Vol. II
p83 Chapter 5
Social and Economic Conditions, 1800‑1836

The Fund for Internal Improvements — The Agricultural Fund — The Literary Fund

For over three decades after 1800 adverse criticism of social and economic conditions characterized all descriptions of life in North Carolina. A conviction of stagnation and decline rather than progress impressed those who had at heart the public welfare. When North Carolina entered the Federal Union in 1789, it ranked third among the states in population; from 1800 to 1820, it stood fourth; by 1830 it had dropped to fifth. From 1790 to 1830 the slave population showed a greater percentage of increase than the white. Land valuation in 1833 showed a decline compared with that of 1815, although more acres were entered. Textile products as late as 1810 surpassed those of Massachusetts, but by 1830 the industrial revolution in the latter state gave it precedence by a wide margin, while agriculture overshadowed all other economic activities in North Carolina. Thousands left the state to find new homes in the Northwest or in other parts of the South.

Among the influences contributing to this situation was that of trade and commerce. Easy exchange of domestic products was impossible; in fact, the North Carolina farmers and merchants were to a large extent dependant on distant markets. Trade relations were determined by geography. Nature divides the state into three distinct sections. First, extending from the coast inland •about 100 miles is an undulating, nearly level plane, which embraces two-fifths of the state's total area. Along the western border of this plain runs a  p84 granite ledge which marks the fall line of the eastern rivers; extending beyond for •200 miles is a wide table land, rising from a low altitude in the east to •1,500 feet at the foot of the Blue Ridge. Further westward, between the Blue Ridge and the Great Smokies, lies a mountain plateau.

This sectionalism of nature was reinforced by racial and economic influences. The eastern belt was colonized mainly by Englishmen from the other colonies who sought better land in the alluvial valleys of tidewater Carolina. Gradually an extensive agricultural life, based on slave labor, developed. The middle and western belts were settled mainly by Scotch-Irish and Germans who migrated from Pennsylvania or from South Carolina. There the slave system developed much more slowly than in the eastern belt. The manufacturing impulse was strongly in evidence. Hats were made of various material. Hides were tanned, the state ranking fourth in the number of tanneries in 1810. Other products were wagons and farm implements for which iron was secured from bloomeries. The surplus grain was distilled and North Carolina liquors were known far and wide in the South. Each family also had its own loom, wheel, and cards. The mountain section, between the Blue Ridge and the Great Smokies, was in a more primitive condition than the other sections. Its development was interwoven with the removal of the Cherokee Indians, consummated by a series of treaties between 1777 and 1835. Its industrial life resembled that of the piedmont plateau.

Now the economic development of these distinct sections was checked by the condition of transportation and trade. There was no market within the state at which staples could be exchanged or the products of other states procured. This fact is explained by the river systems. Of the large streams which reach the ocean, only the Cape Fear empties directly into the Atlantic; but the sand bars obstruct its mouth, and beyond these lie the southernmost part of Smith's Island, known as Cape Fear, and Frying Pan Shoals. "Together these stand for warning and woe; and together they catch the long majestic roll of the Atlantic as it sweeps through a thousand miles of grandeur and power from the Arctic  p85 towards the Gulf. It is the playground of billows and tempests, the kingdom of silence and awe, disturbed by no sound save the sea-gulls' shriek and the breakers' roar. Imagination cannot adorn it. Romance cannot hallow it. Local pride cannot soften it. There it stands today, bleak and threatening and pitiless."​1 Hence Wilmington never developed a trade commensurate with the resources of the southeastern part of the state. The other navigable rivers of the east, the Roanoke, the Tar, and the Neuse, reach the ocean through Ocracoke Inlet, which is too shallow to float any except small craft, and the danger of wreckage was so great as to make the cost of lighterage and insurance very high. Consequently the important trading centers of Eastern Carolina were Petersburg and Norfolk, Virginia. Long distances and poor roads to these places helped to make prices high. Illustrative of the hardship imposed on commerce is a report to the legislature in 1827 by citizens of Northeastern Carolina:

