8.12.3

Explain how states and the federal government encouraged business expansion through tariffs, banking, land grants, and subsidies.
            Business expansion, which was one of the most important aspects of the Industrial Revolution, was encouraged by states and federal government because of the growing businesses in America. The states and federal government used tariffs, or taxes on foreign goods, as bait to attract more people into buying American goods. They did so by increasing tariffs so the Americans would prefer the American goods over the British goods. Some people believed that the tariffs were “tax on the poor for the benefit of the rich”, because tariffs were taxes on British goods. The rich actually did benefit, because tariffs were in favor of American businesses, which were under the control of upper-class Americans. The rich were able to afford such taxed British goods, while the poor were reduced to buying less expensive American products, which were still pricier than the British goods before being taxed.
            Other encouragements to business expansion included land grants, subsidies, and banking or financial aid given to small or new businesses. Land grants were used to encouraged new businesses by giving people land, so they can start a new business on that land. These lead to subsidies, which gave small and new enterprises money, so they can expand into a larger business. These businesses started to expand, and soon started needing larger amounts of money, which makes it necessary to visit a bank to obtain the money they need. There were not any banks during the period between 1811 and 1816, because the First Bank of the United States expired in 1811, 20 years after it was created, and although president Madison supported the founding of a new bank, it took a while for him to lead the Congress into building a new bank. Finally, in 1816, a new bank, the Second National Bank was established by the Congress. The Second National Bank made many large loans to businesses, so that they can expand and help strengthen the economic independence of the United States.


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