In 1806 the British were blockading the European coast "from Brest to the Elbe", and relying on the articles from 1793 to confiscate any goods going to France. Napoleon and the British Empire had claimed the right to claim any ships, cargo and crews that were assisting the other side (p.173). The protesting ports of Salem, Boston, New York, Baltimore and Philadelphia received no assistance from Virginia planter and president Jefferson, who was above all else interested in avoiding war. The Embargo Act therefore required all American ships to trade along the coast exclusively, with bonds at twice the value of the cargo to ensure compliance.
Though some people complied with the rules by selling the ships or simply not returning to harbor in the US (p.174), the impact for the economy was disastrous.
Prices of foreign commodities doubled ; prices of domestic goods fell below the cost of production. The $50,000,000 of capital invested in shipping brought in no revenue. Thirty thousand out of forty thousand American sailors were suddenly thrown out of employment. Farmers unable to dispose of their produce offered their lands for sale. Lumbermen and fishermen were reduced to beggary. The mercantile classes suffered no less. In New York the Embargo caused one hundred and twenty bankruptcies and threw twelve hundred unfortunates into the debtors' prison. (p.174)In 1809, the US Government reversed course (p.175) with the nonintercourse with Great Britain, and now the US could pick up the neutral shipping.
The war tariff of July 1, 1812, doubled and trebled the duties on imported commodities. Imports and exports rapidly declined. Their combined value in 1814 was but $20,000,000, one seventh of the foreign trade of 1810. Our shipowners faced ruin. (p.175)Anyone who owned a ship took out a privateering contract and made for the seas to capture British ships, with the full approval of the government.
Sixty-five vessels were commissioned as privateers in the first three weeks of the war, one hundred and fifty in the first two months. During the summer of 1812 one hundred prizes were taken, and but fifty vessels were lost to the enemy, only thirteen of these being privateers. During the three years of war the five hundred and fifteen privateers commissioned by the United States captured over thirteen hundred British vessels, most of them 'merchantmen carrying valuable cargoes. Congress allowed a rebate of one third the import duty on captured goods and offered twenty-five dollars for each prisoner taken. (p.176)Though in the immediate aftermath, trade blossomed, by 1821, it had collapsed again, and the key reason---beyond the panic of 1819 and the tariff of 1816---was the reciprocity of free trade offered by the US to the rival shipping nations (p.177).
The real gainers from the reciprocity policy were not the shipowners but the farmers and planters, whose surplus products were sent to foreign markets at declining freight rates. (p.178)Then Comen turns to the development of manufacturing.
At the beginning of the nineteenth century, in spite of the encouragement, legislative and otherwise, that had been given to manufactures, the United States was still in the main an agricultural nation. We were producing more both of food products and raw materials than were consumed in the country, and we could not provide manufactured commodities sufficient to supply the home market. (p.180)Shipping, farmers and consumers were happy to trade raw products for manufactured goods imported, only the manufacturers were unhappy (p.180). From the Embargo in 1808 to the end of the War in 1815, the manufacturing of cotton enjoyed a virtual monopoly within the US. This caused a boom in the cotton manufacturing that had previously only progressed gradually. The boom was amplified by the redirection of capital; shipping monies moved into manufacturing instead.
Slater's success at Pawtucket had demonstrated the possibilities of this new textile industry, and men trained under his eye went out to set up rival establishments. The mills at Slatersville, Rhode Island, Pomfret, Connecticut, and Union Village, New York, were direct offshoots from the "Old Mill." For the first ten years development was slow. (p.180)[Slater had grown up in Belper, England, where he had apprenticed at a frame using the Arkwright spinning method for leveraging water power, invented in the 1760s. This knowledge he brought to Rhode Island, even though departure for weaving apprentices was supposed to be illegal, where he collaborated with American artisans like David Wilkinson to reconstruct an Arkwright like frame. RCK]
In 1807 there were fifteen cotton mills running 8000 spindles and producing 300,000 pounds of cotton yarn annually. In 1811 there were eighty-seven mills operating 80,000 spindles, producing 2,880,000 pounds of yarn per year and employing 4000 men, || women, and children. In 1815, 500,000 spindles gave employment to 76,000 persons, with a payroll of $15,000,000 per year. Rhode Island was the center of this flourishing industry. Within thirty miles of Providence were one hundred and thirty mills running 130,000 spindles and employing 26,000 operatives. (pp.180f)However, the cotton was still weaved by hand on looms, until C. Lowell succeeded in 1814 in establishing the first power loom in the USA in Waltham, MA (p.181). The innovation spread, and the work had been simplified to the point that women and children could do it (70%-85% of the employees), which significantly lowered cost.
Establishing the woolen manufacturing required weaning oneself from the sheep imports from Spain, Portugal, Saxony, Russia, South America and Syria (p.182). Merino sheep seemed to be the solution and caught on first; they were able to handle the continental climate. Woll was fetching 75c in 1811 and $2-3 in 1813 (pp.182f). Rowland Hazard succeeded in putting together the first woolen factory, were carding, spinning and weaving was all accomplished by water power, in 1828 (p.183).
The US Iron manufacturing was favored because of the availability of anthracite or stone coal (p.183), which was brought to Philadelphia via the Delaware River as early as 1804 (p.183).
In 1805 there were five furnaces and six forges in Fayette County [in Pennsylvania, RCK]. Three rolling and slitting mills and a steel furnace were successfully established by 1811. The iron deposits of the river valleys to the north were being developed in the same period. Pittsburg was the natural center for this rising industry because of her unexcelled advantages in the way of water transportation. (p.183)