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CHAPTER IV. - Eli F. Heckscher, The Continental System: An Economic Interpretation 
The Continental System: An Economic Interpretation, ed. Harald Westergaard (Oxford: Clarendon Press, 1922).
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POLICY OF THE UNITED STATES
THE policy of the United States during the period of the Continental System is an example of the type which, in the course of an economic war to the knife, seeks to maintain neutrality to the uttermost and to take all the consequences of that attitude, without, it is true, the support of either external military power or an efficient internal administration.46 Down to the close of 1807 this policy brought with it a unique development of American shipping and foreign trade, especially the carrying trade. But when the commercial war became more intense in 1807, it made a complete right-about-face and led to the second great self-blockade caused by the Continental System; and finally, when this became quite untenable, it drove the American Union into the very war which its leading men had done everything in their power to avert.
The desire of the American statesmen for neutrality scarcely calls for any detailed explanation. The sympathies of the population were strongly divided between the combatants. Anglophiles predominated among the Federalists, who later developed into the Republican Party, while Francophiles pre-dominated among the opposite party, the Republicans, later known as Democrats. The Federalists dominated the commercial and sea-faring states of New England, while the main support of their antagonists lay in the agricultural states of the South. The latter party tended to get the upper hand, strongly supported, as it was, by President Jefferson in 1801-9, and again by President Madison in 1809-17, partly because of political tradition dating from the time when France co-operated in the American War of Independence, and partly because the conflicts of a neutral sea-faring nation must always be keenest with that combatant who commands the sea. The remarkable thing about the situation is that it was precisely those economic interests and those parts of the country for the defence of which the campaign of neutrality was carried to extremes, that were its most zealous opponents and did their utmost to prevent its efficacy. Nor did they hesitate to follow the same tactics even during the war to which the policy of neutrality led, just because the measures of neutrality had necessarily to be directed against the few remnants of international intercourse that the belligerents had left undisturbed. Both in this respect and in other respects the neutrals of our day have had something to learn from American developments.
The increased severity in the British treatment of neutrals, as we know, went back especially to the new interpretation of 'broken voyages' in the Essex case in the summer of 1805, and in April, 1806, it had occasioned the American counter-measure in the form of the Non-importation Act,47 which prohibited the importation, both from England and from other countries, of most of the main groups of British industrial products, excluding, however, cotton goods. But the American law did not enter into force until November 15, and was suspended at the close of the year, so that it turned out to be nothing more than a threat. The Berlin decree of November 21, 1806, immediately led the American envoy in Paris to address an inquiry to the French minister of the marine, Vice Admiral Decrès, as to the interpretation of the new law at sea. In the absence of the Emperor the answer was favourable,48 and consequently there was no immediate occasion for uneasiness on the part of America. On the contrary, there were complaints in England that the Americans were making common cause with Napoleon in order to supply France with the industrial products that she was otherwise wont to obtain from England. Nor was any great alteration made in this respect by the first British Order in Council of January, 1807, owing to its restricted range. Accordingly, during the greater part of the year 1807 American trade and shipping continued not merely to flourish, but even to grow, as is shown by the table previously printed.49 In reality, the year 1807 marked the high-water mark of the trade and navigation of the United States for a very long time to come.
But the turning-point was to be reached before the close of the year. The beginning was made with the authentic interpretation of the law which Napoleon, as the sole final authority, gave to his Berlin decree, whereby it came to apply also to the sea. Then followed the new British Orders in Council of November and Napoleon's Milan decree of December.
EMBARGO ACT (DECEMBER 22, 1807)
All this set going the great American series of counter-measures, which also, so far as they concerned Great Britain, were affected by the latest act of aggression, the so-called 'Chesapeake Affair' of June, 1807. A British man-of-war requested to be allowed to search the American frigate Chesapeake with the object of recapturing some alleged deserters from the British navy; and when the request was refused, as a matter of course, the British vessel opened fire, captured the American man-of-war, and took away four of the crew. To this was added the American annoyance at the British practice of impressing for naval service sailors on American trading vessels on the pretext that, having been born before the American states became independent, they were British subjects; and this, combined with the Chesapeake Affair, gave rise to a very pretty diplomatic conflict.
