Banking and Credit.  “The Capitalist Commonwealth” Exploited opportunities to make profit from the war’s triggered by the French Revolution. A Banking System was necessary for the United States to strive economically. Federalists in Congress chartered the first National Bank in 1781 and it expired in 1811 and was never renewed. This Bank was able to issue loans, make commercial loans, while it’s profits averaged 8% annually. By 1805, the Bank had expanded to eight major cities throughout the colonies.

Banking and Credit (con’t)  Thomas Jefferson and his republican followers argued that the Bank was unconstitutional and potentially oppressive.  In 1816, Congress chartered the second Bank of the United States- 246 state charted banks with 68 million in bank notes in circulation.

Panic of 1819  The primary cause behind the crisis was because there was a 30% drop in world agricultural prices.  It reveled that the artisans were now dependant upon the prosperity on the market economy.  Business Cycle- periodic expansion and contraction of production and employment that are inherent to a market economy.  Effects of Panic: Sold handcrafts locally and bartered products with neighbors and then expanded their reach to regional and national markets

Network  1. Merchants bought raw materials 2. Hired workers in farm families to process them. 3. Sold finished manufactures in regional and national markets.  Reflected innovations in organization of production and the market economy rather than technology. -textile machines were big and adopted water- powered machines.  Environmental impact of early industry: foul odors, cut down thousands of trees for wood and space for livestock, quality of natural environment deteriorated. Textile milldams on New England rivers and altered flow of the river and made fishing difficult.

Transportation Bottlenecks and Government Initiatives  Improved overland trade for states -between Mass. Legislature granted charters to more than 100 private turnpike companies.  gave companies special legal status & monopoly rights. -Penn. Issued 55 charters  bulit a gravel road between Lancaster & Philly: expensive but gave boost to regional economy.  State govt’s & private entreprenuers improved water transport -dredging rivers, constructing canals  Erie Canal connected state central to Hudson River Farmers built barges to carry cotton, surplus grain & meat downstream to New Orleans – by 1815 handling $5 mil in agricultural products yearly.

Public Policy: The Commonwealth System  Commonwealth System: legislative support for road and canal companies.  American Gov’t created laws to increase the “common wealth” -special carters to corporate enterprises, grants of limited liabilty (easier to attract investors): if a business failed, the shareholders personal assets could not be seized to pay the corporation’s debts. -most trans. Charters included the valuable power of eminent domain  allowed turnpike, bridge, and canal corporations to force the sale of privately owned land along their routes. State legislators also aided millers & textile manufacturers who often had to flood farmland when they constructed dams to power their water-driven machinery. Mill Dam Act of 1795: deprived farmers of their traditional right under common law to stop flooding and forced them to accept “fair compensation” for their lost acreage.

Critics condemned rights:  Violation of republican principles  Violated “equal rights”, restricted sovereinty of the people.  State court judges upheld corporate charters & approved grants of eminent domain to private transportation corporations.  State mercantilism soon encompassed much more than transportation.  Jefferson’s Embargo of 1807: cut off goods and credit from Europe. -N.E. states awarded charters to 200 iron-mining, textile- manufacturing & banking companies.  By 1820 innovative state gov’ts had created a repub. political economy: a Commonwealth system that funneled state aid to private business whose projects would improve the general welfare.