 p86  However, the section which suffered most on account of its trade routes was the west, the region extending from the eastern fall line to the Tennessee boundary. The general course of its larger rivers is southeast, the Yadkin and Catawba flowing into South Carolina while the swift mountain streams empty into the Tennessee or the Ohio. Trade routes therefore led to Charleston or Greenville, South Carolina, Augusta, Georgia, Knoxville, Tennessee, or even Philadelphia. The long journeys to these markets were made in schooner wagons. Whiskey, distilled from the surplus corn crop, was peddled on the way or exchanged for manufactured articles. The high cost of some of the necessities of life is illustrated by the price of salt, which was $1.50 per bushel in Iredell, a western county, about $1 above the market price at tidewater. Worst of all, in case of crop shortage in one section, there was no good route by which staples could be imported from another part of the state or abroad, and actual suffering often ensued. Thus in 1826 a crop failure in Eastern Carolina drove the price of corn to $7, and that of flour to $8 per barrel, and subscriptions for relief of the suffering people were opened.​3 Twenty years later a similar crop failure occurred in the western counties; there was a plentiful harvest in the east, but no means of cheap and easy transportation.

The conditions here outlined had an important bearing upon the conduct of business. Writing in 1819 Murphey said:

Equally serious was the effect of trade conditions on the development of public spirit. Separated from one another, the people of each section viewed all state problems from the angle of self-interest. Said the Board of Internal Improvements in 1833:

Closely related with trade and commercial conditions was the state of agriculture. Long distance to markets reduced profits and made the prices of manufactured goods high. Equally important were wasteful methods of tillage and the neglect of soil improvement. In primitive times vast forests stretched in every direction; trees, when they died and fell,  p88 made a deposit of rich vegetable matter, furnishing a natural nourishment for seed. The white immigrants selected the most promising spots, cleared the timber, loosened the soil, and raised abundant crops. Then as the natural fertility was exhausted, the land was abandoned for a new tract that was likewise deforested and brought under cultivation. Wrote a critic of agricultural methods in 1822:

Among the by-products of this agricultural condition, two were preëminent. One was speculation, the result of the ever present desire for new virgin lands. It was estimated in 1833 that nine-tenths of the farmers were anxious to sell their landed property. The other was a steady flow of population to other states in search of new homes. "Go in any neighborhood," reported a legislative committee in 1833, "and inquire of the seniors or heads of families, how many children they have raised, and in what state they do reside, and in nine cases out of ten, the answer will be, 'I have raised some six or eight children; but the major portion of them have migrated to some other state,' and adds the parent, 'I am anxious to sell my land, to enable me to follow them.' "​6 Agriculturally, North Carolina before 1830 well deserved its reputation as the "Ireland of America."

Another influence which retarded progress was ignorance. Illiteracy hung like a pall over all sections of the state. In 1810 Jeremiah Battle wrote that two‑thirds of the people in Edgecombe County could read, but only one-half the males and one‑third of the women could write.​7 "It is a notorious  p89 fact," wrote an Edgecombe citizen in 1824, "that many of our farmers of wealth and character, nay, even many of our instructors and clergy, are notoriously deficient in Orthography, and Reading and Writing, and the commonest rules of vulgar arithmetic."​8 In 1838 a Presbyterian minister estimated that "we have probably 120 thousand children between the ages 5 and 15 years, who are destitute of common school education."​9 In the same year a legislative report on education pointed out "that those who have mixed much with the people of our State know that there is an average of nearly half of every family, who have received no education and who are as yet unprovided with the means of learning even to read and write."​10 In 1825 a writer in the Western Carolinian declared that the "dullness and incapacity which is permitted to enter our legislative hall, and disgrace us even in the national representation, and our former tame subserviency to the interest of another State, evince most unequivocally the mental debasement of a large portion of our population."​11 Toward education there was apathy, even hostility, among the masses. "I have been placed in circumstances, and there are few I fear who have not been similarly situated," wrote Dr. Joseph Caldwell, President of the University, in 1832, "where it would be dangerous to the election of a candidate to have it thought that he had any pretensions to information or culture, at least beyond a bare capacity to read. And some miserable being, to secure the great object of his ambition, has frontlessly presented it as a sure and glorious passport to success over the head of a rival, who was so unfortunate as to have had some education, that he belonged to the class of the ignorant, with whom the greater part considered their glory to be ranked."12