But what gave the principal impulse to the American commercial, or rather anti-commercial, intervention was not the measures of Great Britain, but rather those of France, that is to say, the new adaptation of the Berlin decree, which brought it about that a stranded American vessel, the Horizon, had that part of its cargo which was of British origin declared fair prize. However, the new Orders in Council were known in the United States (in fact, though not officially) when on December 22, 1807, Congress and the President enacted the Embargo Act,50 which is one of the most interesting legislative products of the period. As has already been indicated, it was a self-blockade of the purest water, but, unlike Napoleon's, an open and direct one. An embargo was laid on all vessels lying in American ports and bound for foreign ports. The only exceptions were foreign vessels, which were allowed to depart after being informed of the enactment of the law; and vessels in the American coasting trade were to give security that the cargo should be discharged in an American port. Almost at the same time the Non-importation Act, passed in the previous year against British goods, was put into force and excluded importation in foreign bottoms from the only power that was in a position to carry on trade by sea. Under the pressure of the unreasonable procedure of both the combatants, the American government thus sought to cut off at a blow the abnormally large trade and shipping that the United States had until then enjoyed. In principle the policy was impartial, inasmuch as it was intended, on the one hand, to deprive Great Britain of American cotton and grain, as well of sales on the American markets, and, on the other hand, to put an end to the colonial trade from which France and Spain and their colonies derived equal advantages, and also to the importation of the industrial products of the European Continent into America. Although the measure was thus indisputably two-sided, the simultaneous enforcement of the one-sided Non-importation Act gave the policy the appearance of being directed distinctly against Great Britain. That country, indeed, had touched on a particularly tender point by imposing duties on the goods which compulsorily passed through its territories, inasmuch as both the United States and the British opposition put it on a level with the taxation of American trade which in the preceding generation had given the final impulse to the Declaration of Independence by 'the old thirteen'.51
President Jefferson's motive seems to have been partly the bias of the plantation owners, emphasized by his physiocratic tendency toward regarding agriculture as the highest work of man and his grave distrust of everything which departed from agriculture. To begin with, at least, he undoubtedly considered, as the American historian, Channing, says, 'that to put an end to, let us say, three quarters of the commerce of the United States would be a blessing, albeit somewhat in disguise'.52 But evidently this, like most of the measures of the different powers in the commercial war, was also a measure of reprisal, an endeavour to compel the embittered belligerents to be reasonable. In fact, unlike the majority of their own measures, it was a sincere attempt in that direction. It seems also as if the Embargo Act was a means of saving the great American merchant fleet, the largest next to that of Great Britain, from the extinction which must otherwise have been the almost necessary consequence of the Berlin and Milan decrees and of the Orders in Council. Thus, for instance, a large ship-owner in Maryland stated that of fifteen vessels which he had dispatched during the bare four months between September 1 and the enactment of the Embargo Act, only three had arrived at their destination, while two had been captured by the French and the Spaniards, one had been seized at Hamburg, and nine had been taken to England.
However, it is rather an academic question what the effect of the Embargo Act would have been had it been obeyed, for nothing was further from reality. It makes an almost moving impression to see how one supplementary law after another, each more detailed and more draconic than the other, seeks to stop up the holes in the original law, which was very summary; but it has seldom been shown more distinctly that a constant succession of new laws on the same subject means a constant disobedience to the provisions of the law. As early as January 9, 1808, special enactments were made as to the security that coasting and fishing vessels would have to give, and it was declared that the exceptions made in the Embargo Act in favour of public armed vessels did not apply to privateers (chapter 8). On March 12, in the same year, foreign vessels also were required to give security to the extent of four times the value of vessel and cargo, or twice as much as for native vessels, that they would not sail to foreign ports; and for fishing vessels, a declaration was imposed under oath as to whether any of the catch had been sold during the trip. At the same time, however, the President was authorized, very imprudently, to grant vessels the right to go in ballast to foreign ports in order to fetch from there the property of American citizens, on giving a pledge to return with that property, and not to carry on any other trade, etc. (chapter 33). Still more forceful was the intervention a month and a half later by a law of April 25, which both forbade all loading of vessels except under the control of the authorities, and also in general terms forbade any vessel to depart, without the special permission of the President, to any United States port or district which was adjacent to foreign territory; and the customs staff was charged to take under their care any suspiciously large stocks of goods in such border regions. Further, the law gave to naval and customs vessels the right of search and authorized the customs staff, pending the President's decision, to detain vessels suspected of intending to break the law, and so on (chapter 66). Finally, on January 9, 1809, there was passed an Enforcement Act,53 which summoned all the weak public powers of the Union to compel obedience to the law. Thus the President was authorized to employ the fighting forces of the United States by land and sea and to hire the imposing number of thirty vessels for the purpose. At the same time all the previous laws were made more severe. Vehicles were also subjected to the embargo, in order to prevent the law from being circumvented by land routes; permission had to be obtained for the loading of vessels; and the right of the customs officials to refuse permission was extended to the right of ordering the discharge, in suspected cases, of goods already loaded, and also to take goods from vessels into their custody; and the surety deposited was raised to six times the value of the goods. Finally, the right to sail to foreign countries for American property was annulled.
