even the economic position of the newly formed United States began to change drastically. As the Napoleonic Wars drained the energies of Britain, France, and the rest of Europe, America was free to develop its own economic potential. From roughly 1789 till the beginning of the War of 1812 (1812–1814), the United States went through two economic phases that were linked directly to the political factors associated with the wars in Europe.
As a result of the American declaration of neutrality during the French Revolutionary and Napoleonic Wars, the United States experienced a period of rapid growth in foreign trade. The declaration itself reflected domestic political divisions, since the United States was divided on whom to support. The Federalists tended to favor Britain while the Republicans favored France. This indecision was salutary for the nation's commerce, however, since the declaration established free trade, and overnight the restrictions of the old mercantilist system evaporated. As a neutral country the United States could claim unfettered trade with all countries, including Britain and France, and for the most part American ships were welcomed with open arms. American ships carried commodities from all over the world and distributed European manufactures in ports worldwide. Freight earnings boomed. In 1792, American shippers earned an estimated $7.2 million. By 1796 these earnings had tripled to $21.6 million and eventually peaked at $42.1 million in 1807.
As income from the trade boom diffused throughout the economy, the United States experienced dramatic export-led growth. Between 1792 and 1795, U.S. exports doubled; they doubled again in 1801, and by 1807 were five times what they had been fifteen years earlier. Moreover, the rate of growth in foreign trade far outstripped that of population. Per capita income from exports, shipping services, and ship sales averaged $6.77 in 1792. In 1807, the per capita figure was $22.76. This boom in American export trade reflected heavy European demand for re-exports (foreign goods repackaged in American ports), American cotton, (used to supply the British textile industry), and American food to meet European shortages. The growth did hit several temporary slumps: between 1797 and 1798 when an undeclared sea war with France produced a brief dip in export earnings, and also between 1801 and 1803 when the Peace of Amiens allowed European countries to resume peacetime trade activities. After 1803, the United States again experienced another period of rapidly expanding trade. But while scholars agree that the United States experienced increased prosperity during this period, they disagree over the role that export trade played in its growth.
Supporters of the position that an export-led economy led to significant increases in U.S. growth and prosperity also believe this prosperity laid strong foundations for further economic growth after 1815. Critics challenge this position, claiming that the costs associated with neutrality and export-driven expansion have been understated, and the benefits overstated. In addition to all the shipbuilding and freight rates involved in re-exports, critics also argue that the benefits realized by industries such as banking, insurance, and shipbuilding may have been smaller than previously assumed and concentrated only in northeastern ports.
The second U.S. economic phase linked with European affairs began in December 1807 with President Thomas Jefferson's (1801–1809) embargo on all trade with warring nations. This embargo caused America's foreign trade to collapse. In 1805, Napoleon's victories over Austria and Russia at Austerlitz made him temporary master over much of the European continent. Meanwhile, Britain's defeat of the French and Spanish fleets at the Battle of Trafalgar gave it control of the high seas. At the same time both Britain and France ceased to show much respect for neutral countries or the legitimacy of international laws, and both nations reaped havoc on American shipping interests.
In 1805, a British court ruled that goods from the French West Indies bound for Europe on American vessels, even though shipped by way of the United States, were subject to seizure. When the commercial provisions of Jay's Treaty of 1794 expired in 1807 and American diplomats were unable to negotiate a new agreement to President Jefferson's satisfaction, British interference with American shipping increased. Meanwhile, Napoleon challenged British policy with the Berlin Decree of 1806 and Milan Decree of 1807, which closed European ports under his control to British goods and declared that neutral ships complying with British trade regulations would be confiscated. The United States was caught in the middle.
President Jefferson's solution was to resort to "peaceable coercion" with an embargo that banned all trade with Great Britain and continental Europe. Jefferson argued that Europeans, especially the British, were more dependent on U.S. exports, especially grain and cotton, than the United States was on European imports. As a result, U.S. foreign trade fell precipitously. Although trade did recover somewhat in the years following the embargo, it would not reach its former levels until the late 1840s.
During the War of 1812 (1812–1814), the British blockade of U.S. ports almost completely stifled export trade. The blockade followed a general worsening of American commerce, which had declined by almost one-fifth between 1807 and 1809. The embargo was repealed in March 1809, without achieving its goal of forcing the British to reverse their policies, but it may have been a blessing in disguise. While the unemployment and economic distress (especially in U.S. coastal areas) were undeniable, domestic industry did begin to grow. The nation realized if it were to continue to consume the products to which it had become accustomed during the recent period of heightened prosperity, the best course of action was to produce them itself. In 1807, seven new factories were opened in New England states. The next year twenty-six were chartered, eighteen of which were textile factories. The number increased steadily and accelerated during the War of 1812. The pace, however, slowed down after the war, and many of the mills went bankrupt in the following years. As a result both industrial labor and capital sought relief from the government through tariffs on imports.
Although its influence is more difficult to quantify than foreign trade and export growth, another important and perhaps more significant economic impact of the Napoleonic Wars was the Louisiana Purchase (1802). There were several reasons for Napoleon's sudden decision to abandon his imperial ambitions in America and concentrate instead on Europe. He suffered a major disaster in the French colony of San Domingo when his troops failed to suppress a slave insurrection there, and realized the 1802 Peace of Amiens, the treaty that he had hoped would end the European war, had settled nothing. A renewal of war between France and Britain was inevitable. Because of the sustained economic drain of war, Napoleon needed money. In a wise move, he realized that selling the Louisiana Territory would raise capital for the war and avoid a concerted Anglo-American alliance between Britain and the United States.
As the beneficiary of Napoleon's strategy, the United States acquired the whole of the Mississippi River and its Western tributaries, some 828,000 square miles of territory, millions of acres of farmland, and a vast wealth of natural resources.
Adams, Donald R. "American Neutrality and Prosperity, 1793–1808: A Reconsideration." Journal of Economic History 40 (1980).
Frankel, Jeffrey A. "The 1807–1809 Embargo Against Great Britain." Journal of Economic History 42 (1982).
Goldin, Claudia and Lewis, Frank. "The Role of Exports in American Economic Growth during the Napoleonic Wars, 1793–1807." Explorations in Economic History 17 (1980).
North, Douglass C. "The United States Balance of Payments, 1790–1860." In National Bureau of Economic Research, Trends in the American Economy in the 19th Century. Studies in Income and Wealth, (24). Princeton: Princeton University Press, 1960: 573-627.
Shephard, James, and Walton, Gary. "Economic Change after the American Revolution: Pre and Post War Comparisons of Maritime Shipping and Trade." Explorations in Economic History 13 (1976).