Academies existed; evidently they did not to any extent reach the masses. Consequently the only remedy for illiteracy  p90 was to establish schools supported by the state to which all children would be admitted. Sentiment for such a policy dates from the later colonial period. As early as 1754 £6,000 in bills of credit were emitted for the foundation of "a public school or seminary" to which George Vaughn, a London merchant, agreed to contribute £1,000 per annum. However, during the crisis of the French and Indian war the money voted was used for military purposes and after the end of the conflict it was not restored. Governor Dobbs advised the British Government to allow a reissue of bills of credit for that purpose, without results. The first victory for the ideal of public education was attained in the Constitution of 1776, which declared in article 41 that "a school or schools shall be established by the Legislature, for the convenient instruction of youth, with such salaries to the masters, paid by the public, as may enable them to instruct at low prices, and all useful learning shall be duly encouraged, and promoted, in one or more universities." This article was taken verbatim from the Constitution of Pennsylvania. In partial fulfilment of its provisions the University of North Carolina was founded in 1795, but for over a generation no action was taken for establishing schools of lower rank.

The failure to carry out the mandate for elementary education was due to many causes. One was its vague and uncertain terms. Some interpreted it to mean the creation of public schools by the legislature, others that its intent was to lend aid to existing academies or to charter new ones. Indeed many academies were chartered, but bills to extend state aid to them were always defeated. Another hostile influence was the sense of individualism which opposed any increase of the state's activity. According to popular political thought, the function of government was to restrain the lawless, not to stand sponsor for social forces. Instruction was pre-eminently a parental obligation with which the state had no right to interfere. Consequently the only conception of public education was that of charity, to be undertaken by benevolent individuals. Illustrative were societies for education of poor orphan children in Newbern, Fayetteville, Wilmington, Raleigh,  p91 and in Edgecombe, Wayne, and Johnston counties, established between 1800 and 1825. Aversion to taxation also checked the growth of educational sentiment. The purpose of taxation in a democracy, it was held, is to meet the necessary expenses of government, and any violation of this principle is dangerous to liberty. In fact the slender revenue schedules and the general complaint of the depreciation of property made impossible direct taxation for school purposes. However, agitation for public schools opened early in the nineteenth century. Beginning with Governor Williams in 1802, recommendations for a school system were frequently made by the executives.

Evidently the improvement of trade relations, the stimulation of agriculture, and the inauguration of a public school system were the preëminent economic and social needs of North Carolina. A new epoch opened in 1815; popular apathy and legislative inactivity were supplemented by an ever increasing interest in public affairs and also legislative activity in their behalf. A number of influences were responsible for this change. Throughout the United States the close of the second war with England was followed by a keener interest in domestic matters. Party strife subsided with the collapse of the federalist party and made possible concentration on matters pertaining to public welfare. Personifying the new epoch was Archibald DeBow Murphey, of Orange County. Repudiating the traditional spirit of partisan­ship, he consecrated his mind and heart to the cause of social and economic reform. His reports on trade and education mark him distinctly as the agitator and genius of his time. The condition of public finances was also an important factor in the new epoch. An inflation of the currency through the issue of treasury notes and bank notes created a speculative spirit favorable to large enterprises. At the same time a new source of revenue, dividends and taxes from bank stock, made possible state aid for public causes.

As there was general agreement that better trade relations would improve agriculture and also create new values for taxation, the cause of internal improvement received first attention. The steps in the evolution of the new policy were  p92 halting. There were no guides to be found in experience at home or precedent abroad.​13 Yet the appropriations were for that day exceedingly liberal. The legislative committee on inland navigation in 1815 recommended a comprehensive survey with reference to navigation, and subscription to one‑third of the stock of the Tar, the Neuse, and the Yadkin Navigation companies, and also a similar subscription to a canal that would connect the Yadkin and the Cape Fear rivers. The proposal for a survey was readily adopted. Discretion should have prevented appropriation for other purposes until a report on surveys could have been made; but the demand for better trade conditions was so great that a subscription of $25,000 was authorized to the capital stock of the Roanoke Navigation Company, capitalized at $300,000, and $15,000 to that of the Cape Fear Navigation Company,  p93 capitalized at $100,000. The next year $65,000 were subscribed to the stock of other companies as follows: $6,000 to the Neuse River Navigation Company, chartered in 1812 with a capital of $50,000; $8,000 to the Tar River Navigation Company, a new corporation with authorized capital of $75,000; $6,000 to the North Carolina Catawba Company, chartered in 1788; $25,000 to the Yadkin Navigation Company, newly chartered with an authorized capital of $250,000, and $20,000 to the Lumber River Canal Company, also a new corporation, with a capital of $200,000, to connect with the Yadkin and the Cape Fear. Later, in 1818, $5,000 were subscribed to the stock of the Roanoke and "Pamptico" Canal Company, organized with a capital of $150,000 to connect the Roanoke and Pamlico rivers, and $2,500 to the Club Foot and Harlowe's Creek Canal, chartered in 1813 to connect Neuse River with Newport River, so affording an outlet to the sea.