These convulsive regulations give a kind of negative to the actual circumstances, which would seem to have been characterized by even more systematic transgressions of the law than generally occurred during that exceptionally lawless period. In Passamaquoddy Bay, on the borders of British North America, and on the St. Mary's River, which formed the boundary toward the still Spanish Florida, there were collected whole flotillas of American vessels, which, under the pretence of sea damage, put in with flour and fish at the ports of Nova Scotia and of the West Indian Islands, and gave the skippers' need of money to pay for repairs as an excuse that the cargoes had been sold there. This transfer of trade outside the territories of the Union went to the north, west, and south. Northward seven hundred sledges went back and forth between Montreal in Canada and the boundary of the State of Vermont; and at the same time great quantities of potash were imported into Quebec. That city and Halifax in Nova Scotia had halcyon days, the former having more shipping than the whole of the United States; and the British governor of Nova Scotia declared that the Embargo Act was 'well calculated to promote the true interests of His Majesty's American colonies', which, to say the least, was not its intention. In the West Indies, it is true, there appeared at first a serious shortage of foodstuffs and timber, accompanied by a great rise in prices; and the French islands never regained their former prosperity. But many circumstances contributed to this; and in the British West Indies the prices of grain sank again rapidly, and a number of American vessels went there, as also to Havana, where on one occasion, in 1808, there lay nearly a hundred at one time. On the cotton market at Charleston, where the law had evidently been effective in 1808, an agent stated that it had been broken every week since December of that year and January of 1809. Of course the right to sail for American property abroad was particularly abused, and was therefore finally cancelled. Five hundred and ninety vessels are said to have left under this pretext, and as a rule they stayed away, like the American tonnage which happened to be outside the limits of the United States when the law was passed, and which took very good care not to come again under their jurisdiction. On the other hand, of course, those vessels which remained at home in obedience to the law remained largely without employment. Admiral Mahan supposes that those that remained in the states were in the majority, although, on the other hand, the complaints about the sufferings that the law was alleged to cause gained in volume from the desire to make party capital out of the matter. That part of the trade which, as far as one can judge, was hit hardest was the export of raw materials to Europe, especially the export of raw cotton from the Southern States to England. Thus Liverpool received only 25,426 bags in 1808 as compared with 143,756 bags, or nearly six times as much, in 1807. Even that part of the British importation of raw materials which was not directly dependent on American supplies showed a great decline in 1808. This was presumably due to the general shortage of shipping that was a consequence of the withdrawal from traffic of a fairly large part of the second largest mercantile fleet in the world.54
In spite of the immense extent to which the law was disregarded, therefore, it would be an exaggeration to call the Embargo Act ineffective as a means of giving trouble to the belligerents. During the years 1808 and 1809 the British opposition never wearied of holding up to the government the disastrous consequences that its Orders in Council had had by giving rise to the Embargo Act, which had cut off both the supply of raw materials from the United States and, above all, the possibility of sales there. In accordance with the good old British parliamentary custom, they made the government responsible for all the maladies of the body politic, while the government, also in the usual stereotyped fashion, pictured the situation in as favourable a light as possible and ascribed the undeniable difficulties to other causes. Any inquiry of scientific value, however, must consider the course of economic development as a whole, and for this reason the question of the effects of the Continental System on the belligerents has been held over for separate treatment in the fourth part of this work. In any case, the difficulties accruing to Great Britain in consequence of the Embargo Act were not of such consequence as to lead its government in 1808 either to rescind the Orders in Council or even in the least degree to modify their application. On the contrary, Canning, as foreign secretary, conducted the almost continuous exchange of notes with an ironic superiority and a diplomatic skill which were calculated to irritate more and more the American government with its clumsier methods.55
BAYONNE DECREE (APRIL 17, 1808)
