Sturges Vs. Crowhield And Mcculloch V. Maryland

The shaping of the American economy was deeply affected by the governmental structure and the policies made by the various levels of the US governments in the early economic development. Following the Independence War in 1776, the nation’s economic development was implemented mainly by the state governments because the Articles of Confederations limited the power of the federal government to the defense and international affairs while gave all the other powers to the individual states. [1] With the weak central government, the economic development was hampered and confined to the agricultural sector. However, the new constitution crafted in 1787 formed a more powerful federal government, granting the federal government the sole power to regulate

As Wallis points out, “Manufacturing concentrated in the northeast. Agriculture spread through the rest of country….Economic growth built on advances in transportation and finance. Promotion of economic growth required investments in banks and canals, later railroads.” [4] Additionally, the federal government provided a stable and unbiased legal environment for the economic growth. For example, in many landmark cases, such as Sturges v. Crowinshield and McCulloch v. Maryland, the US Supreme Court advocated the supremacy of the federal government over the states. [5] During the economic development, the slavery was a thorny issue to the federal government and it was closely connected to the land policy. The issue eventually led to the several land ordinances including the 1787 “Northwest Ordinance” governing settlement which later became various states, such as Ohio, Indiana, Illinois, Michigan, and Wisconsin. Eventually, the federal government came up with the Missouri Comprise that settled the disparity between the North and the South for the time being. [6] Nonetheless, the economic policies implemented by the federal government faced strong oppositions from the state governments;

The state governments had begun their economic development by encouraging public and private investments in banking and transportation since 1780s. The thriving banking systems generated a great amount of revenues for the state governments. Wallis explains that state chartered banks were the heart of the developing American financial system around the US. [8] Furthermore, the states were involved in the internal improvement since the early history of the United States. For example, the construction of the Erie Canal symbolized the state involvement in shaping US economy. [9] Wallis also concurs the important role of the states in shaping the US economy, “…states were chartering private companies, providing subsidies, and purchasing stock in canal, bridge, road, and turnpike companies…. Despite federal inaction, there was widespread support for internal improvement.”[9] As a result, the economic boom affected the states in the US despite the fact that they suffered from a financial panic in 1837 and an economic depression in 1839. Both the projects of internal improvement and the state banking systems greatly benefited the states. As the state government debts increased while developing the state economies, the states gradually shifted the role of economic development to local governments in the late 19th century.