Thus a comprehensive policy for the improvement of river navigation was adopted. The appropriations for the improvement of the Roanoke, the Tar, the Neuse, the Cape Fear, the connection of the Roanoke and the "Pamptico," and the construction of the Club Foot and Harlowe's Creek Canal were designed to benefit eastern North Carolina, while the appropriation for the Catawba, the Yadkin, and the connection of the Yadkin and the upper Cape Fear were planned to develop the west and to encourage intersectional relations. Of the total subscribed, $61,500 went to eastern and $51,000 to western projects. Considering the condition of the public finances, the appropriations were liberal; the state's income approximated $135,000, and the expenditures $130,000, per annum. It was expected that the subscriptions would be paid from loans secured from the banks, but the meager reports of the Treasurer and the Comptroller do not make clear the method actually used.

During the next few years additional appropriations were made for the above and also for other public works. The largest amount again went to the east, as follows: for the improvement of the Cape Fear River below Wilmington $39,730 were spent; for the Plymouth Turnpike connecting  p94 Plymouth and Hyde County $2,500 were appropriated, and also $300 for a road from Columbia to Gumneck; $25,000 for additional stock in the Roanoke Navigation Company were also voted, as well as $25,000 for stock in the Cape Fear Navigation Company, and $12,500 for stock in the Club Foot and Harlowe's Creek Canal. Loans to the latter company amounting to $18,000 were also made. For the development of the west $2,548 were spent in improvement of Broad River, since South Carolina undertook to improve the portion of the stream in that state. Most significant were appropriations in the mountain region, which developed rapidly after 1819. The roads so favored with their appropriations, were as follows: Wilkes County to the Tennessee line (two roads) $5,000; Old Fort to Asheville, $1,500; Wilkesboro to Iredell County, $500; Rutherfordton to Asheville, $2,452; Jefferson to the Tennessee line, $300; Saluda Gap to Tennessee, $500; Huntsville, Surry County, to the Virginia line, $500.

For the success of the new policy two things were evidently necessary — the establishment of a permanent source of revenue from which the state could meet its subscriptions, and a supervisory board or commission to direct and guide the state's policy. In 1817 and again in 1818 the creation of such a revenue and a board to administer it was recommended, but not until 1819, after a favorable report by Hamilton Fulton, the surveyor appointed under the act of 1815, was the recommendation carried out. Then were provided the Fund for Internal Improvement and the Board of Internal Improvements.

Two sources of revenue were set aside for the fund. First was the Cherokee Lands, consisting of •approximately 1,000,000 acres in the mountain region to which the Indian titles had been extinguished by the federal treaties of 1819. These lands were now open to settlers. Commissioners were appointed to survey and divide them into four classes, which should sell respectively for $4, $3, $2, and 50 cents to $2 per acre. One‑eighth was required of purchasers as first payment, notes being taken for the balance, redeemable in four annual installments. The second source of revenue of the fund was stock held by the state in the banks of Newbern and  p95 Cape Fear, 1,304 shares in the former and 1,250 in the latter; each bank was paying in 1819 dividends of 7 per cent. The state was also to receive stock in each company aided equivalent to the amount of money subscribed.