The American law had, if possible, still less effect, in the direction intended, on Napoleon's measures. Decrès's original uncertainty as to the scope of the Berlin decree had inspired the American government with what it somewhat vaguely called an assurance that the measures would not be applied against the United States; and this curious position was maintained by the Americans in the exchange of notes with Great Britain even after the Milan decree and its application should have definitely dissipated all such hopes. Like Great Britain, France was constantly capturing American vessels; and in so doing she behaved, if possible, in a still more violent manner than her adversary, especially by confiscating vessels simply and solely because they had been subjected to examination by British cruisers, a thing which they could not possibly have escaped. This interpretation was carried to such an extent, and with such disregard of actual conditions, that in 1808, for instance, an American brig was declared lawful prize because of the British examination, despite the fact that, immediately after the examination, it had endeavoured to flee from the British cruiser into the port of Bilbao, which belonged to Napoleon's ally, Spain, and had thus done its best to show its desire to stand well with the continental powers. As a matter of fact, Napoleon was so little inclined to except the United States from his proposition that neutrals did not exist, that with his usual ability to draw unexpected logical conclusions he managed to find in this very Embargo Act a justification for seizing all American vessels that arrived at French or 'allied' ports. In a letter addressed to his minister of finance, Gaudin, on April 17, 1808, he declared, in fact, that, as the government of the United States had laid an embargo on its vessels and resolved not to carry on foreign trade during the war, 'it is evident that all the vessels that say they come from America really come from England and that their papers are fictitious'; and consequently all American vessels that came to the ports of France, Holland, the Hanse Towns or Italy were to be seized.56 This was the Bayonne decree, and was all that the United States got out of France by the Embargo Act.
|FOREIGN TRADE OF THE UNITED STATES (1807-1817)|
|Year||Domestic goods||Foreign goods||Total||For home consumption||Total|
It is true that these figures have one great weakness, namely, that they seem not to pay any regard to smuggling. The enormous decline in exports and the very pronounced decline in imports shown in the year 1808, therefore, undoubtedly give an exaggerated notion of the effect of the Embargo Act, but picture quite correctly the almost complete disappearance of legitimate exports. Professor Channing's calculation that, as a whole, the exports diminished by 75 per cent. and the imports by 50 per cent., is probably too high, especially with regard to exports.67 For consonant with the facts as it may be, that the figures show a stronger decline for exports than for imports, the decrease of exports can hardly be as great as this hypothetical figure would seem to indicate. True, it was against American exports that both the Continental decrees, the Orders in Council, and the Embargo Act directed their blows with practical unanimity; but, on the other hand, it is to be observed that smuggling also directed its successful counter-action to the same point. The subsequent Non-intercourse Act marks a powerful improvement, as appears from the figures for 1809; and the law of 1810 makes the imports and exports for that year and the exports for 1811 still higher. But, for reasons previously given, the export has changed its character from the colonial carrying trade to the sale of the United States' own products. In 1812 began the war with Great Britain, which gradually led to the almost complete cessation of all American foreign trade, especially of all exports. Finally, the years 1815-17 show the restoration of peace conditions, and thereby provide a suitable background for the alterations of war time. Especially noteworthy, in comparison with the situation in 1807, are the low figures for re-exports, which are only a little higher in 1815-17 than under the Embargo Act of 1808. This brings out very clearly the war-time character of this trade.
It may also be of interest to see the development of one special line of this trade, namely, the imports of American cotton into Liverpool. The figures were as follows:68
|IMPORTATION OF AMERICAN COTTON INTO LIVERPOOL|
|Year||No. bags||Year||No. bags|
As is only natural, 1808, the year of the Embargo Act, stands lowest of the years before the war year 1813, while the Non-importation Act of 1811 also brings with it a heavy decline. The Non-intercourse Act of 1809, on the other hand, has no very strong repellent effect, although, of course, 1810, the only year with full freedom of trade, stands still higher. These figures, which presumably include smuggled goods, as well as lawful exports, thus confirm the preceding statements in all essentials.
[46.] The best survey of American developments in this field is to be found in Mahan, Sea Power in its Relations, &c., vol. I, ch. IV. Diplomatic correspondence and other relevant matter is to be found in Hansard, as well as in The Statutes at Large of the United States of America.
