on the ground of revenue, and therefore South Carolina, which had always been opposed to the exercise of power by the federal government, took the lead in a movement of direct opposition to the tariff. At first, the delegates contemplated resigning their seats in Congress, but they were content to secure the formation of a committee to inquire into the powers of the federal government with respect to the subjects then agitated. The committee having been appointed, their report was that the federal constitution was a compact originally formed, not between the people of the different States, as distinct and independent sovereignties, and that when any violation of the letter or the spirit of that compact took place, it is not only the right of the people, but of the state legislature, to remonstrate against it; that the federal government was responsible to the people, whenever it abused or injudiciously exercised powers intrusted to it, and that it was responsible to the state legislature, whenever it assumed powers not conferred on it.' The committee also reported, 'That all legislation for the protection of domestic manufactures was unconstitutional, as being in favour of a local interest, and that Congress had no power to legislate, except upon subjects of general interest.' Upon the reception of this report, the State of Carolina passed a resolution, 'That the Tariff Acts were not authorised by the constitution of the United States, and violated the true meaning and interest thereof, and were null and void.' President Jackson, alarmed at the agitation, lost no time in issuing a proclamation, appealing to Carolina and other states to remember the toil and blood which American liberty cost, the sacredness of the constitution, and the importance of the union. But the legislature of South Carolina, then in session, authorised the governor to issue a counter proclamation. General orders were issued to raise volunteers, and a rupture was at hand, when, Virginia having appealed to the patriotism and magnanimity of South Carolina, a compromise was effected, by which Congress reduced all the duties which exceeded. 20 per cent. and declared that, after 1844, customs duties should be levied only for the purpose of raising such revenues as may be necessary to an economical administration of government. But the compact was not adhered to. The tariff of 1843 exhibited no improvement on the former tariff, and that of 1846 established much higher rates. Some slight reductions were afterwards made in 1857, but Mr. Morrill's tariff, in 1861, made matters worse.'

The slavery question was even more complex than that of customs duties. In 1787, when the constitution was settled,

The South want railway iron in large quantities to make railways for bringing down cotton from the interior; the duty upon this one article under the Morill tariff was 70 per cent. upon the cost of manufacture in England. — Mr. Walford on The Trade of the United States' (Journal of the Statistical Society, vol. xx. 283).

slavery existed in every state of the Union except Massachusetts, though, soon after, the other Northern States took steps for its abolition. Early in fact in the history of the Union, as Mr. Maddison said, the States were divided into different parties, the result not of difference of size but of other circumstances, the most material of which were connected partly with climate and principally with their having or not having slaves. Still, even then slavery was regarded as an evil to be deplored and if possible to be got rid of. But the evil increased. So long as indigo and rice formed the staple of the planting States the increase of slaves was not very material. But when the cotton gin was invented and the value of the cotton crop became more and more important, new Slave States were added, and the slave population increased faster than the free. In 1818 a contest began as to the limits of the slave territory, when the Missouri compromise was entered into, whereby the South and the North each gained two states. Subsequently the South purchased Florida. Then Arkansas was admitted as a Southern State, while Michigan entered as a free state as well as California, and afterwards New Mexico. So that, in 1861, slavery existed in 15 out of the 31 states. These slave states sent 30 senators and 88 representatives to Congress, and more than once the president himself owed his election to the influence of the Slave States.

Thus matters stood when, in November 1860, Abraham Lincoln, the Republican candidate, was elected by a large majority as President of the United States. In this election North and South were openly arrayed against each other, and the result, fatal to Southern influence, became the signal of a great change. Not a month, in fact, elapsed after the election took place when a state convention was held in South Carolina, which declared the Union subsisting between South Carolina and other states under the name of the United States dissolved. Other states followed in adopting a similar resolution. Mississippi did so on January 8, 1861, Florida on the 10th, Alabama on the 11th, Georgia on the 19th. Louisiana and Texas came next, and they were succeeded by North Carolina, Virginia, Tennessee, and Arkansas. All the slave states thus made common cause against the free states, and on February 4, 1861, they constituted a provisional government for themselves under the title of the Confederate States of America. But the Government of the United States withstood such a confederacy and put forth all its strength for securing the permanence of the Union. Civil war ensued, and during the struggle the slavery question was set at rest. In July 1862, Mr. Lincoln sanctioned a bill for the confiscation of property and emancipation of slaves of all persons who did not deposit their arms in sixty days. And in September another proclamation was issued declaring all slaves of the states in revolt on January 1,

1863, free from that day. Accordingly on that day all slaves found in Texas, Arkansas, Mississippi, Alabama, Florida, Georgia, North Carolina, South Carolina, Louisiana, and Virginia, in a state of rebellion, were declared free. The insurrection was quelled after a severe and protracted struggle, and after the unhappy tragedy of the assassination of Lincoln, subsequent to his reelection, the blockade was raised and peace was restored.