For the administration of the fund, the Board of Internal Improvements was created. It consisted of six commissioners, one for each of the judicial districts, elected by the legislature, with the governor as member ex officio. It had authority to appoint engineers, to make subscriptions to public works authorized by the legislature, to report to the legislature "the exact state of the Fund for Internal Improvements: The progress, condition, and net income of all the public works under their charge, the surveys, plans, estimated expense of such new works as they may recommend to the patronage of the General Assembly, together with such other important information as they may have it in their power to collect or in relation to the object committed to their trust." In 1823 member­ship of the board was reduced to the governor and three directors elected by the legislature, and in 1831, to three, the governor, the state treasurer, and one elected member.

The growth of the Fund for Internal Improvements had peculiar difficulties. First of all the accounts rendered by the Board of Internal Improvements and by the Treasury, when the income of the fund was investigated by the legislature in 1823, differed. With the report of the board as the basis, the income of the fund from 1819 to 1823 was as follows: from the Cherokee Lands, $110,217.70¼, of which $39,560 was cash, the remainder notes due from purchasers; from bank stock, $27,870; and appropriations before the board was organized, $6,264.06; total, $144,351.76¼. Expenditures had been $60,879.11, leaving about $70,657.06¼ in notes and $12,815.59 in cash. However, Treasurer Haywood reported the income from land sales to be $1,247 less than the estimate of the board, and that the balance due the fund was $17,361.38½, that claimed by the board being $12,815.59. In the adjustment of accounts the lower cash balance of the board was accepted, while the amount due from Cherokee notes was entered as $87,111.56¼. For the following three years the fund prospered; the cash income from 1824 to 1827 amounted to $118,269.70½,  p96 expenditures were $109,265.52½, and the cash balance was $21,675.16½. But in November a defalcation by the recently deceased treasurer, John Haywood, was disclosed. Of the total deficiency of $69,377.34 in his account, $22,195.15⅞ were charged to the Fund for Internal Improvements.

The most serious check to the growth of the fund, however, was the decline of the dividends from bank stock. In June, 1827, the dividends of the Bank of Newbern dropped from 4 per cent semi-annually to 3½ per cent, in December to 3 per cent, in December, 1828, to 2 per cent; in 1830 no dividends were declared; one of 3 per cent was paid in 1831, but thereafter none until stock dividends at liquidation. In 1828 the Bank of Cape Fear reduced its dividends from 3½ to 2 per cent, passed one dividend in 1830, and all after January, 1831, until reorganization in 1835. This policy of the banks meant a decline of approximately $8,000 per annum for the Fund during the years of reduced dividends and a total loss of $18,000 per annum when dividends were suspended. Thus while the annual income from 1824 to 1827 averaged $27,000, during the succeeding four years the average income was $11,000, and in 1832 and 1833, when no dividends were paid, the average income was only $2,000.

Another cause of the decline of the Fund was the difficulty in collecting the notes due on the Cherokee land sales. The notes taken at the sales of 1819, 1821, and 1822, amounted to $110,117.70¼. The balance uncollected in 1823 was $87,111.56¼. Prior to 1829 the collections varied from $6,000 to $15,000 per annum. Thereafter they declined, dropping in 1835 to $1,835.17. The amount of bonds still uncollected in 1833 was $49,332.67. One cause of this delinquency was the financial depression which pervaded the state after 1828. In 1834 the treasurer was authorized to bring suit for the collection of notes due and unpaid, and similar action was taken in later years, notably in 1842; but all delinquencies were never settled, and no comprehensive report on Cherokee land was ever made.

The expenditure for internal improvement from the initiation of the policy to 1836, inclusive, was $291,446.50. However, of this amount only $205,388.88½ was from the Fund,  p97 the balance being derived from the general revenue of the state. The projects and the amount appropriated to each were as follows:

As paying investments or even successful in securing the desired improvements these appropriations were a failure. Only three of them yielded any dividends; these were the Roanoke Navigation Company, which declared a dividend of 1¾ per cent in 1831 and 1833, the Cape Fear Navigation Company, which paid ten dividends averaging 4½ per cent, and the Buncombe Turnpike, which paid a few dividends averaging 3⁹⁄₁₀ per cent. For all practical purposes, the Yadkin Navigation Company, the Neuse Navigation Company, and the North Carolina Catawba Company were by 1833 unsuccessful,  p98 and the state's investment in them a complete failure. The Club Foot and Harlowe's Creek Canal was reported to be "productive of some benefits," but in 1834 work on it was suspended. Of direct appropriations, that to the Cape Fear was alone profitable, the construction of jetties and dredging helping navigation considerably. The appropriations to roads benefited those communities which they aimed to benefit.

