STATE POWER AND TAX-FREE FINANCE
GROWTH IN state power characterized the early republic. Soon after the War of 1812, American states -- both northern and southern -- began great new projects in economic growth and social welfare. No longer did state governments undertake to do little more than protect each citizen's life, liberty, and property. By successfully tapping new and richer means of financing public activities, states released themselves from the more restricted roles that had marked their earlier behavior. With state support, canals flourished, as did railroads and then schools.
The "rise of the common man" and the spread of political democracy sum up the dominant perceptions of the Age of Jackson. Just as important as the extension of suffrage or the hoopla of electioneering, however, was a remarkable growth in the range of government activities -- the behavior that the growing electorate could shape.1 Focusing on state finance in antebellum America permits the integration in one analysis of such disparate facets of the period as public schooling, railroad development, Indian removal, and relations between the federal government and the states.
Historians have told how states promoted economic growth and development in pre-Civil WarAmerica. They have written of widespread state investment in banks, canals, and railroads. Some ventures were jointly public and private, such as the mixed enterprise of Virginia. Some, on the other hand, like New York's Erie Canal and Georgia's Western and Atlantic Railroad, were exclusively public enterprises. But such accounts of the "American System" as historian Robert A. Lively termed it, tell only part of the story.2
The American system of public investment in banking and transportation sought twin objectives. Not only should citizens benefit from the general prosperity that state-fostered economic growth would bring, but those investments