The War of 1812 has been considered the United States’ second revolutionary war and the second attempt to truly gain independence from British influence in North America. According to South Carolina representative John C. Calhoun in 1812, “I believe that in four weeks from the time a declaration of war is heard on our frontier, the whole of Upper Canada and a part of Lower Canada will be in our power.” The first attempt was lobbed in 1778 during the Revolutionary War when American troops captured Montreal under Generals Richard Montgomery and Benedict Arnold. Consequently, the American forces were defeated and the attempt failed. Dominating Congress beginning in 1810, the War Hawks led by Henry Clay of Kentucky and John C Calhoun of South Carolina, were determined to acquire Canada for its luscious and fertile soil and vastly wooded areas.
The overlooked reason for America’s justification in its engagement in the War of 1812 leads back to a new young group of Republican Congressmen from the west, known as the “War Hawks.” After the election of 1810, the War Hawks, filled with the ideals of the American Revolution as youths, made their way into Congress, desiring to take on the world superpower, Great Britain, once more. The War Hawks pushed for war against Britain to punish them for hurting American prestige and to stop the alleged British instigation of American Indians upon American settlers. But most importantly they wanted to seize control of British Canada, which was still controlled by the King of England. After Thomas Jefferson left the executive in March 1809, the Jeffersonian democratic ideals were replaced with his Democratic-Republican predecessors.
Fearful of American aggression, Native Americans were intent on protecting their lands. The great leader of the Shawnee, Tecumseh, organized a large Indian resistance, traveling across the Mississippi Valley, petitioning for support and reinforcements. In a small battle, Tecumseh’s town was torched by American forces, leading him to leave the Indiana territory and join the British forces at Amherstburg.
War Sentiment
Despite the increased opposition in Congress to the war against Great Britain, Henry Clay was destined to lead the United States once again against Great Britain. When Great Britain realized that America was intent on war, it immediately retracted the 1807 Orders in Council. It authorized impressments and sanctions on American commerce were lifted in the early months of 1812. Despite the fact, on June 18, 1812, the US declared war on Great Britain. Residents of the New England colonies openly opposed the war even denying financial assistance to the war effort and leaving their flags at half-mast to symbolize their disdain. The ambivalence towards the war was due in part because New Englanders perceived that the war was unnecessarily waged and unilaterally put forth by members of the war hawks.
In North Carolina, public opinion on the war was varied. Some believed the actions of Britain were typical and could be withstood for a longer period of time. Others believed the United States had a responsibility to uphold the Constitution and defend against Britain’s coercion.
North Carolina and the War
The War lasted for three years, and would be the last military conflict between the U.S. and Britain. There were minor battles fought in Ocracoke and Portsmouth along the Outer Banks from July 12 to July 16, 1813 between the British and North Carolinians. The greatest consequence for North Carolina was that it dissolved the British/Indian alliance, which paved the way for American settlement in Alabama and Georgia. Native North Carolinians, such as Otway Burns, Benjamin Forsyth, and Johnston Blakely, played eminent roles in the conflict. Otway Burns, an American privateer in the war, later became a North Carolina senator in 1821. Johnston Blakely was considered the most successful naval officer of the period, and Benjamin Forsyth was commander of the 1st Rifle Regiment and rose to the role of captain in the war commanding his own company. Many other soldiers in the war were Cherokees led by Chief Junaluska who was instrumental in defeating American Indian British allied forces in the south.
Future seventh President of the United States, Andrew Jackson, from the Waxhaw region of the Carolinas, also played a poignant role in the war by defeating the British in the Battle of New Orleans on January 8, 1815. Andrew Jackson had contempt for the British because they had invaded the region in 1780. His mother and two brothers died in the ensuing conflict. Jackson’s victory in the War of 1812 was noteworthy because 5,000 of his men were able to win a critical battle against 7,500 British soldiers. Jackson was also acclaimed for maintaining a regiment of relatively low casualties in the battle with seventy one Americans lost compared to the more than 2,000 British casualties.