Two facts explain the failure of this early policy toward internal improvements. The amount of work undertaken was too great for the available revenue and there was a distinct lack of experience and skill in carrying on the part of those directing the enterprises. Said the report of the Board of Internal Improvement in 1833:

The most significant fact in the policy of internal improvement was that in spite of its failures there arose a demand for  p99 larger state aid. In this the Board of Internal Improvement took the lead, recommending in 1821 that the state borrow $500,000 to be spent in the improvement of transportation. In 1825 and again in 1830 the recommendation was repeated. In 1833 the amount recommended was $6,000,000. The desire for larger expenditures was not limited to the board. In the later 'twenties it took the form of a genuinely popular movement. One basis for this popular demand was the rise of a new form of transportation, the railway, for the development of which private capital was not sufficient. The most notable expression of the new sentiment was the "Numbers of Carlton," published in 1825 by Dr. Joseph Caldwell, president of the University, urging the advantages of railroads.

Popular interest was also expressed in a large number of public meetings. In January, 1829, at a meeting in Raleigh a definite organization was perfected by the friends of internal improvement; a central committee was appointed, and also local committees in each county of the state, to carry on the agitation. The climax in the agitation was reached in 1833 when delegates from forty-eight counties met at Raleigh and adopted a memorial to the legislature asking for state aid to various enterprises, amounting to $5,000,000.

The agitation produced no immediate result, the principal reason being the conflict between the east and the west, which was at fever heat from 1830 to 1835. By 1830 the counties west of Raleigh had outstripped those to the east in population; yet because representation was apportioned equally among the counties, the east, with a larger number of counties, had a larger representation in the legislature and controlled legislation. Consequently there was a demand for constitutional reform with especial attention to the matter of representation, championed by the west and opposed by the east. This issue was so acute that it obstructed all other questions. Therefore the memorial of the Internal Improvement Convention of 1833 received no response from the legislature. A wave of protest swept the state. Prominent leaders and newspapers in the east as well as the west condemned the legislature for its failure to heed the popular demand. It was also evident that the matter of representation must be settled before economic problems could be impartially considered. Hence the immediate  p100 outcome of the agitation for internal improvement was to strengthen the sentiment for constitutional reform. After that issue was adjusted by the constitutional convention of 1835, a new chapter opens in the history of state aid.

However new means of financing public works had to be found, for in 1835 the income of the Fund for Internal Improvements was only $14,736. This difficulty was overcome by the distribution of the federal surplus revenue among the states. Two other problems, however, had also to be met with the surplus revenue; one was the obligations due by the state treasury, the other was the demand for aid to public education.

That better markets would make agriculture more profitable was undoubtedly one of the influences which brought about the Fund for Internal Improvements. Regeneration of farming was also sought through the organization of agricultural societies. Such a society was formed in Edgecombe County as early as 1810, and others were established in Beaufort, Halifax, Cumberland, Wake, Guilford, Mecklenburg, Chatham, and Surry. In 1819 the State Agricultural Society was organized at Raleigh, but very little is known of its activities. In 1822 the policy of state aid was directly extended by the creation of the Agricultural Fund, consisting of the income, not exceeding $5,000 per annum, from the sales of vacant land, and uncalled-for sums in the hands of the clerks of the County courts. Expenditures were authorized for three purposes: the support of local agricultural societies, the purchase and distribution of seeds, and publishing the reports and proceedings of county societies. For supervision of this work the presidents or delegates of the county societies were constituted a Board of Agriculture. The activities of the board were not extensive. One of its services was to issue several pamphlets relating to agriculture; more important was to undertake the publication of a geological survey of the state. The first two parts, prepared by Prof. Denison Olmsted, of the university, were published in 1824 and 1825, the third and fourth parts by Prof. Elisha Mitchell, of the same institution, in 1826 and 1827. With the latter were also issued a "Report on the Mineralogy of North Carolina" by C. Rothe, a reprint from Silliman's Journal of Science. These pamphlets  p101 were not only the earliest publication of the State Geological Survey, but were also the first efforts toward a geological publication by any state in the Union. However there seems to have been little inclination to take advantage of the Agricultural Fund by the county societies, for in 1825 there was an unexpended balance of over $7,000. This, and also all future annual balances, were therefore appropriated to the Literary Fund, established in the interest of public schools in 1825.