The finances of the United States during the rebellion acquired an extraordinary magnitude. Previous to that event the expenditure and debt of the United States exhibited a remarkable contrast as compared with those of European states. In 1860 the expenditure was in the proportion of 118. per head of the population, against 21. 68. per head in the United Kingdom, and the interest of the public debt only 6d. per head, against 178. per head in the United Kingdom. How different only a few years after. The public debt of the United States on March 4, 1861, was $68,483,000. On December 31, 1865, it had risen to $2,807,310,000. In five years, from 1861 to 1866, the United States Government expended in the war upwards of $5,000,000,000, besides the expenditure incurred by states, counties, cities, and towns in the loyal burghs for war purposes, estimated at $500,000,000 more, and the expenditure incurred by the Confederate States, estimated at $2,000,000,000, and the immense amount lost in the destruction of property. This enormous expenditure was met partly by loans and partly by the issue of paper currency, the amount authorised to be so issued being not less than $1,200,000,000.2 The whole of this amount was not eventually issued, but what went into circulation was sufficiently large to produce an enormous increase of prices and a proportional depreciation of the currency as against gold. In April 1862 the premium on gold was 174 per cent. In July 1864 it rose to 185 per cent., and the foreign exchanges rose in equal proportions.3 The increasing wants of the treasury led to a considerable increase of taxation which greatly affected the foreign trade of the United States. Prices, calculated at a depreciated currency and aggravated by a prohibitive tariff, rose immensely. Altogether the economic condition of the people was changed by the fictitiousness of all calculations, and a shock was given on the trade and finances which could not fail to retard the progress of a country which had hitherto marched at a most rapid pace.

2 The Act authorising the issue of inconvertible paper in the shape of demand notes was passed on February 22, 1862, and by a supplemental bill approved on March 16, 1862, such demand notes were made receivable for import duties and declared as legal tender. The Act for the resumption of specie payments was passed on January 14, 1875, and was carried into effect on January 1, 1879.

The rate of exchange New York to London on January 5, 1861, was 103; on January 11, 1862. 111; on January 3, 1863, 146; on January 2, 1864, 165; on January 7, 1865, 2434; on January 6, 1866, 1523; and on January 5, 1867, 1091.

Most important also were the effects of the civil war on the commerce between the United States and England. In 1860 our imports from the United States amounted to 44,727,000l., a large portion of which consisted of cotton. Suddenly, however, with the closing of the Southern ports a large portion of the American trade ceased, and the amount of our imports thence was reduced by more than half. In 1860 we imported altogether 1,391,000,000 ls. of cotton, of which 1,115,890,000 lbs., or 75 per cent., were from the United States. In 1862 the imports of American cotton amounted only to 6,394,000 lbs. And the average price of middling Orleans cotton, which in 1860 was 6d. per lb., rose in 1864 to 27 d. Perplexed how to obtain the necessary quantity of cotton, India was put in motion to produce more largely than she had hitherto done. For manufacturing purposes Surat cotton is inferior to American cotton, nevertheless, gradually the manufacturers learnt how to use it mixed with other descriptions, and the importation of Indian cotton, which in 1860 was 204,000,000 lbs., rose in 1866 to 615,000,000 lbs. Much has been done in India to improve the cultivation of cotton by the selection of indigenous seed, by the introduction of exotic seed, by a better cultivation of the soil, by the improvement of pressing bales, by the improvement of roads, and by the construction of railways. But it is the price that regulates the extent of cotton cultivation in India as elsewhere; and whether India will ever be able to compete permanently with America is doubtful. The cotton requirements of the world are estimated at nearly 3,000,000,000 lbs., the half of which is for Great Britain alone, and the other half for Europe, America, and India. It is much to be desired that every facility should be accorded to the cultivation of the article in every country in which it may be advantageously grown. To the United States the insurrection has been most injurious. Their finances have been disorganised; their commerce and navigation considerably reduced; their whole economic policy has been reversed.

The following quotations of extreme prices of cotton from Messrs. George Holt & Co.'s circular may be useful :—

Upland
New Orleans

1860

1864
24 to 321

Sea Island

Surat

The Civil War in the United States produced a considerable distress in Lancashire by the sudden curtailment of the chief source of cotton supply A relief fund was established, and the number of persons relieved, which in Jure 1862 was 129,774, in December 1862 was 485,434. The number continued nearly as high till April 1863, when it was 362,076. Then it fell monthly ti 1865, when the excess disappeared. The total sum distributed in relief by the central executive relief fund was 841,8097., while the value of the contributions in kind were valued at 111,9687., making a total of 1,773,6477,

CHAPTER IV.

THE ALABAMA DISPUTE.

Formation of the Confederate States of North America.-Granting of Belligerent Rights by the British Government.-The Sumter' at Trinidad.The Florida' and the Alabama.'-Rights of Blockade.-Appointment of a Royal Commission.-The Treaty of Washington.--The Arbitration.Appendix: Act V. of the Treaty of Washington, and Decision and Award.

THE political relations between the United Kingdom and the United States were greatly disturbed by the insurrection in the Southern States. The government of the United States charged Great Britain with having hastily and precipitately granted to their rebel subjects belligerent rights, and, by the neglect of the proper duties of a friendly neutral state, to have materially assisted the operations of their enemies. The circumstances were as follows:-The Civil War commenced in November 1860, when seven states renounced their allegiance to the United States and formed themselves into a separate confederation, under the title of the 'Confederate States of North America. Between November 1860 and March 1861, these states adopted a federal constitution, instituted a federal legislature, raised a large army, and established a regular government. Shortly afterwards four other states joined the confederacy, and judging by the size and population of the newly organised confederation, the judgment displayed by its ministers, and the measures they took for its preservation, there was no questioning the fact that the confederacy was more than a handful of rebels to be dispersed by the police, but that, on the contrary, it was, in fact as well as in theory, a belligerent state.

Actual war commenced with the attack of Fort Sumter on April 13. On the 15th the President of the United States raised an army of 75,000 men. On the 17th, Mr. Jefferson Davis, the President of the Confederate States announced his disposition to grant letters of marque, and on the 19th President Lincoln. issued a proclamation subjecting the southern portion of the United States to a rigorous blockade. What did England do? On May 14, fourteen days after the receipt in London of the news that Fort Sumter had been reduced by bombardment, that the President of the United States had called out 75,000 men, and that Mr. Jefferson Davis had taken measures for issuing letters of marque, twelve days after receipt of intelligence that President