Native North Carolinian, Dolley Madison, who was James Madison’s wife, played a significant role in the War of 1812. As First Lady during the conflict, Dolley was responsible for running the presidential household while simultaneously preserving American morale during the war. Furthermore, while the British invaded Washington D.C., before they arrived at the executive mansion, Dolley Madison was successful in quickly collecting and preserving important documents such as the Original Constitution, Declaration of Independence, and many executive papers. The First Lady also saved Gilbert Stuart’s portrait of George Washington and escaped in a coach with the documents before the British burned down what today is known as the White House.
Political and Market Consequences
The War of 1812 ended when it became unpopular with the British citizenry. On December, 24, 1814, the Treaty of Ghent was signed by a unanimous vote in Congress. The Treaty ended the war and required the United States and Great Britain to return what each had conquered.
The immediate and long-term effects of the war were far reaching. The British ceased from halting American ships but the Spanish owned territory of present-day Florida and Canada did not join the United States, as many people presumed. General Andrew Jackson’s battle in the south helped to fragment England’s partnership with regional Indian tribes. As a result, areas in Georgia and Alabama were opened to American settlement. However, the War of 1812 had many disastrous long-term economic consequences. According to Austrian economist Murray Rothbard in an article entitled, “War and Foreign Policy”:
“In the War of 1812 against Great Britain, as we have indicated above, the modern inflationary fractional-reserve banking system first came into being on a large scale, as did protective tariffs, internal federal taxation, and a standing army and navy. And a direct consequence of the wartime inflation was the reestablishment of a central bank, the Second Bank of the United States. Virtually all of these statist policies and institutions continued permanently after the war was over.”
The War of 1812 was disastrous; it ended the anti-Federalist Jeffersonian ideals and replaced them with a form of Federalist state capitalism, central bank, crippling tariffs, government subsidies for infrastructure, and the origins of the first American income tax.
According to Adam Young in “The Origin of the Income Tax”: “The first proposal for an income tax on America occurred during the War of 1812. After two years of war, the federal government had accumulated a then-staggering $100 million of debt. To fund the war against Great Britain, the government doubled the rates of its major source of revenue, customs duties on imports, which obstructed trade and ended up yielding less revenue than the previous lower rates.”
During the middle of the war, goods were slapped with an excise tax, and real estate and property were taxed. When the war came to an end, these taxes were replaced with a large tariff to alleviate the war debt, leaving the proposal for the income tax on the back burner. The income tax would later rear its ugly head in the Civil War to prevent southern secession.
The War of 1812 also presented the United States with precedents for ominous monetary and financial repercussions. During the war, the number of banks and bank notes increased considerably with the government encouraging inflationary monetary policy in the southern, western and midwestern United States. With the New England region remaining ambivalent toward the war and not inflating its credit, inflationary banks were formulated to buy government bonds and then purchase war materials in the New England region. Between 1811 and 1815, the number of banks increased from 117 to 211, notes and deposits increased from $10.9 million in 1811 to $31.6 million in 1815, and the amount of specie increased from 26% in 1811 to 40% of total banks in 1815.
With the government using southern, midwestern and western banks to fund New England goods with inflated paper, once banks in the New England region demanded their payments of bank notes in specie, the banks across the country were faced with potential collapse. In utter violation of property rights and contractual rights, the US government discontinued the redemption of bank notes in gold and silver while continuing in standard operation to give loans and require debtors to repay these loans. This event planted the seed for the primary inflationary effects that were stimulated beginning in August 1815 and wouldn’t end until February 1817 after the war had ended.
To further complicate things, inflation during the war was also spurred by the governments issuing of $15.46 million in Treasury notes to pay for the war in the years 1814 and 1815. This had the disastrous effect of increasing the price of goods, on average of 35% between 1811 and 1815. Furthermore, prices rose due to trade restrictions on imports, leaving the price of goods to rise by an average of 70%.
The War of 1812 had grave consequences and set a grim precedent for the future of the American financial and monetary system. Whenever a future banking panic took place due to credit expansion, the government would suspend specie payments, while continuing to expand loans, thereby violating the property and contractual rights of everyday Americans.
Why It Matters
By analyzing the political and economic circumstances of the war, one can garner a better sense of the distortions and unintended effects that seemingly harmless and trivial historical escapades are riddled with.