There was a tremendous increase in the cause of public education in 1815 and after, due to the same influences that increased the interest in internal improvements. In 1815, the year that the policy of state aid to transportation was adopted, a joint committee on education was appointed by the legislature, but it made no report. In 1816 another legislative committee submitted a report, written by Archibald DeBow Murphey, which pointed out the importance of education to a people and to a state. "In all ages and in all countries," it said, "the great body of the people have been found to be virtuous in the degree in which they have been enlightened. There is a gentleness in wisdom, which softens the angry passions of the soul, and gives exercise to its generous sensibilities. And there is a contentment which it brings to our aid; humility in times of prosperity, fortitude in the hour of adversity, and resignation in affliction. True wisdom teaches men to be good rather than great; and a wise providence has ordered that its influence should be most felt where it is most needed, among the great body of the people, who, constituting the strength of the state, have no other ambition than to see their country prosper and their wives and children and friends happy. To the several classes which compose this great body, the attention of the Government should be particularly directed; to teach them their duties and enable them to understand their rights."​14 The result was the appointment of an ad interim committee to plan a school system. Its report, also written by Murphey, is a landmark in the state's educational history. It outlined a system including grammar schools, academies, the improvement of the University, and  p102 asylums for the deaf and dumb. The state should be divided into townships and academy districts, whose appropriations should be supplemented by aid from a Fund for Public Instruction. Thus was foreshadowed the fundamental organization of a modern public school system. A singular feature of the report was that only the poor would be educated entirely at public expense, — all for a period of three years, and the more promising portion to be advanced through the whole curriculum from primary school to university at public cost, clothing and board included; these in turn would be required to enter the courage profession and to instruct the poor free of charge. There is a marked similarity between this report and one presented to the Virginia legislature in the same year, which was inspired by Thomas Jefferson. One member of the committee, John M. Walker, submitted a separate report which elaborated the details of the training for the promising poor.

Bills to carry into effect these recommendations were rejected, and a similar fate met similar bills at sessions immediately following. The legislature was committed primarily to internal improvements, and conservatism would not brook expensive experiments for education until additional financial resources could be found. By 1825 the financial opportunity was at hand. In order to aid certain prominent banks, which were being hard pressed by their creditors, and in whose stock the state had invested, the legislature of 1823 ordered the purchase of additional bank stock to be paid for with the issue of $100,000 of treasury notes. As the dividends from this new stock were not necessary for the regular expenses of the Government, and as the experiments with internal improvements were not promising, stock of the Bank of the Cape Fear (680 shares) and of the Bank of Newbern (330 shares) was appropriated to the cause of education. In addition the income from five other sources was also utilized: viz., dividends from the stock held by the state in the Cape Fear Navigation Company, the Roanoke Navigation Company, and the Club Foot and Harlowe's Creek Canal; license taxes paid by the retailers of liquors and auctioneers; the unexpended balances of the Agricultural Fund; the income from the sales of vacant and unappropriated swamp lands; and $21,090 due from the Federal Government for aid in removing the Cherokees. Thus  p103 was constituted the Literary Fund. Its administration was placed in charge of three trustees, the Governor and the Speakers of the House of Commons and of the Senate. Bills to establish schools immediately were rejected on the ground that the revenue from the fund was insufficient, and efforts to add new sources to the fund, such as lotteries and additional bank stock, were also defeated. The income was therefore reinvested by the trustees, thus creating a large principal, the interest from which was finally used for educational purposes. This was the distinguishing characteristic of state support of public schools in North Carolina prior to 1860; it was derived from an endowment rather than from direct taxation.