[47.] United States Statutes at Large, vol. II, p. 379.
[48.] See ante, p. 91.
[49.] See ante, p. 103.
[50.] United States Statutes at Large, vol. II, p. 451.
[51.] Cf. Lord Grenville in the House of Lords, Feb. 17, 1809. Hansard, vol. XII, p. 774.
[52.] Channing, op. cit., vol. XII, p. 201-2.
[53.] United States Statutes at Large, vol. II, p. 506.
[54.] Cf. also, Mahan, Sea Power in its Relations, &c.; Channing, op. cit., vol. XII, pp. 216 et seq.; Roloff, op. cit., p. 207; Lord Grenville in the House of Lords, Feb. 17, 1809, and Whitbread in the House of Commons, Mar. 6, 1809 (Hansard, vol. XII, pp. 780, 1167); Tooke, op. cit., vol. II, p. 391 (table); Daniels, American Cotton Trade with Liverpool under the Embargo and Non-intercourse Acts, in American Historical Review (1915-16), vol. XXI, pp. 278, 280; Sears, British Industry and the American Embargo, in Quarterly Journal of Economics, (1919-20), vol. XXXIV, pp. 88 et seq. Cf. also, vol. XXXV, 1920-21, pp. 345 et seq.).
[55.] The most important debates on this subject were in the House of Lords on Mar. 8, 1808, and Feb. 17, 1809, and in the House of Commons on Mar. 6, 1809. For the diplomatic correspondence, cf. Hansard, vol. XII, pp. 241 et seq.; vol. XIII, app.; vol. XIV, pp. 881 et seq.; vol. XVII, app.
[56.] Correspondance, no. 13,753
[57.] United States Statutes at Large, vol. II, p. 528.
[58.] Vogel, op. cit., p. 36; Rubin, 1807-1814, Studier til Københavns og Danmarks Historie (Copenhagen, 1892), pp. 381-2; Bergwall, Historisk under ättelse om staden Götheborgs betydligaste varu-utskeppningar (Gothenburg, 1820), p. 9 note; Daniels, loc. cit., p. 281.
[59.] United States Statutes at Large, vol. II, p. 605.
[60.] Correspondence, nos. 16,080, 16,127, 16,384, 16,736, 16,743; Bulletin des lois, &c., 4th ser., bull. 286, no. 5,402. Memoirs and Correspondence of Lord Wellesley (Pearce ed., London, 1846), vol. III, pp. 116-17, 134 (here, too, can be found the correspondence of 1810-11 between Wellesley, in his capacity as British foreign secretary, and the American minister in London); Le Moniteur, Aug. 9 and Dec. 25, 1810.
[61.] Napoleon to Eugene, Viceroy of Italy, Sept. 19, 1810, and to Champagny, Dec. 13, 1810 (Correspondence, nos. 16,930, 17,206); decree of Nov. 1, 1810 (Bulletin des lois, &c., 4th ser., bull. 324, no. 6,067; Martens, Nouveau recueil, &c., vol. I, pp. 527-8).
[62.] United States Statutes at Large, vol. II, p. 651.
[63.] House of Commons, Apr. 27, 1812 (Hansard, vol. XXII, p. 1061).
[64.] Correspondance, nos. 17,482 and 17,669. For the speech to the deputies of the Chamber of Commerce, of. Thiers, Histoire du Consulat et de l'Empire (Paris, 1856), vol. XIII, pp. 27 et seq.
[65.] For the documents issued by Maret and the British Prince Regent, of. Martens, Nouveau recueil, &c., vol. I, pp. 530 et seq,, 542 et seq. For the revocation of the Orders in Council, cf. Hansard, vol. XXII, pp. 853 et seq. (under an incorrect date), and vol. XXIII, pp. 716 et seq. For the debates on the subject in the House of Commons on May 22, 25, 26, and June 16, 19, 23, and in the House of Lords on June 18, 1812, cf. Hansard, vol. XXIII, pp. 286 et seq., 295 et seq., 486 et seq., 496-7, 587 et seq., 600 et seq., 715 et seq. See also Mahan, Sea Power in its Relations, &c., vol. I, pp. 266-76.
[66.] [The text of this footnote, on p. 146 of the 1922 edition, is missing.—Econlib Editor]
[67.] Channing, op. cit., p. 228.
[68.] Daniels, op. cit., p. 278.