Prior to 1836 the Literary Fund suffered several misfortunes. First of these was a temporary loss occasioned by the defalcation of Treasurer Haywood. In November, 1827, the free balance to the credit of the Fund was $28,201.82½, but an investigation of the treasurer's records — that officer having recently died — showed that all of this except $17.50, which had never been turned over to him, had been lost. However, in 1831, by order of the legislature $28,184.32½ with interest was returned to the Fund, the total amount being $29,074,96. Another misfortune was a decline in the dividends from the bank stocks. In 1827 the Fund held as a result of the act of 1825, 359 shares in the Bank of Newbern and 704 shares in the Bank of the Cape Fear, 29 shares in the Bank of Newbern and 34 in the Bank of the Cape Fear having been advanced by the state since 1825. The rate of dividends was at that time 3 per cent semi-annually by the Bank of the Cape Fear and 4 per cent by the Bank of Newbern. Among the first investments by the trustees was the purchase of 78 shares in the State Bank in 1827, the very year in which the dividends dropped from 4 per cent semi-annually to 3½ semi-annually. In 1828, although the dividends of all the banks had declined, 204 shares of the State Bank were bought at $90 per share, 50 shares in the Bank of the Cape Fear at $80, and 141 in the Bank of Newbern at $80. The same year the State Bank paid only one dividend of 2½ per cent, then yielded one of 3 per cent in 1829, and from 1830 to liquidation only 2 per cent semi-annually. The Bank of the Cape Fear reduced its dividend in 1828 to 2 per cent semi-annually, passed one dividend in  p104 1829, both in 1830, then paid one of 3 per cent in 1831, and passed all until re-organization in 1835. The Bank of Newbern also dropped to a 2 per cent basis in 1828, passed one dividend in 1829, one in 1830, then paid one of 3 per cent in 1831, and thereafter passed all until liquidation.

The investment of public funds such as the Literary Fund in securities of declining value would today be regarded as a violation of a trust. However, the banks were quasi-state institutions; they were being hard pressed to meet their obligations to pay in specie, notably by the Second Bank of the United States; and there was naturally a strong feeling that state funds should support state institutions. Fortunately the loss from the money actually invested by the trustees was small, the State Bank and the Bank of Newbern paying at liquidation $38,803, whereas $41,440 had been paid for shares in these institutions by the trustees of the Fund, On the other hand the capital dividends on the stock in these banks appropriated to the Literary Fund by the legislature were applied to the general expenses of the government. Yet with such experience in the past, one of the principal investments of the Literary Fund after its re-organization in 1836 was in bank stock. Fortunately the experience with the investment was more satisfactory.

The other sources of revenue presented no specific problems. The sale of vacant lands up to 1836 amounted to $55,133.73; license taxes, $31,371.68; auction tax, $6,513.98; agricultural fund balances, $10,962.82; the Cape Fear Navigation Company dividends, $4,484.34; the Roanoke Navigation Company dividends, $2,250.14; premium on exchange of $12,000 United States notes, $1,100; from the United States Government for money advanced for the removal of Cherokee Indians, $22,000; miscellanies, $6,083.60. These with the bank dividends of $102,341.106 and a correction of $915.96 made a total of $243,162.83. There were expended $239,317.83, all of which except $5.50 was for bank stock, leaving a cash balance of $3,845.00.15

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The Author's Notes:

1 Davis, Early Settlement of the Cape Fear.

2 Quoted from Report of the Board of Internal Improvements, 1833.

3 Niles' Register, Aug. 26, 1826. In 1825 corn worth 44 or 46 cts. per bushel in Baltimore brought $1.25 in Wilmington, and flour worth $4.75 in Baltimore brought $8.00 in Raleigh. Ibid., July 23, 1825.

4 Memoir on Internal Improvements.

5 Mitchell, Agricultural Speculations.

6 Committee on Internal Improvements.

7 See Coon, Documentary Hist. of Public Education in N. C., I, p68.

8 Coon, op. cit., I, p244.

9 Ibid., II.813.

10 Ibid., II.862.

11 Ibid., I.252.

12 Letters on Popular Education.

13 Prior to 1815 there were chartered by the legislature 10 toll roads, 12 canal companies and 15 navigation companies. None received state aid and apparently none were serviceable. See Morgan, State Aid to Transportation (N. C. Booklet, Jan. 1911).

14 Hoyt, Papers of Archibald DeBow Murphey, II.49.

15 Totals have been computed from the reports made by the Treasurer, the Comptroller, and the Literary Board.

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